Document:

MERRILL
LYNCH, PIERCE, FENNER & SMITH 

INCORPORATED

 

$100,000,000
AGGREGATE PRINCIPAL AMOUNT

 

JAKKS
PACIFIC, INC.

 

4.25%
CONVERTIBLE SENIOR NOTES

 

DUE
2018

 

Purchase
Agreement

 

dated
July 18, 2013

 

    	 

    	 

    

 

Purchase
Agreement

 

July
18, 2013

 

Merrill
Lynch, Pierce, Fenner & Smith

Incorporated

One
Bryant Park

New York, New York 10036

 

Ladies
and Gentlemen:

 

JAKKS
Pacific, Inc., a Delaware corporation (the “Company”), proposes to issue and sell to Merrill Lynch, Pierce, Fenner
& Smith Incorporated (“MLPFS” or the “Initial Purchaser”) $100,000,000 in aggregate principal amount
of its 4.25% Convertible Senior Notes due 2018 (the “Firm Notes”). In addition, the Company has granted to the Initial
Purchaser an option to purchase up to an additional $15,000,000 in aggregate principal amount of its 4.25% Convertible Senior
Notes due 2018 (the “Optional Notes” and, together with the Firm Notes, the “Notes”), as provided in Section
2.

 

The
Notes will be convertible on the terms, and subject to the conditions, set forth in the indenture (the “Indenture”)
to be entered into between the Company and Wells Fargo Bank NA, as trustee (the “Trustee”), on the Closing Date (as
defined herein). This Agreement, the Indenture and the Notes are referred to herein collectively as the “Operative Documents.”
As used herein, “Conversion Shares” means the fully paid, nonassessable shares of common stock, par value $.001 per
share, of the Company (the “Common Stock”) to be received by the holders of the Notes upon conversion of the Notes
pursuant to the terms of the Notes and the Indenture. The Notes will be convertible initially at a conversion rate of 114.3674
shares of Common Stock per $1,000 principal amount of the Notes, on the terms, and subject to the conditions, set forth in the
Indenture (the “Conversion Rate”).

 

The
Notes will be offered and sold to the Initial Purchaser without being registered under the Securities Act of 1933, as amended,
and the rules and regulations of the Securities and Exchange Commission (the “Commission”) thereunder (the “Securities
Act”), in reliance upon an exemption therefrom.

 

The
Company understands that the Initial Purchaser proposes to make an offering of the Notes on the terms and in the manner set forth
herein and in the Disclosure Package (as defined below), including the Preliminary Offering Memorandum (as defined below), and
the Final Offering Memorandum (as defined below) and agrees that the Initial Purchaser may resell, subject to the conditions set
forth herein, all or a portion of the Notes to purchasers (the “Subsequent Purchasers”) at any time after the date
of this Agreement.

 

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The
Company has prepared an offering memorandum, dated the date hereof, setting forth information concerning the Company, the Notes
and the Common Stock, in form and substance reasonably satisfactory to the Initial Purchaser. As used in this Agreement, “Offering
Memorandum” means, collectively, the Preliminary Offering Memorandum dated as of July 17, 2013 (the “Preliminary
Offering Memorandum”) and the offering memorandum dated the date hereof (the “Final Offering Memorandum”), each
as then amended or supplemented by the Company. As used herein, each of the terms “Disclosure Package”, “Offering
Memorandum”, “Preliminary Offering Memorandum” and “Final Offering Memorandum” shall include in
each case the documents incorporated or deemed to be incorporated by reference therein.

 

The
Company hereby confirms its agreements with the Initial Purchaser as follows:

 

Section
1. Representations, Warranties and Covenants of the Company.

 

The
Company hereby represents and warrants to, and covenants with, the Initial Purchaser as follows:

 

(a)
No Registration. Assuming the
accuracy of the representations and warranties of the Initial Purchaser contained in Section 6 and their compliance with the agreements
set forth therein, it is not necessary, in connection with the issuance and sale of the Notes to the Initial Purchaser, the offer,
resale and delivery of the Notes by the Initial Purchaser and the conversion of the Notes into Conversion Shares, in each case
in the manner contemplated by this Agreement, the Indenture, the Disclosure Package and the Offering Memorandum, to register the
Notes or the Conversion Shares under the Securities Act or to qualify the Indenture under the Trust Indenture Act of 1939.

 

(b)
No Integration. None of the Company
or any of its subsidiaries has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated
in respect of, any “security” (as defined in the Securities Act) that is or will be integrated with the sale of the
Notes or the Conversion Shares in a manner that would require registration under the Securities Act of the Notes or the Conversion
Shares.

 

(c)
Rule 144A. The Notes are eligible
for resale pursuant to Rule 144A under the Securities Act and no securities of the same class (within the meaning of Rule 144A(d)(3)
under the Securities Act) as the Notes are listed or will be listed at the Closing Date on any national securities exchange registered
under Section 6 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or quoted on an automated
inter-dealer quotation system.

 

(d)
Exclusive Agreement. Since November
10, 2009, the Company has not paid or agreed to pay to any person any compensation for soliciting another person to purchase any
securities of the Company (except as contemplated in this Agreement).

 

(e)
Offering Memoranda. The Company
hereby confirms that it has authorized the use of the Disclosure Package, including the Preliminary Offering Memorandum, and the
Final Offering Memorandum in connection with the offer and sale of the Notes by the Initial Purchaser. Each document, if any,
filed or to be filed pursuant to the Exchange Act and incorporated by reference in the Disclosure Package or the Final Offering
Memorandum complied when it was filed, or will comply when it is filed, as the case may be, in all material respects with the
Exchange Act and the rules and regulations of the Commission thereunder. The Preliminary Offering Memorandum, at the date thereof,
did not contain any untrue statement of a material fact or omit 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. At the date of this Agreement, the Closing
Date and on any Subsequent Closing Date, the Final Offering Memorandum did not and will not (and any amendment or supplement thereto,
at the date thereof, at the Closing Date and on any Subsequent Closing Date, will not) contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided that the Company makes no representation or warranty as to information contained
in or omitted from the Preliminary Offering Memorandum or the Final Offering Memorandum in reliance upon and in conformity with
written information furnished to the Company by the Initial Purchaser expressly for use therein, it being understood and agreed
that the only such information furnished by the Initial Purchaser consists of the information described as such in Section 8 hereof.

 

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(f)
Disclosure Package.
The term “Disclosure Package” shall mean (i) the Preliminary Offering Memorandum,
as amended or supplemented at the Applicable Time, (ii) the Final Term Sheet (as defined herein) and (iii) any other
writings that the parties expressly agree in writing to treat as part of the Disclosure Package (“Issuer Written Information”).
As of 6:00 p.m., New York time, on the date of execution and delivery of this Agreement (the “Applicable Time”),
the Disclosure Package did not contain any untrue statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding
sentence does not apply to statements in or omissions from the Disclosure Package based upon and in conformity with written information
furnished to the Company by the Initial Purchaser for use therein, it being understood and agreed that the only such information
furnished by the Initial Purchaser consists of the information described as such in Section 8 hereof. The Disclosure Package contains,
and the Final Offering Memorandum will contain, all the information specified in, and meeting the requirements of, Rule 144A. 
The Company has not distributed and will not distribute, prior to the later of the Closing Date and the completion of the Initial
Purchaser’s distribution of the Notes, any offering material in connection with the offering and sale of the Notes other
than the Disclosure Package and the Final Offering Memorandum.

 

(g)
Statements in Offering Memorandum.
The statements in the Disclosure Package and the Final Offering Memorandum under the headings “Certain United States Income
Tax Considerations” and “Description of Capital Stock” insofar as such statements summarize legal matters, agreements,
documents or proceedings discussed therein, are accurate and fair summaries of such legal matters, agreements, documents or proceedings.

 

(h)
Offering Materials Furnished to Initial Purchaser.
The Company has delivered to the Initial Purchaser copies of the materials contained in the Disclosure Package and the Final Offering
Memorandum, each as amended or supplemented, in such quantities and at such places as the Initial Purchaser has reasonably requested.

 

(i)
Authorization of the Purchase Agreement.
This Agreement has been duly authorized, executed and delivered by the Company.

 

(j)
Authorization of the Indenture.
The Indenture has been duly authorized by the Company; on the Closing Date, the Indenture will have been duly executed and delivered
by the Company and, assuming due authorization, execution and delivery thereof by the Trustee, will constitute a legally valid
and binding agreement of the Company enforceable against the Company in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights
and remedies of creditors or by general equitable principles; and the Indenture conforms in all material respects to the description
thereof contained in the Disclosure Package and the Final Offering Memorandum.

 

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(k)
Authorization of the Notes. The
Notes have been duly authorized by the Company; when the Notes are executed, authenticated and issued in accordance with the terms
of the Indenture and delivered to and paid for by the Initial Purchaser pursuant to this Agreement on the respective Closing Date
(assuming due authentication of the Notes by the Trustee), such Notes will constitute legally valid and binding obligations of
the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except
as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to
or affecting the rights and remedies of creditors or by general equitable principles; and the Notes will conform in all material
respects to the description thereof contained in the Disclosure Package and the Final Offering Memorandum.

 

(l)
Authorization of the Conversion Shares.
The Conversion Shares have been duly authorized and reserved and, when issued upon conversion of the Notes in accordance with
the terms of the Notes and the Indenture, will be validly issued, fully paid and nonassessable, and the issuance of such shares
will not be subject to any preemptive or similar rights.

 

(m)
No Material Adverse Change. Except
as otherwise disclosed in the Disclosure Package and the Final Offering Memorandum (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement), subsequent to the respective dates as of which information is given in the
Disclosure Package: (i) there has been no material adverse change, or any development that could reasonably be expected to
result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business, properties, operations
or prospects, whether or not arising from transactions in the ordinary course of business, of the Company and its subsidiaries,
considered as one entity (any such change is called a “Material Adverse Change”); (ii) the Company and its subsidiaries,
considered as one entity, have not incurred any material liability or obligation, indirect, direct or contingent, nor entered
into any material transaction or agreement; and (iii) there has been no dividend or distribution of any kind declared, paid
or made by the Company or, except for dividends paid to the Company or other subsidiaries, any of its subsidiaries on any class
of capital stock or repurchase or redemption by the Company or any of its subsidiaries of any class of capital stock.

 

(n)
Independent Accountants. BDO
Seidman, LLP, who have expressed their opinion with respect to the financial statements (which term as used in this Agreement
includes the related notes thereto) and supporting schedules included as a part of or incorporated by reference in the Disclosure
Package and the Final Offering Memorandum, are independent registered public accountants with respect to the Company as required
by the Securities Act and the Exchange Act and the applicable published rules and regulations thereunder.

 

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(o)
Preparation of the Financial Statements.
The financial statements and the supporting schedules included or incorporated by reference in the Disclosure Package and the
Final Offering Memorandum present fairly the consolidated financial position of the Company and its consolidated subsidiaries
as of and at the dates indicated and the results of their operations and cash flows for the periods specified. Such financial
statements and supporting schedules comply as to form with the applicable accounting requirements of Regulation S-X and have been
prepared in conformity with generally accepted accounting principles as applied in the United States (“GAAP”) applied
on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. The financial
data set forth in the Disclosure Package, the Final Offering Memorandum under the captions “Summary—Recent Developments”
and “Capitalization” fairly present the information set forth therein on a basis consistent with that of the audited
financial statements contained in the Disclosure Package and the Final Offering Memorandum. The Company’s ratios of earnings
to fixed charges set forth in the Disclosure Package and the Final Offering Memorandum have been calculated in compliance with
Item 503(d) of Regulation S-K under the Securities Act. The interactive data in eXtensible Business Reporting Language incorporated
by reference in the Disclosure Package and the Final Offering Memorandum fairly presents the information called for in all material
respects and has been prepared in all material respects in accordance with the Commission’s rules and guidelines applicable
thereto. In addition, the information included in the Disclosure Package and the Final Offering Memorandum under the heading “Summary—Recent
Developments—Revised 2013 Guidance” was determined by the Company with a reasonable basis and in good faith. 

 

(p)
Incorporation and Good Standing of the Company and its Subsidiaries.
Each of the Company and its subsidiaries has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its incorporation and has corporate power and authority to
own or lease, as the case may be, and operate its properties and to conduct its business as described in the Disclosure Package
and the Final Offering Memorandum and, in the case of the Company, to enter into and perform its obligations under this Agreement.
The Company and each of its subsidiaries is duly qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the
conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually
or in the aggregate, result in a material adverse effect on the condition, financial or otherwise, or on the earnings, business,
properties, operations or prospects, whether or not arising from transactions in the ordinary course of business, of the Company
and its subsidiaries, considered as one entity (a “Material Adverse Effect”). All of the issued and outstanding shares
of capital stock of each subsidiary have been duly authorized and validly issued, are fully paid and nonassessable and are owned
by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance
or claim. Other than a 5% ownership interest in DreamPlay, LLC, the Company does not own or control, directly or indirectly, any
corporation, association or other entity other than the subsidiaries listed in Exhibit 21 to the Company’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2012.

 

(q)
Capitalization and Other Capital Stock Matters.
The authorized, issued and outstanding capital stock of the Company is as set forth in the Disclosure Package and the Final Offering
Memorandum under the caption “Capitalization” (other than for subsequent issuances, if any, pursuant to employee benefit
plans described in the Disclosure Package and the Final Offering Memorandum or upon exercise of outstanding options described
in the Disclosure Package and the Final Offering Memorandum, as the case may be). The Common Stock (including the Conversion Shares)
conforms in all material respects to the description thereof contained in the Disclosure Package and the Final Offering Memorandum.
All of the issued and outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable
and have been issued in compliance with federal and state securities laws. None of the outstanding shares of Common Stock were
issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities
of the Company. There are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other
rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the
Company or any of its subsidiaries other than those accurately described in the Disclosure Package and the Final Offering Memorandum.
The description of the Company’s stock option, stock bonus and other stock plans or arrangements, and the options or other
rights granted thereunder, set forth or incorporated by reference in the Disclosure Package and the Final Offering Memorandum
accurately and fairly presents and summarizes such plans, arrangements, options and rights.

 

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(r)
Non-Contravention of Existing Instruments; No Further Authorizations
or Approvals Required. Neither the Company nor any of its subsidiaries is (i) in violation or
in default (or, with the giving of notice or lapse of time, would be in default) (“Default”) under its charter or
by-laws, (ii) in Default under any indenture, mortgage, loan or credit agreement, deed of trust, note, contract, franchise, lease
or other agreement, obligation, condition, covenant or instrument to which the Company or such subsidiary is a party or by which
it may be bound (including, without limitation, the Company’s 4.50% Convertible Senior Notes due 2014 or the related indenture),
or to which any of the property or assets of the Company or any of its subsidiaries is subject (each, an “Existing Instrument”)
or (iii) in violation of any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative
agency, governmental body, arbitrator or other authority having jurisdiction over the Company or such subsidiary or any of its
properties, as applicable, except with respect to clause (ii) or (iii) only, for such Defaults as would not, individually or in
the aggregate, have a Material Adverse Effect.

