Document:

SRZ Comments: 10/21/2012

 

SUBSCRIPTION
AGREEMENT

 

This Subscription Agreement
(this “Agreement”) is being delivered to the purchaser identified on the signature page to this Agreement (the
“Subscriber”) in connection with its investment in MGT Capital Investments, Inc., a Delaware corporation
(the “Company”). The Company is conducting a private placement (the “Offering”) of up to
Four Million Five Hundred Thousand Dollars ($4,500,000) of its units (“Units”), at a purchase price of Three
Dollars and Twenty Six Cents ($3.26) per Unit (the “Purchase Price”). Each Unit will consist of: (i) one (1)
share of the Company’s Series A Convertible Preferred Stock, which shall be convertible into one share of the Company’s
common stock (the “Common Stock”), par value $0.001 per share and contain such rights and designations as set
forth in the form of Certificate of Designation, attached hereto as Exhibit A, (the “Preferred Shares”),
and (ii) a five (5) year warrant to purchase such number of shares of Common Stock as shall be equal to 200% of the number of shares
of Common Stock the Preferred Shares are convertible into that such Subscriber purchased in the Offering (the “Warrant
Shares”) at a per share exercise price of $3.85 (the “Exercise Price”), substantially in the form
attached hereto as Exhibit B (the “Warrants”). For purposes of this Agreement, the term “Securities”
shall refer to the Units, the Preferred Shares, the Common Stock into which the Preferred Shares are convertible, the Warrants,
and the Warrant Shares.

 

IMPORTANT INVESTOR NOTICES

 

NO OFFERING LITERATURE OR ADVERTISEMENT
IN ANY FORM MAY BE RELIED UPON IN THE OFFERING OF THESE SECURITIES EXCEPT FOR THIS SUBSCRIPTION AGREEMENT AND ANY SUPPLEMENTS HERETO
AND NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY REPRESENTATIONS EXCEPT THOSE CONTAINED HEREIN.

 

THIS AGREEMENT DOES NOT PURPORT TO BE ALL-INCLUSIVE
OR TO CONTAIN ALL OF THE INFORMATION THAT YOU MAY DESIRE IN EVALUATING THE COMPANY, OR AN INVESTMENT IN THE OFFERING. THIS AGREEMENT
DOES NOT CONTAIN ALL OF THE INFORMATION THAT WOULD NORMALLY APPEAR IN A PROSPECTUS FOR AN OFFERING REGISTERED UNDER THE SECURITIES
ACT. YOU MUST CONDUCT AND RELY ON YOUR OWN EVALUATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED, IN DECIDING WHETHER TO INVEST IN THE OFFERING.

 

THIS AGREEMENT CONTAINS A SUMMARY OF CERTAIN
PROVISIONS OF VARIOUS DOCUMENTS RELATING TO THE OPERATIONS OF THE COMPANY. THESE SUMMARIES DO NOT PURPORT TO BE COMPLETE AND ARE
QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE TEXTS OF THE ORIGINAL DOCUMENTS.

 

NEITHER THE DELIVERY OF THIS AGREEMENT
AT ANY TIME NOR ANY SALE OF SECURITIES HEREUNDER SHALL IMPLY THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE. THE COMPANY WILL EXTEND TO EACH PROSPECTIVE INVESTOR (AND TO ITS REPRESENTATIVE, ACCOUNTANT OR LEGAL COUNSEL, IF ANY)
THE OPPORTUNITY, PRIOR TO ITS PURCHASE OF UNITS, TO ASK QUESTIONS OF AND RECEIVE ANSWERS FROM THE COMPANY CONCERNING THE OFFERING
AND TO OBTAIN ADDITIONAL INFORMATION, TO THE EXTENT THE COMPANY POSSESSES THE SAME OR CAN ACQUIRE IT WITHOUT UNREASONABLE EFFORT
OR EXPENSE, IN ORDER TO VERIFY THE ACCURACY OF THE INFORMATION SET FORTH HEREIN. ALL SUCH ADDITIONAL INFORMATION SHALL ONLY BE
PROVIDED IN WRITING AND IDENTIFIED AS SUCH BY THE COMPANY THROUGH ITS DULY AUTHORIZED OFFICERS AND/OR DIRECTORS ALONE; NO ORAL
INFORMATION OR INFORMATION PROVIDED BY ANY BROKER OR THIRD PARTY MAY BE RELIED UPON.

 

    	 

    	 

    

 

NO REPRESENTATIONS, WARRANTIES OR ASSURANCES
OF ANY KIND ARE MADE OR SHOULD BE INFERRED WITH RESPECT TO THE ECONOMIC RETURN, IF ANY, THAT MAY ACCRUE TO AN INVESTOR IN THE COMPANY.

 

THIS AGREEMENT CONTAINS FORWARD-LOOKING
STATEMENTS REGARDING THE COMPANY’S PERFORMANCE, STRATEGY, PLANS, OBJECTIVES, EXPECTATIONS, BELIEFS AND INTENTIONS. THE OUTCOME
OF THE EVENTS DESCRIBED IN THESE FORWARD-LOOKING STATEMENTS IS SUBJECT TO SUBSTANTIAL RISKS, AND ACTUAL RESULTS COULD DIFFER MATERIALLY.
THE SECTIONS ENTITLED “EXECUTIVE SUMMARY,” “RISK FACTORS,” AND “DESCRIPTION OF BUSINESS,” IN
ANY SEC FILING OR REPORT, AS WELL AS THIS AGREEMENT GENERALLY, CONTAINS DISCUSSIONS OF SOME OF THE FACTORS THAT COULD CONTRIBUTE
TO THESE DIFFERENCES.

 

THIS SUBSCRIPTION AGREEMENT AND THE SEC
FILINGS AND REPORTS INCLUDE DATA OBTAINED FROM INDUSTRY PUBLICATIONS AND REPORTS, WHICH THE COMPANY BELIEVES TO BE RELIABLE SOURCES;
HOWEVER, NEITHER THE ACCURACY NOR COMPLETENESS OF THIS DATA IS GUARANTEED. WE HAVE NEITHER INDEPENDENTLY VERIFIED THIS DATA NOR
SOUGHT THE CONSENT OF SUCH SOURCES TO REFER TO THEIR REPORTS IN THIS SUBSCRIPTION AGREEMENT.

 

THE OFFERING PRICE OF THE UNITS HAS BEEN
DETERMINED ARBITRARILY. THE PRICE OF THE UNITS AND THE PREFERRED STOCK AND WARRANTS DOES NOT NECESSARILY BEAR ANY RELATIONSHIP
TO THE ASSETS, EARNINGS OR BOOK VALUE OF THE COMPANY, OR TO POTENTIAL ASSETS, EARNINGS, OR BOOK VALUE OF THE COMPANY. THERE IS
NO ACTIVE TRADING MARKET IN THE COMPANY’S COMMON STOCK AND THERE CAN BE NO ASSURANCE THAT AN ACTIVE TRADING MARKET IN ANY
OF THE COMPANY’S SECURITIES WILL DEVELOP OR BE MAINTAINED. A LIMITED NUMBER OF SHARES OF COMMON STOCK MAY BE ELIGIBLE FOR
TRADING PRIOR TO REGISTRATION OF THE SECURITIES SOLD IN THE OFFERING, AND SUCH REGISTRATION MAY BE DELAYED IN CERTAIN CIRCUMSTANCES.
THE PRICE OF SHARES QUOTED ON THE NYSE MKT MAY BE IMPACTED BY A LACK OF LIQUIDITY OR AVAILABILITY OF SHARES FOR PUBLIC SALE AND
ALSO WILL NOT NECESSARILY BEAR ANY RELATIONSHIP TO THE ASSETS, EARNINGS, BOOK VALUE OR POTENTIAL PROSPECTS OF THE COMPANY OR APPLICABLE
QUOTED OR TRADING PRICES THAT MAY EXIST FOLLOWING REGISTRATION OR THE LAPSE OF RESTRICTIONS ON THE SECURITIES SOLD PURSUANT TO
THE OFFERING OR OTHER RESTRICTIONS. SUCH PRICES SHOULD NOT BE CONSIDERED ACCURATE INDICATORS OF FUTURE QUOTED OR TRADING PRICES
THAT MAY SUBSEQUENTLY EXIST FOLLOWING.

