Document:

Exhibit 10.2

 

 

November 29, 2016

 

PERSONAL AND CONFIDENTIAL

 

Vuzix Corporation

25 Hendrix Road, Suite A

West Henrietta, NY 14586

 

Dear Sirs:

 

This letter will confirm
the understanding and agreement (the “Agreement”) between Chardan Capital Markets, LLC (“Broker”)
and Vuzix Corporation (the “Company”) as follows:

 

		1.	Engagement:The Company hereby engages Broker as its agent in the private or public
placement(s) of one or more classes or series of registered or unregistered securities of the Company to investors (the “Investors”).
Such securities (the “Securities”) may take the form of common stock or other equity-linked securities or any
combination thereof. Such placements shall be referred to as the “Transactions”. Broker may retain other brokers
or dealers to act as sub-agents or selected-dealers on its behalf in connection with such Transactions.

 

		2.	Broker’s Role: Broker hereby accepts the engagement described herein and,
in that connection, agrees to:

 

		(a)	assist in the preparation of other communications to be used in placing the Securities, whether
in the form of letter, circular, notice or otherwise; and

 

		(b)	assist and advise the Company with respect to the negotiation of the sale of the Securities to
the Investors.

 

		3.	Term; Exclusivity: This exclusive engagement will commence on the date hereof and
terminate on December 6, 2016. Upon termination of this Agreement the Company shall pay to Broker all fees earned and reimburse
Broker for all reasonable expenses incurred, in accordance with Paragraphs 7 and 8 hereof, respectively. The Company agrees to
pay Broker any fees specified in Paragraph 7 during the time limitations specified herein. The Company agrees that this section
3 and the provisions relating to the payment of fees, reimbursement of expenses, indemnification and contribution, confidentiality,
conflicts, independent contractor and waiver of the right to trial by jury will survive any termination of this letter agreement.

 

    	 	Chardan Capital Markets, LLC
17 State Street, Suite 1600
New York, NY 10004

1	 

     

    

 

		4.	Best Efforts: It is understood that Broker’s involvement in a Transaction is
strictly on a reasonable best efforts basis and that the consummation of a Transaction will be subject to, among other things,
market conditions.

 

		5.	Information: The Company shall furnish, or cause to be furnished, to Broker all information
requested by Broker for the purpose of rendering services hereunder (all such information being the “Information”).
The Company recognizes and confirms that Broker (a) will use and rely on the Information and on information available from generally
recognized public sources in performing the services contemplated by this Agreement without having independently verified the same;
(b) does not assume responsibility for the accuracy or completeness of the Information and such other information; and (c) will
not make an appraisal of any of the assets or liabilities of the Company. Broker shall be a third party beneficiary of any representations,
warranties and covenants made by the Company to any Investor in a Transaction.

 

		6.	Related Agreement:

 

		(a)	If required by Broker, the Company shall enter into a Placement Agency Agreement with Broker that
is substantially consistent with Broker’s standard form, modified as appropriate to reflect the terms of the applicable Transaction
and containing such terms, covenants, conditions, representations, warranties, and providing for the delivery of legal opinions,
comfort letters and officer’s certificates, all in form and substance satisfactory to Broker and its counsel.

 

		(b)	The sale of Securities to any Investor will be evidenced by a purchase agreement (“Purchase
Agreement”) between the Company and such Investor in a form reasonably satisfactory to the Company and Broker. Prior
to the signing of any Purchase Agreement, officers of the Company with responsibility for financial affairs will be available to
answer inquiries from prospective investors.

 

		(c)	Notwithstanding anything herein to the contrary, in the event that Broker determines that any of
the terms provided for hereunder shall not comply with a FINRA rule, including but not limited to FINRA Rule 5110, then the Company
shall agree to amend this Agreement (or include such revisions in the final underwriting or placement agency agreement) in writing
upon the request of Broker to comply with any such rules; provided that any such amendments shall not provide for terms that are
less favorable to the Company.

 

    	 	Chardan Capital Markets, LLC
17 State Street, Suite 1600
New York, NY 10004

2	 

     

    

 

		7.	Fees: As compensation for the services to be rendered by Broker hereunder, the Company
will pay Broker the following fee (“Transaction Fee”):

 

		(a)	A cash fee based on a total $14,500,000 Transaction value shall be payable immediately upon the
closing of each Transaction, and shall equal to $750,000.

 

		(b)	Broker shall be entitled to a 5% Transaction Fee under clauses (a) and (b) hereunder, calculated
in the manner set forth therein, with respect to any public or private offering or other financing or capital-raising transaction
of any kind (“Tail Financing”) to the extent that such financing or capital is provided to the Company by the
investors set forth on Schedule A whom Broker had introduced, directly or indirectly, to the Company during the term of
this Agreement, if such Tail Financing is consummated at any time within the 6-month period following the expiration or termination
of this Agreement.

 

		8.	Indemnification:

 

		(a)	To the extent permitted by law, the Company will indemnify Broker and its affiliates, stockholders,
directors, officers, employees and controlling persons (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) against all losses, claims, damages, expenses and liabilities, as the same are incurred (including the reasonable
fees and expenses of counsel), relating to or arising out of its activities hereunder or pursuant to this engagement letter, except
to the extent that any losses, claims, damages, expenses or liabilities (or actions in respect thereof) are found in a final judgment
(not subject to appeal) by a court of law to have resulted primarily and directly from Broker’s willful misconduct or gross
negligence in performing the services described herein.

 

		(b)	Promptly after receipt by Broker of notice of any claim or the commencement of any action or proceeding
with respect to which Broker is entitled to indemnity hereunder, Broker will notify the Company in writing of such claim or of
the commencement of such action or proceeding, and the Company will assume the defense of such action or proceeding and will employ
counsel reasonably satisfactory to Broker and will pay the fees and expenses of such counsel. Notwithstanding the preceding sentence,
Broker will be entitled to employ counsel separate from counsel for the Company and from any other party in such action if counsel
for Broker reasonably determines that it would be inappropriate under the applicable rules of professional responsibility for the
same counsel to represent both the Company and Broker. In such event, the reasonable fees and disbursements of no more than one
such separate counsel will be paid by the Company, in addition to local counsel. The Company will have the exclusive right to settle
the claim or proceeding provided that the Company will not settle any such claim, action or proceeding without the prior written
consent of Broker, which will not be unreasonably withheld.

 

    	 	Chardan Capital Markets, LLC
17 State Street, Suite 1600
New York, NY 10004

3	 

     

    

 

		(c)	The Company agrees to notify Broker promptly of the assertion against it or any other person of
any claim or the commencement of any action or proceeding relating to a transaction contemplated by this engagement letter.

 

		(d)	If for any reason the foregoing indemnity is unavailable to Broker or insufficient to hold Broker
harmless, then the Company shall contribute to the amount paid or payable by Broker as a result of such losses, claims, damages
or liabilities in such proportion as is appropriate to reflect not only the relative benefits received by the Company on the one
hand and Broker on the other, but also the relative fault of the Company on the one hand and Broker on the other that resulted
in such losses, claims, damages or liabilities, as well as any relevant equitable considerations. The amounts paid or payable by
a party in respect of losses, claims, damages and liabilities referred to above shall be deemed to include any legal or other fees
and expenses incurred in defending any litigation, proceeding or other action or claim. Notwithstanding the provisions hereof,
Broker’s share of the liability hereunder shall not be in excess of the amount of fees actually received, or to be received,
by Broker under this engagement letter (excluding any amounts received as reimbursement of expenses incurred by Broker).

 

		(e)	These indemnification provisions shall remain in full force and effect whether or not the transaction
contemplated by this engagement letter is completed and shall survive the termination of this engagement letter, and shall be in
addition to any liability that the Company might otherwise have to any indemnified party under this engagement letter or otherwise.

 

		9.	Governing Laws: This letter agreement will be governed by and construed in accordance
with the laws of the State of New York applicable to agreements made and to be fully performed therein. The Company irrevocably
submits to the jurisdiction of any court of the State of New York located in the City and County of New York or in the United States
District Court for the Southern District of New York for the purpose of any suit, action or other proceeding arising out of this
letter agreement or our engagement hereunder.

 

    	 	Chardan Capital Markets, LLC
17 State Street, Suite 1600
New York, NY 10004

4	 

     

    

 

Each of the
Company and Broker hereby waives any right it may have to a trial by jury in respect of any claim brought by or on behalf of either
party based upon, arising out of or in connection with this letter agreement, our engagement hereunder or the transaction contemplated
hereby.

 

All fees and
expenses payable hereunder will be payable in U.S. dollars in cash. The Company hereby irrevocably consents to the service of process
in any proceeding by the mailing of copies of such process to the Company at its address set forth above.

 

		10.	Confidentiality: Except as required by law, this Agreement and the services and advice
to be provided by Broker hereunder, shall not be disclosed to third parties without Broker’s prior written permission. Notwithstanding,
Broker shall be permitted to advertise the services it provided in connection with each Transaction subsequent to the consummation
of such Transaction. Such expense shall not be reimbursable under paragraph 7 hereof.

 

		11.	No Brokers: The Company represents and warrants to Broker that there are no brokers,
representatives or other persons which have an interest in compensation due to Broker from any transaction contemplated herein
or which would otherwise be due any fee, commission or remuneration upon consummation of any Transaction.

 

		12.	Authorization: The Company and Broker represent and warrant that each has all requisite
power and authority to enter into and carry out the terms and provisions of this Agreement and the execution, delivery and performance
of this Agreement does not breach or conflict with any agreement, document or instrument to which it is a party or bound.