 

The
Company’s execution, delivery and performance of the Operative Documents and consummation of the transactions contemplated
thereby, by the Disclosure Package and by the Final Offering Memorandum (i) have been duly authorized by all necessary corporate
action of the Company and will not result in any Default under the charter or by-laws of the Company or any subsidiary, (ii) will
not conflict with or constitute a breach of, or Default or a Debt Repayment Triggering Event (as defined below) under, or result
in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries
pursuant to, or require the consent of any other party to, any Existing Instrument and (iii) will not result in any violation
of any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court,
regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company
or any of its subsidiaries or any of its or their properties.

 

No
consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory
authority or agency is required for the Company’s execution, delivery and performance of the Operative Documents and consummation
of the transactions contemplated thereby, by the Disclosure Package and by the Final Offering Memorandum, except such as have
been obtained or made by the Company and are in full force and effect under the Securities Act, applicable state securities or
blue sky laws and from the Financial Industry Regulatory Authority (“FINRA”).
As used herein, a “Debt Repayment Triggering Event” means any event or condition which gives, or with the giving
of notice or lapse of time would give, the holder of any note, debenture or other evidence of indebtedness (or any person acting
on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness
by the Company or any of its subsidiaries.

 

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(s)
No Stamp or Transfer Taxes. There
are no stamp or other issuance or transfer taxes or duties or other similar fees or charges under federal law or the laws of any
state, or any political subdivision thereof, or any other U.S. or non-U.S. governmental authority required to be paid in connection
with the execution and delivery of this Agreement or the issuance or sale by the Company of the Notes or upon the issuance of
Common Stock upon the conversion thereof.

 

(t)
No Material Actions or Proceedings.
Except as otherwise disclosed in the Disclosure Package and the Final Offering Memorandum, there are no legal or governmental
actions, suits or proceedings pending or, to the best of the Company’s knowledge, threatened against or affecting the Company
or any of its subsidiaries, (i) which has as the subject thereof the Company, any officer or director of, or property owned
or leased by, the Company or any of its subsidiaries or (ii) relating to environmental or discrimination matters, where in
either such case, (A) there is a reasonable possibility that such action, suit or proceeding might be determined adversely
to the Company or such subsidiary, or any officer or director of, or property owned or leased by, the Company or any of its subsidiaries
and (B) any such action, suit or proceeding, if so determined adversely, would reasonably be expected to have a Material
Adverse Effect or adversely affect the consummation of the transactions contemplated by this Agreement.

 

(u)
Labor Matters. No labor problem
or dispute with the employees of the Company or any of its subsidiaries exists or is threatened or imminent, and the Company is
not aware of any existing, threatened or imminent labor disturbance by the employees of any of its or its subsidiaries’
principal suppliers, contractors or customers, that could have a Material Adverse Effect.

 

(v)
Intellectual Property Rights.
Except as otherwise disclosed in the Disclosure Package and the Final Offering Memorandum, the Company and its subsidiaries own,
possess, license or have other rights to use, on reasonable terms, all patents, patent applications, trade and service marks,
trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, technology, know-how and other
intellectual property (collectively, the “Intellectual Property”) necessary for the conduct of the Company’s
business as now conducted or as proposed in the Disclosure Package and the Final Offering Memorandum to be conducted. Except as
set forth in the Disclosure Package and the Final Offering Memorandum, (i) no party has been granted an exclusive license to use
any portion of such Intellectual Property owned by the Company; (ii) to the Company’s knowledge, there is no material infringement
by third parties of any such Intellectual Property owned by or exclusively licensed to the Company; (iii) there is no pending
or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the Company’s rights
in or to any material Intellectual Property, and the Company is unaware of any facts that would form a reasonable basis for any
such claim; (iv) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others
challenging the validity or scope of any such Intellectual Property, and the Company is unaware of any facts that would form a
reasonable basis for any such claim; and (v) there is no pending or, to the Company’s knowledge, threatened action, suit,
proceeding or claim by others that the Company’s business as now conducted infringes or otherwise violates any patent, trademark,
copyright, trade secret or other proprietary rights of others, and the Company is unaware of any other fact that would form a
reasonable basis for any such claim.

 

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(w)
All Necessary Permits, etc. The
Company and each subsidiary possess such valid and current licenses, certificates, authorizations or permits issued by the appropriate
state, federal or foreign regulatory agencies or bodies necessary to conduct their respective businesses, and neither the Company
nor any subsidiary has received any notice of proceedings relating to the revocation or modification of, or non-compliance with,
any such license, certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, could have a Material Adverse Effect.

 

(x)
Title to Properties. The Company
and each of its subsidiaries has good and marketable title to all the properties and assets reflected as owned in the financial
statements referred to in Section 1(o) above, in each case free and clear of any security interests, mortgages, liens, encumbrances,
equities, claims and other defects, except such as do not materially and adversely affect the value of such property and do not
materially interfere with the use made or proposed to be made of such property by the Company or such subsidiary. The real property,
improvements, equipment and personal property held under lease by the Company or any subsidiary are held under valid and enforceable
leases, with such exceptions as are not material and do not materially interfere with the use made or proposed to be made of such
real property, improvements, equipment or personal property by the Company or such subsidiary.

 

(y)
Tax Law Compliance. The Company
and its consolidated subsidiaries have filed all necessary federal, state, local and foreign income and franchise tax returns
in a timely manner and have paid all taxes required to be paid by any of them and, if due and payable, any related or similar
assessment, fine or penalty levied against any of them, except for any taxes, assessments, fines or penalties as may be being
contested in good faith and by appropriate proceedings. The Company has made appropriate provisions in the financial statements
referred to in Section 1(o) above in respect of all federal, state, local and foreign income and franchise taxes for all current
or prior periods as to which the tax liability of the Company or any of its consolidated subsidiaries has not been finally determined.

 

(z)
Company Not an “Investment Company”.
The Company has been advised of the rules and requirements under the Investment Company Act of 1940, as amended, and the
rules and regulations promulgated thereunder (the “Investment Company Act”). The Company is not, and after receipt
of payment for the Notes and the application of the proceeds thereof as contemplated under the caption “Use of Proceeds”
in the Disclosure Package and the Final Offering Memorandum will not be, an “investment company” within the meaning
of the Investment Company Act and will conduct its business in a manner so that it will not become subject to the Investment Company
Act.

 

(aa)
Compliance with Reporting Requirements. The
Company is subject to and in full compliance with the reporting requirements of Section 13 or Section 15(d) of the Exchange Act.

 

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(bb)
Insurance. The Company and its
subsidiaries are insured by recognized, financially sound and reputable institutions with policies in such amounts and with such
deductibles and covering such risks as are generally deemed reasonable and customary for their businesses including, but not limited
to, policies covering real and personal property owned or leased by the Company and its subsidiaries against theft, damage, destruction,
acts of terrorism or vandalism and earthquakes. All policies of insurance and fidelity or surety bonds insuring the Company or
any of its subsidiaries or their respective businesses, assets, employees, officers and directors are in full force and effect;
the Company and its subsidiaries are in compliance with the terms of such policies and instruments in all material respects; and
there are no claims by the Company or any of its subsidiaries under any such policy or instrument as to which any insurance company
is denying liability or defending under a reservation of rights clause; and neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for. The Company has no reason to believe that it or any subsidiary will not
be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage
from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would
not have a Material Adverse Effect. 

 

(cc)
No Restriction on Dividends or other Distributions. No
subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends or other distributions to
the Company, from making any other distribution on such subsidiary’s capital stock, from repaying to the Company any loans
or advances to such subsidiary from the Company or from transferring any of such subsidiary’s property or assets to the
Company or any other subsidiary of the Company, except as described in or contemplated by the Disclosure Package and the Final
Offering Memorandum.

 

(dd)
No Price Stabilization or Manipulation.
The Company has not taken and will not take, directly or indirectly, any action designed to or that might be reasonably expected
to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale
of the Notes. The Company acknowledges that the Initial Purchaser may engage in passive market making transactions in the Common
Stock on the Nasdaq Global Select Market in accordance with Regulation M under the Exchange Act.

 

(ee)
Related Party Transactions. There
are no material business relationships or related-party transactions involving the Company or any subsidiary or any other person
that have not been described in the Disclosure Package or the Final Offering Memorandum.

 

(ff)
No General Solicitation. None
of the Company or any of its affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act (“Regulation
D”)), has, directly or through an agent, engaged in any form of general solicitation or general advertising in connection
with the offering of the Notes or the Conversion Shares (as those terms are used in Regulation D) under the Securities Act or
in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; the Company has not entered
into any contractual arrangement with respect to the distribution of the Notes or the Conversion Shares except for this Agreement,
and the Company will not enter into any such arrangement.

 

(gg)
 No Unlawful Contributions or Other Payments. Neither
the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate
of the Company or any of its subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a
violation by such persons of the FCPA, including, without limitation, making use of the mails or any means or instrumentality
of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money,
or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official”
(as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political
office, in contravention of the FCPA and the Company, its subsidiaries and, to the knowledge of the Company, its affiliates have
conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure,
and which are reasonably expected to continue to ensure, continued compliance therewith.

 

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“FCPA”
means the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder.

 

(hh)
 No Conflict with Money Laundering Laws.
The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money
laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations
or guidelines issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”)
and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving
the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company,
threatened.

 

(ii)
No Conflict with OFAC Laws. Neither
the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate
of the Company or any of its subsidiaries is currently subject to any sanctions administered or enforced by the United States
Government, including, without limitation, the Office of Foreign Assets Control of the U.S. Treasury Department, the United Nations
Security Council, the European Union, Her Majesty’s Treasury or other relevant sanctions authority (collectively, the “Sanctions”);
and the Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available
such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities
of any person currently subject to any Sanctions. Furthermore, neither the Company nor any of its subsidiaries is located, organized
or resident in a country or territory that is the subject of Sanctions. 

 

(jj)
ERISA Compliance.
None of the following events has occurred or exists: (i) a failure to fulfill the obligations, if any, under the minimum funding
standards of Section 302 of the United States Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
and the regulations and published interpretations thereunder with respect to a Plan, determined without regard to any waiver of
such obligations or extension of any amortization period; (ii) an audit or, to the Company’s knowledge, investigation by
the Internal Revenue Service, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation or any other federal or state
governmental agency or any foreign regulatory agency with respect to the employment or compensation of employees by the Company
or any of its subsidiaries that could have a Material Adverse Effect; (iii) any breach of any contractual obligation, or any violation
of law or applicable qualification standards, with respect to the employment or compensation of employees by the Company or any
of its subsidiaries that could have a Material Adverse Effect. None of the following events has occurred or is reasonably likely
to occur: (i) a material increase in the aggregate amount of contributions required to be made to all Plans in the current fiscal
year of the Company and its subsidiaries compared to the amount of such contributions made in the Company and its subsidiaries’
most recently completed fiscal year; (ii) a material increase in the Company and its subsidiaries’ “accumulated post-retirement
benefit obligations” (within the meaning of Statement of Financial Accounting Standards 106) compared to the amount of such
obligations in the Company and its subsidiaries’ most recently completed fiscal year; (iii) any event or condition giving
rise to a liability under Title IV of ERISA that could have a Material Adverse Effect; or (iv) the filing of a claim by one or
more employees or former employees of the Company or any of its subsidiaries related to its or their employment that could have
a Material Adverse Effect. For purposes of this paragraph, the term “Plan” means a plan (within the meaning of Section
3(3) of ERISA) subject to Title IV of ERISA with respect to which the Company or any of its subsidiaries may have any liability.

 

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(kk)
Brokers.
There is no broker, finder or other party that is entitled to receive from the Company any brokerage or finder’s fee or
other fee or commission as a result of any transactions contemplated by this Agreement.

 

(ll)
Sarbanes-Oxley Compliance. There
is and has been no failure on the part of the Company and any of the Company’s directors or officers, in their capacities
as such, to comply with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection
therewith (the “Sarbanes-Oxley Act”), including Section 402 related to loans and Sections 302 and 906 related to certifications.

 

(mm)
Internal Controls and Procedures. The
Company maintains (i) effective internal control over financial reporting as defined in Rule 13a-15 of the Securities Exchange
Act of 1934, as amended (“the Exchange Act”), and (ii) 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 generally accepted
accounting principles 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.

 

(nn)
No Material Weakness in Internal Controls.
Except as disclosed in the Disclosure Package and the Final Offering Memorandum, since the end of the Company’s most recent
audited fiscal year, there has been (i) no material weakness in the Company’s internal control over financial reporting
(whether or not remediated) and (ii) no change in the Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

(oo)
Disclosure Controls. The Company
and its subsidiaries maintain an effective system of “disclosure controls and procedures” (as defined in Rule 13a-15
of the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in reports that it files
or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s
rules and forms, including controls and procedures designed to ensure that such information is accumulated and communicated to
the Company’s management as appropriate to allow timely decisions regarding required disclosure. The Company and its subsidiaries
have carried out evaluations of the effectiveness of their disclosure controls and procedures as required by Rule 13a-15 of the
Exchange Act.

 

    	11

    	 

    

  

(pp)
Stock Options. With respect to
the stock options (the “Stock Options”) granted pursuant to the stock-based compensation plans of the Company and
its subsidiaries (the “Company Stock Plans”), (i) each Stock Option designated by the Company or the relevant subsidiary
of the Company at the time of grant as an “incentive stock option” under Section 422 of the Internal Revenue Code
of 1986, as amended (the “Code”), so qualifies, (ii) each grant of a Stock Option was duly authorized no later than
the date on which the grant of such Stock Option was by its terms to be effective (the “Grant Date”) by all necessary
corporate action, including, as applicable, approval by the board of directors of the Company or the relevant subsidiary of the
Company (or a duly constituted and authorized committee thereof) and any required stockholder approval by the necessary number
of votes or written consents, and the award agreement governing such grant (if any) was duly executed and delivered by each party
thereto, (iii) each such grant was made in accordance with the terms of the Company Stock Plans, the Exchange Act and all other
applicable laws and regulatory rules or requirements, including the Nasdaq Marketplace Rules and any other exchange on which the
securities of the Company or the relevant subsidiary of the Company are traded, (iv) the per share exercise price of each Stock
Option was equal to or greater than the fair market value of a share of Common Stock on the applicable Grant Date and (v) each
such grant was properly accounted for in accordance with GAAP in the consolidated financial statements (including the related
notes) of the Company and disclosed in the Company’s filings with the Commission in accordance with the Exchange Act and
all other applicable laws. Neither the Company nor any of its subsidiaries has knowingly granted, and there is no and has been
no policy or practice of the Company or any of its subsidiaries of granting, Stock Options prior to, or otherwise coordinating
the grant of Stock Options with, the release or other public announcement of material information regarding the Company or its
subsidiaries or their results of operations or prospects.

