Document:

Exhibit 4.1

 

NEWLEAD HOLDINGS LTD

SECOND AMENDED AND RESTATED 2005 EQUITY INCENTIVE PLAN

 

ARTICLE I

General

 

 

		1.1	Purpose

 

The NewLead Holdings
Ltd Second Amended and Restated 2005 Equity Incentive Plan (the “Plan”) is designed to provide certain key persons,
on whose initiative and efforts the successful conduct of the business of NewLead Holdings Ltd (the “Company”) depends,
with incentives to: (a) enter into and remain in the service of the Company, (b) acquire a proprietary interest in the success
of the Company, (c) maximize their performance, and (d) enhance the long-term performance of the Company.

 

		1.2	Administration

 

(a)Administration
by Compensation Committee. The Plan shall be administered by the Company’s Compensation Committee (the “Administrator”).
The Administrator shall have the authority (i) to exercise all of the powers granted to it under the Plan, (ii) to construe, interpret
and implement the Plan and any Award Agreements executed pursuant to Section 2.1 in its sole discretion with all such determination
being final, binding and conclusive, (iii) to prescribe, amend and rescind rules and regulations relating to the Plan, including
rules governing its own operations, (iv) to make all determinations necessary or advisable in administering the Plan, and (v) to
correct any defect, supply any omission and reconcile any inconsistency in the Plan.

 

(b)Administrator
Action. Actions of the Administrator shall be taken by the vote of a majority of its members. Any action may be taken by a written
instrument signed by a majority of the Administrator members, and action so taken shall be fully as effective as if it had been
taken by a vote at a meeting. Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the
Administrator may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate
all or any part of its responsibilities to any person or persons selected by it, and may revoke any such allocation or delegation
at any time.

 

		1.3	Persons Eligible for Awards

 

The persons eligible
to receive awards under the Plan are those officers, directors, executive, managerial, administrative, professional employees and
consultants of the Company, (collectively, “key persons”) as the Administrator in its sole discretion shall select,
taking into account the duties of the respective employees, their present and potential contributions to the success of the Company,
and such other factors as the Administrator deems relevant in connection with accomplishing the purpose of the Plan. The Administrator
may from time to time, in its sole discretion, determine that any key person shall be ineligible to receive awards under the Plan.

 

		1.4	Types of Awards Under Plan

 

Awards may be made under
the Plan in the form of (a) incentive stock options, (b) non-qualified stock options, (c) stock appreciation rights, (d) dividend
equivalent rights, (e) restricted stock, (f) unrestricted stock, (g) restricted stock units, and (h) performance shares, all
as more fully set forth in Article II. The term “award” means any of the foregoing. No incentive stock option may be
granted to a person who is not an employee of the Company on the date of grant and no incentive stock options shall be granted
under the Plan on or after May 29, 2009.

 

    	 

    	 

    

 

		1.5	Shares Available for Awards

 

(a)Aggregate Number
Available; Certificate Legends. Subject to the provisions of Sections 1.5(b) and 1.5(c), the total number of common shares
of the Company (“Common Shares”) with respect to which awards may be granted pursuant to the Plan is 37,209,590 common
shares. Shares issued pursuant to the Plan may be authorized but unissued Common Shares, authorized and issued Common Shares held
in the Company’s treasury or Common Shares acquired by the Company for the purposes of the Plan. The Administrator may direct
that any share certificate evidencing shares issued pursuant to the Plan shall bear a legend setting forth such restrictions on
transferability as may apply to such shares.

 

(b)Increase in Shares
Available. Notwithstanding Section 1.5(a) above, on the first day of each fiscal year of the Company beginning in fiscal year 2014,
the number of Common Shares that may be issued from time to time pursuant to the Plan shall be increased by an amount equal to
5% of the number of outstanding Common Shares of the Company on such date.

 

(c)Adjustment Upon
Changes in Common Shares. Upon certain changes in Common Shares, the number of Common Shares available for issuance with respect
to awards that may be granted under the Plan pursuant to Section 1.5(a), shall be adjusted pursuant to Section 3.7(a).

 

(d)Certain Shares
to Become Available Again. The following Common Shares shall again become available for awards under the Plan: any shares that
are subject to an award under the Plan and that remain unissued upon the cancellation or termination of such award for any reason
whatsoever; any shares of restricted stock forfeited pursuant to Section 2.7(e), provided that any dividends paid on such shares
are also forfeited pursuant to such Section 2.7(e); and any shares in respect of which a stock appreciation right or performance
share award is settled for cash.

 

		1.6	Definitions of Certain Terms

 

(a)The “Fair
Market Value” of a Common Share on any day shall be the closing price on the NASDAQ Stock Market as reported for such day
in The Wall Street Journal or, if no such price is reported for such day, the average of the high bid and low asked price of Common
Shares as reported for such day. If no quotation is made for the applicable day, the Fair Market Value of a Common Share on such
day shall be determined in the manner set forth in the preceding sentence using quotations for the next preceding day for which
there were quotations, provided that such quotations shall have been made within the ten (10) business days preceding the applicable
day. Notwithstanding the foregoing, if deemed necessary or appropriate by the Administrator, the Fair Market Value of a Common
Share on any day shall be determined by the Administrator. In no event shall the Fair Market Value of any Common Share be less
than its par value.

 

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(b)The term “incentive
stock option” means an option that is intended to qualify for special federal income tax treatment pursuant to sections 421
and 422 of the Code as now constituted or subsequently amended, or pursuant to a successor provision of the Code, and which is
so designated in the applicable Grant Certificate. Any option that is not specifically designated as an incentive stock option
shall under no circumstances be considered an incentive stock option. Any option that is not an incentive stock option is referred
to herein as a “non-qualified stock option.”

 

(c)The term “cause”
in connection with a termination of employment by reason of a dismissal for cause shall mean:

 

(i)to
the extent that there is an employment, severance or other agreement governing the relationship between the grantee and the Company,
a Company subsidiary or a Company joint venture, which agreement contains a definition of “cause,” cause shall consist
of those acts or omissions that would constitute “cause” under such agreement; and otherwise,

 

(ii)the
grantee’s termination of employment or service by the Company or an affiliate on account of any one or more of the following:

 

(A)any failure
by the grantee substantially to perform the grantee’s duties;

 

(B)any excessive
unauthorized absenteeism by the grantee;

 

(C)any refusal
by the grantee to obey the lawful orders of the Board or any other person or Administrator to whom the grantee reports;

 

(D)any act
or omission by the grantee that is or may be injurious to the Company, monetarily or otherwise;

 

(E)any act
by the grantee that is inconsistent with the best interests of the Company;

 

(F)the grantee’s
material violation of any of the Company’s policies, including, without limitation, those policies relating to discrimination
or sexual harassment;

 

(G)the grantee’s
unauthorized (a) removal from the premises of the Company or an affiliate of any document (in any medium or form) relating to the
Company or an affiliate or the customers or clients of the Company or an affiliate or (b) disclosure to any person or entity of
any of the Company’s, or its affiliates’ confidential or proprietary information;

 

(H)the grantee’s
commission of any felony, or any other crime involving moral turpitude; and

 

(I)the grantee’s
commission of any act involving dishonesty or fraud.

 

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Any rights the Company
may have hereunder in respect of the events giving rise to cause shall be in addition to the rights the Company may have under
any other agreement with a grantee or at law or in equity. Any determination of whether a grantee’s employment or service
is (or is deemed to have been) terminated for cause shall be made by the Administrator in its discretion, which determination shall
be final, binding and conclusive on all parties. If, subsequent to a grantee’s voluntary termination of employment or service
or involuntary termination of employment or service without cause, it is discovered that the grantee’s employment or service
could have been terminated for cause, the Administrator may deem such grantee’s employment or service to have been terminated
for cause. A grantee’s termination of employment or service for cause shall be effective as of the date of the occurrence
of the event giving rise to cause, regardless of when the determination of cause is made.

 

(d)“Common
Share Offering” shall mean the sale of the Company’s Common Shares in a firmly underwritten public offering.

 

ARTICLE II

Awards Under The Plan

 

		2.1	Agreements Evidencing Awards

 

Each award granted
under the Plan (except an award of unrestricted stock) shall be evidenced by a written certificate (“Award Agreement”)
which shall contain such provisions as the Administrator may, in its sole discretion, deem necessary or desirable. By executing
an Award Agreement pursuant to the Plan, a grantee thereby agrees that the award shall be subject to all of the terms and provisions
of the Plan and the applicable Award Agreement.

 

		2.2	Grant of Stock Options, Stock Appreciation Rights, Restricted
Stock Units and Dividend Equivalent Rights

 

(a)Stock Option
Grants. The Administrator may grant incentive stock options and non-qualified stock options (“options”) to purchase
Common Shares from the Company, to such key persons, and in such amounts and subject to such vesting and forfeiture provisions
and other terms and conditions, as the Administrator shall determine, in its sole discretion, subject to the provisions of the
Plan, provided however, that, from and following May 29, 2009, no incentive stock options shall be granted under the Plan.

 

(b)Stock Appreciation
Right Grants; Types of Stock Appreciation Rights. The Administrator may grant stock appreciation rights to such key persons, and
in such amounts and subject to such vesting and forfeiture provisions and other terms and conditions, as the Administrator shall
determine, in its sole discretion, subject to the provisions of the Plan. The terms of a stock appreciation right may provide that
it shall be automatically exercised for a cash payment upon the happening of a specified event that is outside the control of the
grantee, and that it shall not be otherwise exercisable. Stock appreciation rights may be granted in connection with all or any
part of, or independently of, any option granted under the Plan. A stock appreciation right granted in connection with an option
may be granted at or after the time of grant of such option.

 

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(c)Nature
of Stock Appreciation Rights. The grantee of a stock appreciation right shall have the right, subject to the terms of the Plan
and the applicable Award Agreement, to receive from the Company an amount equal to (i) the excess of the Fair Market Value of a
Common Share on the date of exercise of the stock appreciation right over the Fair Market Value of a Common Share on the date of
grant (or over the option exercise price if the stock appreciation right is granted in connection with an option), multiplied by
(ii) the number of shares with respect to which the stock appreciation right is exercised. Payment upon exercise of a stock appreciation
right shall be in cash or in Common Shares (valued at their Fair Market Value on the date of exercise of the stock appreciation
right) or both, all as the Administrator shall determine in its sole discretion. Upon the exercise of a stock appreciation right
granted in connection with an option, the number of shares subject to the option shall be reduced by the number of shares with
respect to which the stock appreciation right is exercised. Upon the exercise of an option in connection with which a stock appreciation
right has been granted, the number of shares subject to the stock appreciation right shall be reduced by the number of shares with
respect to which the option is exercised.

 

(d)Option Exercise
Price. Each Award Agreement with respect to an option shall set forth the amount (the “option exercise price”) payable
by the grantee to the Company upon exercise of the option evidenced thereby. The option exercise price per share shall be determined
by the Administrator in its sole discretion. Notwithstanding the foregoing, with respect to any options granted within 30 days
of a Common Share Offering, the option exercise price will be the average of the Fair Market Value of a Common Share over the 30
day period following the closing of the Common Share Offering.

 

(e)Exercise Period.
Each Award Agreement with respect to an option or stock appreciation right shall set forth the periods during which the award evidenced
thereby shall be exercisable, whether in whole or in part. Such periods shall be determined by the Administrator in its sole discretion;
provided, however, that no option or a stock appreciation right shall be exercisable more than 10 years after the date of grant,
and provided further that, except as and to the extent that the Administrator may otherwise provide pursuant to Sections 2.5, 3.7
or 3.8, no option or stock appreciation right shall be exercisable prior to the first anniversary of the date of grant. (See the
default exercise period provided for under Sections 2.3(a) and (b).)

 

(f)Reload Options. The Administrator may, in its sole discretion,
include in any Award Agreement with respect to an option (the “original option”) a provision that an additional option
(the “reload option”) shall be granted to any grantee who, pursuant to Section 2.3(c)(ii), delivers Common Shares
in partial or full payment of the exercise price of the original option. The reload option shall be for a number of Common Shares
equal to the number thus delivered, shall have an exercise price equal to the Fair Market Value of a Common Share on the date
of exercise of the original option, and shall have an expiration date no later than the expiration date of the original option.
In the event that an Award Agreement provides for the grant of a reload option, such Agreement shall also provide that the exercise
price of the original option be no less than the Fair Market Value of a Common Share on its date of grant, and that any shares
that are delivered pursuant to Section 2.3(c)(ii) in payment of such exercise price shall have been held for at least six months.

 

(g)Dividend Equivalent
Rights. The Administrator may, in its sole discretion, include in any Award Agreement with respect to an option, stock appreciation
right or performance shares, a dividend equivalent right entitling the grantee to receive amounts equal to the ordinary dividends
that would be paid, during the time such award is outstanding and unexercised, on the Common Shares covered by such award if such
shares were then outstanding. In the event such a provision is included in a Award Agreement, the Administrator shall determine
whether such payments shall be made in cash or in Common Shares, whether they shall be conditioned upon the exercise of the award
to which they relate, the time or times at which they shall be made, and such other vesting and forfeiture provisions and other
terms and conditions as the Administrator shall deem appropriate.

 

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(h)Restricted Stock
Units. The Administrator may, in its sole discretion, grant restricted stock units to such key persons, and in such amounts and
subject to such vesting and forfeiture provisions and other terms and conditions, as the Administrator shall determine, in its
sole discretion, subject to the provisions of the Plan. A restricted stock unit granted under the Plan shall confer upon the grantee
a right to receive from the Company, upon the occurrence of an event specified in the Award Agreement, such grantee’s vested
restricted stock units multiplied by the Fair Market Value of a Common Share. Restricted stock units may be granted in connection
with all or any part of, or independently of, any award granted under the Plan. A restricted stock unit granted in connection with
another award may be granted at or after the time of grant of such award.

 

(i)Incentive Stock
Option Limitation: Exercisability. To the extent that the aggregate Fair Market Value (determined as of the time the option
is granted) of the stock with respect to which incentive stock options are first exercisable by any employee during any calendar
year shall exceed $100,000, or such higher amount as may be permitted from time to time under section 422 of the Code, such options
shall be treated as non-qualified stock options.

 

(j)Incentive Stock
Option Limitation: 10% Owners. Notwithstanding the provisions of paragraphs (d) and (e) of this Section 2.2, an incentive stock
option may not be granted under the Plan to an individual who, at the time the option is granted, owns stock possessing more than
10% of the total combined voting power of all classes of stock of his employer corporation or of its parent or subsidiary corporations
(as such ownership may be determined for purposes of section 422(b) (6) of the Code) unless (i) at the time such incentive stock
option is granted the option exercise price is at least 110% of the Fair Market Value of the shares subject thereto and (ii) the
incentive stock option by its terms is not exercisable after the expiration of 5 years from the date it is granted.

 

		2.3	Exercise of Options, Stock Appreciation Rights and Restricted Stock Units

 

Subject to the other
provisions of this Article II, each option, stock appreciation right and restricted stock unit granted under the Plan shall be
exercisable as follows:

 

(a)Timing and Extent
of Exercise. Options, stock appreciation rights and restricted stock units shall be exercisable at such times and under such conditions
as set forth in the corresponding Award Agreement, but in no event shall any such award be exercisable prior to the first anniversary
or subsequent to the tenth anniversary of the date on which such award was granted. Unless the applicable Award Agreement otherwise
provides, an option, stock appreciation right or restricted stock unit may be exercised from time to time as to all or part of
the shares or units as to which such award is then exercisable. A stock appreciation right granted in connection with an option
may be exercised at any time when, and to the same extent that, the related option may be exercised.

 

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(b)Notice of
Exercise. An option, stock appreciation right or restricted stock unit shall be exercised by the filing of a written notice
with the Company or the Company’s designated exchange agent (the “exchange agent”), on such form and in such
manner as the Administrator shall in its sole discretion prescribe.

 

(c)Payment
of Exercise Price. Any written notice of exercise of an option shall be accompanied by payment for the shares being purchased.
Such payment shall be made: (i) by certified or official bank check (or the equivalent thereof acceptable to the Company or its
exchange agent) for the full option exercise price; or (ii) with the consent of the Administrator, by delivery of Common Shares
having a Fair Market Value (determined as of the exercise date) equal to all or part of the option exercise price and a certified
or official bank check (or the equivalent thereof acceptable to the Company or its exchange agent) for any remaining portion of
the full option exercise price; or (iii) at the discretion of the Administrator and to the extent permitted by law, by such other
provision, consistent with the terms of the Plan, as the Administrator may from time to time prescribe (whether directly or indirectly
through the exchange agent).

 

(d)Delivery
of Certificates Upon Exercise. Subject to the provision of section 2.3(e), promptly after receiving payment of the full option
exercise price, or after receiving notice of the exercise of a stock appreciation right for which payment will be made partly or
entirely in shares, the Company or its exchange agent shall, subject to the provisions of Section 3.2, deliver to the grantee or
to such other person as may then have the right to exercise the award, a certificate or certificates for the Common Shares for
which the award has been exercised. If the method of payment employed upon option exercise so requires, and if applicable law permits,
an optionee may direct the Company or its exchange agent, as the case may be, to deliver the share certificate(s) to the optionee’s
stockbroker.