 

FOR RESIDENTS OF ALL STATES

 

THIS OFFERING IS BEING MADE SOLELY TO “ACCREDITED
INVESTORS,” AS SUCH TERM IS DEFINED IN RULE 501 OF REGULATION D UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”). THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE AND WILL BE OFFERED
AND SOLD IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(2) THEREUNDER AND REGULATION D (RULE 506) OF THE
SECURITIES ACT AND CORRESPONDING PROVISIONS OF STATE SECURITIES LAWS.

 

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THE SECURITIES OFFERED HEREBY ARE SUBJECT
TO RESTRICTION ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT
AND APPLICABLE STATE LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED
TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

 

THE SECURITIES OFFERED HEREBY HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (“SEC”), ANY STATE SECURITIES COMMISSION OR
ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR
THE ACCURACY OR ADEQUACY OF THIS SUBSCRIPTION AGREEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

 

PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE
THE CONTENTS OF THIS AGREEMENT AS INVESTMENT, LEGAL, BUSINESS, OR TAX ADVICE. EACH INVESTOR SHOULD CONTACT HIS, HER OR ITS OWN
ADVISORS REGARDING THE APPROPRIATENESS OF THIS INVESTMENT AND THE TAX CONSEQUENCES THEREOF, WHICH MAY DIFFER DEPENDING ON AN INVESTOR’S
PARTICULAR FINANCIAL SITUATION. IN NO EVENT SHOULD THIS AGREEMENT BE DEEMED OR CONSIDERED TO BE TAX ADVICE PROVIDED BY THE COMPANY.

 

FOR FLORIDA RESIDENTS ONLY

 

THE UNITS REFERRED
TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPT UNDER § 517.061 OF THE FLORIDA SECURITIES ACT.
THE UNITS HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA. IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE
OF VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH SUBSCRIBER TO THE COMPANY,
AN AGENT OF THE COMPANY, OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH
SUBSCRIBER, WHICHEVER OCCURS LATER.

 

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1.          SUBSCRIPTION
AND PURCHASE PRICE

 

(a)          Subscription.
Subject to the conditions set forth in Section 2 hereof, the Subscriber hereby subscribes for and agrees to purchase the number
of Units indicated on page 16 hereof on the terms and conditions described herein.

 

(b)          Purchase
of Units. The Subscriber understands and acknowledges that the purchase price to be remitted to the Company in exchange for
the Units shall be set at Three Dollars and Twenty Six Cents ($3.26) per Unit, for an aggregate purchase price as set forth on
page 16 hereof (the “Aggregate Purchase Price”). The Subscriber’s delivery of this Agreement to the Company
shall be accompanied by payment for the Units subscribed for hereunder, payable in United States Dollars, by wire transfer of immediately
available funds delivered contemporaneously with the Subscriber’s delivery of this Agreement to the Company in accordance
with the wire instructions provided on Exhibit C and pursuant to and in accordance with the Escrow Agreement, attached hereto
as Exhibit D (the “Escrow Agreement”). Notwithstanding anything to contrary contained herein, the Subscriber,
in lieu of delivering the Aggregate Purchase Price to the escrow agent in accordance with the Escrow Agreement at the time of execution
of this Subscription Agreement, may in its sole discretion elect to deliver its Aggregate Purchase Price to the Company at the
Closing after its satisfaction or waiver of the closing conditions required to be satisfied by the Company contained herein. Each
of the Company and the Subscriber understands and agrees that, subject to Section 2 and applicable laws, by executing this Agreement,
it is entering into a binding agreement.

 

2.          Acceptance,
Offering Term and Closing Procedures

 

(a)          Acceptance
or Rejection. Subject to full, faithful and punctual performance and discharge by the Company of all of its duties, obligations
and responsibilities as set forth in this Agreement and any other agreement entered into between the Subscriber and the Company
relating to this subscription (collectively, the "Transaction Documents"), the Subscriber shall be legally bound
to purchase the Units, and the Company shall be bound to sell the Units pursuant to the terms and conditions set forth in this
Agreement. For the avoidance of doubt, upon the occurrence of the failure by the Company to fully, faithfully and punctually perform
and discharge any of its duties, obligations and responsibilities as set forth in any of the Transaction Documents, which shall
have been performed or otherwise discharged prior to the Closing, the Subscriber may, on or prior to the Closing (as defined below),
at its sole and absolute discretion, elect not to purchase the Units and, of applicable, provide instructions to the escrow agent
under the Escrow Agreement to receive the full and immediate refund of the Aggregate Purchase Price. In no event will the Company
hold the funds for more than five (5) Business Days after receipt of funds in escrow and appropriately executed documents.

 

(b)          Closing.
The closing of the purchase and sale of the Units hereunder (the “Closing”) shall take place at the offices
of Sichenzia Ross Friedman Ference, LLP, 61 Broadway, 32nd Floor, New York, NY 10006 or such other place as determined
by the Company and may take place in one of more closings. Closings shall take place within 5 Business Days of the date hereof,
subject to the satisfaction or waiver of the conditions set forth in Section 7 below (the “Closing Date”). “Business
Day” shall mean from the hours of 9:00 a.m. (Eastern Time) through 5:00 p.m. (Eastern Time) of a day other than a Saturday,
Sunday or other day on which commercial banks in New York, New York are authorized or required to be closed. The Units purchased
by the Subscriber will be delivered by the Company on the Closing Date (as defined below) of the Offering. Notwithstanding anything
to the contrary contained herein, there shall be one Closing which Closing shall occur on or prior to October 26, 2012. In the
event that the Closing shall not have occurred with respect to the Subscriber on or before October 26, 2012 hereof due to the Company's
or the Subscriber’s failure to satisfy the conditions set forth in Section 7 (and the nonbreaching party's failure to waive
such unsatisfied condition(s)), the nonbreaching party shall have the option to terminate this Agreement with respect to such breaching
party at the close of business on such date by delivering a written notice to that effect to the other party to this Agreement
and without liability of any party to any other party.

 

(c)          Intentionally
Omitted. 

 

(d)          Intentionally
Omitted. 

 

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(e)          Extraordinary
Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of Common Stock as a dividend
or other distribution on outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock, or (c) combine
its outstanding shares of the Common Stock into a smaller number of shares of Common Stock, then, in each such event, the Purchase
Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Purchase Price by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator
of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall
thereafter be the Purchase Price then in effect. The Purchase Price, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive event or events described herein. The number of Preferred Shares and Warrants that the Subscriber
shall thereafter be issued and obtain on the conversion or exercise thereof, be entitled to receive shall be adjusted to a number
determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section) be
issuable on such exercise by a fraction of which (a) the numerator is the Purchase Price that would otherwise (but for the provisions
of this Section) be in effect, and (b) the denominator is the Purchase Price in effect on the date of such exercise.

 

(f)          Certificate
as to Adjustments. In each case of any adjustment or readjustment in the Preferred Shares issuable hereunder or Warrant Shares
issuable upon the exercise of the Warrants or the exercise price of the Warrants or the conversion price of the Preferred Shares,
the Company at its expense will promptly cause its Chief Executive Officer, Chief Financial Officer or other appropriate designee
to compute such adjustment or readjustment in accordance with the terms hereof and of the Warrant and prepare a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The
Company will forthwith mail a copy of each such certificate to the Subscriber and of the Warrant and any Warrant Agent of the Company.