 

(qq)
Lending Relationship. Except
as disclosed in the Disclosure Package and the Final Offering Memorandum, the Company (i) does not have any material
lending or other relationship with any bank or lending affiliate of the Initial Purchaser and (ii) does not intend to use
any of the proceeds from the sale of the Notes hereunder to repay any outstanding debt owed to any affiliate of the Initial Purchaser.

 

(rr)
Environmental Laws. Except as
described in the General Disclosure Package and the Final Offering Memorandum or would not, singly or in the aggregate, result
in a Material Adverse Effect, (A) neither the Company nor any of its subsidiaries is in violation of any federal, state, local
or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human
health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata)
or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products, asbestos-containing materials or
mold (collectively, “Hazardous Materials”) or to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively, “Environmental Laws”), (B) the Company and its
subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance
with their requirements, (C) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental
Law against the Company or any of its subsidiaries and (D) there are no events or circumstances that would reasonably be expected
to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or Governmental
Entity, against or affecting the Company or any of its subsidiaries relating to Hazardous Materials or any Environmental Laws.

 

    	12

    	 

    

  

(ss)
Statistical and Market-Related Data. Any
statistical and market-related data included in the General Disclosure Package or the Final Offering Memorandum are based on or
derived from sources that the Company believes, after reasonable inquiry, to be reliable and accurate and, to the extent required,
the Company has obtained the written consent to the use of such data from such sources.

 

Any
certificate signed by an officer of the Company and delivered to the Initial Purchaser or to counsel for the Initial Purchaser
shall be deemed to be a representation and warranty by the Company to the Initial Purchaser as to the matters set forth therein.

 

Section
2. Purchase, Sale and Delivery of the Notes

 

(a)
The Firm Notes. The Company agrees
to issue and sell to the Initial Purchaser the Firm Notes upon the terms herein set forth. On the basis of the representations,
warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Initial Purchaser
agrees to purchase from the Company $100,000,000 aggregate principal amount of Firm Notes. The purchase price per Firm Note to
be paid by the Initial Purchaser to the Company shall be 96% of the aggregate principal amount thereof.

 

(b)
The Closing Date. Delivery of
the Firm Notes to be purchased by the Initial Purchaser and payment therefor shall be made at the offices of Alston & Bird
LLP, 333 South Hope Street, 16th Floor, Los Angeles, California 90071  (or such other place as may be agreed to by the Company
and MLPFS) at 9:00 a.m., New York time, on July 24, 2013, or such other time and date not later than 1:30 p.m., New York
time, July 24, 2013 as MLPFS shall designate by notice to the Company (the time and date of such closing are called the “Closing
Date”).

 

(c)
The Optional Notes; any Subsequent Closing Date.
In addition, on the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to
the conditions herein set forth, the Company hereby grants an option to the Initial Purchaser to purchase up to an $15,000,000
aggregate principal amount of Optional Notes from the Company at the same price as the purchase price per Firm Note to be paid
by the Initial Purchaser for the Firm Notes. The option granted hereunder may be exercised at any time and from time to time upon
notice by MLPFS to the Company, which notice may be given at any time within 30 days from the date of this Agreement. Such
notice shall set forth (i) the amount (which shall be an integral multiple of $1,000 in aggregate principal amount) of Optional
Notes as to which the Initial Purchaser are exercising the option, (ii) the names and denominations in which the Optional
Notes are to be registered and (iii) the time, date and place at which such Optional Notes will be delivered (which time
and date may be simultaneous with, but not earlier than, the Closing Date; and in such case the term “Closing Date”
shall refer to the time and date of delivery of the Firm Notes and the Optional Notes). Each time and date of delivery, if subsequent
to the Closing Date, is called a “Subsequent Closing Date” and shall be determined by MLPFS and shall not be earlier
than the Closing Date nor later than 10 business days after delivery of such notice of exercise. 

 

    	13

    	 

    

  

(d)
Payment for the Notes. Payment
for the Notes shall be made at the Closing Date (and, if applicable, at any Subsequent Closing Date) by wire transfer of immediately
available funds to the order of the Company.

 

(e)
Delivery of the Notes. The Company
shall deliver, or cause to be delivered, to the Initial Purchaser the Firm Notes at the Closing Date, against the irrevocable
release of a wire transfer of immediately available funds for the amount of the purchase price therefor. The Company shall also
deliver, or cause to be delivered, to the Initial Purchaser the Optional Notes the Initial Purchaser has agreed to purchase at
the Closing Date or any Subsequent Closing Date, as the case may be, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. Delivery of the Firm Notes and the Optional Notes shall be made
through the facilities of The Depository Trust Company unless MLPFS shall otherwise instruct. Time shall be of the essence, and
delivery at the time and place specified in this Agreement is a further condition to the obligations of the Initial Purchaser.

 

Section
3. Covenants of the Company

 

The
Company covenants and agrees with the Initial Purchaser as follows:

 

(a)
Preparation of Offering Memorandum; MLPFS’s Review of Proposed
Amendments and Supplements. As promptly as practicable following the Applicable Time and in any
event not later than the second business day following the date hereof, the Company will prepare and deliver to the Initial Purchaser
the Final Offering Memorandum, which shall consist of the Preliminary Offering Memorandum as modified only by the information
contained in the Pricing Supplement. During such period beginning on the date hereof and ending on the date of the completion
of the resale of the Notes by the Initial Purchaser (as notified by the Initial Purchaser to the Company), prior to amending or
supplementing the Disclosure Package or the Final Offering Memorandum, the Company shall furnish to MLPFS for review a copy of
each such proposed amendment or supplement, and the Company shall not print, use or distribute such proposed amendment or supplement
to which MLPFS reasonably objects.

 

(b)
Amendments and Supplements to the Offering Memorandum and Other
Securities Act Matters.
If, at any time prior to the completion of the resale of the Notes by the Initial Purchaser (as
notified by the Initial Purchaser to the Company), any event or development shall occur or condition exist as a result of which
it is necessary to amend or supplement the Disclosure Package or the Final Offering Memorandum in order that the Disclosure Package
or the Final Offering Memorandum will not include an untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under which they were made or then prevailing, as the
case may be, not misleading, or if in the opinion of MLPFS or counsel for the Initial Purchaser it is otherwise necessary to amend
or supplement the Disclosure Package or the Final Offering Memorandum to comply with law, the Company shall promptly notify the
Initial Purchaser and prepare, subject to Section 3(a) hereof, such amendment or supplement as may be necessary to correct such
untrue statement or omission.

 

(c)
Copies of Disclosure Package and the Offering Memorandum. The
Company agrees to furnish to the Initial Purchaser, without charge, until the earlier of nine months after the date hereof or
the completion of the resale of the Notes by the Initial Purchaser (as notified by the Initial Purchaser to the Company) as many
copies of the materials contained in the Disclosure Package and the Final Offering Memorandum and any amendments and supplements
thereto as the Initial Purchaser may reasonably request.

 

    	14

    	 

    

  

(d)
Blue Sky Compliance. The Company
shall cooperate with the Initial Purchaser and counsel for the Initial Purchaser, as the Initial Purchaser may reasonably request
from time to time, to qualify or register the Notes for sale under (or obtain exemptions from the application of) the state securities
or blue sky laws or Canadian provincial securities laws or other foreign laws of those jurisdictions designated by the Initial
Purchaser, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long
as required for the distribution of the Notes. The Company shall not be required to qualify as a foreign corporation or to take
any action that would subject it to general service of process in any such jurisdiction where it is not presently qualified or
where it would be subject to taxation as a foreign corporation, other than those arising out of the offering or sale of the Notes
in any jurisdiction where it is not now so subject. The Company will advise the Initial Purchaser promptly of the suspension of
the qualification or registration of (or any such exemption relating to) the Notes for offering, sale or trading in any jurisdiction
or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company shall use its best efforts to obtain the withdrawal thereof at the earliest
possible moment.

 

(e)
Rule 144A Information. Prior
to the completion of the resale of the Notes by the Initial Purchaser with the Subsequent Purchasers, the Company shall file,
on a timely basis, with the Commission all reports and documents required to be filed under Section 13 or 15 of the Exchange Act.
For so long as any of the Notes are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities
Act, the Company shall provide to any holder of the Notes or to any prospective purchaser of the Notes designated by any holder,
upon request of such holder or prospective purchaser, information required to be provided by Rule 144A(d)(4) of the Securities
Act if, at the time of such request, the Company is not subject to the reporting requirements under Section 13 or 15(d) of the
Exchange Act.

 

(f)
Compliance with Securities Law. The
Company will comply with all applicable securities and other laws, rules and regulations, including, without limitation, the Sarbanes-Oxley
Act, and use its best efforts to cause the Company’s directors and officers, in their capacities as such, to comply with
such laws, rules and regulations, including, without limitation, the provisions of the Sarbanes-Oxley Act.

 

(g)
Legends. Each of the Notes will
bear, to the extent applicable, the legend contained in “Notice to Investors” in the Disclosure Package and the Final
Offering Memorandum for the time period and upon the other terms stated therein.

 

(h)
Written Information Concerning the Offering.
Without the prior written consent of MLPFS, the Company will not give to any prospective purchaser of the Notes or any other person
not in its employ any written information concerning the offering of the Notes other than the Disclosure Package, the Final Offering
Memorandum or any other offering materials prepared by or with the prior consent of the Initial Purchaser.

 

(i)
No General Solicitation. The
Company will not, and will cause its subsidiaries not to, solicit any offer to buy or offer to sell the Notes by means of any
form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) or in any
manner involving a public offering within the meaning of Section 4(2) of the Securities Act.

 

    	15

    	 

    

  

(j)
No Integration. The Company will
not, and will cause its subsidiaries not to, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of
any “security” (as defined in the Securities Act) in a transaction that could be integrated with the sale of the Notes
in a manner that would require the registration under the Securities Act of the Notes.

 

(k)
No Directed Selling Efforts. None
of the Company, its Affiliates, or any person acting on its or their behalf will engage in any directed selling efforts with respect
to the Notes, and each of them will comply with the offering restrictions requirement of Regulation S. Terms used in this paragraph
have the meanings given to them by Regulation S.

 

(l)
Information to Publishers. Any
information provided by the Company to publishers of publicly available databases about the terms of the Notes and the Indenture
shall include a statement that the Notes have not been registered under the Securities Act and are subject to restrictions under
Rule 144A of the Securities Act and Regulation S.

 

(m)
DTC. The Company will cooperate
with the Initial Purchaser and use its best efforts to permit the Notes to be eligible for clearance and settlement through The
Depository Trust Company.

 

(n)
Rule 144 Tolling. During the
period of six months after the last Closing Date, the Company will not, and will not permit any of its “affiliates”
(as defined in Rule 144 under the Securities Act) to, resell any of the Notes that constitute “restricted securities”
under Rule 144 that have been reacquired by any of them.

 

(o)
Use of Proceeds. The Company
shall apply the net proceeds from the sale of the Notes sold by it in the manner described under the caption “Use of Proceeds”
in the Disclosure Package and the Final Offering Memorandum.

 

(p)
Transfer Agent. The Company shall
engage and maintain, at its expense, a registrar and transfer agent for the Common Stock.

 

(q)
Available Conversion Shares. The
Company will reserve and keep available at all times, free of pre-emptive rights, the full number of Conversion Shares.

 

(r)
Conversion Rate. Between the
date hereof and the Closing Date, the Company will not do or authorize any act or thing that would result in an adjustment of
the Conversion Rate.

 

(s)
Company to Provide Interim Financial Statements and Other Information.
Prior to the Closing Date, the Company will furnish to the Initial Purchaser, as soon as they
have been prepared by or are available to the Company, a copy of any unaudited interim financial statements of the Company for
any period subsequent to the period covered by the most recent financial statements appearing in the Disclosure Package and the
Final Offering Memorandum.

 

    	16

    	 

    

 

(t)
Agreement Not to Offer or Sell Additional Securities.
During the period commencing on the date hereof and ending on the 90th day following the date of the Final Offering
Memorandum (the “Lock-Up Period”), the Company will not, without the prior written consent of MLPFS (which consent
may be withheld at the sole discretion of MLPFS), directly or indirectly, sell, offer, contract to sell or grant any option to
buy, pledge, transfer or establish an open “put equivalent position” or liquidate or decrease a “call equivalent
position” within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or transfer (or enter into
any transaction that is designed to, or might reasonably be expected to, result in the disposition of), or announce the offering
of, or file any registration statement under the Securities Act in respect of, any shares of Common Stock, options or warrants
to acquire shares of the Common Stock or securities exchangeable or exercisable for or convertible into shares of Common Stock
(in each case other than as contemplated by this Agreement with respect to the Notes); provided, however, that the Company (i)
may issue shares of its Common Stock upon exercise of options pursuant to any stock option, stock bonus or other stock plan or
arrangement existing and in effect on the date hereof and described in the Disclosure Package and (ii) grant options to purchase
its Common Stock or issue restricted shares of its Common Stock pursuant to any stock option, stock bonus or other stock plan
or arrangement existing and in effect on the date hereof and described in the Disclosure Package, provided that such newly granted
option or restricted shares shall not vest within the Lock-Up Period.

 

(u)
Future Reports to Stockholders. The
Company will make available to its stockholders as soon as practicable after the end of each fiscal year an annual report (including
a balance sheet and statements of income, stockholders' equity and cash flows of the Company and its consolidated subsidiaries
certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of
each fiscal year (beginning with the fiscal quarter ending after the date of the Final Offering Memorandum), to make available
to its stockholders consolidated summary financial information of the Company and its subsidiaries for such quarter in reasonable
detail.

 

(v)
Future Reports to the Initial Purchaser.
To the extent not otherwise publicly available, during the period of five years hereafter, the Company will furnish to the Initial
Purchaser at One Bryant Park, New York, NY 10036: (i) as soon as practicable after the end of each fiscal year, copies of the
Annual Report of the Company containing the balance sheet of the Company as of the close of such fiscal year and statements of
income, stockholders’ equity and cash flows for the year then ended and the opinion thereon of the Company’s independent
public or certified public accountants; (ii) as soon as practicable after the filing thereof, copies of each proxy statement,
Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed by the Company with
the Commission, FINRA or any securities exchange; and (iii) as soon as available, copies of any report or communication of the
Company mailed generally to holders of its capital stock.