 

(e)Investment Purpose
and Legal Requirements. Notwithstanding the foregoing, at the time of the exercise of any option, the Company may, if it shall
deem it necessary or advisable for any reason, require the holder of such option (i) to represent in writing to the Company
that it is the optionee’s then intention to acquire the Shares with respect to which the option is to be exercised for investment
and not with a view to the distribution thereof, or (ii) to postpone the date of exercise until such time as the Company has available
for delivery to the optionee a prospectus meeting the requirements of all applicable securities laws; and no shares shall
be issued or transferred upon the exercise of any option unless and until all legal requirements applicable to the issuance or
transfer of such Shares have been complied with to the satisfaction of the Company. The Company shall have the right to condition
any issuance of shares to any optionee hereunder on such optionee’s undertaking in writing to comply with such restrictions
on the subsequent transfer of such shares as the Company shall deem necessary or advisable as a result of any applicable law, regulation
or official interpretation thereof, and certificates representing such shares may contain a legend to reflect any such restrictions.

 

(f)No Shareholder
Rights. No grantee of an option, stock appreciation right or restricted stock unit (or other person having the right to exercise
such award) shall have any of the rights of a shareholder of the Company with respect to shares subject to such award until the
issuance of a share certificate to such person for such shares. Except as otherwise provided in Section 1.5(c), no adjustment shall
be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities or other
property) for which the record date is prior to the date such share certificate is issued.

 

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		2.4	Compensation in Lieu of Exercise of an Option

 

Upon written application
of the grantee of an option, the Administrator may in its sole discretion determine to substitute, for the exercise of such option,
compensation to the grantee not in excess of the difference between the option exercise price and the Fair Market Value of the
shares covered by such written application on the date of such application. Such compensation may be in cash, in Common Shares,
or both, and the payment thereof may be subject to conditions, all as the Administrator shall determine in its sole discretion.
In the event compensation is substituted pursuant to this Section 2.4 for the exercise, in whole or in part, of an option, the
number of shares subject to the option shall be reduced by the number of shares for which such compensation is substituted.

 

		2.5	Termination of Employment; Death Subsequent to a Termination
of Employment

 

(a)General Rule.
Except to the extent otherwise provided in paragraphs (b), (c), (d) or (e) of this Section 2.5 or Section 3.8(b)(iii), a grantee
who incurs a termination of employment or service may exercise any outstanding option or stock appreciation right on the following
terms and conditions: (i) exercise may be made only to the extent that the grantee was entitled to exercise the award on the termination
of employment or service date; and (ii) exercise must occur within three months after termination of employment or service but
in no event after the original expiration date of the award.

 

(b)Dismissal for
Cause; Resignation. If a grantee incurs a termination of employment or service as the result of a dismissal for cause or resignation
without the Company’s prior consent, all options and stock appreciation rights not theretofore exercised shall terminate
upon the grantee’s termination of employment or service.

 

(c)Retirement. If
a grantee incurs a termination of employment as the result of his retirement, then any outstanding option, stock appreciation right
or restricted stock unit shall be exercisable pursuant to its terms. For this purpose “retirement” shall mean a grantee’s
termination of employment, under circumstances other than those described in paragraph (b) above, on or after: (x) his 65th birthday,
(y) the date on which he has attained age 60 and completed at least five years of service with the Company (using any method of
calculation the Administrator deems appropriate) or (z) if approved by the Administrator, on or after he has completed at least
20 years of service.

 

(d)Disability. If
a grantee incurs a termination of employment by reason of a disability (as defined below), then any outstanding option, stock appreciation
right or restricted stock unit shall be exercisable pursuant to its terms. For this purpose “disability” shall mean,
except in connection any physical or mental condition that would qualify a grantee for a disability benefit under the long-term
disability plan maintained by the Company or, if there is no such plan, a physical or mental condition that prevents the grantee
from performing the essential functions of the grantee’s position (with or without reasonable accommodation) for a period
of six consecutive months. The existence of a disability shall be determined by the Administrator in its sole and absolute discretion.

 

(e)
Death.

 

(i)Termination
of Employment as a Result of Grantee’s Death. If a grantee incurs a termination of employment or service as the result of
his death, then any outstanding option, stock appreciation right or restricted stock unit shall be exercisable pursuant to its
terms.

 

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(ii)Restrictions
on Exercise Following Death. Any such exercise of an award following a grantee’s death shall be made only by the grantee’s
executor or administrator or other duly appointed representative reasonably acceptable to the Administrator, unless the grantee’s
will specifically disposes of such award, in which case such exercise shall be made only by the recipient of such specific disposition.
If a grantee’s personal representative or the recipient of a specific disposition under the grantee’s will shall be
entitled to exercise any award pursuant to the preceding sentence, such representative or recipient shall be bound by all the terms
and conditions of the Plan and the applicable Award Agreement which would have applied to the grantee including, without limitation,
the provisions of Sections 3.2 and 3.5 hereof.

 

(f)Special Rules
for Incentive Stock Options. No option that remains exercisable for more than three months following a grantee’s termination
of employment for any reason other than death or disability, or for more than one year following a grantee’s termination
of employment as the result of his becoming disabled, may be treated as an incentive stock option.

 

(g)Administrator
Discretion. The Administrator, in the applicable Award Agreement, may waive or modify the application of the foregoing provisions
of this Section 2.5.

 

		2.6	Transferability of Options, Stock Appreciation Rights and Restricted Stock Units

 

Except as otherwise
provided in an applicable Award Agreement evidencing an option, stock appreciation right or restricted stock unit, during the lifetime
of a grantee, each such award granted to a grantee shall be exercisable only by the grantee and no such award shall be assignable
or transferable otherwise than by will or by the laws of descent and distribution. The Administrator may, in any applicable Award
Agreement evidencing an option (other than an incentive stock option to the extent inconsistent with the requirements of section
422 of the Code applicable to incentive stock options), permit a grantee to transfer all or some of the options to (A) the grantee’s
spouse, children or grandchildren (“Immediate Family Members”), (B) a trust or trusts for the exclusive benefit of
such Immediate Family Members, or (C) other parties approved by the Administrator in its sole and absolute discretion. Following
any such transfer, any transferred options shall continue to be subject to the same terms and conditions as were applicable immediately
prior to the transfer.

 

		2.7	Grant of Restricted Stock

 

(a)Restricted
Stock Grants. The Administrator may grant restricted Common Shares to such key persons, in such amounts, and subject to such vesting
and forfeiture provisions and other terms and conditions as the Administrator shall determine in its sole discretion, subject
to the provisions of the Plan. Restricted stock awards may be made independently of or in connection with any other award under the Plan. A grantee of a restricted
stock award shall have no rights with respect to such award unless such grantee accepts the award within such period as the Administrator
shall specify by accepting delivery of a restricted stock agreement in such form as the Administrator shall determine and, in
the event the restricted shares are newly issued by the Company, makes payment to the Company its exchange agent by certified
or official bank check (or the equivalent thereof acceptable to the Company) in an amount at least equal to the par value of the
shares covered by the award.

 

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(b)Issuance of
Share certificate(s). Promptly after a grantee accepts a restricted stock award, the Company or its exchange agent shall issue
to the grantee a share certificate or share certificates for the Common Shares covered by the award or shall establish an account
evidencing ownership of the stock in uncertificated form. Upon the issuance of such share certificate(s), or establishment of such
account, the grantee shall have the rights of a shareholder with respect to the restricted stock, subject to: (i) the non transferability
restrictions and forfeiture provision described in paragraphs (d) and (e) of this Section 2.7; (ii) in the Administrator’s
discretion, to a requirement that any dividends paid on such shares shall be held in escrow until all restrictions on such shares
have lapsed; and (iii) any other restrictions and conditions contained in the applicable restricted stock agreement.

 

(c)Custody of Share
certificate(s). Unless the Administrator shall otherwise determine, any share certificates issued evidencing shares of restricted
stock shall remain in the possession of the Company until such shares are free of any restrictions specified in the applicable
restricted stock agreement. The Administrator may direct that such share certificate(s) bear a legend setting forth the applicable
restrictions on transferability.

 

(d)Non transferability.
Shares of restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as otherwise
specifically provided in this Plan or the applicable restricted stock agreement. The Administrator at the time of grant shall specify
the date or dates (which may depend upon or be related to the attainment of performance goals and other conditions) on which the
non transferability of the restricted stock shall lapse.

 

(e)Consequence
of Termination of Employment or Service. A grantee’s termination of employment or service for any reason (including death)
shall cause the immediate forfeiture of all shares of restricted stock that have not yet vested as of the date of such termination
of employment or service. All dividends paid on such shares also shall be forfeited, whether by termination of any escrow arrangement
under which such dividends are held, by the grantee’s repayment of dividends he received directly, or otherwise.

 

		2.8	Grant of Unrestricted Stock

 

The Administrator may
grant (or sell at a purchase price at least equal to par value) Common Shares free of restrictions under the Plan, to such key
persons and in such amounts and subject to such forfeiture provisions as the Administrator shall determine in its sole discretion.
Shares may be thus granted or sold in respect of past services or other valid consideration.

 

		2.9	Grant of Performance Shares

 

(a)Performance Share
Grants. The Administrator may grant performance share awards to such key persons, and in such amounts and subject to such vesting
and forfeiture provisions and other terms and conditions, as the Administrator shall in its sole discretion determine, subject
to the provisions of the Plan. Such an award shall entitle the grantee to acquire Common Shares, or to be paid the value thereof
in cash, as the Administrator shall determine, if specified performance goals are met. Performance shares may be awarded independently
of, or in connection with, any other award under the Plan. A grantee shall have no rights with respect to a performance share award
unless such grantee accepts the award by accepting delivery of an Award Agreement at such time and in such form as the Administrator
shall determine.

 

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(b)Shareholder Rights.
The grantee of a performance share award will have the rights of a shareholder only as to shares for which a share certificate
has been issued pursuant to the award and not with respect to any other shares subject to the award.

 

(c)Consequence of
Termination of Employment or Service. Except as may otherwise be provided by the Administrator at any time prior to a grantee’s
termination of employment or service, the rights of a grantee of a performance share award shall automatically terminate upon the
grantee’s termination of employment or service by the Company and its subsidiaries for any reason (including death).

 

(d)Exercise Procedures;
Automatic Exercise. At the discretion of the Administrator, the applicable Award Agreement may set out the procedures to be followed
in exercising a performance share award or it may provide that such exercise shall be made automatically after satisfaction of
the applicable performance goals.

 

(e)Tandem Grants;
Effect on Exercise. Except as otherwise specified by the Administrator, (i) a performance share award granted in tandem with an
option may be exercised only while the option is exercisable, (ii) the exercise of a performance share award granted in tandem
with any other award shall reduce the number of shares subject to such other award in the manner specified in the applicable Award
Agreement, and (iii) the exercise of any award granted in tandem with a performance share award shall reduce the number of shares
subject to the latter in the manner specified in the applicable Award Agreement.

 

(f)Non transferability.
Performance shares may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as otherwise
specifically provided in this Plan or the applicable Award Agreement. The Administrator at the time of grant shall specify the
date or dates (which may depend upon or be related to the attainment of performance goals and other conditions) on which the non
transferability of the performance shares shall lapse.

 

ARTICLE III

Miscellaneous

 

		3.1	Amendment of the Plan; Modification of Awards

 

(a)Amendment
of the Plan. The Board may from time to time suspend, discontinue, revise or amend the Plan in any respect whatsoever, except that
no such amendment shall materially impair any rights or materially increase any obligations under any award theretofore made under
the Plan without the consent of the grantee (or, upon the grantee’s death, the person having the right to exercise the award).
For purposes of this Section 3.1, any action of the Board or the Administrator that in any way alters or affects the tax treatment
of any award shall not be considered to materially impair any rights of any grantee.

 

    	11

    	 

    

 

(b)Shareholder
Approval Requirement. Shareholder approval shall be required with respect to any amendment to the Plan that (i) increases the aggregate
number of shares that may be issued pursuant to incentive stock options or changes the class of employees eligible to receive such
options; or (ii) materially increases the benefits under the Plan to persons whose transactions in Common Shares are subject to
section 16(b) of the 1934 Act or increases the benefits under the Plan to someone who is, materially increases the number of shares
which may be issued to such persons, or materially modifies the eligibility requirements affecting such persons.

 

(c)Modification
of Awards. The Administrator may cancel any award under the Plan. The Administrator also may amend any outstanding Award Agreement,
including, without limitation, by amendment which would: (i) accelerate the time or times at which the award becomes unrestricted
or may be exercised, provided that, except as and to the extent that the Administrator may otherwise provide pursuant to Section
2.5, 3.7 or 3.8, no option, stock appreciation right or restricted stock unit shall be exercisable prior to the first anniversary
of its date of grant; (ii) waive or amend any goals, restrictions or conditions set forth in the Agreement; or (iii) waive or amend
the operation of Section 2.5 with respect to the termination of the award upon termination of employment or service. However, any
such cancellation or amendment (other than an amendment pursuant to Sections 3.7 or 3.8(b)) that materially impairs the rights
or materially increases the obligations of a grantee under an outstanding award shall be made only with the consent of the grantee
(or, upon the grantee’s death, the person having the right to exercise the award).

 

		3.2	Consent Requirement

 

(a)No Plan Action
Without Required Consent. If the Administrator shall at any time determine that any Consent (as hereinafter defined) is necessary
or desirable as a condition of, or in connection with, the granting of any award under the Plan, the issuance or purchase of shares
or other rights thereunder, or the taking of any other action thereunder (each such action being hereinafter referred to as a “Plan
Action”), then such Plan Action shall not be taken, in whole or in part, unless and until such Consent shall have been effected
or obtained to the full satisfaction of the Administrator.

 

(b)Consent Defined.
The term “Consent” as used herein with respect to any Plan Action means (i) any and all listings, registrations or
qualifications in respect thereof upon any securities exchange or under any federal, state or local law, rule or regulation, (ii)
any and all written agreements and representations by the grantee with respect to the disposition of shares, or with respect to
any other matter, which the Administrator shall deem necessary or desirable to comply with the terms of any such listing, registration
or qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made and
(iii) any and all consents, clearances and approvals in respect of a Plan Action by any governmental or other regulatory bodies.

 

		3.3	Nonassignability

 

Except as provided
in Sections 2.5(e), 2.6, 2.7(d) and 2.9(f): (a) no award or right granted to any person under the Plan or under
any Award Agreement shall be assignable or transferable other than by will or by the laws of descent and distribution; and (b)
all rights granted under the Plan or any Award Agreement shall be exercisable during the life of the grantee only by the grantee
or the grantee’s legal representative.

 

    	12

    	 

    

 

		3.4	Requirement of Notification of Election Under Section 83(b)
of the Code

 

If any grantee shall,
in connection with the acquisition of Common Shares under the Plan, make the election permitted under section 83(b) of the Code
(i.e., an election to include in gross income in the year of transfer the amounts specified in section 83(b)), such grantee shall
notify the Company of such election within 10 days of filing notice of the election with the Internal Revenue Service, in addition
to any filing and notification required pursuant to regulations issued under the authority of Code section 83(b).

 

		3.5	Requirement of Notification Upon Disqualifying Disposition
Under Section 421(b) of the Code

 

Each Award Agreement
with respect to an incentive stock option shall require the grantee to notify the Company of any disposition of Common Shares issued
pursuant to the exercise of such option under the circumstances described in section 421(b) of the Code (relating to certain disqualifying
dispositions), within 10 days of such disposition.

 

		3.6	Withholding Taxes

 

(a)With
Respect to Cash Payments. Whenever cash is to be paid pursuant to an award under the Plan, the Company shall be entitled to deduct
therefrom an amount sufficient in its opinion to satisfy all federal, state and other governmental tax withholding requirements
related to such payment.

 

(b)With Respect
to Delivery of Common Shares. Whenever Common Shares are to be delivered pursuant to an award under the Plan, the Company shall
be entitled to require as a condition of delivery that the grantee remit to the Company an amount sufficient in the opinion of
the Company to satisfy all federal, state and other governmental tax withholding requirements related thereto. With the approval
of the Administrator, which the Administrator shall have sole discretion whether or not to give, the grantee may satisfy the foregoing
condition by electing to have the Company withhold from delivery shares having a value equal to the amount of tax to be withheld.
Such shares shall be valued at their Fair Market Value as of the date on which the amount of tax to be withheld is determined.
Fractional share amounts shall be settled in cash. Such a withholding election may be made with respect to all or any portion of
the shares to be delivered pursuant to an award.

 

		3.7	Adjustment Upon Changes in Common Shares

 

(a)Shares Available
for Grants. In the event of any change in the number of Common Shares outstanding by reason of any stock dividend or split, reverse
stock split, recapitalization, merger, consolidation, combination or exchange of shares or similar corporate change, the maximum
number of Common Shares with respect to which the Administrator may grant awards under Article II hereof, as described in Section
1.5(a), shall be appropriately adjusted by the Administrator. In the event of any change in the number of Common Shares outstanding
by reason of any other event or transaction, the Administrator may, but need not, make such adjustments in the number and class
of Common Shares with respect to which awards: may be granted under Article II hereof as the Administrator may deem appropriate.