 

		13.	Independent Contractor: The Company acknowledges that in performing its services,
Broker is acting as an independent contractor, and not as a fiduciary, agent or otherwise, of the Company or any other person.
The Company acknowledges that in performing its services hereunder, Broker shall act solely pursuant to a contractual relationship
on an arm’s length basis (including in connection with determining the terms of any Transaction). Any review by Broker of
the Company, the transaction contemplated hereby or other matters relating to such transactions has been and shall be performed
solely for the benefit of Broker and shall not be on behalf of the Company. The Company agrees that is shall not claim that Broker
owes a fiduciary duty to the Company in connection with such transaction or the process leading thereto. No one other than the
Company is authorized to rely upon engagement of Broker hereunder or any statements, advice, opinions or conduct by Broker. The
Company further acknowledges that Broker may perform certain of the services described herein through one or more of its affiliates
and any such affiliates shall be entitled to the benefit of this Agreement. This Paragraph 13 shall survive the termination or
expiration of this Agreement.

 

    	 	Chardan Capital Markets, LLC
17 State Street, Suite 1600
New York, NY 10004

5	 

     

    

 

		14.	Conflicts: The Company acknowledges that Broker and its affiliates may have and may
continue to have investment banking and other relationships with parties other than the Company pursuant to which Broker may acquire
information of interest to the Company. Broker shall have no obligation to disclose such information to the Company or to use such
information in connection with any contemplated transaction.

 

		15.	Anti-Money Laundering: To help the United States government fight the funding of
terrorism and money laundering, the federal laws of the United States requires all financial institutions to obtain, verify and
record information that identifies each person with whom they do business. This means we must ask you for certain identifying information,
including a government-issued identification number (e.g., a U.S. taxpayer identification number) and such other information or
documents that we consider appropriate to verify your identity, such as certified articles of incorporation, a government-issued
business license, a partnership agreement or a trust instrument.

 

		16.	Miscellaneous: This Agreement constitutes the entire understanding and agreement
between the Company and Broker with respect to the subject matter hereof and supersedes all prior understanding or agreements between
the parties with respect thereto, whether oral or written, express or implied. Any amendments or modifications must be executed
in writing by both parties. It is understood and agreed that Broker’s services hereunder will not include providing any tax,
accounting, legal or regulatory advice or developing any tax strategies for the Company. This Agreement and all rights, liabilities
and obligations hereunder shall be binding upon and inure to the benefit of each party’s successors but may not be assigned
without prior written approval of the other party. This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but such counterparts shall, together, constitute only one instrument. The descriptive headings
of the Paragraphs of this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not
affect in anyway the meaning or interpretation of this Agreement.

 

    	 	Chardan Capital Markets, LLC
17 State Street, Suite 1600
New York, NY 10004

6	 

     

    

 

If all the foregoing
is acceptable to you, please so indicate by signing in the space provided below and returning a signed copy of this letter to us
for our records.

 

Broker is delighted
to accept this engagement and looks forward to working with you. Please confirm that the foregoing correctly set forth our agreement
by signing the enclosed duplicate of this letter in the space provided and returning it, whereupon this letter shall constitute
a binding agreement as of the date first above written.

 

 

	 	Very truly
    yours,	 
	 	 	 	 	 
	 	CHARDAN
    CAPITAL MARKETS, LLC	 
	 	 	 	 	 
	 	 	 	 	 
	 	By:	 	/s/
    Steven Urbach	 
	 	 	 	Name:
    Steven Urbach	 
	 	 	 	Title:
    Chief Executive Officer	 

 

 

ACCEPTED AND AGREED TO

AS OF THE ABOVE DATE:

 

	VUZIX CORPORATION	 
	 	 	 	 
	 	 	 	 
	BY:	 	/s/
    Grant Russell	 
	 	 	Name:
    Grant Russell	 
	 	 	Title:
    EVP and Chief Financial Officer	 

 

 

 

    	 	Chardan Capital Markets, LLC
17 State Street, Suite 1600
New York, NY 10004

7Exhibit 10.1

 

SECURITIES
PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE
AGREEMENT (“Agreement”) is made as of the 22nd day of November, 2016 by and among Precision Optics
Corporation, Inc., a Massachusetts corporation (the “Company”), and the Investors set forth on the signature
pages affixed hereto (each, an “Investor” and collectively, the “Investors”).

 

RECITALS

 

A.       The
Company and the Investors are executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by the provisions of Rule 506 of Regulation D (“Regulation D”), as promulgated by the U.S. Securities
and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended;

 

B.       The
Investors wish to purchase from the Company, and the Company wishes to sell and issue to the Investors, upon the terms and conditions
stated in this Agreement, up to an aggregate of 1,333,334 units (the “Units”), with each unit consisting of
one (1) share of the Company’s common stock, $0.01 par value (“Common Stock”) and one (1) warrant to purchase
one-half of one share of Common Stock (subject to adjustment as provided therein) at a variable exercise price per share in the
form attached hereto as Exhibit B (the “Warrants), at a purchase price of $0.60 per Unit, (the “Warrants”)
(collectively, the “Transaction”); and

 

C.       Contemporaneous
with the sale of the Shares and the Warrants, the parties hereto will execute and deliver a Registration Rights Agreement, in the
form attached hereto as Exhibit A (the “Registration Rights Agreement”), pursuant to which the Company
will agree to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder, and applicable state securities laws.

 

In consideration of the
mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

 

1.               
Definitions. In addition to those terms defined above and elsewhere in this Agreement, for the purposes of
this Agreement, the following terms shall have the meanings set forth below:

 

“Affiliate”
means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries Controls, is
controlled by, or is under common control with, such Person.

 

“Business Day”
means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business.

 

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

 

“Company’s
Knowledge” means the actual knowledge of the executive officers (as defined in Rule 405 under the 1933 Act) of the Company,
after due inquiry.

 

“Control”
(including the terms “controlling”, “controlled by” or “under common control with”) means the
possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.

 

“Intellectual
Property” means all of the following: (a) patents, patent applications, patent disclosures and inventions (whether or
not patentable and whether or not reduced to practice); (b) trademarks, service marks, trade dress, trade names, corporate names,
logos, slogans and Internet domain names, together with all goodwill associated with each of the foregoing; (c) copyrights and
copyrightable works; (d) registrations, applications and renewals for any of the foregoing; and (e) proprietary computer software
(including but not limited to data, data bases and documentation).

 

 

 

    	 	1	 

     

    

 

“Material Adverse
Effect” means a material adverse effect on (a) the assets, liabilities, results of operations, condition (financial or
otherwise), business or prospects of the Company and its Subsidiaries, taken as a whole, or (b) the ability of the Company to perform
its obligations under the Transaction Documents.

 

“Material Contract”
means any contract, instrument or other agreement to which the Company is a party or by which it is bound which has been filed
as an exhibit to the SEC Filings pursuant to Item 601(b)(4) or Item 601(b)(10) of Regulation S-K.

 

“Person”
means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically
listed herein.

 

“Purchase Price”
means an aggregate of $800,000 at $0.60 per share.

 

“Registration
Statement” has the meaning set forth in the Registration Rights Agreement.

 

“SEC Filings”
means the Company’s most recent Annual Report on Form 10-K for the fiscal year ended June 30, 2015 (the “10-K”),
and all other reports filed by the Company pursuant to Sections 13(a), 13(e), 14 and 15(d) of the 1934 Act since the filing of
the 10-K and during the twelve (12) months preceding the date hereof.

 

“Securities”
means the Shares, the Warrants and the Warrant Shares.

 

“Shares”
means the shares of Common Stock to be purchased by the Investors hereunder.

 

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

 

“Transaction
Documents” means this Agreement, the Warrant and the Registration Rights Agreement and documents referenced herein and
therein, and the exhibits, appendices, and schedules hereto and thereto.

 

“Warrants”
means, to each Investor, the warrant to purchase shares of Common Stock in the form attached hereto as Exhibit B and registered
in the name of such Investor to purchase up to a number of shares of Common Stock equal to 50% of such Investor’s Shares,
with a variable exercise price, subject to adjustment therein.

 

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

 

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

 

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

 

2.               
Closing.

 

2.1            
Closing Date. The date and time of the closing of the purchase of the Shares (the “Closing”)
by the Investors shall be 12 noon, New York City time, on such date as shall be mutually agreed to by the Company and the Investors,
which in no event shall be prior to, or more than three (3) Business Days after, the date of this Agreement (such date on which
the Closing actually occurs, the “Closing Date”), at the offices of Trombly Business Law, PC, 1314 Main St.,
Suite 102, Louisville, CO 80027.

 

2.2 Closing Actions.
On the Closing Date, (i) each Investor shall pay the pro rata portion of the Purchase Price as set forth on the signature pages
to this Agreement to the Company, by wire transfer of immediately available funds in accordance with the Company’s written
wire instructions, (ii) the Company shall irrevocably instruct the Company’s transfer agent to deliver to each Investor who
has so paid the pro rata Purchase Price one or more stock certificates, evidencing the Shares duly executed on behalf of the Company
and registered in the name of the Investor, and (iii) the Company shall send to each Investor certificates evidencing the Warrants
registered in the name of the Investor, within three (3) Business Days after the Closing.