 

(w)
Investment Limitation. The Company
shall not invest or otherwise use the proceeds received by the Company from its sale of the Notes in such a manner as would require
the Company or any of its subsidiaries to register as an investment company under the Investment Company Act.

 

(x)
No Manipulation of Price. The
Company will not take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably
be expected to constitute, under the Exchange Act or otherwise, the stabilization or manipulation of the price of any securities
of the Company to facilitate the sale or resale of the Notes.

 

    	17

    	 

    

 

(y)
New Lock-Up Agreements. The Company
will enforce all agreements between the Company and any of its security holders to be entered into pursuant to this agreement
that prohibit the sale, transfer, assignment, pledge or hypothecation of any of the Company’s securities. In addition, the
Company will direct the transfer agent to place stop transfer restrictions upon any such securities of the Company that are bound
by such “lock-up” agreements for the duration of the periods contemplated in such agreements.

 

(z)
DTC. The Company will cooperate
with the Initial Purchaser and use its best efforts to permit the Notes to be eligible for clearance and settlement through The
Depository Trust Company.

 

(aa)
Final Term Sheet. The Company
will prepare a final term sheet, containing solely a description of the Notes and the offering thereof, in the form approved by
you and attached as Schedule A hereto (the “Final Term Sheet”).

 

(bb)
Listing. The Company will use
its best efforts to maintain the listing of the Conversion Shares on the Nasdaq Global Select Market.

 

Section
4. Payment of Expenses

 

The
Company agrees to pay the following costs, fees and expenses incurred in connection with the performance of its obligations hereunder
and in connection with the transactions contemplated hereby: (i) all expenses incident to the issuance and delivery of the
Notes (including all printing and engraving costs), (ii) all fees and expenses of the Trustee under the Indenture incident
to the performance by the Trustee of its obligations thereunder, (iii) all necessary issue, transfer and other stamp taxes
in connection with the issuance and sale of the Notes to the Initial Purchaser, (iv) all fees and expenses of the Company’s
counsel, independent public or certified public accountants and other advisors, (v) all costs and expenses incurred in connection
with the preparation, printing, shipping and distribution of the materials contained in the Disclosure Package, including the
Preliminary Offering Memorandum, and the Final Offering Memorandum, all amendments and supplements thereto and this Agreement,
(vi) all filing fees, attorneys’ fees and expenses incurred by the Company or the Initial Purchaser in connection with qualifying
or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Notes for offer and
sale under the state securities or blue sky laws or the provincial securities laws of Canada, and, if requested by the Initial
Purchaser, preparing and printing a “Blue Sky Survey” or memorandum, and any supplements thereto, advising the Initial
Purchaser of such qualifications, registrations and exemptions, (vii)  the expenses of the Company and the Initial Purchaser
in connection with the marketing and offering of the Notes, including all transportation and other expenses incurred in connection
with presentations to prospective purchasers of the Notes, and (viii) the fees and expenses associated with listing the Conversion
Shares on the Nasdaq Global Select Market. Except as provided in this Section 4, Section 7 and Section 10 hereof,
the Initial Purchaser shall pay its own expenses, including the fees and disbursements of its counsel.

 

Section
5. Conditions of the Obligations of the Initial Purchaser

 

The
obligations of the Initial Purchaser to purchase and pay for the Notes as provided herein on the Closing Date and, with respect
to the Optional Notes, any Subsequent Closing Date, shall be subject to the accuracy of the representations and warranties on
the part of the Company set forth in Section 1 hereof as of the date hereof and as of the Closing Date as though then made
and, with respect to the Optional Notes, as of any Subsequent Closing Date as though then made, to the accuracy of the statements
of the Company made in any certificates pursuant to the provisions hereof, to the timely performance by the Company of its covenants
and other obligations hereunder, and to each of the following additional conditions:

 

    	18

    	 

    

  

(a)
Accountants’ Comfort Letter.
On the date hereof, the Initial Purchaser shall have received from BDO Seidman, LLP, independent public accountants for the Company,
a letter dated the date hereof addressed to the Initial Purchaser, the form of which is attached as Exhibit A.

 

(b)
No Material Adverse Change or Ratings Agency Change.
For the period from and after the date of this Agreement and prior to the Closing Date and, with respect to the Optional Notes,
any Subsequent Closing Date:

 

(i)          in
the judgment of MLPFS there shall not have occurred any Material Adverse Change;

 

(ii)         there
shall not have been any change or decrease specified in the letter or letters referred to in paragraph (a) of this Section 5 which
is, in the sole judgment of MLPFS, so material and adverse as to make it impractical or inadvisable to proceed with the offering
or delivery of the Notes as contemplated by the Disclosure Package and the Final Offering Memorandum; and

 

(iii)        there
shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any
review for a possible change that does not indicate the direction of the possible change, in the rating accorded any securities
of the Company or any of its subsidiaries by any “nationally recognized statistical rating organization” as such term
is defined for purposes of Rule 436(g)(2) under the Securities Act.

 

(c)
Opinion of Counsel for the Company.
On each of the Closing Date and any Subsequent Closing Date, the Initial Purchaser shall have received the favorable opinion of
Feder Kaszovitz LLP, counsel for the Company, dated as of such Closing Date or Subsequent Closing Date, substantially in the form
which is attached as Exhibit B.

 

(d)
Opinion of Counsel for the Initial Purchaser.
On the Closing Date and any Subsequent Closing Date, the Initial Purchaser shall have received the favorable opinion of Alston
& Bird LLP, counsel for the Initial Purchaser, dated as of such Closing Date or Subsequent Closing Date, in form and substance
satisfactory to, and addressed to, the Initial Purchaser, with respect to the issuance and sale of the Notes, the Disclosure Package,
the Preliminary Offering Memorandum, the Final Offering Memorandum and other related matters as the Initial Purchaser may reasonably
require, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling
them to pass upon such matters.

 

(e)
Officers’ Certificate.
On the Closing Date and any Subsequent Closing Date, the Initial Purchaser shall have received a written certificate executed
by the Chairman of the Board, Chief Executive Officer or President of the Company and the Chief Financial Officer or Chief Accounting
Officer of the Company, dated as of such Closing Date or Subsequent Closing Date, to the effect that the signers of such certificate
have carefully examined the Disclosure Package, including the Preliminary Offering Memorandum, and the Final Offering Memorandum,
any amendments or supplements thereto and this Agreement, to the effect set forth in subsection (b)(iii) of this Section 5,
and further to the effect that:

 

    	19

    	 

    

  

(i)          for
the period from and after the date of this Agreement and prior to such Closing Date or Subsequent Closing Date there has not occurred
any Material Adverse Change;

 

(ii)         the
representations and warranties of the Company set forth in Section 1 of this Agreement are true and correct on and as of
such Closing Date or Subsequent Closing Date with the same force and effect as though expressly made on and as of such Closing
Date or such Subsequent Closing Date; and

 

(iii)        the
Company has complied with all the agreements hereunder and satisfied all the conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date or Subsequent Closing Date.

 

(f)
Bring-down Comfort Letter. On
the Closing Date and any Subsequent Closing Date, the Initial Purchaser shall have received from BDO Seidman, LLP, independent
public accountants for the Company, a letter dated such date, in form and substance satisfactory to the Initial Purchaser, to
the effect that they reaffirm the statements made in the letter furnished by them pursuant to subsection (a) of this Section 5,
except that the specified date referred to therein for the carrying out of procedures shall be no more than three business days
prior to such Closing Date or Subsequent Closing Date.

 

(g)
Chief Financial Officer’s Certificate.
On the Closing Date, the Initial Purchaser shall have received a certificate signed by the Chief Financial Officer of the Company
certifying as to the preparation, completeness and accuracy of certain financial and statistical data relating to the Company
included in the Disclosure Package in the form attached as Exhibit C. 

 

(h)
Lock-Up Agreement from Certain Securityholders of the Company.
On or prior to the date hereof, the Company shall have furnished to the Initial Purchaser an agreement in the form of Exhibit D
hereto from directors and executive officers of the Company, and such agreement shall be in full force and effect on each
of the Closing Date and any Subsequent Closing Date.

 

(i)
Listing of Conversion Shares.
The Company shall have caused the Conversion Shares to be approved for listing, subject to notice of issuance, on the Nasdaq Global
Select Market, and satisfactory evidence of such actions has been provided to the Initial Purchaser.

 

(j)
Additional Documents. On or before
each of the Closing Date and any Subsequent Closing Date, the Initial Purchaser and counsel for the Initial Purchaser shall have
received such information, documents and opinions as they may reasonably require for the purposes of enabling them to pass upon
the issuance and sale of the Notes as contemplated herein, or in order to evidence the accuracy of any of the representations
and warranties, or the satisfaction of any of the conditions or agreements, herein contained.

 

If
any condition specified in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated
by MLPFS by notice to the Company at any time on or prior to the Closing Date and, with respect to the Optional Notes, at any
time prior to the applicable Subsequent Closing Date, which termination shall be without liability on the part of any party to
any other party, except that Section 4, Section 7, Section 8, Section 9 and Section 13 shall at all times
be effective and shall survive such termination.

 

    	20

    	 

    

  

Section
6. Representations, Warranties and Agreements of Initial Purchaser

 

The
Initial Purchaser represents and warrants that it is a “qualified institutional buyer”, as defined in Rule 144A of
the Securities Act. The Initial Purchaser agrees with the Company that:

 

(a)
it has not offered or sold, and will not offer or sell, any Notes within the United States or to, or for the account or benefit
of, U.S. persons (x) as part of their distribution at any time or (y) otherwise until one year after the later of the commencement
of the offering of the Notes pursuant hereto and the date of closing of the offering of the Notes pursuant hereto except:

 

(i)          to
those it reasonably believes to be “qualified institutional buyers” (as defined in Rule 144A under the Securities
Act) or

 

(ii)         in
accordance with Rule 903 of Regulation S;

 

(b)
neither it nor any person acting on its behalf has made or will make offers or sales of the Notes in the United States by means
of any form of general solicitation or general advertising (within the meaning of Regulation D) in the United States;

 

(c)
in connection with each sale pursuant to Section 6(a)(i), it has taken or will take reasonable steps to ensure that the purchaser
of such Notes is aware that such sale is being made in reliance on Rule 144A;

 

(d)
any information provided by the Initial Purchaser to publishers of publicly available databases about the terms of the Notes and
the Indenture shall include a statement that the Notes have not been registered under the Securities Act and are subject to restrictions
under Rule 144A under the Securities Act and Regulation S;

 

(e)
it will not engage in hedging transactions with regard to the Notes prior to the expiration of the distribution compliance period
as (defined in Regulation S), unless in compliance with the Securities Act;

 

(f)
neither it, nor any of its Affiliates nor any person acting on its or their behalf has engaged or will engage in any directed
selling efforts (within the meaning of Regulation S) with respect to the Notes;

 

(g)
it has not entered and will not enter into any contractual arrangement with any distributor (within the meaning of Regulation
S) with respect to the distribution of the Notes, except with its affiliates or with the prior written consent of the Company;

 

(h)
it and they have complied and will comply with the offering restrictions requirement of Regulation S;

 

(i)
at or prior to the confirmation of sale of Notes (other than a sale of Notes pursuant to Section 6(a)(ii) of this Agreement),
it shall have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases
Notes from it during the distribution compliance period (within the meaning of Regulation S) a confirmation or notice to substantially
the following effect:

 

    	21

    	 

    

  

“The
Notes covered hereby have not been registered under the U.S. Securities Act of 1933 (the “Securities Act”) and may
not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution
at any time or (ii) otherwise until one year after the later of the commencement of the offering and the date of closing of the
offering, except in either case in accordance with Regulation S or Rule 144A under the Securities Act. Additional restrictions
on the offer and sale of the Notes and the Common Stock issuable upon conversion thereof are described in the offering memorandum
for the Notes. Terms used in this paragraph have the meanings given to them by Regulation S.”; and

 

(j)
it acknowledges that additional restrictions on the offer and sale of the Notes and the Common Stock issuable upon conversion
thereof are described in the Disclosure Package and the Final Offering Memorandum.

 

Section
7. Reimbursement of Initial Purchaser’s Expenses

 

If
this Agreement is terminated pursuant to Section 5 or Section 10(i)(A), or if the sale to the Initial Purchaser of the Notes
on the Closing Date or any Subsequent Closing Date is not consummated because of any refusal, inability or failure on the part
of the Company to perform any agreement herein or to comply with any provision hereof, the Company agrees to reimburse the Initial
Purchaser upon demand for all out-of-pocket expenses that shall have been reasonably incurred by the Initial Purchaser in connection
with the proposed purchase and the offering and sale of the Notes, including but not limited to fees and disbursements of counsel,
printing expenses, travel expenses, postage, facsimile and telephone charges.

 

Section
8. Indemnification

 

(a)
Indemnification of the Initial Purchaser.
The Company agrees to indemnify and hold harmless the Initial Purchaser, its directors, officers, employees, agents, and affiliates
(as defined in Rule 144 under the Securities Act) against any loss, claim, damage, liability or expense, as incurred, to which
the Initial Purchaser, director, officer, employee, agent or controlling person may become subject, insofar as such loss, claim,
damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue statement
or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum, the Final Offering Memorandum,
the information contained in the Final Term Sheet, any Issuer Written Information or any other written information used by or
on behalf of the Company in connection with the offer or sale of the Notes (or any amendment or supplement to the foregoing),
or the omission or alleged omission therefrom of a material fact, in each case, necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading, and to reimburse the Initial Purchaser, its officers,
directors, employees, agents and each such controlling person for any and all expenses (including the fees and disbursements of
counsel chosen by MLPFS) as such expenses are reasonably incurred by such Initial Purchaser, or its officers, directors, employees,
agents or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the foregoing indemnity agreement shall not apply to any
loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement
or alleged untrue statement or omission or alleged omission based upon and in conformity with written information furnished to
the Company by the Initial Purchaser expressly for use in the Preliminary Offering Memorandum, the Final Offering Memorandum,
the Final Term Sheet, any Issuer Written Information or any other written information used by or on behalf of the Company in connection
with the offer or sale of the Notes (or any amendment or supplement thereto), it being understood and agreed that the only
such information furnished by the Initial Purchaser consists of the information described as such in Section 8(b) hereof. The
indemnity agreement set forth in this Section 8(a) shall be in addition to any liabilities that the Company may otherwise
have.