 

    	13

    	 

    

 

(b)Outstanding Restricted
Stock and Performance Shares. Unless the Administrator in its sole and absolute discretion otherwise determines, any securities
or other property (including dividends paid in cash) received by a grantee with respect to a share of restricted stock, the issue
date with respect to which occurs prior to such event, but which has not vested as of the date of such event, as a result of any
dividend, stock split, reverse stock split, recapitalization, merger, consolidation, combination, exchange of shares or otherwise
will not vest until such share of restricted stock vests, and shall be promptly deposited with the Company or other custodian designated
pursuant to Section 2.7(c) hereof.

 

The Administrator may,
in its absolute discretion, adjust any grant of shares of restricted stock, the issue date with respect to which has not occurred
as of the date of the occurrence of any of the following events, or any grant of performance shares, to reflect any dividend, stock
split, reverse stock split, recapitalization, merger, consolidation, combination, exchange of shares or similar corporate change
as the Administrator may deem appropriate to prevent the enlargement or dilution of rights of grantees.

 

(c)Outstanding Options,
Stock Appreciation Rights and Dividend Equivalent Rights--Increase or Decrease in Issued Shares Without Consideration. Subject
to any required action by the shareholders of the Company, in the event of any increase or decrease in the number of issued Common
Shares resulting from a subdivision or consolidation of Common Shares or the payment of a stock dividend (but only on the Common
Shares), or any other increase or decrease in the number of such shares effected without receipt of consideration by the Company,
the Administrator shall proportionally adjust the number of Common Shares subject to each outstanding option and stock appreciation
right, and the exercise price-per-Common Share of each such option and stock appreciation right and the number of any related dividend
equivalent rights.

 

(d)Outstanding Options,
Stock Appreciation Rights, Restricted Stock Units and Dividend Equivalent Rights--Certain Mergers. Subject to any required action
by the shareholders of the Company, in the event that the Company shall be the surviving corporation in any merger or consolidation
(except a merger or consolidation as a result of which the holders of Common Shares receive securities of another corporation),
each option, stock appreciation right and dividend equivalent right outstanding on the date of such merger or consolidation shall
pertain to and apply to the securities which a holder of the number of Common Shares subject to such option, stock appreciation
right, restricted stock unit or dividend equivalent right would have received in such merger or consolidation.

 

(e)Outstanding
Options, Stock Appreciation Rights, Restricted Stock Units and Dividend Equivalent Rights--Certain Other Transactions. In the event
of (i) a dissolution or liquidation of the Company, (ii) a sale of all or substantially all of the Company’s assets, (iii)
a merger or consolidation involving the Company in which the Company is not the surviving corporation or (iv) a merger or consolidation
involving the Company in which the Company is the surviving corporation but the holders of Common Shares receive securities of
another corporation and/or other property, including cash, the Administrator shall, in its absolute discretion, have the power
to:

 

(A)cancel,
effective immediately prior to the occurrence of such event, each option, stock appreciation right and restricted stock unit (including
each dividend equivalent right related thereto) outstanding immediately prior to such event (whether or not then exercisable),
and, in full consideration of such cancellation, pay to the grantee to whom such option or stock appreciation right was granted
an amount in cash, for each Common Share subject to such option or stock appreciation right, respectively, equal to the excess
of (x) the value, as determined by the Administrator in its absolute discretion, of the property (including cash) received by the
holder of a Common Share as a result of such event over (y) the exercise price of such option or stock appreciation right; or

 

    	14

    	 

    

 

(B)provide
for the exchange of each option, stock appreciation right and restricted stock unit (including any related dividend equivalent
right) outstanding immediately prior to such event (whether or not then exercisable) for an option on, stock appreciation right,
restricted stock unit and dividend equivalent right with respect to, as appropriate, some or all of the property which a holder
of the number of Common Shares subject to such option, stock appreciation right or restricted stock unit would have received and,
incident thereto, make an equitable adjustment as determined by the Administrator in its absolute discretion in the exercise price
of the option, stock appreciation right or restricted stock unit, or the number of shares or amount of property subject to the
option, stock appreciation right, restricted stock unit or dividend equivalent right or, if appropriate, provide for a cash payment
to the grantee to whom such option, stock appreciation right or restricted stock unit was granted in partial consideration for
the exchange of the option, stock appreciation right or restricted stock unit.

 

(f)Outstanding Options,
Stock Appreciation Rights, Restricted Stock Units and Dividend Equivalent Rights--Other Changes. In the event of any change in
the capitalization of the Company or a corporate change other than those specifically referred to in Sections 3.7(c), (d) or (e)
hereof, the Administrator may, in its absolute discretion, make such adjustments in the number and class of shares subject to options,
stock appreciation rights, restricted stock units and dividend equivalent rights outstanding on the date on which such change occurs
and in the per-share exercise price of each such option, stock appreciation right and restricted stock unit as the Administrator
may consider appropriate to prevent dilution or enlargement of rights. In addition, if and to the extent the Administrator determines
it is appropriate, the Administrator may elect to cancel each option, stock appreciation right and restricted stock unit (including
each dividend equivalent right related thereto) outstanding immediately prior to such event (whether or not then exercisable),
and, in full consideration of such cancellation, pay to the grantee to whom such option, stock appreciation right or restricted
stock unit was granted an amount in cash, for each Common Share subject to such option, stock appreciation right or restricted
stock unit, respectively, equal to the excess of (i) the Fair Market Value of Common Shares on the date of such cancellation over
(ii) the exercise price of such option, stock appreciation right or restricted stock unit.

 

(g)No Other Rights.
Except as expressly provided in the Plan, no grantee shall have any rights by reason of any subdivision or consolidation of shares
of any class, the payment of any dividend, any increase or decrease in the number of shares of any class or any dissolution, liquidation,
merger or consolidation of the Company or any other corporation. Except as expressly provided in the Plan, no issuance by the Company
of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number of Common Shares subject to an award or the exercise price of any option or stock appreciation
right.

 

    	15

    	 

    

 

		3.8	Change in Control

 

(a)Change in Control
Defined. For purposes of this Section 3.8, “Change in Control” shall mean the occurrence of any of the following:

 

(i)any
person or “group” (within the meaning of Section 13(d)(3) of the 1934 Act), other than entities which the Chairman
of the Board directly or indirectly controls (as defined in Rule 12b-2 under the 1934 Act), acquiring “beneficial ownership”
(as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of fifty percent (50%) or more of the aggregate voting power
of the capital stock ordinarily entitled to elect directors of the Company;

 

(ii)the
sale of all or substantially all of the Company’s assets in one or more related transactions to a person other than such
a sale to a subsidiary of the Company which does not involve a change in the equity holdings of the Company or to an entity which
the Chairman directly or indirectly controls; or

 

(iii)any
merger, consolidation, reorganization or similar event of the Company or any of its subsidiaries, as a result of which the holders
of the voting stock of the Company immediately prior to such merger, consolidation, reorganization or similar event do not directly
or indirectly hold at least fifty-one percent (51%) of the aggregate voting power of the capital stock of the surviving entity.

 

(b)Effect of a Change
in Control. Unless the Administrator provides otherwise in an Award Agreement, upon the occurrence of a Change in Control:

 

(i)notwithstanding
any other provision of this Plan, any award then outstanding shall become fully vested and any award in the form of an option,
stock appreciation right or restricted stock unit shall be immediately exercisable;

 

(ii)to
the extent permitted by law, the Administrator may, in its sole discretion, amend any Award Agreement in such manner as it deems
appropriate;

 

(iii)a
grantee who incurs a termination of employment or service for any reason, other than a dismissal for cause, concurrent with or
within one year following the Change in Control may exercise any outstanding option, stock appreciation right or restricted stock
unit, but only to the extent that the grantee was entitled to exercise the award on his termination of employment or service date,
until the earlier of (A) the original expiration date of the award and (B) the later of (x) the date provided for under the terms
of Section 2.5 without reference to this Section 3.8(b)(iii) and (y) the first anniversary of the grantee’s termination of
employment or service.

 

(c)Miscellaneous.
Whenever deemed appropriate by the Administrator, any action referred to in paragraph (b)(ii) of this Section 3.8 may be made
conditional upon the consummation of the applicable Change in Control transaction.

 

    	16

    	 

    

 

		3.9	Right of Discharge Reserved

 

Nothing in the Plan
or in any Award Agreement shall confer upon any grantee the right to continue his employment or service with the Company or affect
any right that the Company may have to terminate such employment or service.

 

		3.10	Non-Uniform Determinations

 

The Administrator’s
determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or who are eligible
to receive, awards under the Plan (whether or not such persons are similarly situated). Without limiting the generality of the
foregoing, the Administrator shall be entitled, among other things, to make non-uniform and selective determinations, and to enter
into non-uniform and selective Award Agreements, as to (a) the persons to receive awards under the Plan, and (b) the terms and
provisions of awards under the Plan.

 

		3.11	Other Payments or Awards

 

Nothing contained in
the Plan shall be deemed in any way to limit or restrict the Company from making any award or payment to any person under any other
plan, arrangement or understanding, whether now existing or hereafter in effect.

 

		3.12	Headings

 

Any section, subsection,
paragraph or other subdivision headings contained herein are for the purpose of convenience only and are not intended to expand,
limit or otherwise define the contents of such subdivisions.

 

		3.13	Effective Date and Term of Plan

 

(a)Adoption; Shareholder
Approval. The Plan was adopted by the Board and although the Company intends to obtain approval of the Plan by the Company’s
shareholders within the time period required to allow grants of options hereunder to qualify as incentive stock options, awards
under the Plan prior to such shareholder approval may, but need not, be made subject to such approval.

 

(b)Termination
of Plan. Unless sooner terminated by the Board or pursuant to Paragraph (a) above, the provisions of the Plan respecting the grant
of incentive stock options shall terminate on the tenth anniversary of the adoption of the Plan by the Board, and no incentive
stock option awards shall thereafter be made under the Plan. All such awards made under the Plan prior to its termination shall
remain in effect until such awards have been satisfied or terminated in accordance with the terms and provisions of the Plan and
the applicable Award Agreements.

 

		3.14	Restriction on Issuance of Stock Pursuant to Awards

 

The Company shall
not permit any Common Shares to be issued pursuant to Awards granted under the Plan unless such Common Shares are fully paid and
non-assessable under applicable law.

 

		3.15	Governing Law

 

Except to the extent
preempted by any applicable federal law, the Plan will be construed and administered in accordance with the laws of Bermuda, without
giving effect to principles of conflict of laws.

 

    	17SECURITIES PURCHASE AGREEMENT

 

THIS
SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made as of the 13th day of March 2013,
by and between BeesFree, Inc., a Nevada corporation (the “Company”), BeesFree USA, Inc., a Delaware corporation
(“BeesFree USA”), and the investors listed on the Schedule of Investors attached hereto (each an “Investor”
and collectively, the “Investors”).

 

WITNESSETH:

 

WHEREAS, the Company
desires to offer and sell to the Investors (the “Offering”), and the Investors desire to purchase from the Company,
(a) 15% senior secured convertible promissory notes in the aggregate principal amount of up to a maximum of $2,520,000 (the “Notes”),
in the form attached as Exhibit A hereto, and (b) a warrant (the “Warrant”), in the form attached as
Exhibit B hereto, to purchase 700,000 shares of the Company’s common stock, $0.001 par
value per share (the “Common Stock”) for each $105,000 invested, with an exercise price equal to $1.50
per share; and

 

NOW, THEREFORE, in
consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

 

1  Purchase
and Sale of Notes and Warrants.

 

1.1          Issuance
and Sale of Notes and Warrants. Subject to the terms and conditions of this Agreement, the Investors severally and not jointly
agree to purchase at the Closing (as hereafter defined), and the Company agrees to issue and sell to the Investors at the Closing,
the amount of Notes and the Warrants (sometimes collectively referred to herein as the “Securities”) set forth
opposite each Investor’s name on the Omnibus Signature Page hereto, for an aggregate purchase price of up to a maximum of
Two Million Five Hundred Twenty Thousand ($2,520,000) Dollars (the “Offering Amount”).

 

1.2          Payment.  Each
Investor is enclosing with its delivery of its Omnibus Signature Page hereto a check payable to, or will promptly make a wire transfer
payment to, BeesFree, Inc. in the full amount of the purchase price of the Notes and Warrants being subscribed for (the “Purchase
Price”).  Wire instructions are as follows:

 

Bank Name: Bank of America, N.A.

Acct.
Name: BeesFree, Inc.

ABA Number:
026009593

A/C Number:  483043536352

FBO: Investor Name

Social
Security Number

Address

 

All funds tendered
by Investors will be held in a segregated, non-interest bearing account in the Company’s name at Bank of America, N.A. It
is contemplated that the funds will be released at such time (or promptly thereafter) as all conditions to Closing as set forth
in this Agreement have been satisfied (or otherwise waived) and a Closing is consummated. In the event a Closing does not occur,
the Company will refund all subscription funds, without interest accrued thereon or deduction therefrom, and will return the documents
previously delivered to each Investor, and such documents will be terminated and of no force or effect.   Each Investor
understands and acknowledges that there is no minimum amount of funds that needs to be raised to effectuate a Closing hereunder.

 

    	 

    	 

    

 

1.3          Closing.

 

(a)          First
Closing. Subject to the terms and conditions set forth in this Agreement, the Company shall
issue and sell to each Investor, and each Investor shall, severally and not jointly, purchase from the Company at the first closing,
such principal amount of Notes as set forth on the signature pages attached hereto (and applicable number of Warrants), which will
be reflected opposite such Investor’s name on the Schedule of Investors attached hereto (the “First Closing”).
The date of the First Closing is hereinafter referred to as the “First Closing Date.”

 

(b)          Subsequent
Closing(s). The Company agrees to issue and sell to each Investor listed on the Subsequent Closing Schedule of Investors, and
each Investor agrees, severally and not jointly, to purchase from the Company on such Subsequent Closing Date such principal amount
of Notes as set forth on the signature pages attached hereto (and applicable number of Warrants), which will be reflected opposite
such Investor’s name on Schedule of Investors attached hereto (a “Subsequent Closing”). There may be more
than one Subsequent Closing. The date of any Subsequent Closing is hereinafter referred to as a “Subsequent Closing Date”).
Notwithstanding the foregoing, the maximum principal amount of Notes to be sold at the First Closing and all Subsequent Closings
shall be $2,520,000 and the date upon which the final Note(s) are sold hereunder shall be referred to as the “Final Closing
Date”.

 

The First Closing and
any applicable Subsequent Closings are each referred to in this Agreement as a “Closing.” The First Closing
Date, any Subsequent Closing Dates and the Final Closing Date are sometimes referred to herein as a “Closing Date.”

 

(c)          Closing
Location. All Closings shall occur on or prior to March 31, 2013, which date may be extended by the Company in its sole discretion,
at the offices of the Company, 2101 Vista Parkway, Suite 122, West Palm Beach, Florida 334111 or remotely via the exchange
of documents and signatures.

 

(d)          At
the Closing, the Company shall deliver the Notes and the Warrants to the Investors against payment of the Purchase Price to the
Company as described above, along with delivery by the Investors of an Accredited Investor Certification and Investor Profile to
the Company provided to Investors separately.

 

(e)          The
Closing is expressly conditioned upon the Company, BeesFree USA and the Investors having entered into the Security Agreement in
the form attached hereto as Exhibit C.

 

1.4          Additional
Definitions. For purposes of this Agreement, certain capitalized terms are defined under Appendix A.

 

    	2

    	 

    

 

2 Representations
and Warranties of the Company. The Company hereby represents and warrants to the Investors, except as set forth on any Schedule
attached hereto, the following:

 

2.1          Due
Incorporation. The Company and each Subsidiary is a corporation duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, with all requisite corporate power to own its properties and to carry on its
business as presently conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing
in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other
than those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect (as defined herein). For purposes
of this Agreement, a “Material Adverse Effect” shall mean a material adverse effect on the financial condition,
results of operations, prospects, properties or business of the Company and its Subsidiaries taken as a whole. As of the Closing
Date, all of the Company’s Subsidiaries and the Company’s other ownership interests therein are set forth on Schedule
2.1. The Company represents that it owns all of the equity of the Subsidiaries and rights to receive equity of the Subsidiaries
set forth on Schedule 2.1, free and clear of all liens, encumbrances and claims, except as set forth on Schedule
2.1. No person or entity other than the Company has the right to receive any equity interest in the Subsidiaries. Other
than as set forth on Schedule 2.1, the Company further represents that neither the Company nor the Subsidiaries have
been known by any other names for the five (5) years preceding the date of this Agreement.

 

2.2          Outstanding
Stock. All issued and outstanding shares of capital stock and equity interests in the Company have been duly authorized and
validly issued and are fully paid and non-assessable.

 

2.3          Authority;
Enforceability. This Agreement, the Notes, Warrants, Security Agreement and any other agreements delivered or required to be
delivered together with or pursuant to this Agreement or in connection herewith (collectively, the “Transaction Documents”)
have been duly authorized, executed and delivered by the Company and/or the Subsidiaries, as the case may be, and are valid and
binding agreements of the Company and/or the Subsidiaries, as the case may be, enforceable in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors’ rights generally and to general principles of equity. The Company and/or the Subsidiaries, as the
case may be, have full corporate power and authority necessary to enter into and deliver the Transaction Documents and to perform
their obligations thereunder.