 

 

 

    	 	2	 

     

    

 

3.               
Representations and Warranties of the Company. The Company hereby represents and warrants to each Investor
that:

 

3.1            
Organization, Good Standing and Qualification. All of the direct and indirect subsidiaries of the Company
are set forth on Schedule 3.1 hereto. Each of the Company and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now conducted and to own or lease its properties, in each case as described in the SEC Filings.
Each of the Company and its Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or leasing of property makes such qualification or leasing necessary
unless the failure to so qualify has not had and could not reasonably be expected to have a Material Adverse Effect.

 

3.2            
Authorization. The Company has the corporate power and authority to enter into this Agreement and has taken
all requisite action on its part, its officers, directors and shareholders necessary for (a) the authorization, execution and delivery
of the Transaction Documents, (b) the authorization of the performance of all obligations of the Company hereunder or thereunder,
and (c) the authorization, issuance (or reservation for issuance) and delivery of the Securities The Transaction Documents constitute
the legal, valid and binding obligations of the Company, enforceable against the Company 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 equitable principles.

 

3.3            
Capitalization. The Company has duly and validly authorized capital stock as set forth in the SEC Filings
and in the Articles of Incorporation of the Company, as amended and as in effect as of the Closing Date (the “Certificate
of Incorporation”). All of the issued and outstanding shares of the Company’s capital stock have been duly authorized
and validly issued and are fully paid, nonassessable and free of pre-emptive rights and were issued in full compliance with applicable
state and federal securities law and any rights of third parties. Except as set forth in Schedule 3.3, no Person is entitled
to pre-emptive or similar statutory or contractual rights with respect to any securities of the Company. Except as set forth in
Schedule 3.3, there are no outstanding warrants, options, convertible securities or other rights, agreements or arrangements
of any character under which the Company or any of its Subsidiaries is or may be obligated to issue any equity securities of any
kind and except as contemplated by this Agreement, neither the Company nor any of its Subsidiaries is in negotiations for the issuance
of any equity securities of any kind as of the date of this Agreement. There are no voting agreements, buy-sell agreements, option
or right of first purchase agreements or other agreements of any kind among the Company and any of the securityholders of the Company
relating to the securities of the Company held by them. Except as set forth in Schedule 3.3, no Person has the right to
require the Company to register any securities of the Company under the 1933 Act, whether on a demand basis or in connection with
the registration of securities of the Company for its own account or for the account of any other Person.

 

Except as set forth on
Schedule 3.3, the issuance and sale of the Securities hereunder will not obligate the Company to issue shares of Common
Stock or other securities to any other Person (other than the Investors) and will not result in the adjustment of the exercise,
conversion, exchange or reset price of any outstanding security.

 

3.4            
Valid Issuance. The Shares have been duly and validly authorized and, when issued and paid for pursuant to
this Agreement, will be validly issued, fully paid and nonassessable, and shall be free and clear of all encumbrances and restrictions,
except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws. The Warrants
have been duly and validly authorized. Upon the due exercise of the Warrants and full payment for the exercise price thereof, the
Warrant Shares will be validly issued, fully paid and non-assessable free and clear of all encumbrances and restrictions, except
for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws. The Company has reserved
a sufficient number of shares of Common Stock for issuance upon the exercise of the Warrants, free and clear of all encumbrances
and restrictions, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities
laws.

 

 

 

    	 	3	 

     

    

 

3.5            
 Consents. The execution, delivery and performance by the Company of the Transaction Documents and the offer,
issuance and sale of the Securities require no consent of, action by or in respect of, or filing with, any Person, governmental
body, agency, or official other than filings that have been made pursuant to applicable state securities laws and post-sale filings
pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods.
Subject to the accuracy of the representations and warranties of each Investor set forth in Section 4 hereof, the Company
has taken all action necessary to exempt (a) the issuance and sale of the Securities, (b) the issuance of the Warrant Shares upon
due exercise of the Warrants, and (c) any provision of the Articles of Incorporation or the Company’s Bylaws, as in effect
as of the Closing Date (the “Bylaws”), that is or could reasonably be expected to become applicable to the Investors
as a result of the transactions contemplated hereby, including, without limitation, the issuance of the Securities and the ownership,
disposition or voting of the Securities by the Investors or the exercise of any right granted to the Investors pursuant to this
Agreement or the other Transaction Documents.

 

3.6            
Delivery of SEC Filings; Business. The Company has made available to the Investors through the EDGAR system,
true and complete copies of the Company’s SEC Filings. The SEC Filings are the only filings required of the Company pursuant
to the 1934 Act for such period. The Company and its Subsidiaries are engaged in all material respects only in the business described
in the SEC Filings and the SEC Filings contain a complete and accurate description in all material respects of the business of
the Company and its Subsidiaries, taken as a whole.

 

3.7            
Use of Proceeds. The net proceeds of the sale of the Shares and the Warrants hereunder and the exercise of
the Warrants shall be used by the Company for general working capital needs and corporate growth initiatives.

 

3.8            
No Material Adverse Change. Since the date of the latest audited financial statements included within the
SEC Filings, there has not been:

 

(a)             
any change in the consolidated assets, liabilities, financial condition or operating results of the Company from
that reflected in the financial statements included in the Company’s 10-K, except for changes in the ordinary course of business
which have not had and could not reasonably be expected to have a Material Adverse Effect, individually or in the aggregate;

 

(b)            
any declaration or payment of any dividend, or any authorization or payment of any distribution, on any of the capital
stock of the Company, or any redemption or repurchase of any securities of the Company;

 

(c)             
any material damage, destruction or loss, whether or not covered by insurance to any assets or properties of the
Company or its Subsidiaries;

 

(d)            
any waiver, not in the ordinary course of business, by the Company or any Subsidiary of a material right or of a
material debt owed to it;

 

(e)             
any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company or a
Subsidiary, except in the ordinary course of business and which is not material to the assets, properties, financial condition,
operating results or business of the Company and its Subsidiaries, taken as a whole (as such business is presently conducted and
as it is proposed to be conducted);

 

(f)             
any change or amendment to the Articles of Incorporation or Bylaws, or material change to any material contract or
arrangement by which the Company or any Subsidiary is bound or to which any of their respective assets or properties is subject;

 

(g)            
any material labor difficulties or labor union organizing activities with respect to employees of the Company or
any Subsidiary;

 

(h)            
any material transaction entered into by the Company or any Subsidiary other than in the ordinary course of business;

 

 

 

    	 	4	 

     

    

 

(i)              
the loss of the services of any key employee, or material change in the composition or duties of the senior management
of the Company or any Subsidiary;

 

(j)              
the loss or, to the Company’s Knowledge, threatened loss of any customer which has had or could reasonably
be expected to have a Material Adverse Effect; or

 

(k)            
any other event or condition of any character that has had or could reasonably be expected to have a Material Adverse
Effect.

 

3.9            
SEC Filings. At the time of filing thereof, the SEC Filings complied as to form in all material respects with
the requirements of the 1934 Act and did not contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under
which they were made, not misleading.

 

3.10         
No Conflict, Breach, Violation or Default. The execution, delivery and performance of the Transaction Documents
by the Company and the issuance and sale of the Securities will not (a) conflict with or result in a breach or violation of (i)
any of the terms and provisions of, or constitute a default under the Certificate of Incorporation or the Bylaws (true and complete
copies of which have been made available to the Investors through the EDGAR system), or (ii) any statute, rule, regulation or order
of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any of its assets
or properties, or (b) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become
a default) under, result in the creation of any lien, encumbrance or other adverse claim upon any of the properties or assets of
the Company or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse
of time or both) of, any Material Contract, except in the case of clauses (a)(ii) and (b) above, such as could not
reasonably be expected to have a Material Adverse Effect, individually or in the aggregate.

 

3.11         
Tax Matters. The Company has prepared and filed (or filed applicable extensions therefore) all tax returns
required to have been filed by the Company with all appropriate governmental agencies and paid all taxes shown thereon or otherwise
owed by it, other than any such taxes which the Company is contesting in good faith and for which adequate reserves have been provided
and reflected in the Company’s financial statements included in the SEC Filings. The charges, accruals and reserves on the
books of the Company in respect of taxes for all fiscal periods are adequate in all material respects, and there are no material
unpaid assessments against the Company nor, to the Company’s Knowledge, any basis for the assessment of any additional taxes,
penalties or interest for any fiscal period or audits by any federal, state or local taxing authority except for any assessment
which is not material to the Company. All taxes and other assessments and levies that the Company is required to withhold or to
collect for payment have been duly withheld and collected and paid to the proper governmental entity or third party when due, other
than any such taxes which the Company is contesting in good faith and for which adequate reserves have been provided and reflected
in the Company’s financial statements included in the SEC Filings. There are no tax liens or claims pending or, to the Company’s
Knowledge, threatened in writing against the Company or any of its assets or property. There are no outstanding tax sharing agreements
or other such arrangements between the Company and any other corporation or entity.

 

3.12         
Title to Properties. The Company has good and marketable title to all real properties and all other properties
and assets (excluding Intellectual Property assets which are the subject of Section 3.15 hereof) owned by it, in each case,
free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made
or planned as of the date of this agreement to be made thereof by them unless failure to do so has not had and could not reasonably
be expected to have a Material Adverse Effect; and the Company holds any leased real or personal property under valid and enforceable
leases with no exceptions that would materially interfere with the use made or planned as of the date of this agreement to be made
thereof by them.