 

    	22

    	 

    

  

(b)
Indemnification of the Company, its Directors and Officers.
The Initial Purchaser agrees to indemnify and hold harmless the Company, each of its directors, each of its officers and each
person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such director, officer or controlling person may become
subject, insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises
out of or is based upon any untrue or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum,
the Final Offering Memorandum, the information contained in the Final Term Sheet, any
Issuer Written Information or any other written information used by or on behalf of the Company in connection with the offer or
sale of the Notes (or any amendment or supplement thereto), or arises out of or is based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in
each case to the extent, and only to the extent, that such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Preliminary Offering Memorandum, the Final Offering Memorandum,
the Final Term Sheet, any Issuer Written Information or any other written information used by or on behalf of the Company in connection
with the offer or sale of the Notes (or any amendment or supplement thereto), in reliance upon and in conformity with written
information furnished to the Company by MLPFS expressly for use therein; and to reimburse the Company, or any such director, officer
or controlling person for any legal and other expense (including the fees and disbursements of counsel chosen by the Company)
reasonably incurred by the Company, or any such director, officer or controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability, expense or action. The Company hereby acknowledges that
the only information that the Initial Purchaser has furnished to the Company expressly for use in the Preliminary Offering Memorandum,
the Final Offering Memorandum, the Final Term Sheet, any Issuer Written Information or
any other written information used by or on behalf of the Company in connection with the offer or sale of the Notes (or
any amendment or supplement thereto) are the statements set forth in Schedule B. The indemnity agreement set forth in this
Section 8(b) shall be in addition to any liabilities that the Initial Purchaser may otherwise have.

 

    	23

    	 

    

 

(c)
Notifications and Other Indemnification Procedures.
Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 8, notify the indemnifying
party in writing of the commencement thereof, but the failure to so notify the indemnifying party (i) will not relieve it
from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in
any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. In case any such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in,
and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered
to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof
with counsel satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may arise
between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that
there may be legal defenses available to it and/or other indemnified parties that are different from or additional to those available
to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt
of notice from the indemnifying party to such indemnified party of such indemnifying party’s election so to assume the defense
of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso
to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more
than one separate counsel (other than local counsel), reasonably approved by the indemnifying party (or by MLPFS in the case of
Section 8(b)), representing the indemnified parties who are parties to such action) or (ii) the indemnifying party shall
not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after
notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying
party.

 

(d)
Settlements. The indemnifying
party under this Section 8 shall not be liable for any settlement of any proceeding effected without its written consent,
which shall not be withheld unreasonably, but if settled with such consent or if there is a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 8(c)
hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid
request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party,
effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding
in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder
by such indemnified party, unless such settlement, compromise or consent (x) includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such action, suit or proceeding and (y) does not include a statement
as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

 

    	24

    	 

    

  

Section
9. Contribution

 

If
the indemnification provided for in Section 8 is for any reason unavailable to or otherwise insufficient to hold harmless
an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying
party shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as a result of any losses,
claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Initial Purchaser, on the other hand, from the offering of the Notes
pursuant to this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company, on the one hand, and the Initial Purchaser, on the other hand, in connection with the untrue statements
or omissions or alleged untrue statements or alleged omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand,
and the Initial Purchaser, on the other hand, in connection with the offering of the Notes pursuant to this Agreement shall be
deemed to be in the same respective proportions as the total net proceeds from the offering of the Notes pursuant to this Agreement
(before deducting expenses) received by the Company, and the total purchase discount received by the Initial Purchaser bear to
the aggregate initial offering price of the Notes. The relative fault of the Company, on the one hand, and the Initial Purchaser,
on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, on
the one hand, or the Initial Purchaser, on the other hand, and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.

 

The
amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall
be deemed to include, subject to the limitations set forth in Section 8(c), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action or claim.

 

The
Company and the Initial Purchaser agree that it would not be just and equitable if contribution pursuant to this Section 9
were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations
referred to in this Section 9.

 

Notwithstanding
the provisions of this Section 9, the Initial Purchaser shall not be required to contribute any amount in excess of the purchase
discount or commission received by the Initial Purchaser in connection with the Notes purchased by it hereunder. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 9, each director, officer,
employee and agent of an Initial Purchaser and each person, if any, who controls an Initial Purchaser within the meaning of the
Securities Act and the Exchange Act shall have the same rights to contribution as such Initial Purchaser, and each director of
the Company, each officer of the Company, and each person, if any, who controls the Company within the meaning of the Securities
Act or the Exchange Act shall have the same rights to contribution as the Company.

 

    	25

    	 

    

  

Section
10. Termination of this Agreement

 

Prior
to the Closing Date and, with respect to the Optional Notes, any Subsequent Closing Date, this Agreement may be terminated by
MLPFS by notice given to the Company if at any time (i) (A) trading or quotation in any of the Company’s securities
shall have been suspended or limited by the Commission or by the Nasdaq Global Select Market, or (B) trading in securities generally
on the New York Stock Exchange or the Nasdaq Global Select Market shall have been suspended or limited, or minimum or maximum
prices shall have been generally established by the Commission or FINRA or on either such stock exchange; (ii) a general
banking moratorium shall have been declared by federal or New York authorities or a material disruption in commercial banking
or securities settlement or clearance services in the United States has occurred; or (iii) there shall have occurred any
outbreak or escalation of national or international hostilities or declaration of a national emergency or war by the United States
or any crisis or calamity, or any change in the United States or international financial markets, or any substantial change or
development involving a prospective substantial change in United States’ or international political, financial or economic
conditions, as in the judgment of MLPFS is material and adverse and makes it impracticable or inadvisable to market the Notes
in the manner and on the terms described in the Disclosure Package and the Final Offering Memorandum or to enforce contracts for
the sale of securities. Any termination pursuant to this Section 10 shall be without liability on the part of (a) the
Company to the Initial Purchaser, except that the Company shall be obligated to reimburse the expenses of the Initial Purchaser
pursuant to Sections 4 and 7 hereof or (b) the Initial Purchaser to the Company.

 

Section
11. No Advisory or Fiduciary Responsibility

 

The
Company acknowledges and agrees that: (i) the purchase and sale of the Notes pursuant to this Agreement, including the determination
of the offering price of the Notes and any related discounts and commissions, is an arm’s-length commercial transaction
between the Company, on the one hand, and the Initial Purchaser, on the other hand, and the Company is capable of evaluating and
understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement;
(ii) in connection with each transaction contemplated hereby and the process leading to such transaction the Initial Purchaser
is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary of the Company or its affiliates,
stockholders, creditors or employees or any other party; (iii) no Initial Purchaser has assumed or will assume an advisory, agency
or fiduciary responsibility in favor of the Company with respect to any of the transactions contemplated hereby or the process
leading thereto (irrespective of whether the Initial Purchaser has advised or is currently advising the Company on other matters)
and the Initial Purchaser has no obligation to the Company with respect to the offering contemplated hereby except the obligations
expressly set forth in this Agreement; (iv) the Initial Purchaser and their respective affiliates may be engaged in a broad range
of transactions that involve interests that differ from those of the Company and that the Initial Purchaser has no obligation
to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Initial Purchaser has
not provided any legal, accounting, regulatory or tax advice with respect to the offering contemplated hereby and the Company
has consulted its own legal, accounting, regulatory and tax advisors to the extent it deemed appropriate.

 

This
Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company and the Initial Purchaser,
or any of them, with respect to the subject matter hereof. The Company hereby waives and releases, to the fullest extent permitted
by law, any claims that the Company may have against the Initial Purchaser with respect to any breach or alleged breach of agency
or fiduciary duty.

 

    	26

    	 

    

  

Section
12. Research Analyst Independence

 

The
Company acknowledges that the Initial Purchaser’s research analysts and research departments are required to be independent
from their respective investment banking divisions and are subject to certain regulations and internal policies, and that the
Initial Purchaser’s research analysts may hold views and make statements or investment recommendations and/or publish research
reports with respect to the Company and/or the offering that differ from the views of their respective investment banking divisions.
The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the
Initial Purchaser with respect to any conflict of interest that may arise from the fact that the views expressed by their independent
research analysts and research departments may be different from or inconsistent with the views or advice communicated to the
Company by the Initial Purchaser’s investment banking divisions. The Company acknowledges that the Initial Purchaser is
a full service securities firm and as such from time to time, subject to applicable securities laws, may effect transactions for
its own account or the account of its customers and hold long or short positions in debt or equity securities of the Company.

 

Section
13. Representations and Indemnities to Survive Delivery

 

The
respective indemnities, agreements, representations, warranties and other statements of the Company, of its officers and of the
Initial Purchaser set forth in or made pursuant to this Agreement (i) will remain operative and in full force and effect, regardless
of any (A) investigation, or statement as to the results thereof, made by or on behalf of the Initial Purchaser, the officers
or employees of the Initial Purchaser, or any person controlling the Initial Purchaser, the Company, the officers or employees
of the Company or any person controlling the Company, as the case may be or (B) acceptance of the Notes and payment for them hereunder
and (ii) will survive delivery of and payment for the Notes sold hereunder and any termination of this Agreement.

 

Section
14. Notices

 

All
communications hereunder shall be in writing and shall be mailed, hand delivered or telecopied and confirmed to the parties hereto
as follows:

 

If
to MLPFS:

Merrill Lynch, Pierce, Fenner & Smith

Incorporated 

One
Bryant Park

New York, NY 10036

Facsimile: (646) 855-3793

Attention: Syndicate Department

 

    	27

    	 

    

 

with
a copy to:

Merrill Lynch, Pierce, Fenner & Smith 

Incorporated

One
Bryant Park

New York, NY 10036

Facsimile: (646) 855-3703

Attention: ECM – Legal

 

and:

Alston
& Bird LLP

1201
West Peachtree Street

Atlanta,
Georgia 30309

Facsimile:
(404) 253-8376

Attention:
Scott Ortwein 

 

If
to the Company:

JAKKS Pacific, Inc.

22619
Pacific Coast Highway

Malibu,
California 90265

Facsimile: (310) 317-8527

Attention: Jack Friedman

 

with
a copy to:

Feder
Kaszovitz LLP

845
Third Avenue

New
York, New York 10022

Facsimile:
(212) 888-7776

Attention:
Geoff Bass

 

Any
party hereto may change the address for receipt of communications by giving written notice to the others.

 

Section
15. Successors and Assigns

 

This
Agreement will inure to the benefit of and be binding upon the parties hereto, and to the benefit of (i) the Company, its directors
and any person who controls the Company within the meaning of the Securities Act or the Exchange Act, (ii) the Initial Purchaser,
the officers, directors, employees and agents of the Initial Purchaser and each person, if any, who controls the Initial Purchaser
within the meaning of the Securities Act or the Exchange Act and (iii) the respective successors and assigns of any of the above,
all as and to the extent provided in this Agreement, and no other person shall acquire or have any right under or by virtue of
this Agreement. The term “successors and assigns” shall not include a purchaser of any of the Notes from the Initial
Purchaser merely because of such purchase.

 

    	28

    	 

    

  

Section
16. Partial Unenforceability

 

The
invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability
of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as
are necessary to make it valid and enforceable.

 

Section
17. Governing Law Provisions; Consent to Jurisdiction

 

(a)
Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK.

 

(b)
Consent to Jurisdiction. Any
legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby (“Related
Proceedings”) may be instituted in the federal courts of the United States of America located in the City and County of
New York, Borough of Manhattan or the courts of the State of New York in each case located in the City and County of New York,
Borough of Manhattan (collectively, the “Specified Courts”), and each party irrevocably submits to the exclusive jurisdiction
(except for proceedings instituted in regard to the enforcement of a judgment of any such court (a “Related Judgment”),
as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process,
summons, notice or document by mail to such party’s address set forth above shall be effective service of process for any
suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to
the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive
and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has
been brought in an inconvenient forum. 

 

(c)
Trial by Jury. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders
and affiliates) and the Initial Purchaser hereby irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated
hereby.

 

    	29

    	 

    

  

Section
18. General Provisions

 

This
Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous
oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may be executed in
two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and
no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit.
The Section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation
of this Agreement. TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY
REFER TO NEW YORK CITY TIME.

 

Each
of the parties hereto acknowledges that it is a sophisticated business person who was adequately represented by counsel during
negotiations regarding the provisions hereof, including, without limitation, the indemnification provisions of Section 8
and the contribution provisions of Section 9, and is fully informed regarding said provisions. Each of the parties hereto
further acknowledges that the provisions of Sections 8 and 9 hereto fairly allocate the risks in light of the ability of the parties
to investigate the Company, its affairs and its business in order to assure that adequate disclosure has been made in the Preliminary
Offering Memorandum and the Final Offering Memorandum.

 

    	30

    	 

    

 

If
the foregoing is in accordance with your understanding of our agreement, kindly sign and return to the Company the enclosed copies
hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its
terms.

 

	 	Very truly
    yours,
	 	JAKKS
    PACIFIC, INC.
	 	 
	 	By:	 
	 	Title:
    

 

The
foregoing Purchase Agreement is hereby confirmed and accepted by the Initial Purchaser as of the date first above written.

 

	MERRILL
LYNCH, PIERCE, FENNER & SMITH INCORPORATED	 
	 	 
	By:	 	 
	Title: 	 

 

    	31

    	 

    

 

SCHEDULE
A

 

	PRICING SUPPLEMENT	STRICTLY CONFIDENTIAL

 

JAKKS
Pacific, Inc.

$100,000,000

4.25%
Convertible Senior Notes due 2018

July
18, 2013

 

	Issuer:	 	JAKKS Pacific, Inc.
	 	 	 
	Ticker/Exchange:	 	JAKK/Nasdaq Global Select Market
	 	 	 
	Title of securities:	 	4.25% Convertible Senior Notes
	 	 	 
	Issue price:	 	100%, plus accrued interest, if any, from July 24, 2013.
	 	 	 
	Aggregate principal amount offered:	 	$100,000,000 (excluding the initial purchaser’s option to
    purchase up to $15,000,000 of additional aggregate principal amount of Notes to cover overallotments, if any).
	 	 	 
	Net proceeds:	 	$95.9 million ($110.3 million if the initial purchaser exercises
    its option to purchase up to $15,000,000 of additional aggregate principal amount of Notes to cover overallotments in full),
    after deducting the initial purchaser’s discount and before other fees and estimated expenses.
	 	 	 
	Maturity:	 	August 1, 2018, subject to earlier repurchase or conversion.
	 	 	 
	Annual interest rate:	 	4.25%
	 	 	 
	Interest payment dates:	 	August 1 and February 1
	 	 	 
	Initial Conversion price:	 	Approximately $8.74 per share of common stock
	 	 	 
	Initial Conversion rate:	 	114.3674 shares of common stock per $1,000 aggregate principal
    amount of Notes
	 	 	 
	Use of Proceeds:	 	We
        plan to use the net proceeds from this offering, along with cash on hand, to repurchase all or a portion of our 4.50%
        convertible senior notes due 2014. In the event we are unable to repurchase such notes on satisfactory terms, we will
        use such proceeds for general corporate purposes.