 

(g)          Right
of Participation. Until twenty four (24) months following the Closing Date, the Subscribers
hereunder shall be given not less than ten (10) days prior written notice of any proposed sale by the Company of its Common stock
or other securities or equity linked debt obligations (“Other Offering”) If Subscribers elect to exercise
their rights pursuant to this Section 2(g), the Subscribers shall have the right during the ten (10)
days following receipt of the notice, to purchase in the aggregate up to all of such offered Common Stock, debt or other
securities in accordance with the terms and conditions set forth in the notice of sale, relative to each other in proportion to
the amount of Units issued to them as of the Closing Date. Subscribers who participate in such Other Offering shall be entitled
at their option to purchase, in proportion to each other, the amount of such Other Offering that could have been purchased by Subscribers
who do not exercise their rights hereunder until up to the entire Other Offering is purchased by Subscribers. In the event such
terms and conditions are modified during the notice period, Subscribers shall be given prompt notice of such modification and shall
have the right during the five (5) days following the notice of modification to exercise such right. The Right of Participation
shall be split in the following proportion: Barry Honig, or any entity designated by him (50%), Hudson Bay Capital Management LP,
or any entity designated by them (25%); and Iroquois Master Fund Ltd (25%) or any entity designated by them.

 

3.          THE
SUBSCRIBER’s Representations, Warranties AND cOVENANTS

 

The Subscriber hereby
acknowledges, agrees with and represents, warrants and covenants to the Company, as follows:

 

(a)          The
Subscriber has full power and authority to enter into this Agreement, the execution and delivery of which has been duly authorized,
if applicable, and this Agreement constitutes a valid and legally binding obligation of the Subscriber, except as may be limited
by bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement
of rights of creditors, and except as enforceability of the obligations hereunder are subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or law).

 

(b)          The
Subscriber acknowledges its understanding that the Offering and sale of the Securities is intended to be exempt from registration
under the Securities Act of 1933, as amended (the “Securities Act”), by virtue of Section 4(2) of the Securities
Act and the provisions of Regulation D promulgated thereunder (“Regulation D”). In furtherance thereof, the
Subscriber represents and warrants to the Company and its affiliates as follows:

 

(i)          Intentionally
omitted.

 

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(ii)         The
Subscriber realizes that the basis for exemption would not be available if the Offering is part of a plan or scheme to evade registration
provisions of the Securities Act or any applicable state or federal securities laws.

 

(iii)        The
Subscriber is acquiring the Securities solely for the Subscriber’s own beneficial account, for investment purposes, and not
with a view towards, or resale in connection with, any distribution of the Securities except sales pursuant to a registration statement
or sales that are exempted under the Securities Act.

 

(iv)        The
Subscriber has the financial ability to bear the economic risk of the Subscriber’s investment, has adequate means for providing
for its current needs and contingencies, and has no need for liquidity with respect to an investment in the Company.

 

(v)         The
Subscriber and the Subscriber’s attorney, accountant, purchaser representative and/or tax advisor, if any (collectively,
the “Advisors”) has such knowledge and experience in financial and business matters as to be capable of evaluating
the merits and risks of a prospective investment in the Securities. If other than an individual, the Subscriber also represents
it has not been organized solely for the purpose of acquiring the Securities.

 

(vi)        The
Subscriber (together with its Advisors, if any) has received all documents requested by the Subscriber, if any, has carefully reviewed
them and understands the information contained therein, prior to the execution of this Agreement.

 

(c)          The
Subscriber is not relying on the Company or any of its employees, agents, sub-agents or advisors with respect to the legal, tax,
economic and related considerations involved in this investment. The Subscriber has relied on the advice of, or has consulted with,
only its Advisors. Each Advisor, if any, has disclosed to the Subscriber in writing (a copy of which is annexed to this Agreement)
the specific details of any and all past, present or future relationships, actual or contemplated, between the Advisor and the
Company or any affiliate or sub-agent thereof.

 

(d)          The
Subscriber has carefully considered the potential risks relating to the Company and a purchase of the Securities, and fully understands
that the Securities are a speculative investment that involves a high degree of risk of loss of the Subscriber’s entire investment.

 

(e)          The
Subscriber will not sell or otherwise transfer any Securities without registration under the Securities Act or an exemption therefrom,
and fully understands and agrees that the Subscriber must bear the economic risk of its purchase because, among other reasons,
the Securities have not been registered under the Securities Act or under the securities laws of any state and, therefore, cannot
be resold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Securities Act and under
the applicable securities laws of such states, or an exemption from such registration is available. In particular, the Subscriber
is aware that the Securities are “restricted securities,” as such term is defined in Rule 144 promulgated under the
Securities Act (“Rule 144”), and they may not be sold pursuant to Rule 144 unless all of the conditions of Rule
144 are met. The Subscriber understands that any sales or transfers of the Securities are further restricted by state securities
laws and the provisions of this Agreement.

 

(f)          No
oral or written representations or warranties have been made, or information furnished, to the Subscriber or its Advisors, if any,
by the Company or any of its officers, employees, agents, sub-agents, affiliates, advisors or subsidiaries in connection with the
Offering, other than any representations of the Company contained herein, and in subscribing for the Units, the Subscriber is not
relying upon any representations other than those contained herein.

 

(g)          The
Subscriber’s overall commitment to investments that are not readily marketable is not disproportionate to the Subscriber’s
net worth, and an investment in the Securities will not cause such overall commitment to become excessive.

 

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(h)          The
Subscriber understands and agrees that the certificates for the Securities shall bear substantially the following legend until
(i) such Securities shall have been registered under the Securities Act and effectively disposed of in accordance with a registration
statement that has been declared effective or (ii) in the opinion of counsel acceptable to the Subscriber, such Securities may
be sold without registration under the Securities Act:

 

THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED (I) IN THE ABSENCE OF (A) A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO SUCH SECURITIES UNDER THE ACT OR (B) AN OPINION OF COUNSEL THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE ACT IS AVAILABLE WITH RESPECT TO SUCH TRANSFER OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

 

(i)          Neither
the SEC nor any state securities commission has approved the Securities or passed upon or endorsed the merits of the Offering.
There is no government or other insurance covering any of the Securities.

 

(j)          The
Subscriber and its Advisors, if any, have had a reasonable opportunity to ask questions of and receive answers from a person or
persons acting on behalf of the Company concerning the Offering and the business, financial condition, results of operations and
prospects of the Company, and all such questions have been answered to the full satisfaction of the Subscriber and its Advisors,
if any.

 

(k)          (i)          In
making the decision to invest in the Securities the Subscriber has relied solely upon the information provided by the Company in
the Transaction Documents. To the extent necessary, the Subscriber has retained, at its own expense, and relied upon appropriate
professional advice regarding the investment, tax and legal merits and consequences of this Agreement and the purchase of the Securities
hereunder. The Subscriber disclaims reliance on any statements made or information provided by any person or entity in the course
of Subscriber’s consideration of an investment in the Securities other than the Transaction Documents. 

 

(ii)         The
Subscriber represents and warrants that: (i) the Subscriber was contacted regarding the sale of the Securities by the Company (or
an authorized agent or representative thereof) with whom the Subscriber had a prior substantial pre-existing relationship and (ii)
no Securities were offered or sold to it by means of any form of general solicitation or general advertising, and in connection
therewith, the Subscriber did not (A) receive or review any advertisement, article, notice or other communication published in
a newspaper or magazine or similar media or broadcast over television or radio, whether closed circuit, or generally available;
or (B) attend any seminar meeting or industry investor conference whose attendees were invited by any general solicitation or general
advertising; or (C) observe any website or filing of the Company with the SEC in which any offering of securities by the Company
was described and as a result learned of any offering of securities by the Company.

 

(l)          The
Subscriber has taken no action that would give rise to any claim by any person for brokerage commissions, finders’ fees or
the like relating to this Agreement or the transactions contemplated hereby.