 

3.13         
Certificates, Authorities and Permits. The Company possesses adequate certificates, authorities or permits
issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by it, except to the extent
failure to possess such certificates, authorities or permits could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate, and the Company has not received any notice of proceedings relating to the revocation or modification
of any such certificate, authority or permit that, if determined adversely to the Company, could reasonably be expected to have
a Material Adverse Effect, individually or in the aggregate.

 

 

 

    	 	5	 

     

    

 

3.14         
Labor Matters.

 

(a)             
The Company is not a party to or bound by any collective bargaining agreements or other agreements with labor organizations.
The Company has not violated in any material respect any laws, regulations, orders or contract terms, affecting the collective
bargaining rights of employees, labor organizations or any laws, regulations or orders affecting employment discrimination, equal
opportunity employment, or employees’ health, safety, welfare, wages and hours.

 

(b)            
(i) There are no labor disputes existing, or to the Company’s Knowledge, threatened, involving strikes, slow-downs,
work stoppages, job actions, disputes, lockouts or any other disruptions of or by the Company’s employees, (ii) there are
no unfair labor practices or petitions for election pending or, to the Company’s Knowledge, threatened before the National
Labor Relations Board or any other federal, state or local labor commission relating to the Company’s employees, (iii) no
demand for recognition or certification heretofore made by any labor organization or group of employees is pending with respect
to the Company and (iv) to the Company’s Knowledge, the Company enjoys good labor and employee relations with its employees
and labor organizations.

 

(c)             
The Company is, and at all times has been, in compliance with all applicable laws respecting employment (including
laws relating to classification of employees and independent contractors) and employment practices, terms and conditions of employment,
wages and hours, and immigration and naturalization, except where the failure to so comply could not reasonably be expected to
have a Material Adverse Effect, individually or in the aggregate. There are no claims pending against the Company before the Equal
Employment Opportunity Commission or any other administrative body or in any court asserting any violation of Title VII of the
Civil Rights Act of 1964, the Age Discrimination Act of 1967, 42 U.S.C. §§ 1981 or 1983 or any other federal, state or
local Law, statute or ordinance barring discrimination in employment.

 

3.15         
Intellectual Property. The Company owns, or has obtained valid and enforceable licenses for, or other rights
to use, the Intellectual Property necessary for the conduct of the business of the Company as conducted as of the date of this
agreement and as described in the SEC Filings as being owned or licensed by them, except where the failure to own, license
or have such rights could not reasonably be expected to result in a Material Adverse Effect, individually or in the aggregate.
Except as set forth in Schedule 3.15 (a) to the Company’s Knowledge, there are no third parties who have or will be
able to establish rights to any Intellectual Property, except for the ownership rights of the owners of the Intellectual Property
which is licensed to the Company as described in the SEC Filings or where such rights could not reasonably be expected to result
in a Material Adverse Effect, individually or in the aggregate, (b) there is no pending or, to the Company’s Knowledge,
threat of any, action, suit, proceeding or claim by others challenging the Company’s rights in or to, or the validity,
enforceability, or scope of, any Intellectual Property owned by or licensed to the Company or claiming that the use of any Intellectual
Property by the Company in its businesses as conducted as of the date of this agreement infringes, violates or otherwise conflicts
with the intellectual property rights of any third party, and (c) to the Company’s Knowledge, the use by the Company of any
Intellectual Property by the Company in its businesses as conducted as of the date of this agreement does not infringe, violate
or otherwise conflict with the intellectual property rights of any third party.

 

3.16         
Environmental Matters. To the Company’s Knowledge, the Company is not in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal
or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to
hazardous or toxic substances (collectively, “Environmental Laws”), owns or operates any real property contaminated
with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to
any Environmental Laws, or is subject to any claim relating to any Environmental Laws, which violation, contamination, liability
or claim has had or could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate; and there
is no pending or, to the Company’s Knowledge, threatened investigation that might lead to such a claim.

 

 

 

    	 	6	 

     

    

 

3.17          Litigation.
There are no pending actions, suits or proceedings against or affecting the Company or any of its properties; and to the
Company’s Knowledge, no such actions, suits or proceedings are threatened, except any such proceeding, which if
resolved adversely to the Company, could not reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate. Neither the Company nor any director or officer thereof, is or has been the subject of any action involving a
claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has
not been, and to the Company’s Knowledge, there is not pending or contemplated, any investigation by the SEC involving
the Company or any current or former director or officer of the Company. The SEC has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company under the 1933 Act or the 1934 Act.

 

3.18         
Financial Statements. The financial statements included in each SEC Filing comply in all material respects
with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time
of filing (or to the extent corrected by a subsequent restatement) and present fairly, in all material respects, the consolidated
financial position of the Company as of the dates shown and its consolidated results of operations and cash flows for the periods
shown, and such financial statements have been prepared in conformity with United States generally accepted accounting principles
applied on a consistent basis (“GAAP”) (except as may be disclosed therein or in the notes thereto, and, in
the case of quarterly financial statements, as permitted by Form 10-Q under the 1934 Act). Except as set forth in the SEC Filings
filed prior to the date hereof, the Company has not incurred any liabilities, contingent or otherwise, except those incurred in
the ordinary course of business, consistent (as to amount and nature) with past practices since the date of such financial statements,
none of which, individually or in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect.

 

3.19         
Insurance Coverage. The Company maintains in full force and effect insurance coverage that is customary for
comparably situated companies for the business being conducted and properties owned or leased by the Company.

 

3.20         
Brokers and Finders. No Person, including, without limitation, any Investor or any current holder of shares
of Common Stock, will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest
or claim against or upon the Company or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of the Company. Except as a result of any agreements or arrangements made by an Investor
or its representatives or Affiliates, to the Company’s knowledge, Investors shall have no obligation with respect to any
such fees or commissions of a type contemplated in this Section 3.20 that may be due in connection with the transactions contemplated
by this Agreement.

 

3.21         
No Directed Selling Efforts or General Solicitation. Neither the Company nor any Person acting on its behalf
has conducted any general solicitation or general advertising (as those terms are used in Regulation D) in connection with the
offer or sale of any of the Securities.

 

3.22         
No Integrated Offering. Assuming the accuracy of the Investors’ representations and warranties set forth
in Section 4 hereof, 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 Company security or solicited any offers to buy any security, which are or will
be integrated with this offering of the Securities hereunder in a manner that would adversely affect reliance by the Company on
Section 4(a)(2) for the exemption from registration for the transactions contemplated hereby or would require registration of the
Securities under the 1933 Act.

 

3.23         
Private Placement. Assuming the accuracy of the Investors’ representations and warranties set forth
in Section 4 hereof, the offer and sale of the Securities to the Investors as contemplated hereby is exempt from the registration
requirements of the 1933 Act.

 

3.24         
Bad Actor Disqualification.

 

(a)             
No Disqualification Events. With respect to Securities to be offered and sold hereunder in reliance on Rule
506 under the 1933 Act (“Regulation D Securities”), none of the Company, any of its predecessors, any affiliated
issuer, any director, executive officer, other officer of the Company participating in the offering, any beneficial owner of 20%
or more of the Company's outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the 1933 Act) connected with the Company in any capacity at the time of sale (each, an “Issuer
Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the “Bad Actor”
disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 Act (a “Disqualification Event”),
except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine
whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with
its disclosure obligations under Rule 506(e), and has furnished to the Investors a copy of any disclosures provided thereunder.

 

 

 

    	 	7	 

     

    

 

(b)            
Other Covered Persons. The Company is not aware of any person that (i) has been or will be paid (directly
or indirectly) remuneration for solicitation of an Investor in connection with the sale of the Securities and (ii) who is subject
to a Disqualification Event.

 

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

 

3.25         
Questionable Payments. Neither the Company nor, to the Company’s Knowledge, any of its current
or former shareholders, directors, officers, employees, agents or other Persons acting on behalf of the Company, has, on behalf
of the Company or in connection with its businesses, (a) used any corporate funds for unlawful contributions, gifts, entertainment
or other unlawful expenses relating to foreign or domestic political activity, (b) made any direct or indirect unlawful payments
to any foreign or domestic governmental officials or employees from corporate funds, (c) established or maintained any unlawful
or unrecorded fund of corporate monies or other assets, (d) made any false or fictitious entries on the books and records of the
Company, or (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature.

 

3.26         
Transactions with Affiliates. Except as disclosed in the SEC Filings, none of the officers or directors of
the Company and, to the Company’s Knowledge, none of the employees of the Company is presently a party to any transaction
with the Company (other than as holders of stock options and/or warrants, and for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or,
to the Company’s Knowledge, any entity in which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.

 

3.27         
Internal Controls. Except as disclosed in the SEC Filings, the Company is in material compliance with the
provisions of the Sarbanes-Oxley Act of 2002 applicable to the Company as of the date of this agreement. The Company maintains
a system of internal accounting controls sufficient to provide reasonable assurance that (a) transactions are executed in accordance
with management’s general or specific authorizations, (b) transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset accountability, (c) access to assets is permitted only in accordance
with management’s general or specific authorization, and (d) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established
disclosure controls and procedures (as defined in 1934 Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure
controls and procedures to ensure that material information relating to the Company is made known to the certifying officers by
others within those entities, particularly during the period in which the Company’s most recently filed periodic report under
the 1934 Act, as the case may be, is being prepared. The Company’s certifying officers have evaluated the effectiveness of
the Company’s controls and procedures as of the end of the period covered by the most recently filed periodic report under
the 1934 Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report
under the 1934 Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures
based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant changes in the
Company’s internal controls (as such term is defined in Item 308 of Regulation S-K) or, to the Company’s Knowledge,
in other factors that could significantly affect the Company’s internal controls. The Company maintains and will continue
to maintain a standard system of accounting established and administered in accordance with GAAP and the applicable requirements
of the 1934 Act while it continues to report under the 1934 Act.