        

	 	 	 
	Settlement Date:	 	July 24, 2013
	 	 	 
	Adjustment to Conversion Rate Upon a Make-Whole Fundamental Change:	 	The following table sets forth numbers of additional shares to
    be received per $1,000 principal amount of Notes based on the respective stock prices and effective dates set forth below:

 

    	 

    	 

    

 

	 	 	 	Effective
    Date	 
	Stock

    Price	 	 	July 24, 

    2013	 	 	August 1,
    

    2014	 	 	August 1,
    

    2015	 	 	August 1,
    

    2016	 	 	August 1,
    

    2017	 	 	August 1,
    

    2018	 
	$	6.995	 	 	 	28.5918	 	 	 	28.5918	 	 	 	28.5918	 	 	 	28.5918	 	 	 	28.5918	 	 	 	28.5918	 
	$	8.00	 	 	 	22.3427	 	 	 	19.8704	 	 	 	17.3142	 	 	 	14.6100	 	 	 	11.8287	 	 	 	10.6326	 
	$	8.74	 	 	 	19.5061	 	 	 	16.8269	 	 	 	13.8997	 	 	 	10.6043	 	 	 	6.7530	 	 	 	0.0000	 
	$	10.00	 	 	 	16.3535	 	 	 	13.7503	 	 	 	10.8773	 	 	 	7.6389	 	 	 	3.9736	 	 	 	0.0000	 
	$	12.50	 	 	 	12.6846	 	 	 	10.5844	 	 	 	8.2597	 	 	 	5.7120	 	 	 	2.9565	 	 	 	0.0000	 
	$	15.00	 	 	 	10.3255	 	 	 	8.6204	 	 	 	6.7309	 	 	 	4.6604	 	 	 	2.4159	 	 	 	0.0000	 
	$	20.00	 	 	 	7.3888	 	 	 	6.1804	 	 	 	4.8343	 	 	 	3.3525	 	 	 	1.7400	 	 	 	0.0000	 
	$	25.00	 	 	 	5.6260	 	 	 	4.7160	 	 	 	3.6952	 	 	 	2.5667	 	 	 	1.3338	 	 	 	0.0000	 
	$	30.00	 	 	 	4.4494	 	 	 	3.7394	 	 	 	2.9353	 	 	 	2.0428	 	 	 	1.0620	 	 	 	0.0000	 
	$	40.00	 	 	 	2.9763	 	 	 	2.5125	 	 	 	1.9837	 	 	 	1.3843	 	 	 	0.7175	 	 	 	0.0000	 

 

The
exact stock prices and effective dates may not be set forth in the table above, in which case:

 

		·	if
                                                                                                              the stock price
                                                                                                              is between two stock
                                                                                                              prices in the table
                                                                                                              or the effective
                                                                                                              date is between
                                                                                                              two effective dates
                                                                                                              in the table, the
                                                                                                              number of additional
                                                                                                              shares will be determined
                                                                                                              by a straight-line
                                                                                                              interpolation between
                                                                                                              the number of additional
                                                                                                              shares set forth
                                                                                                              for the higher and
                                                                                                              lower stock prices
                                                                                                              and the earlier
                                                                                                              and later effective
                                                                                                              dates, based on
                                                                                                              a 365-day year,
                                                                                                              as applicable;

 

		·	if
                                                                                                              the stock price
                                                                                                              is greater than
                                                                                                              $40.00 per share
                                                                                                              (subject to adjustment),
                                                                                                              no additional shares
                                                                                                              will be added to
                                                                                                              the conversion rate;
                                                                                                              and

 

		·	if
                                                                                                              the stock price
                                                                                                              is less than $6.995
                                                                                                              per share (subject
                                                                                                              to adjustment),
                                                                                                              no additional shares
                                                                                                              will be added to
                                                                                                              the conversion rate.

 

Notwithstanding
the foregoing, in no event will the conversion rate for the Notes exceed 142.9592 per $1,000 principal amount of such Notes, other
than on account of proportional adjustments to the conversion rate in the manner set forth in clauses (1) through (3) under the
caption “—Conversion Rate Adjustments.”

 

	CUSIP Number:	47012E AE6
	 	 
	Listing:	None

 

This
communication is confidential and is intended for the sole use of the person to whom it is provided by the sender.

 

These
securities have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and may only
be sold to qualified institutional buyers pursuant to Rule 144A of the Securities Act or pursuant to another applicable exemption
from registration.

 

    	 

    	 

    

 

The
information in this term sheet supplements the Company’s preliminary Offering Memorandum, dated July 17, 2013 (the “Preliminary
Offering Memorandum”) and supersedes the information in the Preliminary Offering Memorandum to the extent inconsistent with
the information in the Preliminary Offering Memorandum. This term sheet is qualified in its entirety by reference to the Preliminary
Offering Memorandum. Terms used herein but not defined herein shall have the respective meanings as set forth in the Preliminary
Offering Memorandum.

 

A
securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any
time. 

 

ANY
DISCLAIMERS OR OTHER NOTICES THAT MAY APPEAR BELOW ARE NOT APPLICABLE TO THIS COMMUNICATION AND SHOULD BE DISREGARDED. SUCH DISCLAIMERS
OR OTHER NOTICES WERE AUTOMATICALLY GENERATED AS A RESULT OF THIS COMMUNICATION BEING SENT VIA BLOOMBERG OR ANOTHER EMAIL SYSTEM.

 

    	 

    	 

    

 

SCHEDULE
B

 

		1.	The
last paragraph on the cover page of the Offering Memorandum regarding the delivery of the Notes;

 

		2.	The
information in the sixth paragraph under the caption “Plan of Distribution” concerning the concession to dealers;
and

 

		3.	The
information in paragraphs under the heading “Plan of Distribution—Price Stabilization, Short Positions.”

 

    	 

    	 

    

 

EXHIBIT
A

 

Form
of Comfort Letter

 

This
draft is furnished solely for the purpose of indicating the form of letter that we would expect to be able to furnish Bank
of America Merrill Lynch in response to their request, the matters expected to be covered
in the letter, and the nature of the procedures that we would expect to carry out with respect to such matters. Based on our discussions
with Bank of America Merrill Lynch, it is our understanding that the procedures
outlined in this draft letter are those they wish us to follow. Unless Bank of America Merrill Lynch
informs us otherwise, we shall assume that there are no additional procedures they wish us to follow. The text of the letter itself
will depend, of course, on the results of the procedures, which we would not expect to complete until shortly before the letter
is given and in no event before the cutoff date indicated therein.

 

July
18, 2013

 

Merrill
Lynch, Pierce, Fenner & Smith

Incorporated

One Bryant Park

New York, New York 10036

 

Ladies
and Gentlemen:

 

We
have audited the consolidated balance sheets of JAKKS Pacific, Inc. (the “Company”) and subsidiaries as of December
31, 2011 and 2012, and the consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2012, and the related financial statement schedule all incorporated
by reference in the Preliminary Offering Memorandum dated July 17, 2013 relating to $100 million Convertible Senior Notes due
2018, herein referred to as the “Memorandum.” Our reports with respect thereto are also incorporated by reference
in the Memorandum. We have also audited the effectiveness of the Company’s internal control over financial reporting as
of December 31, 2012, and our report with respect thereto is also incorporated by reference in the Memorandum.

 

This
letter is being furnished in reliance upon the representation from the underwriter named in the Memorandum to us that -

 

		a.	You
                                                                              are knowledgeable with respect to the due diligence
                                                                              review process that would be performed if this placement
                                                                              of securities were being registered pursuant to
                                                                              the Securities Act of 1933, as amended (the “Act”).

 

		b.	In
                                                                              connection with the offering of convertible notes,
                                                                              the review process you have performed is substantially
                                                                              consistent with the due diligence review process
                                                                              that you would have performed if this placement
                                                                              of securities were being registered pursuant to
                                                                              the Act.

 

    	 

    	 

    

 

In
connection with the Memorandum:

 

(1)         We
are an independent registered public accounting firm with respect to the Company within the meaning of the Act and the applicable
rules and regulations thereunder adopted by the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight
Board (United States) (PCAOB).

 

(2)         In
our opinion, the consolidated financial statements and financial statement schedule audited by us and incorporated by reference
in the Memorandum comply as to form in all material respects with the applicable accounting requirements of the Act and the Securities
Exchange Act of 1934 (the “Exchange Act”) and the related rules and regulations adopted by the SEC.

 

(3)         We
have not audited any financial statements of the Company as of any date or for any period subsequent to December 31, 2012; although
we have conducted audits for the years ended December 31, 2012, the purpose (and therefore the scope) of the audit was to enable
us to express our opinion on the consolidated financial statements as of December 31, 2012 and for the years then ended, but not
on the financial statements for any interim period within that year. Therefore, we are unable to and do not express any opinion
on the unaudited condensed consolidated balance sheet as of March 31, 2013, and the unaudited condensed consolidated statements
of operations, comprehensive income (loss), and cash flows for the three-months ended March 31, 2013 and 2012, incorporated by
reference in the Memorandum, or on the financial position, results of operations, or cash flows as of any date or for any period
subsequent to December 31, 2012.

 

(4)         For
purposes of this letter, we have read the 2013 minutes of meetings of the stockholders, the board of directors, and the audit
committee of the Company and its subsidiaries as set forth in the minute books at July 16, 2013, officials of the Company having
advised us that the minutes of all such meetings through that date were set forth therein; we have carried out other procedures
to July 16, 2013 as follows (our work did not extend to the period from July 17, 2013 to July 18, 2013, inclusive):

 

(a)         With
respect to the three-month periods ended March 31, 2013 and 2012, we have:

 

(i)          Performed
the procedures specified by the PCAOB for a review of interim financial information as described in AU sec. 722, “Interim
Financial Information,” on the unaudited condensed consolidated balance sheet as of March 31, 2013, the unaudited condensed
consolidated statements of operations and comprehensive income and cash flows for the three-months ended March 31, 2013 and 2012,
incorporated by reference in the Memorandum.

 

(ii)         Inquired
of certain officials of the Company who have responsibility for financial and accounting matters whether the unaudited condensed
consolidated financial statement referred to in (4)(a)(i), incorporated by reference in the Memorandum comply as to form in all
material respects with the applicable accounting requirements of the Act and Exchange Act and the related rules and regulations
adopted by the SEC.

 

    	 

    	 

    

 

		(b)	With
                                                                              respect to the period from April 1, 2013 to June
                                                                              30, 2013, we have:

 

		(i)	Read
                                                                               the unaudited consolidated financial statements
                                                                               of the Company and subsidiaries for June 30 of
                                                                               both 2013 and 2012 furnished to us by the Company,
                                                                               officials of the Company having advised us that
                                                                               no such financial statements as of any date or
                                                                               for any period subsequent to June 30, 2013, were
                                                                               available. The financial information for June 30,
                                                                               2013 is incomplete in that it omits a statement
                                                                               of cash flows and other disclosures.

 

		(ii)	Inquired
                                                                                of certain officials of the Company who have responsibility
                                                                                for financial and accounting matters whether the
                                                                                unaudited consolidated financial statements referred
                                                                                to in b(i) are stated on a basis substantially
                                                                                consistent with that of the audited consolidated
                                                                                financial statements incorporated by reference
                                                                                in the Memorandum.

 

The
foregoing procedures do not constitute an audit of financial statements conducted in accordance with the standards of the PCAOB.
Also, they would not necessarily reveal matters of significance with respect to the comments in the following paragraph. Accordingly,
we make no representations regarding the sufficiency of the foregoing procedures for your purposes.

 

		(5)	Nothing
                                                                              came to our attention as a result of the foregoing
                                                                              procedures, however, that caused us to believe that:

 

		(a)	(i)          Any
                                                                              material modifications should be made to the unaudited
                                                                              condensed consolidated financial statements described
                                                                              in (4)(a), incorporated by reference in the Memorandum,
                                                                              for them to be in conformity with U.S. generally
                                                                              accepted accounting principles.

 

(ii)         The
unaudited condensed consolidated financial statements described in (4)(a) do not comply as to form in all material respects with
the applicable accounting requirements of the Act and Exchange Act and the related rules and regulations adopted by the SEC.

 

		(b)	(i)          At
                                                                              June 30, 2013, there was any change in the capital
                                                                              stock, increase in long-term debt, or decrease in
                                                                              consolidated net current assets or stockholders'
                                                                              equity of the consolidated companies as compared
                                                                              with amounts shown in the March 31, 2013, unaudited
                                                                              condensed consolidated balance sheet incorporated
                                                                              by reference in the Memorandum,
                                                                              or (ii) for the period from April 1,
                                                                              2013, to June 30, 2013, there were any decreases,
                                                                              as compared to the corresponding period in the preceding
                                                                              year, in consolidated net sales or in the total
                                                                              or per-share amounts of income before extraordinary
                                                                              items or net income, except in
                                                                              all instances for changes, increases, or decreases
                                                                              that the Memorandum discloses have occurred or may
                                                                              occur, except that the unaudited consolidated balance
                                                                              sheet as of June 30, 2013, which we were furnished
                                                                              by the company, showed a decrease from March 31,
                                                                              2013, in net current assets of $65.4 million, and
                                                                              in stockholders’ equity of $48.2 million.

 

    	 

    	 

    

 

(6)         As
mentioned in 4b, Company officials have advised us that no consolidated financial statements as of any date or for any period
subsequent to June 30, 2013, are available; accordingly, the procedures carried out by us with respect to changes in financial
statement items after June 30, 2013, have, of necessity, been even more limited than those with respect to the periods referred
to in (4). We have inquired of certain officials of the Company who have responsibility for financial and accounting matters whether
(a) at July 16, 2013, there was any change in the capital stock, increase in long-term debt or any decreases in consolidated net
current assets or stockholders' equity of the consolidated companies as compared with amounts shown on the March 31, 2013, unaudited
condensed consolidated balance sheet incorporated by reference in the Memorandum or (b) for the period from April 1, 2013 to June
30, 2013, there were any decreases, as compared with the corresponding period in the preceding year, in consolidated net sales
or in the total or per-share amounts of income before extraordinary items or of net income. On the basis of these inquiries and
our reading of the minutes as described in (4), nothing came to our attention that caused us to believe that there was any such
change, increase, or decrease except in all instances for changes, increases, or decreases that the Memorandum discloses have
occurred or may occur, except as described in the following sentence. We have been informed by officials of the company that there
continues to be a decrease in net current assets and stockholders’ equity that are estimated to be the same amounts as set
forth in item 5(b) above.