 

(m)          The
Subscriber is not relying on the Company or any of its employees, agents, or advisors with respect to the legal, tax, economic
and related considerations of an investment in the Units, and the Subscriber has relied on the advice of, or has consulted with,
only its own Advisors.

 

(n)          The
Subscriber acknowledges that any estimates or forward-looking statements or projections furnished by the Company to the Subscriber
were prepared by the management of the Company in good faith, but that the attainment of any such projections, estimates or forward-looking
statements cannot be guaranteed by the Company or its management and should not be relied upon.

 

(o)          No
oral or written representations have been made, or oral or written information furnished, to the Subscriber or its Advisors, if
any, in connection with the Offering that are in any way inconsistent with the information contained herein.

 

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

 

(q)          This
Agreement is not enforceable by the Subscriber unless it has been accepted by the Company, and the Subscriber acknowledges and
agrees that the Company reserves the right to reject any subscription for any reason.

 

(r)          Intentionally
omitted.

 

(s)          The
Subscriber is, and on each date on which the Subscriber continues to own restricted Securities from the Offering will be, an “Accredited
Investor” as defined in Rule 501(a) under the Securities Act. In general, an “Accredited Investor” is deemed
to be an institution with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 (excluding such
person’s residence) or annual income exceeding $200,000 or $300,000 jointly with his or her spouse.

 

(t)          The
Subscriber, either alone or together with its representatives, has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the Offering, and has so evaluated the merits and risks
of such investment. The Subscriber has not authorized any person or entity to act as its Purchaser Representative (as that term
is defined in Regulation D of the General Rules and Regulations under the Securities Act) in connection with the Offering. The
Subscriber is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete
loss of such investment.

 

(u)          The
Subscriber has reviewed, or had an opportunity to review, all of the SEC Filings (as defined below), and all “Risk Factors”
and “Forward Looking Statements” disclaimers contained therein. In addition, the Subscriber has reviewed and acknowledges
it has such knowledge, sophistication, and experience in securities matters.

 

4.          The
Company’s Representations, Warranties and Covenants

 

The Company hereby
acknowledges, agrees with and represents, warrants and covenants to the Subscriber, as follows:

 

(a)          Organization
and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the
state of Delaware. The Company is duly qualified to do business, and is in good standing in the states required due to (a) the
ownership or lease of real or personal property for use in the operation of the Company's business or (b) the nature of the business
conducted by the Company. The Company has all requisite power, right and authority to own, operate and lease its properties and
assets, to carry on its business as now conducted, to execute, deliver and perform its obligations under this Agreement and the
other Transaction Documents to which it is a party, and to carry out the transactions contemplated hereby and thereby. All actions
on the part of the Company and its officers and directors necessary for the authorization, execution, delivery and performance
of this Agreement and the other Transaction Documents, the consummation of the transactions contemplated hereby and thereby, and
the performance of all of the Company's obligations under this Agreement and the other Transaction Documents have been taken or
will be taken prior to the Closing. This Agreement has been, and the other Transaction Documents to which the Company is a party
on the Closing will be, duly executed and delivered by the Company, and this Agreement is, and each of the other Transaction Documents
to which it is a party on the Closing will be, a legal, valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms.

 

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(b)          Issuance
of Securities. The Securities to be issued to the Subscriber pursuant to this Agreement, when issued and delivered in accordance
with the terms of this Agreement, will be duly and validly issued and will be fully paid and non-assessable.

 

(c)          Authorization;
Enforcement. The execution, delivery and performance of this Agreement and the other Transaction Documents by the Company,
and the consummation of the transactions contemplated hereby and thereby, will not (a) constitute a violation (with or without
the giving of notice or lapse of time, or both) of any provision of any law or any judgment, decree, order, regulation or rule
of any court, agency or other governmental authority applicable to the Company, (b) require any consent, approval or authorization
of, or declaration, filing or registration with, any person, (c) result in a default (with or without the giving of notice or lapse
of time, or both) under, acceleration or termination of, or the creation in any party of the right to accelerate, terminate, modify
or cancel, any agreement, lease, note or other restriction, encumbrance, obligation or liability to which the Company is a party
or by which it is bound or to which any assets of the Company are subject, (d) result in the creation of any lien or encumbrance
upon the assets of the Company, or upon any Preferred Shares or other securities of the Company, (e) conflict with or result in
a breach of or constitute a default under any provision of those certain articles of incorporation or those certain bylaws of the
Company, or (f) invalidate or adversely affect any permit, license, authorization or status used in the conduct of the business
of the Company.

 

(d)          SEC
Filings. The Company is subject to, and in full compliance with, the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). The Company has made available to each Subscriber through
the EDGAR system true and complete copies of each of the Company’s Quarterly Reports on Form 10-Q, Annual Reports on Form
10-K and Current Reports on Form 8-K (collectively, the “SEC Filings”), and all such SEC Filings are incorporated
herein by reference. The SEC Filings, when they were filed with the SEC (or, if any amendment with respect to any such document
was filed, when such amendment was filed), complied in all material respects with the applicable requirements of the Exchange Act
and the rules and regulations thereunder and did not, as of such date, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. All reports and statements required to be filed by the Company under the Exchange Act
have been filed, together with all exhibits required to be filed therewith. The Company and each of its direct and indirect subsidiaries,
if any (collectively, the “Subsidiaries”), are engaged in all material respects only in the business described
in the SEC Filings, and the SEC Filings contain a complete and accurate description in all material respects of the business of
the Company and the Subsidiaries.

 

(e)          No
Financial Advisor. The Company acknowledges and agrees that the Subscriber is acting solely
in the capacity of an arm’s length purchaser with respect to the Securities and the transactions contemplated hereby. The
Company further acknowledges that the Subscriber is not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by the Subscriber or any
of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental
to the Subscriber’s purchase of the Units. The Company further represents to the Subscriber that the Company’s decision
to enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.

 

(f)          Indemnification.
The Company will indemnify and hold harmless the Subscriber and, where applicable, its directors, officers, employees, agents,
advisors and shareholders, from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not
limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against
any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any
representation or warranty of the Company contained herein or in any document furnished by the Company to the Subscriber in connection
herewith being untrue in any material respect or any breach or failure by the Company to comply with any covenant or agreement
made by the Company to the Subscriber in connection therewith.

 

(g)          Capitalization
and Additional Issuances. The authorized and outstanding capital stock of the Company on a fully
diluted basis as of the date of this Agreement and the Closing Date (not including the Securities) are set forth in the SEC Filings.
Except as set forth in the SEC Filings, there are no options, warrants, or rights to subscribe to, securities, rights, understandings
or obligations convertible into or exchangeable for or giving any right to subscribe for any shares of capital stock or other equity
interest of the Company or any of the Subsidiaries. The only officer, director, employee and consultant stock option or
stock incentive plan or similar plan currently in effect or contemplated by the Company is described in the SEC Filings. There
are no outstanding agreements or preemptive or similar rights affecting the Company's Common Stock.

 

    	- 9 -

    	 

    

 

(h)          Private
Placements. Assuming the accuracy of the Subscriber’s representations and warranties set forth in Section 3, no registration
under the Securities Act is required for the offer and sale of the Securities by the Company to the Subscribers as contemplated
hereby.

 

(j)          Investment
Company. The Company is not, and is not an affiliate of, and immediately after receipt of payment for the Securities will not
be or be an affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act.

 

(k)          No
Additional Agreements. Neither the Company nor any of its Subsidiaries has any agreement
or understanding with any Subscriber with respect to the transactions contemplated by the Transaction Documents other than pursuant
to documents substantially identical to the Transaction Documents.