 

2.4          Capitalization
and Additional Issuances. The authorized and outstanding capital stock of the Company and the Subsidiaries on a fully diluted
basis and all outstanding rights to acquire or receive, directly or indirectly, any equity of the Company and/or the Subsidiaries
as of the date of this Agreement and the Closing Date (not including the Securities) are set forth on Schedule 2.4.
Except as set forth on Schedule 2.4, there are no options, warrants or rights to subscribe to securities, rights,
understandings or obligations convertible into or exchangeable for or granting any right to subscribe for any shares of capital
stock or other equity interest of the Company or any of the Subsidiaries. Except as set forth on Schedule 2.4, there
are no outstanding agreements or preemptive or similar rights affecting the Company’s Common Stock or equity.

 

    	3

    	 

    

 

2.5          Consents.
No consent, approval, authorization or order of any court, governmental agency or body or arbitrator having jurisdiction over the
Company, the Subsidiaries or any of their Affiliates, any Principal Market or the Company’s stockholders is required for
the execution by the Company of the Transaction Documents and compliance and performance by the Company and the Subsidiaries of
their respective obligations under the Transaction Documents, including, without limitation, the issuance and sale of the Securities,
other than (i) the filings required pursuant to this Agreement, and (ii) the filing of Form D with the Commission and such filings
as are required to be made under applicable state securities laws. The Transaction Documents and the Company’s performance
of its obligations thereunder have been unanimously approved by the Company’s board of directors in accordance with the Company’s
articles of incorporation and applicable law. Any such qualifications and filings will, in the case of qualifications, be effective
upon Closing, and will, in the case of filings, be made within the time prescribed by law.

 

2.6          No
Violation or Conflict. Conditioned upon the representations and warranties of Investors in Section 3 hereof being materially
true and correct, neither the issuance nor the sale of the Securities nor the performance of the Company’s obligations under
this Agreement and the other Transaction Documents by the Company, will:

 

(a)          violate,
conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time
or both would be reasonably likely to constitute a default) under (A) the articles of incorporation or bylaws of the Company, (B)
to the Company’s knowledge, any decree, judgment, order, law, treaty, rule, regulation or determination applicable to the
Company of any court, governmental agency or body, or arbitrator having jurisdiction over the Company or over the properties or
assets of the Company or any of its Affiliates, (C) the terms of any bond, debenture, note or any other evidence of indebtedness,
or any agreement, stock option or other similar plan, indenture, lease, mortgage, deed of trust or other instrument to which the
Company or any of its Affiliates is a party, by which the Company or any of its Affiliates is bound, or to which any of the properties
of the Company or any of its Affiliates is subject or (D) the terms of any “lock-up” or similar provision of any underwriting
or similar agreement to which the Company, or any of its Affiliates is a party, except the violation, conflict, breach or default
of which would not have a Material Adverse Effect; or

 

(b)          result
in the creation or imposition of any lien, charge or encumbrance upon the Securities or any of the assets of the Company or any
of its Affiliates, except in favor of each Investor as described herein; or

 

(c)          except
as set forth in Schedule 2.6 hereto, result in the activation of any rights of first refusal, participation rights,
preemptive rights, anti-dilution rights or a reset or repricing of any debt, equity or security instrument of any creditor or equity
holder of the Company, or the holder of the right to receive any debt, equity or security instrument of the Company, nor result
in the acceleration of the due date of any obligation of the Company; or

 

(d)          except
as set forth in Schedule 2.6 hereto, result in the triggering of any piggy-back or other registration rights of any
person or entity holding securities of the Company or having the right to receive securities of the Company.

 

    	4

    	 

    

 

2.7          The
Securities. The Securities upon issuance:

 

(a)          
are, or will be, free and clear of any security interests, liens, claims or other encumbrances, subject only to restrictions upon
transfer under the Securities Act and any applicable state securities laws;

 

(b)
have been, or will be, duly and validly authorized and on the dates of issuance of the Notes and Warrants, the Conversion Shares
upon conversion of the Notes, and the Warrant Shares upon exercise of the Warrants, and such Notes will constitute the valid
and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by
applicable law, and the Warrants, Conversion Shares and Warrant Shares will be duly and validly issued,
fully paid and non-assessable;

 

(c)          
will not have been issued or sold in violation of any preemptive or other similar rights of the holders of any securities of the
Company or rights to acquire securities or debt of the Company;

 

(d)          will
not subject the holders thereof to personal liability by reason of being such holders; and

 

(e)          conditioned
upon the representations and warranties of the Investors as set forth in Section 3 hereof being materially true and correct, will
not result in a violation of Section 5 under the Securities Act.

 

2.8          Litigation.
There is no pending or, to the best knowledge of the Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its Affiliates that would adversely
affect the execution by the Company or the complete and timely performance by the Company of its obligations under the Transaction
Documents. Except as disclosed in the Reports, there is no pending or, to the best knowledge of the Company, basis for or threatened
action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over
the Company, or any of its Affiliates which litigation if adversely determined would have a Material Adverse Effect.

 

2.9          No
Market Manipulation. The Company and its Affiliates have not taken, and will not take, directly or indirectly, any action designed
to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of the Common Stock
to facilitate the sale or resale of the Securities or affect the price at which the Securities may be issued or resold.

 

    	5

    	 

    

 

2.10        Information
Concerning Company. As of the date of this Agreement and the Closing Date, the Reports and Other Written Information contain
and will contain all material information relating to the Company and its operations and financial condition as of their respective
dates which information is required to be disclosed therein. Since December 31, 2011, and except as disclosed in the Reports or
modified in the Reports and Other Written Information or in the Schedules hereto, there has been no Material Adverse Effect relating
to the Company’s business, financial condition or affairs. The Reports and Other Written Information including the financial
statements included therein do 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, taken as a whole, not misleading in light of the circumstances and
when made.

 

2.11        Defaults.
The Company is not in material violation of its articles of incorporation or bylaws. The Company is (i) not in default under or
in violation of any other material agreement or instrument to which it is a party or by which it or any of its properties are bound
or affected, which default or violation would have a Material Adverse Effect, (ii) not in default with respect to any order of
any court, arbitrator or governmental body or subject to or party to any order of any court or governmental authority arising out
of any action, suit or proceeding under any statute or other law respecting antitrust, monopoly, restraint of trade, unfair competition
or similar matters which default would have a Material Adverse Effect, or (iii) not in violation of any statute, rule or regulation
of any governmental authority which violation would have a Material Adverse Effect.

 

2.12        No
Integrated Offering. Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf, has directly
or indirectly made any offers or sales of any security of the Company nor solicited any offers to buy any security of the Company
under circumstances that would cause the offer of the Securities pursuant to this Agreement to be integrated with prior offerings
by the Company for purposes of the Securities Act or any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of the OTC Market. No prior offering will impair the exemptions relied upon in this Offering or
the Company’s ability to timely comply with its obligations hereunder. Neither the Company nor any of its Affiliates will
take any action or suffer any inaction or conduct any offering other than the transactions contemplated hereby that may be integrated
with the offer or issuance of the Securities or that would impair the exemptions relied upon in this Offering or the Company’s
ability to timely comply with its obligations hereunder.

 

2.13        No
General Solicitation. Neither the Company, nor any of its Affiliates, nor to its knowledge, 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 under the Securities
Act) in connection with the offer or sale of the Securities.

 

2.14        No
Undisclosed Liabilities. The Company has no liabilities or obligations which are material, individually or in the aggregate,
other than those incurred in the ordinary course of the Company’s business since December 31, 2011, and which, individually
or in the aggregate, would reasonably be expected to have a Material Adverse Effect, except as disclosed in the Reports or in Schedule
2.14.

 

    	6

    	 

    

 

2.15         No
Undisclosed Events or Circumstances. Since December 31, 2011, except as disclosed in the Reports, no event or circumstance
has occurred or exists with respect to the Company or its businesses, properties, operations or financial condition, that, under
applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which
has not been so publicly announced or disclosed in the Reports.

 

2.16         Dilution.
The Company’s executive officers and directors understand the nature of the Securities being sold hereby and recognize that
the issuance of the Securities will have a potential dilutive effect on the equity holdings of other holders of the Company’s
equity or rights to receive equity of the Company. The board of directors of the Company has concluded, in its good faith business
judgment, that the issuance of the Securities is in the best interests of the Company. The Company specifically acknowledges that
its obligation to issue the Conversion Shares upon conversion of the Notes and the Warrant Shares upon exercise of the Warrants
is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other
stockholders of the Company or parties entitled to receive equity of the Company.

 

2.17         No
Disagreements with Accountants and Lawyers. There are no material disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the accountants and lawyers previously and presently employed by the
Company, including, but not limited to, disputes or conflicts over payment owed to such accountants and lawyers, nor have there
been any such disagreements during the two years prior to the Closing Date,

 

2.18         Investment
Company. Neither the Company nor any Affiliate of the Company is an “investment company” within the meaning of
the Investment Company Act of 1940, as amended.

 

2.19         Certain
Fees. Other than as set forth on Schedule 2.19 hereto, the Company represents
that to the best of its knowledge, there are no parties entitled to receive fees, commissions, finder’s fees, due diligence
fees or similar payments in connection with the Offering. The Investors shall have no obligation with respect to any fees or with
respect to any claims made by or on behalf of other persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by the Transaction Documents.

 

2.20         Foreign
Corrupt Practices. Neither the Company, nor to the knowledge of the Company, any Subsidiary, any agent or other person acting
on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment
or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed
to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware)
which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.

 

2.21         Reporting
Company/Shell Company. The Company is a publicly-held company subject to reporting obligations pursuant to Section 13 of the
Exchange Act and has a class of Common Stock registered pursuant to Section 12(g) of the Exchange Act. Pursuant to the provisions
of the Exchange Act, the Company has timely filed all reports and other materials required to be filed thereunder with the Commission
during the preceding twelve months. As of the Closing Date, the Company is not a “shell company” but is a “former
shell company” as those terms are employed in Rule 144 under the Securities Act.

 

    	7

    	 

    

 

2.22         Listing.
The Company’s Common Stock is quoted on the over-the-counter market maintained by the OTC Markets Group, Inc. (the “OTC
Market”) under the symbol “BEES”. The Company has not received any pending oral or written notice that its
Common Stock is not eligible nor will become ineligible for quotation on the OTC Market nor that its Common Stock does not meet
all requirements for the continuation of such quotation.

 

2.23         DTC
Status. The Company’s transfer agent is a participant in, and the Common Stock shall be eligible for transfer pursuant
to, the Depository Trust Company Automated Securities Transfer Program. The name, address, telephone number, fax number, contact
person and email address of the Company transfer agent is set forth on Schedule 2.23 hereto.

 

2.24         Company
Predecessor and Subsidiaries. The Company makes each of the representations contained in Sections 2.1, 2.2, 2.3, 2.5, 2.6,
2.8, 2.10, 2.11, 2.14, 2.15, 2.17, 2.18 and 2.20 of this Agreement, as same relate or could be applicable to each Subsidiary. All
representations made by or relating to the Company of a historical or prospective nature and all undertakings described in Section
9 shall relate, apply and refer to the Company and the Subsidiaries and their predecessors and successors.

 

2.25         Correctness
of Representations. The Company represents that the foregoing representations and warranties are true and correct as of the
date hereof in all material respects, and, unless the Company otherwise notifies the Investors prior to the Closing Date, shall
be true and correct in all material respects as of the Closing Date; provided that if such representation or warranty is
made as of a different date, such representation or warranty shall be true as of such date.

 

2.26         Survival.
The foregoing representations and warranties shall survive the Closing Date for a period of one year.

 

3Representations
and Warranties of the Investors. Each of the Investors, severally and not jointly, hereby represents and warrants that:

 

3.1           Authorization.
Investor (i) if a natural person, represents that Investor has reached the age of 21 and has full power and authority to execute
and deliver this Agreement and all other Transaction Documents and to carry out the provisions hereof and thereof; (ii) if a corporation,
partnership, or limited liability company or partnership, or association, joint stock company, trust, unincorporated organization
or other entity, represents that such entity was not formed for the specific purpose of acquiring the Securities, such entity is
duly organized, validly existing and in good standing under the laws of the state of its organization, the consummation of the
transactions contemplated hereby is authorized by, and will not result in a violation of state law or its charter or other organizational
documents, such entity has full power and authority to execute and deliver this Agreement and all other Transaction Documents and
to carry out the provisions hereof and thereof and to purchase and hold the Securities the execution and delivery of this Agreement
has been duly authorized by all necessary action, this Agreement has been duly executed and delivered on behalf of such entity
and is a legal, valid and binding obligation of such entity; or (iii) if executing this Agreement in a representative or fiduciary
capacity, represents that it has full power and authority to execute and deliver this Agreement in such capacity and on behalf
of the subscribing individual, ward, partnership, trust, estate, corporation, or limited liability company or partnership, or other
entity for whom Investor is executing this Agreement, and such individual, partnership, ward, trust, estate, corporation, or limited
liability company or partnership, or other entity has full right and power to perform pursuant to this Agreement and make an investment
in the Company, and represents that this Agreement constitutes a legal, valid and binding obligation of such entity. The execution
and delivery of this Agreement will not violate or be in conflict with any order, judgment, injunction, agreement or controlling
document to which Investor is a party or by which it is bound.

 

    	8

    	 

    

 

3.2           Purchase
Entirely for Own Account. The Securities to be purchased by the Investor will be acquired for investment for the Investor’s
own account and not with a view to the resale or distribution of any part thereof, and such Investor has no present intention of
selling, granting any participation in, or otherwise distributing the same. Such Investor does not have any contract, undertaking,
agreement, or arrangement with any person to sell, transfer, or grant participation to any person with respect to any of the Securities.

 

3.3           Disclosure
of Information. The Investor acknowledges that it has received all the information that it has requested relating to the Company
and the purchase of the Securities. Such Investor acknowledges that it has been furnished with, either by the Company or through
the EDGAR Website of the Commission, copies of the Company’s filings made with the Commission through the tenth (10th)
business day preceding the Closing Date (hereinafter collectively referred to as the “Reports”). Such Investor
is not deemed to have any knowledge of any information not included in the Reports or the Transaction Documents, unless such information
is delivered in the manner described in the next sentence. In addition, such Investor may have received in writing from the Company
such other information concerning its operations, financial condition and other matters as such Investor has requested in writing,
identified thereon as OTHER WRITTEN INFORMATION (such other information is collectively, the “Other Written Information”),
and considered all factors such Investor deems
material in deciding on the advisability of investing in the Securities. In addition to the foregoing, such Investor acknowledges
that it has been afforded: (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of
investing in the Securities; (ii) access to information about the Company and its financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make
an informed investment decision with respect to the investment. Neither such inquiries nor any other investigation conducted by
or on behalf of such Investor or its representatives or counsel shall modify, amend or affect such Investor’s right to rely
on the truth, accuracy and completeness of the Reports, Other Written Information and the Company’s
representations and warranties contained in the Transaction Documents.

 

    	9

    	 

    

 

3.4           Information
on Investor. Such Investor is, and will be at the time of the conversion of the Notes and exercise of the Warrants, an “accredited
investor,” as such term is defined in Rule 501 of Regulation D promulgated by the Commission under the Securities Act and
as set forth on the Accredited Investor Certification, is experienced in investments and business matters, has made investments
of a speculative nature and has purchased securities of United States publicly-owned companies in the development stage in private
placements in the past and, with its representatives, if any, has such knowledge and experience in financial, tax and other business
matters as to enable such Investor to utilize the information made available by the Company to evaluate the merits and risks of,
and to make an informed investment decision with respect to, the proposed purchase, which such Investor hereby agrees represents
a speculative investment. Such Investor has the authority and is duly and legally qualified to purchase and own the Securities.
Such Investor is and acknowledges that it is able to fend for itself, able to bear the risk of such investment for an indefinite
period and to afford a complete loss thereof.