 

(7)         Our
audit of the consolidated financial statements for the periods referred to in the introductory paragraph of this letter comprised
audit tests and procedures deemed necessary for the purpose of expressing an opinion on such consolidated financial statements
taken as a whole. For none of the periods referred to therein nor for any other period did we perform audit tests for the purpose
of expressing an opinion on individual balances of accounts or summaries of selected transactions such as those enumerated below
and, accordingly, we express no opinion thereon.

 

(8)         However,
for purposes of this letter, we have read the circled items identified by you on the attached copy of the Annual Report on Form
10-K for the year ended December 31, 2012; Quarterly Report on Form 10-Q for the quarter ended March 31, 2013; and the Preliminary
Offering Memorandum, and have performed the following additional procedures, which were applied as indicated by the symbols explained
below. In performing these procedures, we have considered to be in agreement amounts that, when compared, differed only due to
the effect of rounding. With respect to amounts that were computed by adjusting amounts for the receipt and application of the
proceeds from the offering as set forth under "Use of Proceeds," it should be understood that we make no comment regarding
the reasonableness of the "Use of Proceeds" or whether such proceeds or use will actually occur. Additionally, with
respect to analyses prepared by the Company, we make no comment regarding the completeness or appropriateness of such analyses
or the manner in which they were prepared. Our additional procedures were as follows:

 

(a)         Compared
the specified dollar amounts, percentages, and/or numbers of shares to amounts in the audited consolidated financial statements
described in the introductory paragraph of this letter to the extent that such amounts are included in or can be derived from
such statements or the related notes thereto, and found them to be in agreement.

 

(b)         Compared
the specified dollar amounts, percentages, and numbers of shares to amounts in the unaudited condensed consolidated financial
statements as discussed in 4(a) to the extent that such amounts are included in or can be derived from such statements or the
related notes thereto, and found them to be in agreement.

 

    	 

    	 

    

 

(c)         Compared
the specified dollar amounts, percentages, and numbers of shares to amounts in the Company’s accounting records and found
them to be in agreement.

 

(d)         Compared
the specified dollar amounts, percentages, and numbers of shares to amounts reflected in an accounting analyses or schedules prepared
by the Company and found them in to be agreement. With respect to analyses and schedules prepared by the Company, we make no comment
regarding the completeness, accuracy or appropriateness of such analyses or the manner in which they were prepared.

 

(e)         Recalculated
the specific dollar amounts, per share amounts, ratios and percentages based on the financial statements referred to in (a) or
(b) above and found them to be in agreement when taking rounding into account.         

 

(f)          Compared
the specified amounts to amounts reflected in the Company’s Board of Directors, or Board committee meeting minutes provided
to us by the Company, and found them to be in agreement.

 

(g)         Compared
the specified dollar amounts and percentage to amounts reflected in Footnote 20, Selected Quarterly Financial Data (unaudited),
in the December 31, 2012 consolidated financial statements to the extent that such amounts are included in or can be derived from
such footnote, and found them to be in agreement.

 

(h)         Compared
the specified dollar amounts to amounts reflected in the accounting analysis or schedule prepared by the Company and noted differences
of $0.1 million and $0.1 million for the 2012 interest expense in respect to the Company’s credit facility and Maui acquisition,
respectively.

 

(i)          Compared
the specified dollar amounts to amounts reflected in the individual’s employment agreement issued by the Company, and found
them to be in agreement.

 

(j)          Compared
or recalculated the specified dollar amounts, percentages, and/or numbers of shares to amounts in the 2010, 2009 and 2008 consolidated
financial statements, to the extent that such amounts are included in or can be derived from such statements or the related notes
thereto, and found them to be in agreement.

 

(k)         Compared
the specified dollar amounts to amounts reflected in the accounting analysis or schedule prepared by the Company and noted a difference
of $0.3 million for product development expense.

 

(l)          Compared
the specified dollar amounts to amounts reflected in the accounting analysis or schedule prepared by the Company and noted a difference
of $0.1 million for legal expense.

 

(m)        Compared
the specific dollar amounts to amounts reflected in the respective agreements entered into by the Company, and found them to be
in agreement.

 

(n)         Compared
sales concentration percentage of the three largest customers amount to amount reflected in the audited
consolidated financial statements described in the introductory paragraph of this letter and found a variance of 4.7% between
the sales concentration percentage of 42.1% versus 46.8% disclosed in the audited consolidated financial statements.

 

    	 

    	 

    

 

(o)         Compared
the specified dollar amounts, percentages, and/or numbers of shares to amounts reflected in the June 30, 2012 unaudited consolidated
financial statements of the Company (not incorporated by reference in the Memorandum), filed with the SEC in a quarterly report
on Form 10-Q on August 7, 2012 to the extent that such amounts are included in or can be derived from such statements or the related
notes thereto, and found them to be in agreement.

 

(p)         Compared
the specified dollar amounts, percentages, and numbers of shares to amounts in the Company’s accounting records and the
June 30, 2013 unaudited financial statements provided by the Company as discussed in 4(b)(i) and found them to be in agreement.
The June 30, 2013 unaudited financial statements provided by the Company are preliminary and subject to change.

 

(9)         It
should be understood that we make no representations regarding questions of legal interpretation or regarding the sufficiency
for your purposes of the procedures enumerated in the preceding paragraph; also, such procedures would not necessarily reveal
any material misstatement of the amounts or percentages listed above. Further, we have addressed ourselves solely to the foregoing
data as set forth in the Memorandum and make no representations regarding the adequacy of disclosure or regarding whether any
material facts have been omitted.

 

(10)       This
letter is solely for the information of the addressees and to assist you in conducting and documenting their investigation of
the affairs of the Company in connection with the offering of the securities covered by the Memorandum, and it is not to be used,
circulated, quoted, or otherwise referred to for any other purpose, including but not limited to the registration, purchase, or
sale of securities, nor is it to be filed with or referred to in whole or in part in the Memorandum or any other document, except
that reference may be made to it in the purchase agreement or in any list of closing documents pertaining to the offering of the
Convertible Senior Notes covered by the Memorandum.

 

Very
truly yours,

 

    	 

    	 

    

 

EXHIBIT
B

 

Form
of Opinion of Counsel for the Company

 

July
__, 2013

 

Merrill
Lynch, Pierce, Fenner & Smith Inc.

One
Bryant Park

New
York, New York 10036

 

Ladies
and Gentlemen:

 

This
opinion is rendered to you pursuant to Section 5 of the Purchase Agreement (the “Purchase Agreement”) dated July __,
2013 between you, as the Initial Purchaser, and JAKKS Pacific, Inc. (the “Company”), as the Seller, of $100,000,000
____% Convertible Notes due 2018.

 

References
herein to the Disclosure Package, the Preliminary Offering Memorandum and the Final Offering Memorandum include any amendments
or supplements thereto, respectively, at the Closing Date. Capitalized terms not hereafter defined shall have the meaning ascribed
to them in the Purchase Agreement.

 

In
rendering this opinion, we rely as to matters of fact, to the extent we deem proper, on certificates of responsible officers of
the Company and public officials.

 

(i)          The
Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware.

 

(ii)         The
Company has corporate power and authority to own, lease and operate its properties and to conduct its business as described in
the Disclosure Package and the Final Offering Memorandum and to enter into and perform its obligations under the Purchase Agreement.

 

(iii)        The
Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which
such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for
such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, have
a Material Adverse Effect.

 

(iv)        Each
significant subsidiary of the Company (as defined in Rule 405 under the Securities Act) has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority
to own or lease, as the case may be, and to operate its properties and to conduct its business as described in the Disclosure
Package and the Final Offering Memorandum and is duly qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the
conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually
or in the aggregate, have a Material Adverse Effect.

 

    	 

    	 

    

  

(v)         All
of the issued and outstanding capital stock of each such significant subsidiary of the Company has been duly authorized and validly
issued, is fully paid and nonassessable and is owned by the Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance or, to the best of our knowledge, any pending or threatened claim.

 

(vi)        The
Company’s authorized equity capitalization is as set forth in the Disclosure Package and
the Final Offering Memorandum. The authorized, issued and outstanding capital stock of the Company (including the Common Stock)
conforms to the descriptions thereof set forth in the Disclosure Package and the Final Offering
Memorandum. All of the outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable.

 

(vii)       The
Purchase Agreement has been duly authorized, executed and delivered by the Company.

 

(viii)      The
Indenture has been duly authorized by the Company; on the Closing Date, the Indenture will have been duly executed and delivered
by the Company and, assuming due authorization, execution and delivery of the Indenture by the Trustee, will constitute a legally
valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors’ or by general equitable principles; and the Indenture conforms in all material respects
to the description thereof contained in the Disclosure Package and the Final Offering Memorandum.

 

(ix)         The
Notes have been duly authorized by the Company; when the Notes are executed, authenticated and issued in accordance with the terms
of the Indenture and delivered to and paid for by the Initial Purchaser pursuant to the Purchase Agreement on the Closing Date
(assuming due authentication of the Notes by the Trustee), such Notes will constitute legally valid and binding obligations of
the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except
as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to
or affecting the rights and remedies of creditors or by general equitable principles; and the Notes will conform in all material
respects to the description thereof contained in the Disclosure Package and the Final Offering Memorandum.

 

    	 

    	 

    

  

(x)          To
our knowledge the Company and each subsidiary possess such valid and current certificates, authorizations or permits issued by
the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct their respective businesses, and,
to our knowledge, neither the Company nor any subsidiary has received any notice of proceedings relating to the revocation or
modification of, or non-compliance with, any such certificate, authorization or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, could have a Material Adverse Effect.

 

(xi)         Except
as otherwise disclosed in the Disclosure Package and the Final Offering Memorandum, to our knowledge
the Company and its subsidiaries own or possess sufficient Intellectual Property Rights reasonably necessary to conduct their
business as now conducted; and the expected expiration of any of such Intellectual Property Rights would not, singly or in the
aggregate, have a Material Adverse Effect. To our knowledge and except as set forth in the Disclosure Package, the Final Memorandum,
neither the Company nor any of its subsidiaries has received any notice of infringement or conflict with, and to the best of our
knowledge, there is no infringement of or conflict with, asserted Intellectual Property Rights of others, which
infringement or conflict the Company has determined would, singly or in the aggregate, have a Material Adverse Effect. To our
knowledge, none of the technology employed by the Company has been obtained or is being used by the Company in violation of any
contractual obligation binding on the Company or any of its officers, directors or employees or otherwise in violation of the
rights of any persons.

 

(xii)        The
Conversion Shares initially issuable upon conversion of the Notes have been duly authorized and reserved and, when issued upon
conversion of the Notes in accordance with the terms of the Notes and the Indenture, will be validly issued, fully paid and nonassessable,
and the issuance of such shares will not be subject to any preemptive or similar rights.

 

(xiii)       Registration
of the Notes under the Securities Act of 1933, as amended, is not required for (i) the offer and sale of the Notes by the Company
to the Initial Purchaser or (ii) the re-offer and resale of the Notes by the Company to the Initial Purchaser, in each case in
the manner contemplated by the Purchase Agreement, the Disclosure Package and the Final Offering
Memorandum, relating to the Notes.

 

(xiv)      No
stockholder of the Company or any other person has any preemptive right, right of first refusal or other similar right to subscribe
for or purchase securities of the Company arising (i) by operation of the charter or by-laws of the Company or the General Corporation
Law of the State of Delaware or (ii) to the best of our knowledge or otherwise.

 

    	 

    	 

    

 

(xv)       Each
document filed pursuant to the Exchange Act (other than the financial statements and supporting schedules included therein) and
incorporated or deemed to be incorporated by reference in the Disclosure Package or the Final
Offering Memorandum complied when so filed as to form in all material respects with the Exchange Act.

 

(xvi)      The
statements in the Disclosure Package and the Final Offering Memorandum under the caption “Certain United States Income Tax
Considerations”, insofar as such statements constitute matters of law, summaries of legal matters or legal proceedings,
or legal conclusions, have been reviewed by us and accurately and fairly present and summarize, in all material respects, the
matters referred to therein.

 

(xvii)     Except
as disclosed in the Disclosure Package, the Final Offering Memorandum, to the best of our knowledge, there are no other legal
or governmental actions, suits or proceedings pending or threatened (i) against or affecting the Company or any of its subsidiaries,
(ii) which has as the subject thereof any officer or director of, or property owned or leased by, the Company or any of its
subsidiaries or (iii) relating to environmental or discrimination matters, where in any such case (A) there is a reasonable
possibility that such action, suit or proceeding might be determined adversely to the Company or such subsidiary and (B) any
such action, suit or proceeding, if so determined adversely, would reasonably be expected to, singly or in the aggregate, have
a Material Adverse Effect or adversely affect the consummation of the transactions contemplated by the Purchase Agreement. After
due inquiry, we do not know of any existing or, to the best of our knowledge, threatened or pending, material labor dispute with
the employees of the Company or any of its subsidiaries, or with the employees of any principal supplier of the Company.

 

(xviii)    No
consent, approval, authorization or other order of, or registration or filing with, any court or other governmental authority
or agency is required for the Company’s execution, delivery and performance of the Purchase Agreement and consummation of
the transactions contemplated thereby and by the Disclosure Package and the Final Offering Memorandum, except as required under
the Securities Act, applicable state securities or blue sky laws and from FINRA.

 

(xix)       The
execution and delivery of the Purchase Agreement, the Indenture and the Notes by the Company and the performance by the Company
of its obligations thereunder (other than performance by the Company of its obligations under the indemnification section of the
Purchase Agreement, as to which no opinion is rendered) (i) will not result in any violation of the provisions of the charter
or by-laws of the Company or any subsidiary; (ii) will not constitute a breach of, or Default or a Debt Repayment Triggering
Event under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company
or any of its subsidiaries pursuant to, (A) the Company’s 4.50% Convertible Senior Notes due 2014 or the related
indenture, or (B) any other Existing Instrument known to us; or (iii)  will not result in any violation of any statute, law,
rule, judgment, regulation, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or any of its subsidiaries
or any of its or their properties.

 

    	 

    	 

    

  

(xx)        The
Company is not, and after receipt of payment for the Notes and the application of the proceeds thereof as contemplated under the
caption “Use of Proceeds” in the Disclosure Package and the Final Offering Memorandum will not be, an “investment
company” within the meaning of Investment Company Act.

 

(xxi)       To
the best of our knowledge, neither the Company nor any subsidiary (A) is in violation of (i) its charter or by-laws or (ii) any
statute, law, rule, judgment, regulation, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory
body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or any of its
subsidiaries or any of its or their properties or (B) is in Default in the performance or observance of any obligation, agreement,
covenant or condition contained in any material Existing Instrument, except with respect to this clause (B) only, for such Defaults
as would not, individually or in the aggregate, have a Material Adverse Effect.