 

(l)          Shell
Company Status. To the Company's knowledge, the Company is not, and for the seven (7) years prior to the date hereof has not
been, an issuer identified in Rule 144(i)(1) of the Securities Act. The Company is, and has been for a period of at least 90 days,
subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act. The Company has filed its current "Form
10 information" with the SEC pursuant to and in accordance with applicable requirements reflecting its status as an entity
that is no longer an issuer described in Rule 144(i)(1) and one (1) year has elapsed from the date that the Company filed "Form
10 information" with the SEC.

 

5.          OTHER
AGREEMENTS OF THE PARTIES

 

(a)          Furnishing
of Information. As long as any Subscriber owns Securities, the Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant
to the Exchange Act. As long as any Subscriber owns Securities, if the Company is not required to file reports pursuant to the
Exchange Act, it will prepare and furnish to the Subscribers and make publicly available in accordance with Rule 144(c) under the
Securities Act such information as is required for the Subscribers to sell the Securities under Rule 144. The Company further covenants
that it will take such further action as any holder of Securities may reasonably request, all to the extent required from time
to time to enable such person to sell such Securities without registration under the Securities Act within the limitation of the
exemptions proved by Rule 144 under the Securities Act. As it pertains to the foregoing, the Company agrees and covenants that
it will accept opinions from counsel acceptable to the Subscriber, in Subscriber’s sole discretion, that such Securities
may be sold without registration under the Securities Act.

 

(b)          Shareholder
Rights Plan. No claim will be made or enforced by the Company or, to the knowledge of the Company, any other person that any
Subscriber is an “Acquiring Person” under any shareholder rights plan or similar plan or arrangement in effect or hereafter
adopted by the Company, or that any Subscriber could be deemed to trigger the provisions of any such plan or arrangement, by virtue
of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Subscribers.

 

(c)          Securities
Laws Disclosure; Publicity. The Company shall not publicly disclose the name of any Subscriber, or include the name of any
Subscriber in any filing with the SEC or any regulatory agency, without the prior written consent of such Subscriber, except (i)
as required by federal securities law in connection with the registration statement contemplated by the Registration Rights Agreement
and (ii) to the extent such disclosure is required by law.

 

    	- 10 -

    	 

    

 

(d)          Public
Information. At any time during the period commencing from the six (6) month anniversary of the Closing Date and ending at
such time that all of the Securities, if a registration statement is not available for the resale of all of the Securities, may
be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1),
if (i) the Company shall fail for any reason to satisfy the requirements of Rule 144(c)(1), including, without limitation, the
failure to satisfy the current public information requirement under Rule 144(c) or (ii) the Company becomes an issuer described
in Rule 144(i)(1)(i) in the future, and the Company shall fail to satisfy any condition set forth in Rule 144(i)(2) (a "Public
Information Failure") then, as partial relief for the damages to any holder of Securities by reason of any such delay
in or reduction of its ability to sell the Securities (which remedy shall not be exclusive of any other remedies available at law
or in equity), the Company shall pay to each such holder an amount in cash equal to one percent (1%) of the aggregate Purchase
Price of such holder's Securities on every thirtieth day following a Public Information Failure (pro rated for periods totaling
less than thirty days) until the earlier of (i) the date such Public Information Failure is cured and (ii) such time that such
public information is no longer required pursuant to Rule 144. The payments to which a holder shall be entitled pursuant to this
Section 5(d) are referred to herein as "Public Information Failure Payments." Public Information Failure Payments
shall be paid on the earlier of (I) the last day of the calendar month during which such Public Information Failure Payments are
incurred and (II) the third Business Day after the event or failure giving rise to the Public Information Failure Payments is cured.
In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure
Payments shall bear interest at the rate of 1% per month (prorated for partial months) until paid in full. The aggregate amount
of Public Information Failure Payments shall not exceed 10% of the aggregate Purchase Price.

 

(e)          Reservation
of Securities. The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to
the Transaction Documents in such amount as may be required to fulfill its obligations in full under the Transaction Documents.
In the event that at any time the then authorized shares of Common Stock are insufficient for the Company to satisfy its obligations
in full under the Transaction Documents, the Company shall promptly take such actions as may be required to increase the number
of authorized shares, including without limitation promptly preparing and filing any proxy or information statement with the SEC
for purposes of a special meeting to authorize the issuance of additions shares to Subscribers, which in no event shall be filed
more than ten (10) Business Days following the date on which the Company becomes aware that it may have inadequate authorized capital.

 

    	- 11 -

    	 

    

 

(f)          Use
of Proceeds. The Company covenants and agrees the gross proceeds of the Offering shall be applied as follows: (i) from
the Closing $50,000 for legal fees and expenses of Sichenzia Ross Friedman Ference LLP and (ii) the balance for general working
capital purposes.

 

(g)          Quotation.
As long as any Subscriber owns Securities, the Company shall use its best efforts to maintain
eligibility for the Company’s Common Stock on the NYSE MKT or other national securities exchange.

 

(h)          Post
- Closing Obligations. The Company covenants and agrees that it shall as long as any Preferred Shares remain outstanding and
unconverted, the Company shall engage (i) an investor relations firm at a price not to exceed $210,000 in one year and $10,000
monthly thereafter and (ii) a public relations firm for a minimum of six months, at a price not to exceed $100,000 in the aggregate.

 

(i)          DTC
Eligibility. For as long as any Subscriber owns Securities, the Company shall use its best efforts to maintain full eligibility
of the Company’s Common Stock for electronic clearance and settlement services through the Depository Trust Company.

 

(j)          Insider
Lock-Up Agreements. The Company shall cause each of its officers, directors and beneficial owners of 10% or more of its securities
(collectively, the “Insiders”) to execute and deliver a Lock-Up Agreement (collectively, the “Lock-Up
Agreements”) in which such Insiders agree not to sell any securities owned by them for a per share price of less than
$8.00 for a period of One Hundred and Eighty (180) days from the Closing Date. Furthermore, and notwithstanding the foregoing,
the Insiders shall agree that until such time as at least 50% of the shares of Common Stock underlying the Preferred Shares sold
in this Offering are registered under an effective registration statement pursuant to Section 6 below, the Insiders may not sell
in excess of 20% of their respective holdings at the minimum per share price of $8.00 and the balance of such holdings (80%) may
not be sold for a per share price less than $10.00. All dollar amounts in this Section shall be subject to adjustment for stock
splits, reverse stock splits and similar transactions. The Company shall not amend, waiver or terminate any provision of any of
the Lock-Up Agreements except to extend the term of the lock-up period and shall enforce the provisions of each Lock-Up Agreement
in accordance with its terms. If any officer, or directors that is a party to a Lock-Up Agreement breaches any provision of a Lock-Up
Agreement, the Company shall promptly use its best efforts to seek specific performance of the terms of the Lock-Up Agreement.

 

(k)          Legal
Fees.         The Company agrees to reimburse up to $25,000 (based on time
actually incurred) of aggregate legal fees to all Subscribers for their review of the Transaction Documents.

 

(l)          Securities
Laws Disclosure; Publicity. The Company shall by 8:30 a.m. (New York City time) on the first Business Day after this Agreement
has been executed, (a) issue a press release disclosing the material terms of the transactions contemplated hereby and (b) file
a Current Report on Form 8-K with the Securities and Exchange Commission (“SEC”), including the Transaction
Documents as exhibits thereto. From and after the issuance of such press release, the Company shall have publicly disclosed all
material, non-public information delivered to any of the Subscribers by the Company or any of its subsidiaries, or any of their
respective officers, directors, employees or agents. The Company and each Subscriber shall consult with each other in issuing any
other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Subscriber shall issue
any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any
press release of any Subscriber, or without the prior consent of each Subscriber, with respect to any press release of the Company,
which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing
party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing,
the Company shall not publicly disclose the name of any Subscriber, or include the name of any Subscriber in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written consent of such Subscriber, except (a) as required
by federal securities law in connection with the filing of final Transaction Documents (including signature pages thereto) with
the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company
shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b).