 

3.5           Restricted
Securities. Such Investor understands that the Securities have not been registered under the Securities Act, are characterized
as “Restricted Securities” under federal securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering, and such Investor shall not sell, offer to sell, assign, pledge, hypothecate or otherwise
transfer any of the Securities unless pursuant to an effective registration statement under the Securities Act, or unless an exemption
from registration is available. Notwithstanding anything to the contrary contained in this Agreement, such Investor may transfer
(without restriction and without the need for an opinion of counsel) the Securities to its Affiliates, provided that each
such Affiliate is an “accredited investor,” as such term is defined under Regulation D, and such Affiliate agrees in
writing to be bound by the terms and conditions of this Agreement. For the purposes of this Agreement, an “Affiliate”
of any person or entity means any other person or entity directly or indirectly controlling, controlled by or under direct or indirect
common control with such person or entity. Without limiting the foregoing, each Subsidiary is an Affiliate of the Company. For
purposes of this definition, “control” means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract or otherwise. Other than consummating the transactions
contemplated hereunder, such Investor has not, nor has any person acting on behalf of or pursuant to any understanding with such
Investor, directly or indirectly executed any purchases or sales, including short sales, of the securities of the Company
during the period commencing from the time that such Investor first received a term sheet (written or oral) from the Company or
any other person representing the Company setting forth the material terms of the transactions contemplated hereunder. Other than
to other persons party to this Agreement, such Investor has maintained the confidentiality of all disclosures made to it in connection
with this transaction (including the existence and terms of this transaction). Investor represents that it is familiar with SEC
Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

 

3.6           High
Risk and Speculative Investment. Investor recognizes that the purchase of the Securities involves a high degree of risk
including, but not limited to, the risk factors set forth on Schedule 3.6 and in the Reports and the following: (a) the
Company may require funds in addition to the proceeds of the Offering; (b) an investment in the Company is highly speculative,
and only investors who can afford the loss of their entire investment should consider investing in the Company and the Securities;
(c) the Investor may not be able to liquidate its investment; (d) transferability of the Securities is extremely limited; (e) the
Company may issue additional securities in the future which have rights and preferences that are senior to those of the Securities,
Conversion Shares and Warrant Shares; and (f) that the Common Stock may not successfully become actively traded. Investor has reviewed
the Risk Factors which are set forth in Schedule 3.6 hereto.

 

    	10

    	 

    

 

3.7           Use
of Proceeds. Investor acknowledges and understands that the proceeds from the sale of the Securities are expected to be used
by the Company for its general working capital needs.

 

3.8           General
Solicitation. The offer to sell the Securities was directly communicated to such Investor by the
Company. Investor is not purchasing the Securities as a result of any advertisement, article, notice, or other communication
regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented
in any seminar or any other general solicitation or general advertisement.

 

3.9           Fees.
Except as set forth on Schedule 2.19, no brokerage or finder’s fees or commissions are or will be payable by the Company
or  any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other
person with respect to the transactions contemplated by the Transaction Documents.  The Investors shall have no obligation
with respect to any fees or with respect to any claims made by or on behalf of other persons for fees of a type contemplated in
this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

 

3.10         Legends.
It is understood that the certificates evidencing the Securities (and the Conversion Shares and Warrant Shares, respectively) will
bear the following legend:

 

“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN THIS CERTIFICATE. THE SECURITIES REPRESENTED HEREBY MAY NOT
BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION
OF COUNSEL, REASONABLY ACCEPTABLE TO COUNSEL FOR THE COMPANY, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER, OR DISPOSITION MAY
BE EFFECTUATED WITHOUT REGISTRATION UNDER THE ACT.”

 

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

 

    	11

    	 

    

 

3.12         Investor
should check the Office of Foreign Assets Control (“OFAC”) website at http://www.treas.gov/ofac before
making the following representations. Investor represents that the amounts invested by it in the Company in the Offering were not
and are not directly or indirectly derived from activities that contravene federal, state or international laws and regulations,
including anti-money laundering laws and regulations. Federal regulations and Executive Orders administered by OFAC prohibit, among
other things, the engagement in transactions with, and the provision of services to, certain foreign countries, territories, entities
and individuals. The lists of OFAC prohibited countries, territories, persons and entities can be found on the OFAC website at
http://www.treas.gov/ofac. In addition, the programs administered by OFAC (the “OFAC Programs”) prohibit
dealing with individuals1 or entities in certain countries regardless of whether such individuals or entities appear
on the OFAC lists;

 

3.13         To
the best of Investor’s knowledge, none of: (1) Investor; (2) any person controlling or controlled by Investor; (3) if Investor
is a privately-held entity, any person having a beneficial interest in Investor; or (4) any person for whom Investor is acting
as agent or nominee in connection with this investment is a country, territory, individual or entity named on an OFAC list, or
a person or entity prohibited under the OFAC Programs. Please be advised that the Company may not accept any amounts from a prospective
investor if such prospective investor cannot make the representation set forth in the preceding paragraph. Investor agrees to promptly
notify the Company should Investor become aware of any change in the information set forth in these representations. Investor understands
and acknowledges that, by law, the Company may be obligated to “freeze the account” of Investor, either by prohibiting
additional subscriptions from Investor, declining any redemption requests and/or segregating the assets in the account in compliance
with governmental regulations, and the Company may also be required to report such action and to disclose Investor’s identity
to OFAC. Investor further acknowledges that the Company may, by written notice to Investor, suspend the redemption rights, if any,
of Investor if the Company reasonably deems it necessary to do so to comply with anti-money laundering regulations applicable to
the Company or any of the Company’s other service providers. These individuals include specially designated nationals, specially
designated narcotics traffickers and other parties subject to OFAC sanctions and embargo programs.

 

3.14         To
the best of Investor’s knowledge, none of: (1) Investor; (2) any person controlling or controlled by Investor; (3) if Investor
is a privately-held entity, any person having a beneficial interest in Investor; or (4) any person for whom Investor is acting
as agent or nominee in connection with this investment is a senior foreign political figure,2 or any immediate family3
member or close associate4 of a senior foreign political figure, as such terms are defined in the footnotes
below.

 

 

1 These individuals include specially designated
nationals, specially designated narcotics traffickers and other parties subject to OFAC sanctions and embargo programs.

 

2 A “senior foreign political figure”
is defined as a senior official in the executive, legislative, administrative, military or judicial branches of a foreign government
(whether elected or not), a senior official of a major foreign political party, or a senior executive of a foreign governmentowned
corporation. In addition, a “senior foreign political figure” includes any corporation, business or other entity that
has been formed by, or for the benefit of, a senior foreign political figure.

 

3 “Immediate family” of a senior foreign
political figure typically includes the figure’s parents, siblings, spouse, children and in-laws.

 

4 A “close associate” of a senior foreign
political figure is a person who is widely and publicly known to maintain an unusually close relationship with the senior foreign
political figure, and includes a person who is in a position to conduct substantial domestic and international financial transactions
on behalf of the senior foreign political figure.

 

    	12

    	 

    

 

3.15         If
Investor is affiliated with a non-U.S. banking institution (a “Foreign Bank”), or if Investor receives deposits
from, makes payments on behalf of, or handles other financial transactions related to a Foreign Bank, Investor represents and warrants
to the Company that: (1) the Foreign Bank has a fixed address, other than solely an electronic address, in a country in which the
Foreign Bank is authorized to conduct banking activities; (2) the Foreign Bank maintains operating records related to its banking
activities; (3) the Foreign Bank is subject to inspection by the banking authority that licensed the Foreign Bank to conduct banking
activities; and (4) the Foreign Bank does not provide banking services to any other Foreign Bank that does not have a physical
presence in any country and that is not a regulated affiliate.

 

3.16         Correctness
of Representations. Investor represents that the foregoing representations and warranties are true and correct as of the date
hereof and, unless Investor otherwise notifies the Company in writing prior to the Closing Date, shall be true and correct as of
the Closing Date.

 

3.17         Survival.
The foregoing representations and warranties shall survive the Closing Date.

 

4Conditions
of the Investors’ Obligations at Closing. The obligations of the Investors under subsection 1.2 of this Agreement
are subject to the fulfillment on or before each Closing of each of the following conditions:

 

4.1           Representations
and Warranties. The representations and warranties of the Company contained in Section 2 hereof shall be true on and as
of the Closing with the same effect as though such representations and warranties had been made on and as of the date of such Closing.

 

4.2           Performance.
The Company shall have performed and complied with all agreements, obligations, and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.

 

4.3           Suspension
of Offering. No order suspending or enjoining the Offering or sale of the Notes and Warrants has been issued, and no proceedings
for that purpose or a similar purpose have been initiated or are pending, or, to the best of the Company’s knowledge, are
contemplated or threatened.

 

4.4           No
Material Adverse Effect. There shall have been no Material Adverse Effect with respect to the Company since the date hereof
within ten (10) business days of a Closing hereunder.

 

4.5           Delivery
of Notes and Warrants. The Company shall have delivered the Notes and the Warrants to the Investors, as specified in Section 1.

 

    	13

    	 

    

 

5Conditions
of the Company’s Obligations at Closing. The obligations of the Company to the Investors under this Agreement are subject
to the fulfillment on or before each Closing of each of the following conditions by the Investors:

 

5.1          Representations
and Warranties. The representations and warranties of the Investors contained in Section 3 shall be true on and as of such
Closing with the same effect as though such representations and warranties had been made on and as of such Closing.

 

5.2          Payment
of Purchase Price. The Investors shall have delivered the purchase price specified in Section 1.2.

 

6Indemnification.
The Investors, severally and not jointly, agree to indemnify and hold harmless the Company and its officers, directors, employees,
agents, control persons and affiliates from and against all losses, liabilities, claims, damages, costs, fees and expenses whatsoever
(including, but not limited to, any and all expenses incurred in investigating, preparing or defending against any litigation commenced
or threatened) based upon or arising out of any actual or alleged false acknowledgment, representation or warranty, or misrepresentation
or omission to state a material fact, or breach by the Investor of any covenant or agreement made by the Investor herein or in
any other document delivered in connection with this Agreement.

 

The Company agrees
to indemnify and hold harmless the Investors and any of Investors’ general partners, employees,
officers, directors, members, agents and other representatives from and against all losses, liabilities, claims, damages,
costs, fees and expenses whatsoever (including, but not limited to, any and all expenses incurred in investigating, preparing or
defending against any litigation commenced or threatened) based upon or arising out of any actual or alleged false acknowledgment,
representation or warranty, or misrepresentation or omission to state a material fact, or breach by the Company of any covenant
or agreement made by the Company herein or in any other document delivered in connection with this Agreement.

 

7Registration
Rights.

 

7.1          Company
hereby grants the following registration rights to holders of the Securities:

 

(a)          On
one occasion, commencing thirty (30) days after the Final Closing Date, but not later than two years after the Final Closing Date,
upon a written request therefor from any Investor or Investors of more than 50% of the Conversion Shares issued and issuable upon
conversion of the outstanding Notes and outstanding Warrant Shares issued and issuable upon exercise of the outstanding Warrants,
the Company shall prepare and not later than sixty (60) days after such request (“Filing Date”) file, subject to Section
7.1(d) hereof, with the Commission a registration statement under the Securities Act registering the Registrable Securities (as
defined below) which are the subject of such request, subject to applicable Commission rules and regulations, for unrestricted
public resale by the holder thereof. For purposes of Sections 7.1(a) and 7.1(b) hereof, the definition of Registrable Securities
shall not include Securities (A) which are registered for resale in an effective registration statement, (B) which are included
for registration in a pending registration statement, (C) which have been issued without further transfer restrictions after a
sale or transfer pursuant to Rule 144 under the Securities Act or (D) which may be resold under Rule 144 without volume limitations.
Upon the receipt of such written request, the Company shall promptly give written notice to all other Investors (as of the date
of delivery of such written notice) of the Registrable Securities that such registration statement is to be filed and shall include
in such registration statement Registrable Securities for which it has received written requests within ten (10) days after the
Company gives such written notice. Such other requesting Investors shall be deemed to have exercised their demand registration
right under this Section 7.1(a). “Registrable Securities” shall mean all of the Conversion Shares and the Warrant
Shares issuable upon complete conversion of the Notes and exercise of the Warrants issued in the Offering.

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(b)          If
the Company at any time proposes to register any of its securities under the Securities Act for sale to the public, whether for
its own account or for the account of other security holders or both, except with respect to registration statements on Forms S-4,
S-8 or another form not available for registering the Registrable Securities for sale to the public, provided the Registrable
Securities are not otherwise registered for resale by the Investors pursuant to an effective registration statement, each such
time it will give at least ten (10) days’ prior written notice to the Investors (as of the date of delivery of such written
notice) of its intention so to do. Upon the written request of any Investor that is received by the Company within ten (10) days
after the giving of any such notice by the Company to register any of the Registrable Securities held by such Investor not previously
registered, the Company will cause such Registrable Securities as to which registration shall have been so requested to be included
with the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent required
to permit the sale or other disposition of the Registrable Securities so registered by such Investor (each, a “Seller”
and together, the “Sellers”). In the event that any registration pursuant to this Section 7.1(b) shall be, in
whole or in part, an underwritten public offering of common stock of the Company, the number of shares of Registrable Securities
to be included in such an underwriting may be reduced on a pro rata basis among the Investors so requesting registration by the
managing underwriter if and to the extent that the Company and the underwriter shall reasonably be of the opinion that such inclusion
would adversely affect the marketing of the securities to be sold by the Company therein; provided, however, that the Company
shall notify the Seller in writing of any such reduction. Unless the Investor notifies the Company in writing that it elects to
deem the registration statement filed or to be filed pursuant to this Section 7.1(b) as a registration statement filed or to be
filed pursuant to Section 7.1(a), the Company may withdraw or delay or suffer a delay of any registration statement referred to
in this Section 7.1(b) without thereby incurring any liability to the Sellers.

 

(c)          If,
at the time any written request for registration is received by the Company pursuant to Section 7.1(a) hereof, the Company has
determined to proceed with the actual preparation and filing of a registration statement under the Securities Act in connection
with the proposed offer and sale for cash of any of its securities for the Company’s own account and the Company actually
does file such other registration statement, such written request shall be deemed to have been given pursuant to Section 7.1(b)
rather than Section 7.1(a), and the rights of the holders of Registrable Securities covered by such written request shall be governed
by Section 7.1(b).

 

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(d)          Notwithstanding
any other provision of this Section 7.1, if due to any SEC Guidance (as defined herein) (a) the Commission does not declare the
Registration Statement effective on or before the period set forth in Section 7.4 hereof, or (b) if the Commission allows the Registration
Statement to be declared effective at any time before or after such date, subject to the withdrawal of certain Registrable Securities
from the Registration Statement, and the reason for (a) or (b) is the Commission’s determination that (x) the offering of
any of the Registrable Securities constitutes a primary offering of securities by the Company, (y) Rule 415 of the Securities Act
may not be relied upon for the registration of the resale of any or all of the Registrable Securities, and/or (z) a holder of any
Registrable Securities must be named as an underwriter (and the Company has made a commercially reasonable effort to advocate with
the SEC for the registration of all or a greater number of Registrable Securities), the Investors understand and agree that in
the case of (b) the Company may reduce, on a pro rata basis, subject to the senior registration right of other holders (the
“Other Holders”), the total number of Registrable Securities to be registered on behalf of each such Investor,
and, in the case of (a) or (b), that an Investor shall not be entitled to any liquidated damages under Section 7.4 hereof with
respect to the Registrable Securities not registered for the reason set forth in (a), or so reduced on a pro rata basis
as set forth in (b). In any such pro rata reduction, the number of Registrable Securities to be registered on such Registration
Statement will first be reduced by the Registrable Securities represented by the Warrant Shares (applied, in the case that some
Warrant Shares may be registered, to the Investors on a pro rata basis based on the total number of unregistered Warrant Shares
held by such Investors on a fully diluted basis), and second by Registrable Securities represented by Conversion Shares (applied,
in the case that some Conversion Shares may be registered, to the Investors on a pro rata basis based on the total number of unregistered
Conversion Shares held by such Investors). The Investors acknowledge and agree the provisions
of this paragraph may apply to more than one Registration Statement. The Company shall file a new registration statement as soon
as reasonably practicable covering the resale by the Investors and Other Holders of not less than the number of such Registrable
Securities that are not registered in the registration statement. For the purpose of this Section 7.1, Investors understand and
acknowledge that the holders of the Company’s warrants issued with the Company’s Series A Cumulative Convertible Preferred
Stock and holders of the Company’s Series B Cumulative Convertible Preferred Stock and warrants issued with the Company’s
Series B Cumulative Convertible Preferred Stock shall be considered to have registration rights senior to the Investors and all
shares of common stock underlying such warrants and shares of Series B Cumulative Convertible Preferred Stock shall be considered
Registrable Securities hereunder. “SEC Guidance” means (i) any publicly-available written guidance, or
rule of general applicability of the SEC staff, or (ii) oral or written comments, requirements or requests of the SEC staff
to the Company in connection with the review of a registration statement, including, but not limited to, such guidance as may effect
a reduction in the number of Registrable Securities that may be registered by the Company.