 

We
have participated in conferences with officers and other representatives of the Company, representatives of the independent public
or certified public accountants for the Company and representatives of the Initial Purchaser at which the contents of the Disclosure
Package, including the Preliminary Offering Memorandum, and the Final Offering Memorandum, and any supplements or amendments thereto,
and related matters were discussed and, although we are not passing upon and do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Disclosure Package and the Final Offering Memorandum (other than as
specified above), and any supplements or amendments thereto, on the basis of the foregoing, nothing has come to our attention
that would lead us to believe that (i) the Disclosure Package, as of the Applicable Time, contained any untrue statement of a
material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of circumstances
under which they were made, not misleading or (ii) either the Final Offering Memorandum or any amendments thereto, as of its date
or at the Closing Date or any Subsequent Closing Date, as the case may be, contained an untrue statement of a material fact or
omitted 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 (it being understood that we express no belief as to the financial statements or schedules or other
financial data derived therefrom, included in the Disclosure Package, the Final Offering Memorandum or any amendments or supplements
thereto).

 

    	 

    	 

    

 

EXHIBIT
C

 

CERTIFICATE
OF CHIEF FINANCIAL OFFICER

 

July
[___], 2013

 

I,
the undersigned, Joel Bennett, Chief Financial Officer of JAKKS Pacific, Inc., a Delaware corporation (the “Company”),
pursuant to that certain Purchase Agreement, dated as of July [___], 2013 (the “Purchase Agreement”), by and
between the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Initial Purchaser”) (capitalized
terms used but not otherwise defined herein shall have the meanings given to such terms in the Purchase Agreement), hereby certify,
on behalf of the Company, that:

 

		1.	I
                                                                                am duly elected, qualified and am acting in the
                                                                                capacity set forth above, am familiar with the
                                                                                facts certified herein and have made any and all
                                                                                additional inquiries necessary in my judgment
                                                                                in order to make the certifications herein.

 

		2.	The
                                                                                information included in the Preliminary Offering
                                                                                Memorandum under the heading “Summary –
                                                                                Recent Developments – Revised 2013 Guidance”
                                                                                represents the Company’s current best good
                                                                                faith estimate of the Company’s net sales
                                                                                and diluted net loss per share for the full year
                                                                                2013 based on all information currently available
                                                                                to the Company.

 

		3.	I
                                                                                have compared each item marked on the attached
                                                                                copy of the Preliminary Offering Memorandum with
                                                                                the amount included in the Company’s accounting
                                                                                records or on a schedule or report prepared by
                                                                                the Company from its accounting records and found
                                                                                them to be in agreement.

 

		4.	The
                                                                                Initial Purchaser is entitled to rely on this
                                                                                Chief Financial Officer’s Certificate.

 

IN
WITNESS WHEREOF, I have hereunto set my hand to this Chief Financial Officer’s Certificate as of the date first written
above.

 

	 	JAKKS PACIFIC, INC.,
	 	a Delaware corporation
	 	 	 
	 	By:	 
	 	 	Joel Bennett
	 	 	Chief Financial Officer

 

    	 

    	 

    

 

EXHIBIT
D

 

[Date]

 

Merrill
Lynch, Pierce, Fenner & Smith

                    Incorporated

One
Bryant Park

New York, New York 10036

 

Re:           JAKKS
Pacific, Inc. (the “Company”)

 

Ladies
and Gentlemen:

 

The
undersigned is an owner of record or beneficially of certain shares of Common Stock of the Company or securities convertible into
or exchangeable or exercisable for Common Stock. The Company proposes to carry out an offering of 4.25% Convertible Senior Notes
due 2018, which will be convertible into common stock, $.001 par value (the “Common Stock”), of the Company (the “Offering”),
for which you are the initial purchaser. The undersigned recognizes that the Offering will be of benefit to the undersigned and
will benefit the Company. The undersigned acknowledges that you are relying on the representations and agreements of the undersigned
contained in this letter in carrying out the Offering and in entering into a purchase agreement with the Company with respect
to the Offering.

 

In
consideration of the foregoing, the undersigned hereby agrees that the undersigned will not, (and will cause any spouse or immediate
family member of the spouse or the undersigned living in the undersigned’s household not to), without the prior written
consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPFS”) (which consent may be withheld in its
sole discretion), directly or indirectly, sell, offer, contract to sell or grant any option to buy (including without limitation
any short sale), pledge, transfer, establish an open “put equivalent position” or liquidate or decrease a “call
equivalent position” within the meaning of Rule 16a-1(h) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), or otherwise dispose of or transfer (or enter into any transaction that is designed to, or might reasonably be expected
to, result in the disposition of) including the filing (or participation in the filing of) of a registration statement with the
Securities and Exchange Commission in respect of, any shares of Common Stock, options or warrants to acquire shares of Common
Stock, or securities exchangeable or exercisable for or convertible into shares of Common Stock currently or hereafter owned either
of record or beneficially (as defined in Rule 13d-3 under the Exchange Act) by the undersigned (or such spouse or family member),
or publicly announce an intention to do any of the foregoing, for a period commencing on the date hereof and continuing through
the close of trading on October 16, 2013 (the “Lock-Up Period”). The foregoing sentence shall not apply to (i) the
transfer of any or all of the shares of Common Stock owned by the undersigned, either during his or her lifetime or on death,
by gift, will or intestate succession to the immediate family of the undersigned or to a trust the beneficiaries of which are
exclusively the undersigned and/or a member or members of his or her immediate family (for purposes of this agreement, “immediate
family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin) or (ii) any bona
fide gifts to any charitable organization; provided, however, that in the case of any transfers permitted by clauses (i) and (ii)
it shall be a pre-condition to such transfer that (a) the transferee or donee executes and delivers to MLPFS a lock-up agreement
in form and substance satisfactory to MLPFS, (b) no filing by any party (transferor, transferee, donor or donee) under the Exchange
Act shall be required or shall be voluntarily made in connection with such transfer or distribution (other than a filing on a
Form 5, Schedule 13D or Schedule 13G (or 13D/A or 13G/A) made after the expiration of the Lock-Up Period), (c) each party (transferor,
transferee, donor or donee) shall not be required by law (including without limitation the disclosure requirements of the Securities
Act of 1933, as amended, and the Exchange Act) to make, and shall agree to not voluntarily make, any public announcement of the
transfer or disposition and (d) the undersigned notifies MLPFS at least three business days prior to the proposed transfer or
disposition. Furthermore, notwithstanding anything to the contrary in this agreement, the undersigned may (i) exercise any option
or warrant to acquire shares of Common Stock, or the exchange of securities exchangeable for or convertible into Common Stock,
provided that any Common Stock received upon such exercise or exchange shall be subject to the restrictions contained in this
agreement, and (ii) forfeit to the Company shares of Common Stock or options to purchase Common Stock, in an amount not to exceed
30,000 shares in the aggregate, to satisfy tax withholding obligations of the undersigned in connection with the vesting of equity
awards acquired by the undersigned pursuant to equity incentive plans existing and as in effect on the date of this agreement,
The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent
and registrar against the transfer of shares of Common Stock or securities convertible into or exchangeable or exercisable for
Common Stock held by the undersigned except in compliance with the foregoing restrictions.

 

    	 

    	 

    

  

This
agreement is irrevocable and will be binding on the undersigned and the respective successors, heirs, personal representatives,
and assigns of the undersigned.

 

	 	 
	 	Printed Name of Holder	 
	 	 	 
	By:	 	 
	 	Signature	 
	 	 
	 	 
	 	Printed Name of Person Signing	 

 

(and
indicate capacity of person signing if signing as custodian, trustee, or on behalf of an entity)ex10-4.htm

Exhibit 10.4

 

SECURITIES PURCHASE AGREEMENT

AMENDMENT NO. 3

This Amendment (the “Amendment”) to the Securities Purchase Agreement (the “Securities Purchase Agreement”, or the "Agreement") dated as of the 7th day of October, 2009, as amended, between TANGIERS INVESTORS, LP, a limited partnership (the “Investor”), and NORTH BAY RESOURCES INC., a corporation organized and existing under the laws of the State of Delaware (the “Company”), is entered into as of this 24h day of July, 2013, with an agreed Effective Date of January 24, 2013.  This Amendment supersedes Amendment No. 2 dated March 28, 2013 and Amendment No. 1 dated January 28, 2013.

 

WHEREAS, the Company and the Investor wish to amend the Agreement under the terms and subject to the conditions set forth in this Amendment and the Securities Purchase Agreement as if set forth herein;

In consideration of the mutual promises contained herein, the parties agree as follows:

 

1. Amendment.

1.1 The second paragraph of the preamble to the Securities Purchase Agreement is hereby amended and restated in its entirety as set forth below:

"WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Investor, as provided herein, and the Investor shall purchase from the Company, up to Ten Million Dollars ($10,000,000) of the Company’s common stock, par value $0.001 per share (the “Common Stock”); and"

1.2 Section 1.7 of the Securities Purchase Agreement is hereby amended and restated in its entirety as set forth below:

Section 1.7. “Commitment Amount” shall mean the aggregate amount of up to Ten Million Dollars ($10,000,000) which the Investor has agreed to provide to the Company in order to purchase the Company’s Common Stock pursuant to the terms and conditions of this Agreement.

1.3 Section 1.8 of the Securities Purchase Agreement is hereby amended and restated in its entirety as set forth below:

Section 1.8. “Commitment Period” shall mean the period commencing on the Effective Date, and expiring on the earliest to occur of (x) the date on which the Investor shall have made payment of Advances pursuant to this Agreement in the aggregate amount of the Commitment Amount, (y) the date this Agreement is terminated pursuant to Section 10.2 or (z) the date occurring sixty (60) months after the Effective Date.

 

  

  

  

 

1.4 Section 1.9 of the Securities Purchase Agreement is hereby amended and restated in its entirety as set forth below:

Section 1.9. “Common Stock” shall mean the Company’s common stock, par value $ 0.001per share whether issued to the Investor directly.

1.5 Section 1.16 of the Securities Purchase Agreement is hereby amended and restated in its entirety as set forth below:

Section 1.16. “Base Amount/Maximum Advance Amount”  The Base Amount shall mean the amount of each Advance that is equal to the average daily trading volume in dollar amount during the ten (10) trading days preceding the Advance Date.  No Advance will be made in an amount lower than the Minimum Advance Amount (defined below). No advance will be made higher than Two Hundred and Fifty Thousand Dollars ($250,000) or 300% of the Base Amount, whichever is less

1.6 Section 1.17 of the Securities Purchase Agreement is hereby amended and restated in its entirety as set forth below:

Section 1.17.                           “Minimum Advance Amount” shall be Ten Thousand Dollars ($10,000) per Advance Notice.  In the event the Base Amount (as defined in Section 1.22) is less than the Minimum Amount, the Base Amount shall equal the Minimum Amount.

1.7 Section 1.22 of the Securities Purchase Agreement is hereby amended and restated in its entirety as set forth below:

Section 1.22. “Purchase Price” shall be set at (a) ninety percent (90%) of the Market Price during the Pricing Period for up to 100% of the Base Amount (as defined in Section 1.16), (b) eighty two and a half percent (82.5%) of the Market Price during the Pricing Period for any shares in excess of 100% and less than or equal to 200% of the Base Amount, and (c) seventy five percent (75%) of the Market Price during the Pricing Period for any shares in excess of 200%  and less than or equal to 300% of the Base Amount.

1.8 Section 1.23 of the Securities Purchase Agreement is hereby amended and restated in its entirety as set forth below:

Section 1.23. “Registrable Securities” shall mean the shares of Common Stock to be issued hereunder  (i) in respect of which the Registration Statement has not been declared effective by the SEC, (ii) which have not been sold under circumstances meeting all of the applicable conditions of Rule 144 (or any similar provision then in force) under the Securities Act (“Rule 144”) or (iii) which have not been otherwise transferred to a holder who may trade such shares without restriction under the Securities Act, and the Company has delivered a new certificate or other evidence of ownership for such securities not bearing a restrictive legend.

 

  

  

  

 

1.9 Section 2.2(c) of the Securities Purchase Agreement is hereby deleted in its entirety.

1.10 Section 7.2(a) of the Securities Purchase Agreement is hereby amended and restated in its entirety as set forth below:

Section 7.2(a) Registration of the Common Stock with the SEC. The Company shall have filed with the SEC a Registration Statement with respect to the resale of the Registrable Securities in accordance with the terms of the Registration Rights Agreement. As set forth in the Registration Rights Agreement, the Registration Statement shall have previously become effective and shall remain effective on each Condition Satisfaction Date and (i) neither the Company nor the Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to the Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or intends or has threatened to do so, and (ii) no other suspension of the use or withdrawal of the effectiveness of the Registration Statement or related prospectus shall exist. The Registration Statement must have been declared effective by the SEC prior to the first Advance Notice Date.

1.11 Section 12.2 of the Securities Purchase Agreement is hereby amended and restated in its entirety as set forth below:

Section 12.2. Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between the Investor, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Investor makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended.

1.12 Section 12.4 of the Securities Purchase Agreement is hereby deleted and replaced in its entirety as set forth below:

Section 12.4.   Release.   The Investor hereby irrevocably and unconditionally releases the Company of and from all claims, demands, causes of actions, fees and liabilities of any kind whatsoever, which it had, now has or may have against the Company as of the date of this amendment, by reason of any actual or alleged act, omission, transaction, practice, conduct, statement, occurrence, or any other matter within the reasonable scope of this Agreement that is known to the Investor, including, but not limited to, the right to rescind its purchases pursuant to this Agreement.

 

  

  

  

 

2. General Provisions.

2.1 Except as defined herein, all defined terms used herein shall have the meaning set forth in the Securities Purchase Agreement

2.2 The captions to the paragraphs/sections in this Amendment are not a part of this Amendment or the Securities Purchase Agreement, and are included merely for convenience of reference only and shall not affect its meaning or interpretation.

2.3 This Amendment may be signed in any number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument.

2.4 Company and Investor confirm and acknowledge that the Securities Purchase Agreement is in full force and effect, that there have been no uncured events of breach to date, and that each represents and warrants to the other that they are in material compliance with the Securities Purchase Agreement. Except for the changes made by this Amendment to the Securities Purchase Agreement, the Securities Purchase Agreement remains in full force and effect without modification. All references to the Agreement in the Securities Purchase Agreement mean the Securities Purchase Agreement as amended hereby.

[Remainder of Page Intentionally Left Blank]

 

 

  

  

  

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Parties hereto have duly executed this Amendment to the Agreement as of this 24th day of July, 2013.

 

Tangiers Investors, LP

 

By:  /s/ Michael Sobeck             

 

Name: Michael Sobeck

 

Title:           Managing Member of the General Partner, Tangiers Capital, LLC

 

 

North Bay Resources Inc.

 

 

By: _/s/ Perry Leopold                

 

Name: Perry Leopold

 

Title:           CEO

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