 

3.28         
Investment Company. The Company is not required to be registered as, and is not an Affiliate of, and immediately
following the Closing will not be required to register as, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.

 

 

 

    	 	8	 

     

    

 

3.29         
Application of Takeover Protections. The Company and its board of directors have taken or will take prior
to the Closing Date all necessary action, if any, in order to render inapplicable any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Articles of
Incorporation or the laws of the state of its incorporation which is or could become applicable to the Investor as a result of
the transactions contemplated by this Agreement, including, without limitation, the Company's issuance of the Securities and the
Investors' ownership of the Securities.

 

3.30         
Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the
Transaction Documents that will be timely publicly disclosed by the Company, the Company confirms that neither it nor any other
Person acting on its behalf has provided the Investor or its agents or counsel with any information that it believes constitutes
or might constitute material, non-public information which is not otherwise disclosed in the Registration Statement or the SEC
Documents unless the Investor has agreed verbally or in writing to receive such information in which case this sentence does not
apply. The Company understands and confirms that the Investor will rely on the foregoing representation in effecting purchases
and sales of securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Investor regarding
the Company, its business and the transactions contemplated hereby, including the disclosure schedules to this Agreement, is true
and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order
to make the statements made therein, in light of the circumstances under which they were made, not misleading. The press releases
disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees
that the Investor neither makes nor has made any representations or warranties with respect to the transactions contemplated hereby
other than those specifically set forth in Section 3 hereof.

 

3.31         
Shell Company Status. The Company is not as of the date of this agreement, and never has been, an issuer identified
in Rule 144(i)(1) under the 1933 Act.

 

3.32         
Each of the Investors acknowledges and agrees that the Company has not made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically set forth in this Section 3. Each of the Investors
further acknowledges and agrees that neither the Company nor any other Person has made any representation or warranty, expressed
or implied, as to the accuracy or completeness of any information received by any such Investor which constitutes or may be deemed
to constitute a projection, estimate or other forecast and certain business plan information, except that such information was
prepared in good faith and based upon assumptions that the Company believes to have been reasonable at the time such information,
if any, was provided to the applicable Investor.

 

4.               
Representations and Warranties of the Investors. Each of the Investors hereby severally, and not jointly,
represents and warrants to the Company that:

 

4.1            
Organization and Existence. If such Investor is not a natural person, such investor is a corporation, limited
partnership or limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction
of its incorporation or organization and has all requisite corporate, partnership or limited liability company power and authority
to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder.

 

4.2            
Authorization. The execution, delivery and performance by such Investor of the Transaction Documents to which
such Investor is a party have been duly authorized and each will constitute the legal, valid and binding obligation of such Investor,
enforceable against such Investor in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

 

4.3            
Consents. All consents, approvals, orders and authorizations required on the part of such Investor in connection
with the execution, delivery or performance of each Transaction Document and the consummation of the transactions contemplated
hereby and thereby have been obtained and are effective as of the date hereof.

 

 

 

    	 	9	 

     

    

 

4.4            
Purchase Entirely for Own Account. The Securities to be received by such Investor hereunder will be acquired
for such Investor’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof
in violation of the 1933 Act, and such Investor has no present intention of selling, granting any participation in, or otherwise
distributing the same and has no arrangement or understanding with any other Persons regarding the distribution of such Securities
in violation of the 1933 Act or any applicable state securities law without prejudice, however, to such Investor’s right
at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state
securities laws. Such Investor is acquiring the Securities hereunder in the ordinary course of its business. Nothing contained
herein shall be deemed a representation or warranty by such Investor to hold the Securities for any period of time. Such Investor
is not a broker-dealer registered with the SEC under the 1934 Act or an entity engaged in a business that would require it to be
so registered.

 

4.5            
Investment Experience. Such Investor acknowledges that it can bear the economic risk and complete loss of
its investment in the Securities and has such knowledge and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment contemplated hereby.

 

4.6            
Disclosure of Information. The Company has made available a draft of the quarterly report on Form 10-Q for
the quarter ended September 30, 2016 and such Investor has had the opportunity to review such report. Such Investor has had an
opportunity to receive all information related to the Company requested by it and to ask questions of and receive answers from
the Company regarding the Company, its business and the terms and conditions of the offering of the Securities. Such Investor acknowledges
receipt of copies of the SEC Filings. Neither such inquiries nor any other due diligence investigation conducted by such Investor
shall modify, limit or otherwise affect such Investor’s right to rely on the Company’s representations and warranties
contained in this Agreement.

 

4.7            
Restricted Securities. Such Investor understands that the Securities are characterized as “restricted
securities” under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction
not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration
under the 1933 Act only in certain limited circumstances.

 

4.8            
Legends. It is understood that, except as provided below, certificates evidencing the Securities may bear
the following or any similar legend:

 

(a)             
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED
FOR SALE PURSUANT TO THE SECURITIES ACT AND SUCH REGISTRATION STATEMENT REMAINS EFFECTIVE, (II) SUCH SECURITIES MAY BE SOLD PURSUANT
TO RULE 144, OR (III) COMPANY COUNSEL HAS OPINED THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES
ACT.”

 

(b)            
If required by the authorities of any state in connection with the issuance or sale of the Securities, the legend
required by such state authority.

 

4.9            
Accredited Investor. Such Investor is an accredited investor as defined in Rule 501(a) of Regulation D, as
amended, under the 1933 Act. Such Investor was not organized for the specific purpose of acquiring the Securities and is not required
to be registered as a broker-dealer under Section 15 of the Exchange Act.

 

4.10         
No General Solicitation. Such Investor did not learn of the investment in the Securities as a result of any
general solicitation or general advertising.

 

 

 

    	 	10	 

     

    

 

4.11         
Brokers and Finders. No Person will have, as a result of the transactions contemplated by the Transaction
Documents, any valid right, interest or claim against or upon the Company or an Investor for any commission, fee or other compensation
pursuant to any agreement, arrangement or understanding entered into by or on behalf of such Investor.

 

4.12         
Prohibited Transactions. Since such time as such Investor was first contacted by the Company or any other
Person acting on behalf of the Company regarding the transactions contemplated hereby through the public announcement of the Transaction,
neither such Investor nor any Affiliate of such Investor which (a) had knowledge of the transactions contemplated hereby, (b) has
or shares discretion relating to such Investor’s investments or trading or information concerning such Investor’s investments,
including in respect of the Securities, or (c) is subject to such Investor’s review or input concerning such Affiliate’s
investments or trading has, directly or indirectly, effected or agreed to effect, or will directly or indirectly effect, any short
sale, whether or not against the box, established any “put equivalent position” (as defined in Rule 16a-1(h) under
the 1934 Act) with respect to the Common Stock, granted any other right (including, without limitation, any put or call option)
with respect to the Common Stock or with respect to any security that includes, relates to or derived any significant part of its
value from the Common Stock or otherwise sought to hedge its position in the Securities (each, a “Prohibited Transaction”).
Such Investor acknowledges that the representations, warranties and covenants contained in this Section 4.12 are being made
for the benefit of the Investors as well as the Company and that each of the other Investors shall have an independent right to
assert any claims against such Investor arising out of any breach or violation of the provisions of this Section 4.12.

 

The Company acknowledges
and agrees that each Investor has not made any representations or warranties with respect to the transactions contemplated by the
Transaction Documents other than those specifically set forth in this Section 4.

 

5.               
Conditions to Closing.

 

5.1            
Conditions to the Investors’ Obligations. The obligation of each Investor to purchase the Shares and
the Warrants at the Closing is subject to the fulfillment to such Investor’s satisfaction, on or prior to the Closing Date,
of the following conditions, any of which may be waived by such Investor (as to itself only):

 

(a)             
The representations and warranties made by the Company in Section 3 hereof qualified as to materiality shall
be true and correct at all times prior to and on the Closing Date as so qualified, except to the extent any such representation
or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct as
of such earlier date as so qualified, and, the representations and warranties made by the Company in Section 3 hereof not
qualified as to materiality shall be true and correct in all material respects at all times prior to and on the Closing Date, except
to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or
warranty shall be true and correct in all material respects as of such earlier date. The Company shall have performed in all material
respects all obligations and covenants herein required to be performed by it on or prior to the Closing Date.

 

(b)            
The Company shall have obtained any and all consents, permits, approvals, registrations and waivers necessary or
appropriate for consummation of the purchase and sale of the Securities and the consummation of the other transactions contemplated
by the Transaction Documents, all of which shall be in full force and effect.

 

(c)             
The Company shall have executed and delivered the Registration Rights Agreement.

 

(d)            
No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including
any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding
shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated
hereby or in the other Transaction Documents.

 

(e)             
The Investors shall have received an opinion from Trombly Business Law, PC, dated as of the Closing Date, in form
and substance reasonably acceptable to the Investors and addressing such legal matters as the Investors may reasonably request.

 

 

 

    	 	11	 

     

    

 

(f)             
No stop order or suspension of trading shall have been imposed by the SEC or any other governmental or regulatory
body with respect to public trading in the Common Stock.