 

7.2          Registration
Procedures. If and whenever the Company is required by the provisions of Section 7.1 to effect the registration of any Registrable
Securities under the Securities Act, the Company will, as expeditiously as possible:

 

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(a)          subject
to the timelines provided in this Agreement, (i) prepare and file with the Commission a registration statement required by Section
7.1 with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement
to become and remain effective for the period of the distribution contemplated thereby (determined as herein provided), (ii) promptly
provide to the holders of the Registrable Securities copies of all filings and Commission letters of comment and notify the Sellers
(by telecopier and by e-mail addresses provided by the Investors) on or before the second (2nd) business days thereafter
that the Company receives notice that (A) the Commission has no comments or no further comments on the registration statement,
and (B) the registration statement has been declared effective (failure to timely provide notice as required by this Section 7.2(a)
shall be a material breach of the Company’s obligation and an Event of Default as defined in the Notes and a Non-Registration
Event as defined in Section 7.4 of this Agreement);

 

(b)          prepare
and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective until such registration statement has been effective
for a period of one (1) year, and comply with the provisions of the Securities Act with respect to the disposition of all of the
Registrable Securities covered by such registration statement in accordance with the Sellers’ intended method of disposition
set forth in such registration statement for such period;

 

(c)          furnish
to the Sellers, at the Company’s expense, such number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or
their disposition of the securities covered by such registration statement, or make them electronically available;

 

(d)          use
its commercially reasonable efforts to register or qualify the Registrable Securities covered by such registration statement under
the securities or “blue sky” laws of New York and such jurisdictions as the Sellers shall reasonably request in writing,
provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business
as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such
jurisdiction;

 

(e)          as
applicable, list or make available for quotation the Registrable Securities covered by such registration statement with any securities
exchange or quotation system on which the Common Stock of the Company is then listed or quoted;

 

(f)          notify
the Sellers within two (2) business days of the happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light
of the circumstances then existing, or which becomes subject to a Commission, state or other governmental order suspending the
effectiveness of the registration statement covering any of the Registrable Securities; and

 

(g)          provide
to the Sellers copies of the registration statement and amendments thereto at least two (2) days prior to the filing thereof with
the Commission. A Seller’s failure to comment on any registration statement or other document provided to an Investor or
its counsel shall be construed to constitute approval thereof nor the accuracy thereof.

 

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7.3.          Provision
of Documents. In connection with each registration described in this Section 7, each Seller will furnish to the Company in
writing such information and representation letters with respect to itself and the proposed distribution by it as reasonably shall
be necessary in order to assure compliance with federal and applicable state securities laws.

 

7.4.          Non-Registration
Events. The Company agrees that the Sellers will suffer damages if any registration statement required under Section 7.1(a)
or 7.1(b) is not filed within sixty (60) days after written request and declared effective by the Commission within one hundred
eighty (180) days after such request, and maintained in the manner and within the time periods contemplated by Section 7, and it
would not be feasible to ascertain the extent of such damages with precision. Accordingly, if (A) if the registration statement
described in Section 7.1(a) or 7.1(b) is not filed within sixty (60) days after such written request, or is not declared effective
within one hundred eighty (180) days after such written request, or (B) any registration statement described in Sections 7.1(a)
or 7.1(b) is filed and declared effective but shall thereafter cease to be effective without being succeeded within thirty (30)
business days by an effective replacement or amended registration statement or for a period of time which shall exceed sixty (60)
days in the aggregate per year (defined as every rolling period of 365 consecutive days commencing on the actual effective date
of such registration statement) (each such event referred to in clauses A and B of this Section 7.4 is referred to herein as a
“Non-Registration Event”), then the Company shall pay to the holder of Registrable Securities, as “Liquidated
Damages”, an amount equal to one percent (1%) for each thirty (30) days (or such lesser pro-rata amount for any period
of less than thirty (30) days) of the (i) purchase price of the outstanding Notes and (ii) purchase price of the Conversion Shares
and Warrant Shares issued upon conversion of Notes and exercise of Warrants held by Investors which are subject to such Non-Registration
Event; provided, however, that the Company shall not be required to pay any Liquidated Damages to any Investor pursuant
to this Section 7.4 in excess of four percent (4%) of a Investor’s aggregate Purchase Price hereunder. The Company must pay
the Liquidated Damages in cash. The Liquidated Damages must be paid within ten (10) business days after the end of each thirty
(30) day period or shorter part thereof for which Liquidated Damages are payable. In the event a registration statement but is
withdrawn prior to being declared effective by the Commission, then such Registration Statement will be deemed to have not been
filed and Liquidated Damages will be calculated accordingly. Liquidated Damages shall not be payable pursuant to this Section 7.4
in connection with Registrable Securities for such times as such Registrable Securities may be sold by the holder thereof without
volume limitations or other restrictions pursuant to Section 144(b)(1)(i) of the Securities Act. The Company may require,
from time to time, information from a holder of the Securities that is necessary to complete the registration statement in accordance
with the requirements of the Securities Act.  In the event of the failure by such holder to comply with the Company’s
request within fifteen (15) business days from the date of such request, the Company shall be permitted to exclude such holder
from a registration statement without being subject to the payment of any amount of Liquidated Damages to such holder. At such
time that such holder complies with the Company’s request, the Company shall use its reasonable best efforts to include such
holder in the registration statement.

 

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7.5.         Expenses.
All expenses incurred by the Company in complying with Section 7, including, without limitation, all registration and filing fees,
printing expenses (if required), fees and disbursements of Company counsel and independent public accountants for the Company,
fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or “blue
sky” laws, fees of FINRA, and fees of transfer agents and registrars are herein called “Registration Expenses.”
All underwriting discounts, selling commissions and transfer applicable to the sale of Registrable Securities are herein called
“Selling Expenses.” The Company will pay all Registration Expenses in connection with any registration statement
described in Section 7. Selling Expenses in connection with each such registration statement shall be borne by the Seller and may
be apportioned among the Sellers in proportion to the number of shares included on behalf of the Seller relative to the aggregate
number of shares included under such registration statement for all Sellers, or as all Sellers thereunder may agree.

 

7.6.         Indemnification
and Contribution.

 

(a)          In
the event of a registration of any Registrable Securities under the Securities Act pursuant to Section 7, the Company will, to
the extent permitted by law, indemnify and hold harmless the Seller and each of the officers, directors, agents, Affiliates, members,
managers, control persons, and principal shareholders of the Seller, each underwriter of such Registrable Securities thereunder
and each other person, if any, who controls such Seller or underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities to which such Seller or person may become subject under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement
of any material fact contained in any registration statement under which such Registrable Securities was registered under the Securities
Act pursuant to Section 7, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof,
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 in light of the circumstances when made, and will, subject to the provisions
of Section 7.6(c), reimburse such Seller for any reasonable legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company shall
not be liable to the Seller to the extent that any such damages arise out of or are based upon an untrue statement or omission
made in any preliminary prospectus if (i) the Seller failed to send or deliver a copy of the final prospectus delivered by the
Company to the Seller with or prior to the delivery of written confirmation of the sale by the Seller to the person asserting the
claim from which such damages arise, (ii) the final prospectus would have corrected such untrue statement or alleged untrue statement
or such omission or alleged omission, or (iii) to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information
furnished by any such Seller in writing specifically for use in such registration statement or prospectus.

 

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(b)          In
the event of a registration of any of the Registrable Securities under the Securities Act pursuant to Section 7, each Seller, severally
but not jointly, will, to the extent permitted by law, indemnify and hold harmless the Company, and each person, if any, who controls
the Company within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director
of the Company, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, against
all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling
person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained
in the registration statement under which such Registrable Securities were registered under the Securities Act pursuant to Section
7, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, 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, and will reimburse the Company and each such officer, director, underwriter and controlling
person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Seller will be liable hereunder in any such case if and only to
the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such Seller, as
such, furnished in writing to the Company by such Seller specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of the Seller hereunder shall be limited to the net proceeds actually received
by the Seller from the sale of Registrable Securities pursuant to such registration statement.

 

(c)          Promptly
after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof,
but the omission to so notify the indemnifying party shall not relieve the indemnifying party from any liability which it may have
to such indemnified party other than under this Section 7.6(c), and shall only relieve it from any liability which it may have
to such indemnified party under this Section 7.6(c), except and only if and to the extent the indemnifying party is materially
prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish,
to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election to so assume and undertake the defense thereof, the indemnifying party shall not
be liable to such indemnified party under this Section 7.6(c) for any legal expenses subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to indemnified party
which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified parties, as a group, shall have
the right to select one separate counsel, reasonably satisfactory to the indemnified and indemnifying party, and to assume such
legal defenses and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred.

 

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(d)          In
order to provide for just and equitable contribution in the event of joint liability under the Securities Act in any case in which
either (i) a Seller, or any controlling person of a Seller, makes a claim for indemnification pursuant to this Section 7.6 but
it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding
the fact that this Section 7.6 provides for indemnification in such case, or (ii) contribution under the Securities Act may be
required on the part of the Seller or controlling person of the Seller in circumstances for which indemnification is not provided
under this Section 7.6, then, and in each such case, the Company and the Seller will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution from others) in such proportion so that the Seller is responsible
only for the portion represented by the percentage that the public offering price of its securities offered by the registration
statement bears to the public offering price of all securities offered by such registration statement, provided, however,
that, in any such case, (y) the Seller will not be required to contribute any amount in excess of the public offering price of
all such securities sold by it pursuant to such registration statement; and (z) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was
not guilty of such fraudulent misrepresentation; and provided, further, however, that the liability of the Seller hereunder
shall be limited to the net proceeds actually received by the Seller from the sale of Registrable Securities pursuant to such registration
statement.

 

7.7.         Unlegended
Shares and 144 Sales.

 

(a)          Delivery
of Unlegended Shares. Within five business (5) days (such fifth (5th) business day being the “Unlegended
Shares Delivery Date”) after the day on which the Company has received (i) a notice that Conversion Shares, Warrant Shares
or any other Common Stock held by Investor has been sold pursuant to a registration statement or Rule 144 under the Securities
Act, (ii) a representation that the prospectus delivery requirements, or the requirements of Rule 144, as applicable and if required,
have been satisfied, (iii) the original share certificates representing the shares of Common Stock that have been sold, and (iv)
in the case of sales under Rule 144, customary representation letters of Investor and, if required, Investor’s broker regarding
compliance with the requirements of Rule 144, the Company, at its expense, (y) shall deliver, and shall cause legal counsel selected
by the Company to deliver to its transfer agent (with copies to Investor) an appropriate instruction directing the delivery of
shares of Common Stock without any legends including the legend set forth in Section 3.10 above (the “Unlegended Shares”);
and (z) cause the transmission of the certificates representing the Unlegended Shares, together with a legended certificate representing
the balance of the submitted Common Stock certificate, if any, to Investor at the address specified in the notice of sale, via
express courier, by electronic transfer or otherwise on or before the Unlegended Shares Delivery Date.

 

(b)          DWAC.
In lieu of delivering physical certificates representing the Unlegended Shares, upon request of the Investors, so long as the certificates
therefor do not bear a legend, the Common Stock is eligible for electronic transfer through the Depository Trust Company, and the
Investor is not obligated to return such certificate for the placement of a legend thereon, the Company shall cause its transfer
agent to electronically transmit the Unlegended Shares by crediting the account of Investor’s prime broker with the Depository
Trust Company through its Deposit Withdrawal Agent Commission system. Such delivery must be made on or before the Unlegended Shares
Delivery Date.

 

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(c)          Late
Delivery of Unlegended Shares. The Company understands that a delay in the delivery of the Unlegended Shares pursuant to this
Section 7.7 hereof later than the Unlegended Shares Delivery Date could result in economic loss to an Investor. As compensation
to a Investor for such loss, the Company agrees to pay late payment fees (as liquidated damages and not as a penalty) to Investor
for late delivery of Unlegended Shares in the amount of $100 per business day after the Unlegended Shares Delivery Date for each
$10,000 of purchase price of the Unlegended Shares, subject to the delivery default; provided that such delay is not the
direct or indirect result of Investor’s actions or omissions. If during any three hundred sixty (360) day period, the Company
fails to deliver Unlegended Shares as required by this Section 7.7 for an aggregate of thirty (30) days, then each Investor or
assignee holding Securities subject to such default may, at its option, require the Company to redeem all or any portion of the
Unlegended Shares subject to such default at a price per share equal to the greater of (i) 120% of the Purchase Price paid by Investor
for the Unlegended Shares that were not timely delivered, or (ii) a fraction in which the numerator is the highest closing price
of the Common Stock during the aforedescribed thirty day period and the denominator of which is the lowest conversion price or
exercise price, as the case may be, during such thirty (30) day period, multiplied by the price paid by Investor for such
Common Stock (“Unlegended Redemption Amount”). The Company shall promptly pay any payments incurred under this
Section in immediately available funds upon demand.

 

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

 

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(e)          144
Default. At any time commencing twelve (12) months after the Closing Date, in the event Investor is not permitted to sell any
of the Conversion Shares or Warrant Shares without any restrictive legend, or if such sales are permitted but subject to volume
limitations or further restrictions on resale as a result of the unavailability to Investor of Rule 144(b)(1)(i) under the Securities
Act or any successor rule (a “144 Default”), for any reason, including, but not limited to, failure by the Company
to file quarterly, annual or any other filings required to be made by the Company by the required filing dates (provided that any
filing made within the time for a valid extension shall be deemed to have been timely filed), or the Company’s failure to
make information publicly available which would allow Investor’s reliance on Rule 144 in connection with sales of Conversion
Shares or Warrant Shares, except due to a change in current applicable securities laws or because Investor is an Affiliate (as
defined under Rule 144) of the Company, then the Company shall pay such Investor as liquidated damages and not as a penalty for
each thirty (30) days (or such lesser pro-rata amount for any period less than thirty (30) days) an amount equal to one percent
(1.0%) of the purchase price of the Conversion Shares and Warrant Shares (which could be issued on a cashless basis pursuant to
Section 2 of the Warrant) which is subject to such 144 Default; provided, however, that the Company shall not be required to pay
any liquidated damages to any Investor pursuant to this Section 7.7(e) in excess of 4% of such Investor’s aggregate Purchase
Price hereunder. Liquidated damages shall not be payable pursuant to this Section 7.7(e) in connection with Conversion Shares or
Warrant Shares for such times as such shares may be sold by the holder thereof without any legend or volume or other restrictions
pursuant to Section 144(b)(1)(i) of the Securities Act or pursuant to an effective registration statement.

 

8Miscellaneous.

 

8.1           Appointment
of Collateral Agent. In the event an Event of Default (as described in the Notes) shall have occurred and be continuing, prior
to taking any actions to declare the Notes due and payable or to attempt to foreclose on any collateral securing the Notes, Investors
holding a majority of the outstanding indebtedness evidenced by the Notes (the “Requisite Holders”) will authorize
and appoint an agent (which may be an Investor or third party) to act as collateral agent on behalf of all of the Investors, and
in such capacity to exercise for the benefit of all of the Investors all rights, powers and remedies provided to them, under or
pursuant to the Security Agreement, including, without limitation, those available upon an Event of Default, subject always to
the terms, conditions, limitations and restrictions provided in the Security Agreement. The Investors have carefully reviewed the
Security Agreement and understand the information contained therein.

 

8.2           Survival
of Warranties. All of the representations and warranties made herein shall survive the execution and delivery of this Agreement
for a period of one year. The Investors are entitled to rely, and the parties hereby acknowledge that the Investors have so relied,
upon the truth, accuracy and completeness of each of the representations and warranties of the Company contained herein, irrespective
of any independent investigation made by Investors. The Company is entitled to rely, and the parties hereby acknowledge that the
Company has so relied, upon the truth, accuracy and completeness of each of the representations and warranties of the Investors
contained herein, irrespective of any independent investigation made by the Company.

 

8.3           Successors
and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties (including transferees of any Notes sold hereunder or
any Common Stock issued upon conversion thereof). Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, except as expressly provided in this Agreement.

 

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8.4           Governing
Law. This Agreement shall be governed by and construed under the laws of the State of New York as applied to agreements among
New York residents entered into and to be performed entirely within New York. The parties hereto (1) agree that any legal suit,
action or proceeding arising out of or relating to this Agreement shall be instituted exclusively in New York State Supreme Court,
County of New York, or in the United States District Court for the Southern District of New York, (2) waives any objection which
the Company may have now or hereafter to the venue of any such suit, action or proceeding, and (3) irrevocably consents to the
jurisdiction of the New York State Supreme Court, County of New York, and the United States District Court for the Southern District
of New York in any such suit, action or proceeding. The Company further agrees to accept and acknowledge service of any and all
process which may be served in any such suit, action or proceeding in the New York State Supreme Court, County of New York, or
in the United States District Court for the Southern District of New York and agrees that service of process upon the Company mailed
by certified mail to the Company's address shall be deemed in every respect effective service of process upon the Company, in any
such suit, action or proceeding. THE PARTIES HERETO AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.

 

8.5           Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument. This Agreement may also be executed via facsimile or by
e-mail delivery of a “.pdf” format data file, either of which shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) this Agreement with the same force and effect as if such facsimile or
“.pdf” signature page were an original thereof.

 

8.6           Titles
and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

 

8.7           Notices.
Unless otherwise provided, any notice, authorization, request or demand required or permitted to be given under this Agreement
shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified or three (3)
days following deposit with the United States Post Office, by registered or certified mail, postage prepaid, or two days after
it is sent by an overnight delivery service, or when sent by facsimile with machine confirmation of delivery addressed as follows:

 

If to Company, to:

 

BeesFree,
Inc.         

2101 Vista
Parkway, Suite 122

West Palm
Beach, FL 33411

Attention: Chief
Executive Officer

Fax: (561)
939-4861

 

    	24

    	 

    

 

With a copy
to:

 

Littman Krooks
LLP

2655 Third
Avenue, 20th Floor

New York,
NY 10017

Attention:
Steven D. Uslaner, Esq. 

Fax: (212)
490-2990

 

If to the
Investors to:

 

The addresses sent forth on the signature
pages attached.