 

    	- 12 -

    	 

    

 

(n)          Non-Public
Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents,
the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Subscriber or its
agents or counsel with any information that the Company believes constitutes material non-public information, and each Subscriber
agrees, and shall direct its agents and counsel not to, request any material non-public information from the Company or any Person
acting on its behalf, unless prior thereto such Purchaser shall have executed a written agreement with the Company regarding the
confidentiality and use of such information. The Company understands and confirms that each Subscriber shall be relying on the
foregoing covenant in effecting transactions in securities of the Company.

 

(o)          [Cash
Maintenance. The Company covenants and agrees that it shall as long as at least 345,092 Preferred Shares remain outstanding,
the Company shall maintain a cash balance of at least $2,000,000.][OPEN]

 

6.          REGISTRATION
RIGHTS

 

The Company shall file
a “resale” registration statement with the SEC covering all shares of Common Stock underlying the Preferred Shares
and the Warrants, so that such shares of Common Stock will be registered under the Securities Act. The Company will maintain the
effectiveness of the “resale” registration statement from the effective date of the registration statement until all
Registrable Securities (as defined in the Registration Rights Agreement) covered by such registration statement have been sold,
or may be sold without the requirement to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation
pursuant to Rule 144. The Company will use its reasonable best efforts to have such “resale” registration statement
filed within thirty (30) days after the Closing Date (the “Filing Deadline”) and declared effective by the SEC as soon
as possible and, in any event, within ninety (90) days after the Closing Date of the Offering (the “Effectiveness Deadline”),
unless extended by Subscriber Consent.

 

The
Company is obligated to pay to the Subscribers a fee of 1% per month of the investors’ investment, payable in cash, up to
a maximum of six (6%) percent, on the Filing Deadline and the Effectiveness Deadline if the registration obligations set forth
herein have not been met, and pro- rata for each month, or partial month, in excess of the Filing Deadline and/or the Effectiveness
Deadline that the registration statement has not been declared effective; provided, however, that the Company shall not be obligated
to pay any such liquidated damages if the Registrable Securities that would otherwise be covered by the registration statement
have been sold or may be sold pursuant to Rule 144 or if the Company is unable to fulfill
its registration obligations as a result of rules, regulations, positions or releases issued or actions taken by the SEC pursuant
to its authority with respect to “Rule 415”, provided the Company registers at such time the maximum number of shares
of Common Stock permissible upon consultation with the staff of the SEC. 

 

The description of registration rights
is qualified in its entirety by reference to Registration Rights Agreement annexed hereto as Exhibit E.

 

7.          CONDITIONS
TO CLOSING

 

The Subscriber’s
obligation to consummate the transactions contemplated hereby are conditioned upon satisfaction of the following conditions precedent:

 

(a)          As
of the Closing, no legal action, suit or proceeding shall be pending that seeks to restrain or prohibit the transactions contemplated
by this Agreement.

 

(b)          The
representations and warranties of the Company contained in this Agreement shall have been true and correct in all material respects
on the date of this Agreement and shall be true and correct as of the Closing as if made on the Closing Date (unless as of a specific
date therein in which case they shall be accurate as of such date).

 

(c)          All
obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed

 

(d)          The
Subscriber shall have received the opinion of Sichenzia Ross Friedman Ference LLP, the Company's outside counsel, dated as of the
Closing Date, in form and substance satisfactory to the Subscribers representing at least 60% of the aggregate number of shares
of Common Stock issued or issuable under the Preferred Shares and Warrants (the "Required Holders”).

 

The Company’s
obligation to consummate the transactions contemplated hereby are conditioned upon satisfaction of the following conditions precedent:

 

    	- 13 -

    	 

    

 

(a)          As
of the Closing, no legal action, suit or proceeding shall be pending that seeks to restrain or prohibit the transactions contemplated
by this Agreement.

 

(b)          The
representations and warranties of the Subscriber contained in this Agreement shall have been true and correct in all material respects
on the date of this Agreement and shall be true and correct as of the Closing as if made on the Closing Date (unless as of a specific
date therein in which case they shall be accurate as of such date).

 

(c)          All
obligations, covenants and agreements of the Subscriber to be performed at or prior to the Closing Date shall have been performed

 

8.          MISCELLANEOUS
PROVISIONS

 

(a)          All
parties hereto have been represented by counsel, and no inference shall be drawn in favor of or against any party by virtue of
the fact that such party’s counsel was or was not the principal draftsman of this Agreement.

 

(b)          Except
as set forth in Section 5(k) above, each of the parties hereto shall be responsible to pay the costs and expenses of its own legal
counsel in connection with the preparation and review of this Agreement and related documentation.

 

(c)          Neither
this Agreement, nor any provisions hereof, shall be waived, modified, discharged or terminated except by an instrument in writing
signed by the party against whom any waiver, modification, discharge or termination is sought.

 

(d)          The
representations, warranties and agreement of the Subscriber and the Company made in this Agreement shall survive the execution
and delivery of this Agreement and the delivery of the Securities.

 

(e)          Any
party may send any notice, request, demand, claim or other communication hereunder to the Subscriber at the address set forth on
the signature page of this Agreement or to the Company at its primary office (including personal delivery, expedited courier, messenger
service, fax, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication will be deemed
to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to
which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other parties written
notice in the manner herein set forth.

 

(f)          Except
as otherwise provided herein, this Agreement shall be binding upon, and inure to the benefit of, the parties to this Agreement
and their heirs, executors, administrators, successors, legal representatives and assigns. If the Subscriber is more than one person
or entity, the obligation of the Subscriber shall be joint and several and the agreements, representations, warranties and acknowledgments
contained herein shall be deemed to be made by, and be binding upon, each such person or entity and its heirs, executors, administrators,
successors, legal representatives and assigns. This Agreement sets forth the entire agreement and understanding between the parties
as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every
nature among them.

 

(g)          This
Agreement is transferable and assignable by the Subscriber.

 

(h)          The
Company hereby represents and warrants as of the date hereof that none of the terms offered to any Person with respect to any offer,
sale or subscription of the Series A Preferred Stock or Warrants to Purchase Common Stock of the Company (each a "Subscription
Document"), is or will be more favorable to such Person than those of the Subscriber and this Agreement shall be, without
any further action by the Subscriber or the Company, deemed amended and modified in an economically and legally equivalent manner
such that the Subscriber shall receive the benefit of the more favorable terms contained in such Subscription Document. Notwithstanding
the foregoing, the Company agrees, at its expense, to take such other actions (such as entering into amendments to the Transaction
Documents) as the Subscriber may reasonably request to further effectuate the foregoing.

 

    	- 14 -

    	 

    

 

(i)          Except
as otherwise provided herein, this Agreement shall not be changed, modified or amended except by a writing signed by both (a) the
Company and (b) Subscribers in the Offering holding 60% of the Units issued in the Offering then held by the original Subscribers.
The Company shall be prohibited from offering any additional consideration (other than the reimbursement of legal fees) to any
Subscriber in this Offering for the purposes of inducing such person to change, modify, waive or amend any term of this Agreement
or any other Transaction Document without making the same offer on a pro-rata basis to all other Subscribers in this offering.

 

(j)          This
Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts
of law principles.

 

(k)          The
Company and the Subscriber hereby agree that any dispute that may arise between them arising out of or in connection with this
Agreement shall be adjudicated before a court located in the City of New York, Borough of Manhattan, and they hereby submit to
the exclusive jurisdiction of the federal and state courts of the State of New York located in the City of New York, Borough of
Manhattan with respect to any action or legal proceeding commenced by any party, and irrevocably waive any objection they now or
hereafter may have respecting the venue of any such action or proceeding brought in such a court or respecting the fact that such
court is an inconvenient forum, relating to or arising out of this Agreement or any acts or omissions relating to the sale of the
securities hereunder, and consent to the service of process in any such action or legal proceeding by means of registered or certified
mail, return receipt requested, postage prepaid, in care of the address set forth herein or such other address as either party
shall furnish in writing to the other.