 

5.2            
Conditions to Obligations of the Company. The Company’s obligation to sell and issue the Shares and
the Warrants at the Closing is subject to the fulfillment to the satisfaction of the Company on or prior to the Closing Date of
the following conditions, any of which may be waived by the Company:

 

(a)             
The representations and warranties made by the Investors in Section 4 hereof, other than the representations
and warranties contained in Sections 4.4, 4.5, 4.6, 4.7, 4.8, 4.9 and 4.10 (the
“Investment Representations”), shall be true and correct in all material respects when made, and shall be true
and correct in all material respects on the Closing Date with the same force and effect as if they had been made on and as of said
date. The Investment Representations shall be true and correct in all respects when made, and shall be true and correct in all
respects on the Closing Date with the same force and effect as if they had been made on and as of said date. The Investors shall
have performed in all material respects all obligations and covenants herein required to be performed by them on or prior to the
Closing Date.

 

(b)            
The Investors shall have executed and delivered the Registration Rights Agreement.

 

(c)             
The Investors shall have delivered the Purchase Price to the Company.

 

5.3            
Termination of Obligations to Effect Closing.

 

(a)             
The obligations of the Company, on the one hand, and the Investors, on the other hand, to effect the Closing shall
terminate as follows:

 

		(i)	Upon the mutual written consent of the Company and the Investors;

 

		(ii)	By the Company if any of the conditions set forth in Section 5.2 shall have become incapable
of fulfillment, and shall not have been waived by the Company;

 

		(iii)	By an Investor (with respect to itself only) if any of the conditions set forth in Section 5.1
shall have become incapable of fulfillment, and shall not have been waived by the Investor; or

 

		(iv)	By either the Company or any Investor (with respect to itself only) if the Closing has not occurred
on or prior to December 31, 2016;

 

provided, however, that, except in the
case of clause (i) above, the party seeking to terminate its obligation to effect the Closing shall not then be in breach
of any of its representations, warranties, covenants or agreements contained in this Agreement or the other Transaction Documents
if such breach has resulted in the circumstances giving rise to such party’s seeking to terminate its obligation to effect
the Closing.

 

(b)            
In the event of termination by the Company or any Investor of its obligations to effect the Closing pursuant to this
Section 5.3, written notice thereof shall forthwith be given to the other Investors by the Company and the other Investors
shall have the right to terminate their obligations to effect the Closing upon written notice to the Company and the other Investors.
Nothing in this Section 5.3 shall be deemed to release any party from any liability for any breach by such party of the
terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific
performance by any other party of its obligations under this Agreement or the other Transaction Documents.

 

6.               
Covenants and Agreements.

 

6.1            
Reservation of Common Stock. The Company shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of providing for the exercise of the Warrants, such number of shares
of Common Stock as shall from time to time equal the Warrant Shares issuable from time to time.

 

 

 

    	 	12	 

     

    

 

6.2            
No Conflicting Agreements. The Company will not take any action, enter into any agreement or make any commitment
that would conflict or interfere in any material respect with the Company’s obligations to the Investors under the Transaction
Documents.

 

6.3            
Insurance. The Company shall maintain appropriate insurance coverage consistent with its business being conducted.

 

6.4            
Compliance with Laws. The Company will comply in all material respects with all applicable laws, rules, regulations,
orders and decrees of all governmental authorities.

 

6.5            
Listing of Underlying Shares and Related Matters. If the Company applies to have its Common Stock or other
securities traded on any principal stock exchange or market, it shall include in such application the Shares and the Warrant Shares
and will take such other action as is necessary to cause such Common Stock to be so listed.

 

6.6            
Termination of Covenants. The provisions of Sections 6.3 through 6.5 shall terminate and be
of no further force and effect on the date on which the Company’s obligations under the Registration Rights Agreement to
register or maintain the effectiveness of any registration covering the Registrable Securities (as such term is defined in the
Registration Rights Agreement) terminates.

 

6.7            
Removal of Legends. Consistent with federal and state securities laws, upon the earlier of (a) the sale or
disposition of any Securities by an Investor pursuant to Rule 144 or pursuant to any other exemption under the 1933 Act or (b)
any Securities of the Investor becoming eligible to be sold without restriction pursuant to all applicable requirements of Rule
144, upon the written request of such Investor, the Company shall or, in the case of Common Stock, shall cause the transfer agent
for the Common Stock (the “Transfer Agent”) to issue replacement certificates representing such Securities.

 

6.8            
Subsequent Equity Sales. The Company shall not, and shall use its best efforts to ensure that no Affiliate
of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the 1933 Act) that will be integrated with the offer or sale of the Securities in a manner that would require the
registration under the 1933 Act of the sale of the Securities to the Investors, or that will be integrated with the offer or sale
of the Securities for purposes of the rules and regulations of any trading market such that it would require shareholder approval
prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.

 

6.9            
Equal Treatment of Investors. No consideration shall be offered or paid to any Person to amend or consent
to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered
to all of the parties to the Transaction Documents. For clarification purposes, this provision constitutes a separate right granted
to each Investor by the Company and negotiated separately by each Investor, and is intended for the Company to treat the Investors
as a class and shall not in any way be construed as the Investors acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.

 

6.10         
Prohibited Transactions. From the date hereof until one (1) year after the Closing Date, no Investor shall
enter into any Prohibited Transaction relating to the Common Stock.

 

7.               
Survival and Indemnification.

 

7.1            
Survival. The representations, warranties, covenants and agreements contained in this Agreement shall survive
the Closing of the transactions contemplated by this Agreement until the expiration of the applicable statute of limitations.

 

 

 

    	 	13	 

     

    

 

7.2            
Indemnification. The Company agrees to indemnify and hold harmless each Investor, its Affiliates and, and
each of their directors, officers, shareholders, partners, employees, agents, and any Person who controls Investor within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act (collectively, the “Investor Parties” and each an
“Investor Party”), from and against any and all losses, claims, damages, liabilities and expenses (including,
without limitation, actual and reasonable attorney fees and disbursements (subject to Section 7.3 below) and other actual
expenses incurred in connection with investigating, preparing or defending any action, claim or proceeding, pending or threatened
and the costs of enforcement thereof) (collectively, “Losses”) to which such Person may become subject as a
result of (a) any breach of any representation, warranty, covenant or agreement made by or to be performed on the part of the Company
under the Transaction Documents; (b) any action instituted against any Investor Party, or any of them or their respective Affiliates,
by any stockholder of the Company who is not an Affiliate of an Investor Party, with respect to any of the transactions contemplated
by the Transaction Documents (unless such action is based upon a breach of Investor’s representation, warranties or covenants
or agreements under the Transaction Documents or any agreements or understandings Investor may have with any such stockholder or
any violations by Investor of state or federal securities laws or any conduct by Investor which constitutes fraud, gross negligence,
willful misconduct or malfeasance), (c) any untrue statement or alleged untrue statement of a material fact contained in a Registration
Statement (or in a Registration Statement as amended by any post-effective amendment thereof by the Company) or arising out of
or based upon any omission or alleged omission to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and/or (d) any untrue statement or alleged untrue statement of a material fact included in any
Prospectus ( or any amendments or supplements to any Prospectus ), or arising out of or based upon any omission or alleged omission
to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that (i) the Company shall not be obligated to indemnify any Investor Party for any
Losses finally adjudicated to have been caused solely by an untrue statement of a material fact or an omission to state a material
fact made in reliance upon and conformity with information furnished to the Company in writing by or on behalf of such Person expressly
for use in the Registration Statement or the Prospectus (or any amendment or supplement thereto) and (ii) the foregoing indemnity
shall not inure to the benefit of any Investor Party from whom the Person asserting any Losses purchased Securities, if a copy
of the Prospectus (as then supplemented) was not sent or given by or on behalf of such Investor Party to such Person, if required
by law to have been delivered, at or prior to the written confirmation of the sale of such Securities to such person, and if delivery
of the Prospectus (as then supplemented) would have cured the defect giving rise to such Losses, and the Company will reimburse
any such Person for all such amounts as they are incurred by such Person.

 

7.3            
Conduct of Indemnification Proceedings. Any person entitled to indemnification hereunder shall
(a) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (b) permit such
indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided
that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the
defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (i) the indemnifying
party has agreed to pay such fees or expenses, (ii) the indemnifying party shall have failed to assume the defense of such claim
and employ counsel reasonably satisfactory to such person or (iii) in the reasonable judgment of any such person, based upon written
advice of its counsel, a conflict of interest exists between such person and the indemnifying party with respect to such claims
(in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at
the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf
of such person); and provided, further, that the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations hereunder, except to the extent that such failure to give notice shall
materially adversely affect the indemnifying party in the defense of any such claim or litigation. It is understood that the indemnifying
party shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate
firm of attorneys at any time for all such indemnified parties. No indemnifying party will, except with the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation.
The Company will not be liable to any indemnified party under this Agreement (a) for any settlement by such indemnified party effected
without the Company’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed, or (b) for
any Losses incurred by such indemnified party which a court of competent jurisdiction determines in a final judgment which is not
subject to further appeal are solely attributable to (A) a breach of any of the representations, warranties, covenants or agreements
made by such indemnified party under this Agreement or in any other Transaction Document or (B) the fraud, gross negligence or
willful misconduct of such indemnified party.