 

Any party may change its address for such
communications by giving notice thereof to the other parties in conformity with this Section.

 

8.8           Transaction
Expenses; Enforcement of Transaction Documents. The Company and each Investor shall pay their respective costs and expenses
incurred with respect to the negotiation, execution, delivery and performance of this Agreement. If any action at law or in
equity is necessary to enforce or interpret the terms of the Transaction Documents, the prevailing party shall be entitled to reasonable
attorney’s fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled.

 

8.9           Amendments
and Waivers. This Agreement may be amended or terminated and the observance of any term of this Agreement may be waived with
respect to all parties to this Agreement (either generally or in a particular instance and either retroactively or prospectively),
with the written consent of the Company and the Note Requisite Holders (as defined below). Notwithstanding the foregoing, this
Agreement may not be amended or terminated and the observance of any term hereunder may not be waived with respect to any Investor
without the written consent of such Investor unless such amendment, termination or waiver applies to all Investors in the same
fashion. The Company shall give prompt written notice of any amendment or termination hereof or waiver hereunder to any party hereto
that did not consent in writing to such amendment, termination or waiver. Any amendment, termination or waiver effected in accordance
with this Section 8.9 shall be binding on all parties hereto, even if they do not execute such consent. No waivers of or exceptions
to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a
further or continuing waiver of any such term, condition or provision. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of all such securities, and the Company. For purposes
hereof, “Note Requisite Holder(s)” shall mean holders of Notes representing at least 66% of the aggregate amount of
principal then outstanding under such Notes.

 

8.10         Severability.
If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.

 

    	25

    	 

    

 

8.11         Entire
Agreement. This Agreement and the documents referred to herein constitute the entire agreement among the parties and no party
shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically
set forth herein or therein.

 

8.12         Independent
Nature of Investors. The obligations of each Investor under this Agreement or other transaction document are several and not
joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations
of any other Investor under this Agreement or any other transaction document. Each Investor shall be responsible only for its own
representations, warranties, agreements and covenants hereunder. The decision of each Investor to purchase Notes and Warrants pursuant
to this Agreement has been made by such Investor independently of any other Investor and independently of any information, materials,
statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have been made or given by any other Investor or by any agent or
employee of any other Investor, and no Investor or any of its agents or employees shall have any liability to any other Investor
(or any other person) relating to or arising from any such information, materials, statements or opinions. Nothing contained herein
or in any other transaction document, and no action taken by any Investor pursuant hereto or thereto, shall be deemed to constitute
the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors
are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement.
Except as otherwise provided in this Agreement or any other transaction document, each Investor shall be entitled to independently
protect and enforce its rights arising out of this Agreement or out of the other transaction documents, and it shall not be necessary
for any other Investor to be joined as an additional party in any proceeding for such purpose. Each Investor represents and warrants
that it has been represented by its own separate legal counsel in connection with the transactions contemplated hereby and acknowledges
and understands that Littman Krooks, LLP has served as counsel to the Company only, and the Investors cannot rely upon Littman
Krooks, LLP in any manner with regard to their decision to participate in the transactions contemplated hereby.

 

    	26

    	 

    

 

IN WITNESS WHEREOF,
the parties have executed this Agreement as of the date first above written.

 

	BEESFREE, INC.	 
	 	 	 	 
	By:	/S/ DAVID W. TODHUNTER	 
	 	Name:	David W. Todhunter	 
	 	Title:	President and CEO	 
	 	 	 	 
	BEESFREE USA, INC.	 
	 	 	 	 
	By:	/S/ DAVID W. TODHUNTER	 
	 	Name:	David W. Todhunter	 
	 	Title:	President	 

 

Investors:

 

[TO SIGN AND COMPLETE SIGNATURE PAGE ANNEXED HERETO]

 

    	27

    	 

    

 

OMNIBUS SIGNATURE PAGE TO SECURITIES
PURCHASE 

AGREEMENT AND SECURITY AGREEMENT

 

By execution and delivery of this signature
page, you are agreeing to become an Investor, as defined in that certain Securities Purchase Agreement (the “Purchase
Agreement”) by and among BeesFree, Inc., a Nevada corporation (the “Company”), BeesFree USA, Inc.
(“BeesFree USA”) and the Investors (as defined in the Purchase Agreement), dated as of ______ 5__,
2013, and acknowledges having read the representations in the Purchase Agreement section entitled “Representations and Warranties
of the Investors,” and hereby represents that the statements contained therein are complete and accurate with respect to
the undersigned as an Investor. The undersigned further hereby agrees that execution by the undersigned of this Omnibus Signature
Page to Securities Purchase Agreement and Security Agreement shall constitute an agreement to be bound by the terms and conditions
of each of the Purchase Agreement and the Security Agreement, with the same effect as if such separate, but related agreement,
was separately signed.

 

	INVESTOR:	PRINCIPAL AMOUNT OF NOTES
	 	PURCHASED: $___________________
	Print Name: ________________________	 
	 	Number of Warrants: ________________
	Signature:__________________________	 
	 	Date: __________________
	Print Name: ________________________	 
	 	Contact Person: ______________________
	Signature:__________________________	 
	 	Telephone No. _____________________
	Title (if entity)_______________________	 
	 	E-mail Address: ____________________
	__________________________________	 
	Street Address	Soc Sec # or Fed ID #________________
	 	 
	__________________________________	 
	Street Address – 2nd line	 
	 	 
	__________________________________	 
	City, State, Zip	 

 

 

5 To be completed to reflect date of initial closing.
Investors should not complete this.

 

    	28

    	 

    

 

SCHEDULE OF INVESTORS

 

	Name	 	Principal Amount of Note	 	 	Number of Warrants	 
	 	 	 	 	 	 	 
	 	 	$	 	 	 	 	 	 
	 	 	$	 	 	 	 	 	 
	 	 	$	 	 	 	 	 	 
	 	 	$	 	 	 	 	 	 
	 	 	$	 	 	 	 	 	 
	 	 	$	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	TOTAL	 	$	 	 	 	 	 	 

 

    	 

    	 

    

 

APPENDIX A

 

Additional Definitions

 

For purposes of this
Agreement, the following additional capitalized terms shall have the respective definitions set forth below:

 

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

 

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

 

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

 

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

 

“Conversion
Shares” means the shares of Common Stock issuable upon conversion of all principal and accrued but unpaid interest under
the Notes.

 

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

 

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

 

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

 

“Material
Adverse Effect” means a material adverse effect on the financial condition, results of operations, prospects, properties
or business of the Company and its Subsidiaries taken as a whole.

 

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

 

“Principal
Market” means whichever of the following is at the time the principal trading exchange or market for the Common Stock;
NYSE Amex Equities, Nasdaq Capital Market, Nasdaq Global Market, Nasdaq Global Select Market, OTC Market, Bulletin Board, or New
York Stock Exchange.

 

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

 

    	 

    	 

    

 

“Subsidiary”
means any subsidiary of the Company as set forth on Schedule 2.1 and shall, where applicable, also include any direct or
indirect subsidiary of the Company formed or acquired after the date hereof.

 

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

 

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

 

“Transaction
Documents” means this Agreement, the Note, the Warrant, and the Security Agreement, together with all exhibits and schedules
thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

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

 

    	2

    	 

    

 

SCHEDULE 3.6

 

RISK FACTORS

 

An investment in the Securities
is speculative and illiquid and involves a high degree of risk, including the risk of a loss of your entire investment. You should
carefully consider the risks and uncertainties described below, the risks set forth in our filings with the SEC and the other information
contained in the Securities Purchase Agreement of which this Schedule is a part, before purchasing any Securities. The risks set
forth below are not the only ones facing our Company. Additional risks and uncertainties may exist that could also adversely affect
our business, operations and prospects. Based on the foregoing, our business, financial condition, prospects and/or operations
could suffer. In such event, the value of the securities you are purchasing could decline, and you could lose all or a substantial
portion of the money that you invest. No inference should be drawn as to the magnitude of any particular risk from its position
in the list of risk factors.  As used in these Risk Factors, “we” and “our” refers to the Company
and its subsidiaries.

 

RISKS RELATED TO OUR BUSINESS

 

We have a very limited operating
history; we have not yet generated revenue and incurred losses since inception; and we expect to continue to incur losses for the
near term.

 

We have a very limited operating history.
Since our inception in August 2011, we have incurred net losses and as of September 30, 2012, we had an accumulated deficit of
$2,471,532. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered
by companies in their early stages of operations. We anticipate that our accumulated deficit has grown since September 30, 2012.

 

We continue to experience a severe,
continuing cash shortage and without sufficient additional financing we may not be able to execute our and may be required to cease
operations, and this demonstrates uncertainty as to our ability to continue as a going concern.

 

As of September 30, 2012, our cash and
cash equivalents amounted to $12,900. We generated no revenues in 2012, and we have been dependent upon proceeds from various fundraising
activities to fund our operations. If we do not raise sufficient capital to fund our operations until we can generate sufficient
internal cash flow, we may be required to discontinue or further substantially modify our business. We cannot be certain that
additional financing will be available to us on favorable terms when required, if at all. The failure to raise needed funds could
have a material adverse effect on our business, financial condition, operating results and prospects.  These factors raise
substantial doubt about our ability to continue as a going concern. The report of the independent registered public accounting
firm relating to the audit of our consolidated financial statements for the year ended December 31, 2011 contains an explanatory
paragraph expressing uncertainty regarding our ability to continue as a going concern because of our operating losses and our need
for additional capital. Such explanatory paragraph could make it more difficult for us to raise additional capital and may materially
and adversely affect the terms of any future financing that we may obtain.  There can be no assurances that the audit report
related to our financial statements for the year ended December 31, 2012 will not also express substantial doubt about our ability
to continue as a going concern.

 

    	 

    	 

    

 

We have limited operating history
and as such an investor cannot assess our profitability or performance based on past results.

 

We are a development stage company, with
limited operations that commenced upon our incorporation in August 2011. Our primary assets consist of our rights to the patent-pending
proprietary chemical compound (BeesVita PlusTM) and dispenser (the BeespenserTM). We have yet to commence
active operations to sell any products associated with the proprietary bee healthcare technologies that we intend to market. We
have no prior operating history from which to evaluate our likelihood of success in operating our business, generating any revenues
or achieving profitability. Accordingly, it is possible that the Securities and Exchange Commission, FINRA, a national exchange
or other regulatory authority may take the position that we are a “shell” company. This determination would restrict
our ability to remove restrictive legends from our securities pursuant to Rule 144.

 

Our operations to date have consisted primarily
of acquiring the patent-pending technology rights to our proprietary chemical compound and dispenser, securing office space, hiring
sales personnel, continuing research and development, hiring laboratory personnel, constructing an industrial model of the BeesFree
Dispenser, commencing the regulatory clearance process in Argentina and Europe, finding manufacturers in the US, Argentina and
Europe, and commencing trials in the US with large, commercial beekeepers. We will require significant additional capital to achieve
our business objectives, and the inability to obtain such financing on acceptable terms or at all could lead to closure of our
business.

 

Our revenue and income potential is uncertain.
Any evaluation of our business and prospects must be considered in light of these factors and the risks and uncertainties often
encountered by companies in the development stage.

 

We are a development stage company
that has a limited operating history, therefore, it is possible that the Securities and Exchange Commission, FINRA, a national
exchange, or other regulatory authority may take the position that we are a “shell” company which would limit the ability
of our shares to be sold under Rule 144.

 

We are a development stage company, with
limited operations that commenced upon our incorporation in August 2011. Our primary assets consist of our rights to the patent-pending
proprietary chemical compound (BeesVita PlusTM) and dispenser (the BeespenserTM), and we have limited operating
history. We have yet to commence active operations to sell any products associated with the proprietary bee healthcare technologies
that we intend to market. We have no prior operating history from which to evaluate our likelihood of success in operating our
business, generating any revenues or achieving profitability. Accordingly, it is possible that the Securities and Exchange Commission,
FINRA, a national exchange or other regulatory authority may take the position that we are a “shell” company. This
determination would restrict our ability to remove restrictive legends from our securities pursuant to Rule 144.

 

    	 

    	 

    

 

We are developing and attempting to commercialize new
and unproven technologies.

 

We work with and intend to develop new
technologies for the beekeeping healthcare industry that have not yet been proven for commercial application. While we believe
that each of the component agents and compounds that comprise our patent-pending proprietary mix of compounds have proven effective
in promoting greater health in the bee population when being administered individually, we are not certain that our patent-pending
proprietary mix will be effective in combating the effects of CCD or even in improving the health of the bee population, especially
given that scientists have not come to a consensus as to the causes of CCD. In addition, while we have designed the BeespenserTM
using scientifically-proven theories concerning shapes and colors that attract bees, we cannot be sure that the BeespenserTM
will be efficacious in delivering our patent-pending proprietary mix of compounds to the bee population it is intended to serve.
Even if the mix of compounds and the BeespenserTM prove effective, there is no guarantee that these technologies will
be appropriate for commercial application without additional capital investment and a significant amount of work, if at all. It
is therefore possible that products developed by us may not achieve widespread market acceptance. We cannot be certain that any
such products will be able to be commercialized and sold successfully, or at all.

 

We may need additional financing
to fund our activities in the future.

 

Assuming we raise at
least $1 million in net proceeds in this Offering, we anticipate we will not require additional funding for at least 12 months.
While we anticipate that we will generate revenues in 2013 and may generate sufficient cash flow to be self sufficient, as noted
above, we have limited operating history and an unproven technology. We may consume our available capital if revenues are delayed
or if we are not efficient in developing our products or if regulatory requirements change. We might
seek equity or debt financings in the future to fund our operations. However, in such event, there is no assurance that
we will be successful in raising the additional capital we need to fund our business plan on terms that are acceptable to us, or
at all. If we do not succeed in raising additional funds on acceptable terms, we could be forced to discontinue product development,
forego sales and marketing efforts, sacrifice attractive business opportunities, cease operations entirely and sell or otherwise
transfer all or substantially all of our remaining assets.

 

Our ability to compete successfully
and achieve future revenue will depend on our ability to protect our proprietary technology.

 

It is possible that the technology for
our proprietary mix of chemical compounds and our (BeesVita PlusTM) and dispenser (the BeespenserTM) may
not provide any competitive advantage to us or will be successfully challenged, invalidated or circumvented in the future. In addition,
potential competitors may have substantial resources and could make significant investments in competing technologies, may seek
to apply for and obtain patents that will prevent, limit or interfere with our ability to make, use or sell our products either
in the U.S. or in international markets.

 

    	 

    	 

    

 

The degree of future protection for our
proprietary rights is uncertain, and we cannot ensure that:

 

		·	we were the first to make the inventions covered by our patent-pending technology;

		·	we were the first to seek a patent application for these inventions;

		·	others will not independently develop similar, or alternative technologies, or duplicate any of our technologies;

		·	our pending patent will be valid or enforceable;

		·	any potential patents issued to us will provide a basis for commercially viable products, will provide us with any competitive
advantages or will not be challenged by third parties;

		·	we will develop additional proprietary technologies or products that are patentable; or

		·	the patents of others will not have an adverse effect on our business.

 

In addition to our proprietary mix of chemical
compounds, we rely on trade secrets and proprietary know-how, which we seek to protect in part through confidentiality and proprietary
information agreements and limit access to and distribution of our proprietary information. Such measures may not provide adequate
protection for our trade secrets or other proprietary information. In addition, our trade secrets or proprietary technology may
become known or be independently developed by competitors. Our failure to protect our proprietary technology could have a material
adverse effect on our business, financial condition and results of operations.

 

Any future litigation over intellectual
property rights would likely involve significant expense on our part and distract our management.

 

Our ability to compete successfully and
achieve future revenue will depend in part on our ability to operate without infringing on the rights of others and our ability
to enforce our own intellectual property rights. Litigation or claims could result in substantial costs and diversion of resources
and could have a material adverse effect on our business, financial condition, and results of operations. Although there are no
pending lawsuits against us regarding our technology or notices that we are infringing on the intellectual property rights of others,
litigation or infringement claims may arise in the future.

 

We are currently dependent on only
a few products.

 

Our sole source of revenues for the foreseeable
future is expected to come from sales of the BeespenserTM and bottles of our proprietary mix of chemical compounds (BeesVita
PlusTM). Our operations may be adversely affected by economic, regulatory or similar problems or events that may apply
only to us, only to the beekeeping industry or only within a particular market area in which our products are sold. The adverse
effect of any such problems or events could be more easily absorbed in a more diversified business or one that operates in a variety
of different industries.

 

    	 

    	 

    

 

We may be unable to keep pace with
the technological changes in the beekeeping industry or with the changes facing bee populations worldwide and, as a result, our
technologies may become obsolete.

 

Although the beekeeping industry is currently
a limited field, with few competitors, potential competitors, including chemical manufacturers, could have significantly greater
resources than us and could employ such resources to compete with our technology and products. Research and discoveries by others
may result in insights or breakthroughs, especially with respect to treatment of CCD, which may render our technologies obsolete
even before they generate any revenue. These factors could have a material adverse effect on our business.

 

We have limited manufacturing experience,
and will depend on third-party suppliers and manufacturers, and if they are unable to deliver, our business may suffer.