 

(l)          WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES
EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY
AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

 

(m)          This
Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

 

[Signature Pages Follow]

 

    	- 15 -

    	 

    

 

ALL
SUBSCRIBERS MUST COMPLETE THIS PAGE

 

IN WITNESS WHEREOF,
the Subscriber has executed this Agreement on the ____ day of October, 2012.

 

	 	 	x  $3.26  for each Unit      =	 	 
	Units subscribed for	 	 	 	      Aggregate Purchase Price

 

Manner in which Title is to be held (Please Check One):

 

	1.	___	Individual	7.	___	
        Trust/Estate/Pension or Profit sharing Plan

        Date Opened:______________

	2.	___	Joint Tenants with Right of Survivorship	8.	___	
        As a Custodian for

        ________________________________

        Under the Uniform Gift to Minors Act of the State of

        ________________________________

	3.	___	Community Property	9.	___	Married with Separate Property
	4.	___	Tenants in Common	10.	___	Keogh
	5.	___	Corporation/Partnership/ Limited Liability Company	11.	___	Tenants by the Entirety
	6.	___	IRA	 	 	 

 

ALTERNATIVE DISTRIBUTION INFORMATION

 

To direct distribution
to a party other than the registered owner, complete the information below. YOU MUST COMPLETE THIS SECTION IF THIS IS AN IRA INVESTMENT.

 

Name of Firm (Bank, Brokerage, Custodian):

 

Account Name:

 

Account Number:

 

Representative Name:

 

Representative Phone Number:

 

Address:

 

City, State, Zip:

 

    	- 16 -

    	 

    

 

IF MORE THAN ONE SUBSCRIBER, EACH SUBSCRIBER
MUST SIGN.

INDIVIDUAL SUBSCRIBERS MUST COMPLETE THIS PAGE 17.

SUBSCRIBERS WHICH ARE ENTITIES MUST COMPLETE PAGE 18.

 

EXECUTION
BY NATURAL PERSONS

 

	
         

        _________________________________________________________________________

        Exact Name in Which Title is to be Held

	 	 	 
	
        _________________________________

        Name (Please Print)
	 	
        _________________________________

        Name of Additional Subscriber

	 	 	 
	
        _________________________________

        Residence: Number and Street
	 	
        _________________________________

        Address of Additional Subscriber

	 	 	 
	
        _________________________________

        City, State and Zip Code
	 	
        _________________________________

        City, State and Zip Code

	 	 	 
	
        _________________________________

        Social Security Number
	 	
        _________________________________

        Social Security Number

	 	 	 
	
        _________________________________

        Telephone Number
	 	
        _________________________________

        Telephone Number

	 	 	 
	
        _________________________________

        Fax Number (if available)
	 	
        ________________________________

        Fax Number (if available)

	 	 	 
	
        _________________________________

        E-Mail (if available)
	 	
        ________________________________

        E-Mail (if available)

	 	 	 
	
        __________________________________

        (Signature)

         

         
	 	
        ________________________________

        (Signature of Additional Subscriber)

	ACCEPTED this ___ day of October 2012, on behalf of the Company.

 

	 	By:	 	 
	 	 	Name:	 
	 	 	Title:	 

 

[SIGNATURE PAGE FOR SUBSCRIPTION AGREEMENT]

 

    	- 17 -

    	 

    

 

EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY

 

(Corporation, Partnership, LLC, Trust, Etc.)

 

	
         

        ___________________________________________________________________________________

        Name of Entity (Please Print)

	Date of Incorporation or Organization:
	 
	State of Principal Office:
	 
	
        Federal Taxpayer Identification Number:

         

        ____________________________________________

        Office Address

         

        ____________________________________________

        City, State and Zip Code

         

        ____________________________________________

        Telephone Number

         

        ____________________________________________

        Fax Number (if available)

         

        ____________________________________________

        E-Mail (if available)

         

	 	By: _________________________________
 Name:
 Title:
	
        [seal]

 

        Attest: _________________________________

        (If Entity is a Corporation)
	
        _________________________________

 

        _________________________________

        Address

	 	 
	ACCEPTED this ____ day of October 2012, on behalf of the Company.
	 	
         

         

        By: _________________________________

        Name:

        Title:

 

[SIGNATURE PAGE FOR SUBSCRIPTION AGREEMENT]

 

    	- 18 -

    	 

    

 

INVESTOR QUESTIONNAIRE

 

Instructions: Check all boxes below
which correctly describe you.

 

		o	You are (i) a bank, as defined in Section 3(a)(2) of the Securities Act of 1933, as amended
(the “Securities Act”), (ii) a savings and loan association or other institution, as defined in Section
3(a)(5)(A) of the Securities Act, whether acting in an individual or fiduciary capacity, (iii) a broker or dealer registered
pursuant to Section 15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (iv)
an insurance company as defined in Section 2(13) of the Securities Act, (v) an investment company registered under the Investment
Company Act of 1940, as amended (the “Investment Company Act”), (vi) a business development company as
defined in Section 2(a)(48) of the Investment Company Act, (vii) a Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301 (c) or (d) of the Small Business Investment Act of 1958, as amended, (viii)
a plan established and maintained by a state, its political subdivisions, or an agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees and you have total assets in excess of $5,000,000, or (ix) an employee benefit
plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and (1)
the decision that you shall subscribe for and purchase shares of common stock and warrants to purchase common stock (the “Units”),
is made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance
company, or registered investment adviser, or (2) you have total assets in excess of $5,000,000 and the decision that you shall
subscribe for and purchase the Securities is made solely by persons or entities that are accredited investors, as defined in Rule
501 of Regulation D promulgated under the Securities Act (“Regulation D”) or (3) you are a self-directed plan
and the decision that you shall subscribe for and purchase the Units is made solely by persons or entities that are accredited
investors.

 

		o	You are a private business development company as defined in Section 202(a)(22) of the Investment
Advisers Act of 1940, as amended.

 

		o	You are an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended (the “Code”), a corporation, Massachusetts or similar business trust or a partnership, in each case
not formed for the specific purpose of making an investment in the Units and its underlying securities in excess of $5,000,000.

 

		o	You are a director or executive officer of the Company.

 

		o	You are a natural person whose individual net worth, or joint net worth with your spouse, exceeds
$1,000,000 (excluding residence) at the time of your subscription for and purchase of the Units.

 

		o	You are a natural person who had an individual income in excess of $200,000 in each of the two
most recent years or joint income with your spouse in excess of $300,000 in each of the two most recent years, and who has a reasonable
expectation of reaching the same income level in the current year.

 

		o	You are a trust, with total assets in excess of $5,000,000, not formed for the specific purpose
of acquiring the Units and whose subscription for and purchase of the Units is directed by a sophisticated person as described
in Rule 506(b)(2)(ii) of Regulation D.

 

		o	You are an entity in which all of the equity owners are persons or entities described in one of
the preceding paragraphs.

 

    	- 19 -

    	 

    

 

Check all boxes below which correctly describe you.

 

With respect to this investment in the Units, your:

 

	 	Investment Objectives: 	p Aggressive
    Growth	p Speculation	 
	 	 	 	 	 
	 	Risk Tolerance: 	o Low
    Risk 	o Moderate
    Risk 	p High
    Risk

 

Are you associated with a FINRA Member Firm?     o
Yes   o No

 

Your initials (Subscriber
and co-Subscriber, if applicable) are required for each item below:

 

____  
____  I/We understand that this investment is not guaranteed.

 

____  
____  I/We are aware that this investment is not liquid.

 

____  
____  I/We are sophisticated in financial and business affairs and are able to evaluate
the risks and merits of an investment in this offering.