 

 

 

    	 	14	 

     

    

 

8.               
Miscellaneous.

 

8.1            
Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of
the Investors and their respective successors and assigns. An Investor may transfer or assign, in whole or from time to time in
part, to one or more persons its rights hereunder in connection with the transfer of Securities by such Investor to such person,
provided that (a) the Investor agrees in writing with such transferee or assignee to assign all or any portion of such rights,
and a copy of such agreement is furnished to the Company within a reasonable time after such assignment; (b) the Company is, within
a reasonable time after such transfer or assignment, furnished with written notice of (i) the name and address of such transferee
or assignee, and (ii) the securities with respect to which such registration rights are being transferred or assigned; (c) immediately
following such transfer or assignment the further disposition of such securities by such transferee or assignee is restricted under
the 1933 Act or applicable state securities laws if so required; (d) at or before the time the Company receives the written notice
contemplated by clause (b) of this sentence such transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein; (e) such transfer or assignment shall have been made in accordance with the applicable requirements
of this Agreement; and (f) such transfer or assignment shall have been conducted in accordance with all applicable federal and
state securities laws. The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted
successors and assigns of the parties. Without limiting the generality of the foregoing, in the event that the Company is a party
to a merger, consolidation, share exchange or similar business combination transaction in which the Common Stock is converted into
the equity securities of another Person, from and after the effective time of such transaction, such Person shall agree to and,
by virtue of such transaction, have assumed the obligations of the Company hereunder, the term “Company” shall be deemed
to refer to such Person and the term “Common Stock” shall be deemed to refer to the securities received by the Investors
in connection with such transaction. 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.

 

8.2            
Counterparts; Faxes. 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 in a “.pdf” format data file, which shall be deemed an original.

 

8.3            
 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.

 

8.4            
Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in
writing and shall be deemed effectively given as hereinafter described (a) if given by personal delivery, then such notice shall
be deemed given upon such delivery, (b) if given by facsimile or e-mail, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (c) if given by mail, then such notice shall be deemed given upon the earlier of (i) receipt
of such notice by the recipient or (ii) three days after such notice is deposited in first class mail, postage prepaid, and (d)
if given by an internationally recognized overnight air courier, then such notice shall be deemed given one Business Day after
delivery to such carrier. All notices shall be addressed to the party to be notified at the address as follows, or at such other
address as such party may designate by ten days’ advance written notice to the other party:

 

If to the Company:

 

Precision Optics Corporation, Inc.

22 East Broadway

Gardner, Massachusetts 01440-3338

Attention: Chief Executive Officer

Fax: (978) 630-1487

E-mail: jforkey@poci.com

 

 

 

    	 	15	 

     

    

 

With a copy to (which shall not constitute notice):

 

Amy Trombly

Trombly Business Law, PC

1314 Main Street, Suite 102

Louisville,
CO  80027

Fax: (617) 243-0066

E-mail: amy@tromblybusinesslaw.com

 

If to the Investors:

 

to the addresses set forth on the signature pages hereto.

 

8.5            
Expenses. The parties hereto shall pay their own costs and expenses in connection herewith, regardless of
whether the transactions contemplated hereby are consummated. In the event that legal proceedings are commenced by any party to
this Agreement against another party to this Agreement in connection with this Agreement or the other Transaction Documents, the
party or parties which do not prevail in such proceedings shall severally, but not jointly, pay their pro rata share of the reasonable
attorneys’ fees and other reasonable out-of-pocket costs and expenses incurred by the prevailing party in such proceedings.

 

8.6            
Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent
of the Company and Investors representing at least one-half of the shares issued in this transaction. 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, each future holder of all such Securities, and the Company.

 

8.7            
Publicity. The Company will file a public release or announcement concerning the transactions contemplated
hereby as required by law or the applicable rules or regulations of any securities exchange or securities market.

 

8.8            
Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable
law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders
any provision hereof prohibited or unenforceable in any respect.

 

8.9            
Entire Agreement. This Agreement, including the Exhibits and the Disclosure Schedules, and the other Transaction
Documents constitute the entire agreement among the parties hereof with respect to the subject matter hereof and thereof and supersedes
all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and
thereof.

 

8.10         
Further Assurances. The parties shall execute and deliver all such further instruments and documents and take
all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment
of the agreements herein contained.

 

8.11         
Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of New York applicable to agreements made and to be performed entirely within
the State of New York (except to the extent the provisions of the California Corporations Code would be mandatorily applicable
to the issuance of the Shares, the Warrants or the Warrant Shares). Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern
District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and
the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on
each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each
of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to
the laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of venue of any such suit,
action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum. TO THE EXTENT ALLOWABLE UNDER APPLICABLE LAW, EACH OF THE PARTIES
HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL
HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

 

 

    	 	16	 

     

    

 

8.12         
Independent Nature of Investors’ Obligations and Rights. The obligations of each Investor under any
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 any Transaction Document. The decision of each Investor
to purchase Securities pursuant to the Transaction Documents has been made by such Investor independently of any other Investor.
Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant 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 the Transaction Documents. Each Investor acknowledges that no other Investor has acted as agent for such Investor in connection
with making its investment hereunder and that no Investor will be acting as agent of such Investor in connection with monitoring
its investment in the Securities or enforcing its rights under the Transaction Documents. Each Investor shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction
Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such
purpose. Each Investor has been represented by its own separate legal counsel in their review and negotiation of the Transaction
Documents. The Company acknowledges that each of the Investors has been provided with the same Transaction Documents for the purpose
of closing a transaction with multiple Investors and not because it was required or requested to do so by any Investor.

 

[Signature Pages Follow]

 

 

 

 

 

 

 

 

 

    	 	17	 

     

    

 

IN WITNESS WHEREOF, the
parties have executed this Securities Purchase Agreement or caused their duly authorized officers to execute this Securities Purchase
Agreement as of the date first above written.

 

 

	The Company:	PRECISION OPTICS CORPORATION, INC.
	 	 
	 	 
	 	By:	/s/ Joseph N. Forkey
	 	Name:	Joseph N. Forkey
	 	Title:	Title: President and Chief Executive
Officer

 

 

 

 

[Signature Page for Investor Follows]

 

 

 

 

 

 

 

 

 

    	 	18	 

     

    

 

[Signature Page to Securities Purchase
Agreement]

 

 

	Name of Investor:	 
	 	 
	 	 
	 	By:	 
	 	Name:	 
	 	Title:	 
	 	 	 
	 	 	 
	Address for Delivery of Certificate to Investor:	 
	 	 
	 	 
	 	 	 
	 	Fax:	 
	 	Email:	 
	 	 	 
		 	 
	Address for Notice (if different):	 
	 	 
	 	 
	 	 	 
	 	Fax:	 
	 	Email:	 
	 	 	 
	 	 	 
	Subscription Amount:	$
	 	 	 
	Shares:	 
	 	 	 
	Warrants:	 
	 	 	 
	EIN Number:	 

 

 

 

 

 

 

 

 

 

    	 	19	 

     

    

 

Disclosure Schedules to the Securities
Purchase Agreement

 

Schedule 3.1 – Subsidiaries.

 

	Name	 	Jurisdiction of Incorporation
	 	 	 
	Precise Medical, Inc.	 	Commonwealth of Massachusetts, USA
	Wood’s Precision Optics Corporation, Limited	 	Hong Kong

 

 

Schedule 3.3 – Capitalization.

 

The capitalization of the Company, as of
June 30, 2016 is set forth below.

 

	Common stock outstanding	7,539,582
	Common stock options	1,136,000
	Common stock purchase warrants	3,032,794
	Total 	11,708,376

 

Private Placement of 10% Senior Secured Convertible Notes
and Warrants on June 25, 2008

 

On June 25, 2008, the Company entered into
a purchase agreement, as amended on December 11, 2008, with institutional and other accredited investors pursuant to which the
Company sold a total of $600,000 of 10% Senior Secured Convertible Notes, referred to as the “Notes,” that are convertible
into a total of 480,000 shares of common stock at a conversion rate of $1.25. The Company also issued warrants to purchase a total
of 316,800 shares of common stock at an exercise price of $1.75 per share, referred to as the “Warrants.” Interest
accrued on the Notes at a rate of 10% per year and was payable in cash upon the earlier of conversion or maturity of the Notes.
The original maturity of the Notes was June 25, 2010 and the Warrants expire on June 25, 2015, subject to extension. By mutual
agreement with the Company, the Investors amended the Notes on several dates to extend the “Stated Maturity Date” of
the Notes. The exercise price of the Warrants may be adjusted downward in the event the Company issues shares of common stock or
securities convertible into common stock at a price lower than the exercise price of the Warrants at the time of issuance.

 

Pursuant to the purchase agreement, the
Notes and Warrants were not convertible or exercisable until the Company implemented a 1 for 6 reverse stock split, which required
the approval of its stockholders. On November 25, 2008, the Company entered into a Side Letter Agreement in which the investors
agreed to change the ratio of the reverse split from 1 for 6 to 1 for 25. On December 11, 2008, the Company effected a 1 for 25
reverse split of our common stock.

 

Pursuant to a registration rights agreement
entered into with the investors on June 25, 2008, the Company agreed to file a registration statement with the SEC by the earlier
of (i) two days following the effectiveness of the amendment to implement a reverse stock split and (ii) December 15, 2008, to
register the resale of the common stock issuable upon the conversion of the Notes and the exercise of the Warrants. The Company
agreed to keep the registration statement effective until the earlier of (i) the date on which all the securities covered by the
registration statement, as amended from time to time, have been sold and (ii) the date on which all the securities covered by such
registration statement may be sold without restriction pursuant to Rule 144 of the Securities Act of 1933.