 

To be successful, our products will need
to be manufactured in sufficient quantities, in compliance with regulatory requirements and at an acceptable cost. We have limited
manufacturing experience. We expect to purchase all of our components and supplies from third-party suppliers and to outsource
the manufacturing to contract manufacturers. Although we do not anticipate any difficulties in partnering with suppliers and manufacturers,
due to the generally wide availability of our component parts and the simplicity of the design of our products, we may still experience
significant difficulty in locating suppliers and manufacturers qualified to manufacture our products or components thereof. Further,
manufacturers generally have the right to manufacture similar products that may compete with our products, and to terminate their
agreements without significant penalty under certain conditions. In addition, disclosure of our proprietary technology to a third-party
for manufacturing purposes increases the risk of theft or loss of trade secrets. There can be no assurance that we will be successful
in locating manufacturers or suppliers on terms and conditions or with reputations and experience acceptable to us or that our
trade secrets will not be stolen.

 

Additionally, unanticipated increases in
the prices of our component parts could increase production costs and adversely affect our profitability. While we do not anticipate
significant difficulty fulfilling our supply purchase requirements, we cannot provide any assurances that we will not experience
such difficulties in the future

 

We intend to rely on third parties
whose operations are outside our control.

 

We intend to rely on arrangements with
third-party shippers and carriers such as independent shipping companies for timely delivery of our products to our customers.
As a result, we may be subject to carrier disruptions and increased costs due to factors that are beyond our control, including
labor strikes, inclement weather, natural disasters and rapidly increasing fuel costs. If the services of any of these third parties
become unsatisfactory, we may experience delays in meeting our customers’ product demands and we may not be able to find
a suitable replacement on a timely basis or on commercially reasonable terms. Any failure to deliver products to our customers
in a timely and accurate manner may damage our reputation and could cause us to lose customers.

 

    	 

    	 

    

 

The departure of key personnel could
disrupt our business.

 

We depend on the continued efforts of our
chief executive officer, our chief scientist, and other senior management. We cannot be certain that any individual will continue
in such capacity for any particular period of time. The loss of key personnel, or the inability to hire and retain qualified employees,
could negatively impact our ability to manage our business.

 

Our revenue may be adversely affected
by fluctuations in currency exchange rates.

 

Initially, we anticipate that a significant
portion of our revenues and expenses will occur in Argentina and Europe. However, we report our financial condition and results
of operations in U.S. dollars. As a result, fluctuations between the U.S. dollar, the Euro and the Argentine peso will impact the
amount of our revenues. For example, if either the Euro or the Argentine peso appreciates relative to the U.S. dollar, the fluctuation
will result in a positive impact on the revenues that we report. However, if either the Euro or the Argentine peso depreciates
relative to the U.S. dollar, there will be a negative impact on the revenues we report due to such fluctuation. It is possible
that the impact of currency fluctuations will result in a decrease in reported sales even though we have experienced an increase
in sales when reported in the Argentine peso. Conversely, the impact of currency fluctuations may result in an increase in reported
sales despite declining sales when reported in the Argentine peso. The exchange rate from the U.S. dollar to the Euro and the Argentine
peso has fluctuated substantially and may continue to do so in the future. Though we may choose to hedge our exposure to foreign
currency exchange rate changes in the future, there is no guarantee such hedging, if undertaken, will be successful.

 

If we are not successful in protecting
our intellectual property rights, our ability to compete or maintain market share may be harmed.

 

In order to protect our proprietary technology,
we are dependent on the appropriate authorities granting our patents. However, despite our efforts to protect our intellectual
property, we cannot assure you that:

 

		·	any future patents will not be challenged, invalidated or circumvented;

		·	our pending patent applications or future applications will be approved;

		·	others will not independently develop similar products or processes to our, or design around our, patents; or

		·	Any of the measures described above will provide meaningful protection.

 

It may be possible for a third-party, including
our licensees, to misappropriate our copyrighted material or trademarks. It is possible that existing or future patents may be
challenged, invalidated or circumvented and effective patent, copyright, trademark and trade secret protection may be unavailable
or limited in foreign countries. It may be possible for a third-party to copy or otherwise obtain and use our products or technology
without authorization, develop similar technology independently or design around our pending patents. As a result, despite our
efforts and expenses, we may be unable to prevent others from infringing upon or misappropriating our intellectual property, which
could harm our business.

 

    	 

    	 

    

 

Risks Relating to Our Organization and Our Common Stock

 

Because we became public by means
of a “reverse merger,” we may not be able to attract the attention of major brokerage firms.

 

There may be risks associated with us becoming
public through a “reverse merger” with a shell company. Although the shell company did not have recent or past operations
or assets and we performed a due diligence review of the shell company, there can be no assurance that we will not be exposed to
undisclosed liabilities resulting from the prior operations of the shell company. Securities analysts of major brokerage firms
and securities institutions may also not provide coverage of us because there were no broker-dealers who sold our stock in a public
offering that would be incentivized to follow or recommend the purchase of our common stock. The absence of such research coverage
could limit investor interest in our common stock, resulting in decreased liquidity. No assurance can be given that established
brokerage firms will, in the future, want to cover our securities or conduct any secondary offerings or other financings on our
behalf.

 

Our certificate of incorporation
allows for our board to create new series of preferred stock without further approval by holders of our Common Stock, which could
adversely affect the rights of the holders of our Common Stock.

 

Our board of directors has the authority
to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has the authority to issue
preferred stock without further approval by holders of our Common Stock. As a result, our board of directors could authorize the
issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right
to receive dividend payments before dividends are distributed to the holders of Common Stock and the right to the redemption of
the shares, together with a premium, prior to the redemption of our Common Stock. In addition, our board of directors could authorize
the issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible into our
common stock, which could decrease the relative voting power of our Common Stock or result in dilution to our existing stockholders.

 

The Securities are being offered
on “reasonable efforts, no minimum” basis.

 

The Securities are
being offered on a “reasonable efforts, no minimum” basis.  In this type of offering where there is no minimum
amount necessary to consummate the offering, there is no assurance that the Offering Amount of $2,520,000 will be sold.  Accordingly,
persons purchasing the Securities do so without any assurance that sufficient funds can be raised to satisfy our working capital
needs and to otherwise allow the Company to effectuate its business plan.  The failure to raise the Offering Amount will also
increase the need of the Company to obtain additional financing, which may or may not be available at such time on terms satisfactory
to us, if at all.

 

    	 

    	 

    

 

The Company may
not have available working capital to satisfy interest payments on the Notes or repay the Notes on maturity.

 

In the event we do
not raise sufficient funds hereunder or begin generating revenues soon we may be unable to repay the Notes when due. If the Company
fails to timely meet its financial obligations as they come due, its operating results, balances sheet and future ability to raise
capital could be seriously harmed. Furthermore, Company security holders, including Investors in this Offering, may suffer a loss
of all or a substantial portion of their investment in the Company.

 

The Securities, Conversion
Shares and Warrant Shares will not be registered and cannot be sold for at least six months after the Securities are issued.

 

The ability to resell
such securities will depend upon the availability of an exemption to the requirements of Section 5 of the Securities Act. The most
commonly utilized exemption is Rule 144. Under Rule 144, the securities issuable upon conversion of the Notes and exercise of the
Warrants may become eligible for resale six (6) months after the Closing in which the applicable security is issued, so long as
the Company fulfills its current reporting requirements under the Exchange Act. After a year, the current information requirement
no longer applies for purchasers who are not Affiliates of the Company. Any purchasers which are Affiliates of the Company will
be subject to certain other requirements such as volume limitations, manner of share and filing requirements.

 

Our sale of a significant number
of shares of our Common Stock, convertible securities or warrants or the issuance or exercise of stock options could depress the
market price of our stock.

 

The market price of
our Common Stock could decline as a result of sales of substantial amounts of our common stock in the public market or the perception
that substantial sales could occur because of our sale of Common Stock, convertible securities or warrants, or the issuance or
exercise of stock options. These sales also might make it difficult for us to sell equity securities in the future at a time when,
and at a price which, we deem appropriate. As of December 31, 2012, we had stock options to purchase 2,000,000 shares of our
Common Stock outstanding, of which options to purchase 650,000 shares were exercisable. In addition, as of such date we had issued
and outstanding shares of Series A Preferred Stock, Series B Preferred Stock and warrants convertible or exercisable into an aggregate
for 5,139,800 shares of our Common Stock, a significant number of which contain full ratchet and antidilution protection provisions.
Exercise of any current or future outstanding stock options or warrants could harm the market price of our Common Stock.

 

We may be unable to list our
Common Stock, which currently trades on the QTC markets, on the NASDAQ or any other securities exchange, in which case an investor
may find it difficult to dispose of shares or obtain accurate quotations as to the market value of our Common Stock.

 

Although we may apply
to list our common stock on NASDAQ or the NYSE Amex Equities in the future when and if we have stabilized our liquidity concerns,
we may not be able to meet the initial listing standards, including the minimum per share price and minimum capitalization requirements,
of either of those or any other stock exchange, and we may not be able to maintain a listing of our Common Stock on either of those
or any other stock exchange. If we are unable to list our common stock on NASDAQ, the NYSE Amex Equities or another stock exchange,
or to maintain that listing, we expect that our Common Stock will continue to trade on the QTX markets, or possibly another over-the-counter
quotation system or on the "pink sheets," where an investor may find it difficult to dispose of shares or obtain accurate
quotations as to the market value of our Common Stock.

 

    	 

    	 

    

 

Our Common Stock is considered
a “penny stock” and may be difficult to sell.

 

Our Common Stock is
considered to be a “penny stock” since it meets one or more of the definitions in Rule 3a51-1 under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). These include but are not limited to the following: (i) the
stock trades at a price less than $5.00 per share; (ii) it is not traded on a “recognized” national exchange; (iii) it
is not quoted on the NASDAQ Stock Market, or even if so, has a price less than $5.00 per share; or (iv) is issued by a company
with net tangible assets less than $2.0 million, if in business more than a continuous three years, or with average revenues of
less than $6.0 million for the past three years. The principal result or effect of being designated a “penny stock”
is that securities broker-dealers cannot recommend the stock but must trade in it on an unsolicited basis.  Section 15(g)
of the Exchange Act and Rule 15g-2 promulgated thereunder by the SEC require broker-dealers dealing in penny stocks to
provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written
receipt of the document before effecting any transaction in a penny stock for the investor’s account.

 

Potential investors
in our offering are urged to obtain and read such disclosure carefully before purchasing any Securities. Moreover, Rule 15g-9 may
be somewhat of an impediment to your sale of the shares of Common Stock underlying the Securities you may purchase, as it requires
broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny
stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or
her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information,
that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as
to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement
setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and
dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation,
investment experience and investment objectives.  Compliance with these requirements may make it more difficult for holders
of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.

 

We may not be able to attract
the attention of brokerage firms, which could have a material adverse impact on the market value of our Common Stock.

 

Security analysts of
brokerage firms have not provided, and may not provide in the future, coverage of our common stock since there is limited incentive
to brokerage firms to produce research reports and recommend the purchase of our Common Stock. To date, we have not been able to
attract the attention of brokerage firms and securities analysts. The absence of such attention limits the likelihood that an active
market will develop for our common stock. It also will likely make it more difficult to attract new investors at times when we
require additional capital.

 

    	 

    	 

    

 

The trading price of our Common
Stock is volatile, which could cause the value of an investment in the Company’s securities to decline.

 

The market price of
shares of our Common Stock has been volatile. The price of our Common Stock may continue to fluctuate in response to a number of
factors, such as:

 

		·	our cash resources and our ability to obtain additional funding;

 

		·	announcements by us or a competitor of business developments;

 

		·	our entry into or termination of strategic business relationships;

 

		·	changes in government regulations; and

 

		·	changes in our revenue or expense levels

 

The occurrence of any
of these events may cause the price of our Common Stock to fall. In addition, the stock market in general has experienced volatility
that often has been unrelated to the operating performance or financial condition of individual companies. Any broad market or
industry fluctuations may adversely affect the trading price of our Common Stock, regardless of operating performance or prospects.

 

An investment in the Securities
is speculative and there can be no assurance of any return on any such investment.

 

An investment in the
Securities is speculative and there is no assurance that investors will obtain any return on their investment. Investors will be
subject to substantial risks involved in an investment in the Company, including the risk of losing their entire investment.

 

We have broad discretion on
how we use any proceeds we receive from this Offering.

 

Our management has
broad discretion on how to use and spend any proceeds we receive from this Offering and may use the proceeds in ways that differ
from the proposed uses discussed in this Agreement. Our stockholders may not agree with our decision on how to use such proceeds.
If we fail to spend the proceeds effectively, our business and financial condition could be harmed and we may need to seek additional
financing sooner than expected.

 

The Securities may be purchased
by parties that are related to our Company.

 

Our
officers, directors, employees and related parties (including current shareholders and related parties of shareholders) may purchase
Securities in this Offering and such amounts will be included in determining whether the Offering Amount has been sold.
Because there may be substantial purchases by affiliates
of the Company, no potential investor should place any reliance on the sale of any amount of the Securities as an indication of
the merits of the Offering. Each investor must make his own investment decision as to the merits of the Offering.

 

    	 

    	 

    

 

The Note conversion price and
the Warrant exercise price were determined by the Company and may not be indicative of the Company’s actual value or the
value of the Common Stock underlying the Notes or Warrants.

 

The purchase price
of the Securities, the conversion price of the Notes and the exercise price of the Warrants were determined by the Company and
took into account, among other things, previous prices of our Common Stock, our business and growth plans, and other factors that
we deemed relevant. The purchase price of the Securities, the conversion price of the Notes and the Warrant exercise price are
not necessarily related to the asset value, net worth or any other established criteria of value of the Company.

 

Investors in this Offering
will experience immediate and substantial dilution.

 

The investors in this
Offering will experience an immediate and substantial dilution of their investment. Therefore, the investors in this Offering
will bear a substantial portion of the risk of loss, while control of our Company will remain in the hands of our Company’s
officers, directors and founders.

 

The Securities, Conversion
Shares and Warrant Shares will be subject to restrictions on transfer.

 

The Securities and
the securities issuable upon conversion and exercise thereof have not been registered under the Securities Act, or under the securities
laws of any state, but are being offered and sold in reliance upon exemptions from registration thereunder, including the exemptions
from federal registration contained in Rule 506 of Regulation D promulgated thereunder and applicable state laws. As a consequence
of the restrictions on subsequent transfer imposed by these exemptions, the Securities may not subsequently be sold, assigned,
conveyed, pledged, hypothecated or otherwise transferred by the holder thereof, whether or not for consideration, except upon registration
of such securities or the issuance to us of such evidence as may be satisfactory to counsel for us to the effect that any such
transfer will not be in violation of the Securities Act, and applicable state securities laws. Investors of the Securities must
be prepared to bear the economic risks of investment for an indefinite period of time since the Securities cannot be sold unless
they are subsequently registered or an exemption from registration is available, such as afforded pursuant to Rule 144 of the Securities
Act.

 

The Offering has not been reviewed
or approved by regulatory agencies.

 

The sale of the Notes
and Warrants offered hereby has not been approved or disapproved by the Commission or any state regulatory agencies, and no regulatory
body has passed upon or endorsed the accuracy, adequacy, or completeness of the information in this Agreement. Accordingly, prospective
investors must rely on their own examination of the Agreement, including, without limitation, the merits of, and risks involved
in, acquiring the Notes and Warrants.

 

    	 

    	 

    

 

RISKS RELATED TO THE COMPANY’S
PRIOR FINANCING ARRANGEMENTS

 

The purchase price protection
features of the Company’s securities issued in prior private placements could require the Company to issue a substantially
greater number of shares of Common Stock, which will cause dilution to the Company’s stockholders.

 

On
October 10, 2012 the Company completed a private offering of an aggregate of 3,099 shares of
the Company’s Series B Preferred Stock and warrants (“Series B Warrants”) to purchase up to 309,900 shares of
Common Stock (the “2012 Private Placement”). The Series B Preferred Stock is convertible
into shares of Common Stock at an initial conversion price of $1.75 per share (or initially 100 shares per share of Series B Preferred
Stock, or 309,900 shares of Common Stock in the aggregate). The warrants are exercisable at $2.26 per share. If we issue
shares of Common Stock or securities convertible into or exchangeable or exercisable for Common Stock, for a consideration at a
price per share, or having a conversion, exchange or exercise price per share less than the conversion price of the Series B Preferred
Stock or the exercise price of the Series B Warrants in effect prior to such sale or issuance, then immediately prior to such sale
or issuance the conversion price of the conversion price of the Series B Preferred Stock and the exercise price of the Series B
Warrants shall be reduced to such other lower price. Based on the foregoing adjustment provision, upon
consummation of this Offering, investors in the 2012 Private Placement will be entitled to a
significant number of additional warrants and reduction of the exercise price of a significant number of outstanding warrants.

 

    	 

    	 

    

 

EXHIBIT A

 

FORM OF NOTE

 

    	 

    	 

    

 

EXHIBIT B

 

FORM OF WARRANT

 

    	 

    	 

    

 

EXHIBIT C

 

FORM OF SECURITY AGREEMENT

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