 

 

 

    	 	20	 

     

    

 

On December 15, 2011, the Company repaid
Special Situations Fund III QP, L.P. a principal repayment of $275,000 and accrued interest of $95,486, for a total payment of
$370,486. On December 15, 2011, the Company repaid Special Situations Private Equity Fund, L.P. a principal repayment of $275,000
and accrued interest of $95,486, for a total payment of $370,486. The Notes held by Special Situations Fund III QP, L.P. and Special
Situations Private Equity Fund, L.P. have been satisfied in full and the obligations thereunder have been terminated.

 

On March 31, 2012, the remaining investor,
Arnold Schumsky, further amended his remaining Note to extend the “Stated Maturity Date” of the principal to July 31,
2012 and to modify the Note such that all accrued and unpaid interest on the Note up to and including March 31, 2012 shall be due
on or before April 13, 2012, on the condition that the Company issue to him a warrant for 5,000 shares of common stock with an
exercise price of $1.20 per share and a term of three years. On April 13, 2012, the Company repaid Mr. Schumsky a payment of the
accrued interest of $18,819, and such payment included all accrued and unpaid interest on the Note up to and including March 31,
2012. On May 8, 2012, the Company issued Mr. Schumsky the warrant according to the terms described in the amended Note. On July
31, 2012, Mr. Schumsky further amended his remaining Note to extend the “Stated Maturity Date” of the principal to
August 31, 2012. On August 31, 2012, Mr. Schumsky further amended his remaining Note to extend the “Stated Maturity Date”
of the principal to September 30, 2012.

 

On September 28, 2012, the Company repaid
Mr. Schumsky the outstanding and accrued interest of $2,500 due under his Note and such payment satisfied its obligations in regards
to the accrued interest due on the Note in full. On that same date, Mr. Schumsky presented the outstanding principal balance of
the Note to the Company and agreed to exchange the $50,000 principal balance of his Note for participation in the Company’s
September 2012 financing transaction, and was issued units consisting of 55,555 shares of common stock and 38,889 warrants upon
the same terms as the units sold in the September 2012 financing transaction. Accordingly, the Note held by Mr. Schumsky has been
satisfied in full and the obligations thereunder have been terminated.

 

As a result of the issuance of warrants
to purchase 100,000 shares of common stock in December 2010 and the September 28, 2012 private placement, certain anti-dilution
provisions in the June 25, 2008 Warrants were triggered and the Company was obligated to issue an aggregate of 153,031 additional
shares upon the exercise of the Warrants. Additionally, the exercise price of those Warrants was reduced from $1.74 to $1.18. 39,153
of these Warrants expired on June 25, 2015, and the remaining 430,678 Warrants (as discussed below) expire on May 11, 2017.

 

As the Company’s previous registration
statements for the June 25, 2008 transaction became stale, the Company registered the securities in a registration statement that
is effective as of the date of this Agreement.

 

September 28, 2012 Private Placement

 

On September 28, 2012, the Company entered
into agreements with accredited investors for the sale and purchase of units consisting of an aggregate of (i) 2,777,795 shares
of common stock, and (ii) warrants to purchase an aggregate of 1,944,475 shares of common stock, at a per unit price of $0.90.
In conjunction with the offering, the Company also entered into a registration rights agreement dated September 28, 2012 with the
investors, whereby it was obligated to file a registration statement with the Securities and Exchange Commission to register the
resale by the Investors of the 2,777,795 shares of the common stock purchased in the offering, and the 1,944,475 shares of common
stock underlying the warrants purchased in the offering.

 

 

 

    	 	21	 

     

    

 

Under the Registration Rights agreement,
the Company also agreed to include a Right to Piggyback Registration any of the Securities still outstanding that are not covered
on an effective registration statement if so requested.

 

A registration statement covering the shares
is effective as of the date of this Agreement.

 

February 2013 Settlement

 

On February 12, 2013, the Company entered
into a settlement agreement with two stockholders, Special Situations Fund III QP, L.P. and Special Situations Private Equity Fund,
L.P. (along with Special Situations Fund III QP, L.P., “Special Situations”) (the “Settlement Agreement”).

 

Without agreeing to the alleged damages,
the Company entered into the Settlement Agreement with Special Situations in order to resolve the claim without requiring a cash
payment or extended distraction of the Company’s resources away from operational activities. Under the terms of the Settlement
Agreement, Special Situations agreed to forego their claims for cash damages. In return, the Company agreed to: (a) issue an aggregate
of (i) 350,000 shares of common stock, and (ii) warrants to purchase an aggregate of 350,000 shares of common stock, and (b) amend
the expiration date of the warrants issued to Special Situations in conjunction with the Company’s June 25, 2008 private
placement (the “2008 Warrants”), as payment in full of the alleged damages sought by Special Situations. The expiration
date of the 2008 Warrants was amended from June 25, 2015 to May 11, 2017. The new warrants issued in connection with the Settlement
Agreement have an exercise price of $1.50 per share, subject to adjustment, expire three years from February 12, 2013, and are
exercisable in whole or in part, at any time prior to expiration.

 

In conjunction with the Settlement Agreement,
the Company also entered into a registration rights agreement dated February 12, 2013 with Special Situations, whereby it was obligated
to register the resale by Special Situations of the securities, consisting of 350,000 shares of common stock and the 350,000 shares
of common stock underlying the warrants issued on February 12, 2013.

 

Under the Registration Rights agreement,
the Company also agreed to include a Right to Piggyback Registration any of the Securities still outstanding that are not covered
on an effective registration statement if so requested.

 

A registration statement covering the shares
is effective as of the date of this Agreement.

 

July 2014 Private Placement

 

On July 1 through July 7, 2014, the Company
closed agreements with institutional and accredited investors for the sale and purchase of 1,717,152 shares of the Company’s
common stock, $0.01 par value at a purchase price of $0.60 per share. The Company received $1,030,291 in gross proceeds from the
offering. The Company used the net proceeds from this placement for general working capital purposes. Of this amount, $50,000 was
received in June 2014 and the remainder was received in July 2014.

 

In conjunction with the placement, the
Company also entered into a registration rights agreement with the Investors, whereby the Company was obligated to file a registration
statement with the Securities Exchange Commission on or before 45 calendar days after July 1, 2014 to register the resale by the
investors of the 1,717,152 shares of the common stock purchased in the placement. Subsequent to the execution of the agreement,
the parties agreed to extend the time period by which the Company was obligated to file a registration statement with the Securities
Exchange Commission. The registration statement was filed with the Securities Exchange Commission on October 9, 2014, in accordance
with the extended timetable, and became effective on October 30, 2014.

 

 

 

    	 	22	 

     

    

 

October 2015 Private Placement

 

On October 19, 2015, the Company entered
into agreements with accredited investors for the sale and purchase of 1,044,776 shares of the Company’s common stock, $0.01
par value at a purchase price of $0.67 per share. The Company received $700,000 in gross proceeds from the offering. The Company
used the majority of the net proceeds from this placement for general working capital purposes.

 

In conjunction with the placement, the
Company also entered into a registration rights agreement with the investors, and in compliance with the terms of the agreement
the registration statement was filed on January 19, 2016 and became effective on February 1, 2016.

 

In conjunction with the offering, certain
anti-dilution provisions of the warrants issued in conjunction with the Company’s June 25, 2008 and September 28, 2012 financing
transactions were triggered. As a result, the number of existing June 25, 2008 warrants increased from 493,398 to 517,222 and the
related exercise price of the warrants decreased from $1.03 to $0.98 per share. Also, as a result of the offering, the number of
existing September 28, 2012 warrants increased from 2,189,724 to 2,293,013 and 217,322 to 222,559, respectively, and the related
exercise price decreased from $1.11 to $1.06 and from $0.85 to $0.83, respectively.

 

Variable Rate Securities:

 

Warrants to Purchase Shares of Common Stock,
dated June 25, 2008 (included as Exhibit 4.2 to the Form 8-K filed June 27, 2008). On 2/12/13, the expiration date of these warrants
was extended from June 25, 2015 to May 11, 2017.

 

Warrants to Purchase Shares of Common Stock
(included as Exhibit 4.1 to the Form 8-K filed October 2, 2012)

 

Warrant to Purchase Shares of Common Stock
issued to Loewen, Ondaatje, McCutcheon USA LTD, dated September 28, 2012 (included as Exhibit 4.3 to the Form 8-K filed October
2, 2012).

 

Schedule 3.15 Intellectual Property.

 

On July 28, 2011, as reported in the Company’s
Form 8-K filed with the SEC on August 3, 2011, the Company entered into an asset purchase agreement with Intuitive Surgical Operations,
Inc., through which the Company assigned all of the issued and pending patents that the Company held as of the date of the agreement.
As part of the agreement the Company retained an exclusive license to directly and indirectly make, use, develop, modify, improve,
substitute, iterate, combine, distribute, offer for sale, and sell, import and export products outside the field of medical robotics
throughout countries worldwide and a non-exclusive license to directly and indirectly make, use, develop, modify, improve, substitute,
iterate, combine, distribute, offer for sale, and sell, import and export products and services for in vitro procedures utilizing
genomic and/or proteomic lab-on-a-chip or other similar benchtop diagnoses, both inside and outside the field of medical robotics
throughout countries worldwide.

 

 

 

    	 	23	 

     

    

 

Exhibit A

 

Registration Rights Agreement

 

 

 

 

 

 

 

 

 

    	 	24	 

     

    

 

Exhibit B

 

Warrant

 

 

 

 

 

 

 

 

 

    	 	25

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