 

____  
____  I/We confirm that this investment is considered “high risk.” (This type of investment is considered
high risk due to the inherent risks including lack of
liquidity and lack of diversification.  Success or

failure of private placements such as this is dependent on the corporate issuer of these
securities and is outside the control of the investors. While potential loss is limited to the amount invested, such
loss is possible.)

 

The Subscriber hereby
represents and warrants that all of its answers to this Investor Questionnaire are true as of the date of its execution of the
Subscription Agreement pursuant to which it purchased the Units.

 

	 	 	 	 
	Name of Subscriber  [please print]	 	Name of Co- Subscriber  [please print]	 
	 	 	 	 
	 	 	 	 
	Signature of Subscriber (Entities please	 	Signature of Co- Subscriber	 
	provide signature of Subscriber’s duly	 	 	 
	authorized signatory.)	 	 	 
	 	 	 	 
	 	 	 	 
	Name of Signatory (Entities only)	 	 	 
	 	 	 	 
	 	 	 	 
	Title of Signatory (Entities only)	 	 	 

 

[SIGNATURE PAGE FOR INVESTOR QUESTIONNAIRE]

 

    	- 20 -

    	 

    

 

SRZ Comments: 10/21/2012

 

Exhibit A

 

Series A Convertible Preferred Stock
Certificate of Designation

 

See Attached.

 

    	 

    	 

    

 

SRZ Comments: 10/21/2012

 

Exhibit B

 

Form of Warrant

 

See Attached.

 

    	 

    	 

    

 

SRZ Comments: 10/21/2012

 

Exhibit C

 

Wire Instructions

 

	 	Citibank	 
	 	666 Fifth Avenue	 
	 	New York, NY 10103	 
	 	A/C of Sichenzia Ross Friedman Ference LLP	 

	 	A/C#:	92883436
	 	ABA#:	021000089
	 	SWIFT Code:       	CITIUS33
	 	Ref:	MGT CAPITAL INVESTMENTS INC.

 

    	 

    	 

    

 

Exhibit D

 

Escrow Agreement

 

See Attached.

 

    	- 24 -

    	 

    

 

SRZ Comments: 10/21/2012

 

Exhibit E

 

Registration Rights Agreement

 

See Attached.SRZ Comments: 10/21/2012

 

MGT
CAPITAL INVESTMENTS, INC.

 

CERTIFICATE OF DESIGNATION OF PREFERENCES,

RIGHTS AND LIMITATIONS

OF

6% SERIES A CONVERTIBLE PREFERRED STOCK

 

PURSUANT TO SECTION 151 OF THE 

DELAWARE GENERAL CORPORATION LAW

 

The undersigned, President
of MGT Capital Investments, Inc. (the “Corporation”), a corporation organized and existing under the Delaware
General Corporation Law (the “DGCL”), DOES HEREBY CERTIFY that the following resolutions were duly adopted by
the Board of Directors of the Corporation by unanimous written consent on October ___, 2012 (the Effective Date”);

 

WHEREAS, the
Board of Directors is authorized within the limitations and restrictions stated in the Certificate of
Incorporation of the Corporation, as amended to date, to provide by resolution or resolutions for the issuance of 10,000,000 shares
of Preferred Stock, par value $0.001 per share, of the Corporation, in such series and with such designations, preferences and
relative, participating, optional or other special rights and qualifications, limitations or restrictions as the Corporation’s
Board of Directors shall fix by resolution or resolutions providing for the issuance thereof duly adopted by the Board of Directors;
and

 

WHEREAS,
it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to authorize and fix the terms of a series
of Preferred Stock and the number of shares constituting such series;

 

NOW, THEREFORE,
BE IT RESOLVED:

 

Section 1.          Designation
and Authorized Shares. The Corporation shall be authorized to issue one million five hundred
thousand (1,500,000) shares of 6% Series A Cumulative Convertible Preferred Stock, par value $0.001 per share (the “Series
A Preferred Stock”).

 

Section 2.          Stated
Value. Each share of Series A Preferred Stock shall have a stated value of $3.26 per share
(the “Stated Value”).

 

Section 3.          Liquidation.

 

(a)       Upon
the liquidation, dissolution or winding up of the business of the Corporation, whether voluntary or involuntary, each holder of
Series A Preferred Stock shall be entitled to receive, for each share thereof, out of assets of the Corporation legally available
therefor, a preferential amount in cash equal to (and not more than) the Stated Value (the “Liquidation Amount”)
plus all accrued and unpaid dividends. All preferential amounts to be paid to the holders of Series A Preferred Stock in connection
with such liquidation, dissolution or winding up shall be paid before the payment or setting apart for payment of any amount for,
or the distribution of any assets of the Corporation to the holders of (i) any other class or series of capital stock and (ii)
the Corporation's Common Stock. If upon any such distribution the assets of the Corporation shall be insufficient to pay the holders
of the outstanding shares of Series A Preferred Stock (or the holders of any class or series of capital stock ranking on a parity
with the Series A Preferred Stock as to distributions in the event of a liquidation, dissolution or winding up of the Corporation)
the full amounts to which they shall be entitled, such holders shall share ratably in any distribution of assets in accordance
with the sums which would be payable on such distribution if all sums payable thereon were paid in full.

 

(b)       Any
distribution in connection with the liquidation, dissolution or winding up of the Corporation, or any bankruptcy or insolvency
proceeding, shall be made in cash to the extent possible. Whenever any such distribution shall be paid in property other than cash,
the value of such distribution shall be the Fair Market Value of such property. 

 

    	 

    	 

    

 

Section 4.            Rank.         The
Series A Preferred Stock shall, with respect to dividend distributions and distributions upon liquidation, winding up or dissolution
of the Corporation, rank senior to all classes of Common Stock and to each other class of Capital Stock of the Corporation or series
of Preferred Stock of the Corporation existing or hereafter created (collectively referred to, together with all classes of Common
Stock, as “Junior Securities”).

 

Section 5.             Dividends;
Purchase Rights.

 

(a)           The
Series A Preferred Stock shall pay a six percent (6%) annual dividend on the outstanding Series A Preferred Stock, payable quarterly
on March 31, June 30, September 30 and December 31 of each year (the “Dividend Date”), with the first dividend
payable for the period commencing on the Issuance Date. Each quarterly dividend shall be payable in cash; provided, that if the
Corporation (i) so chooses, or (ii) is prohibited from paying dividends pursuant to the terms of the instruments governing any
senior debt obligations then owed, the quarterly dividend shall be paid on such Dividend Date in additional shares of Series A
Preferred Stock (the "Dividend Shares"). In the event and to the extent that dividends shall be paid in Dividend
Shares, such Dividend Shares to be determined on each quarterly Dividend Date (i) as to each outstanding share of Series A Preferred
Stock on the Dividend Date, by multiplying (A) $0.045, by (B) the $3.26 per share Stated Value of each share of Preferred Stock,
and (ii) as to all outstanding shares of Series A Preferred Stock on the Dividend Date, by multiplying (A) the aggregate number
of such outstanding shares, by (B) the product of multiplying (A) $0.045 by (B) the $3.26 per share Stated Value of each share
of Preferred Stock. For purposes of this Certificate, the term dividend will mean either a cash dividend or Dividend Shares as
appropriate.

 

(b)          In
the event that the Corporation shall at any time declare and pay a dividend or distribution of assets on any pari passu or junior
shares of capital stock of the Corporation (other than a dividend or distribution payable solely in shares of Common Stock), it
shall, at the same time, declare and pay to each holder of Series A Preferred Stock a dividend equal to the dividend that would
have been payable to such holder as if the shares of Series A Preferred Stock held by such holder had been converted pursuant to
Section 6(a) hereof into Common Stock on the date of determination of Holders of Common Stock entitled to receive such dividend
(provided, however, to the extent that the right of a holder of Series A Preferred Stock to participate in any such
dividend would result in such holder exceeding such holder’s ownership limitations as set forth in Section 6(d) herein, then
such holder shall not be entitled to participate in such dividend to such extent (or in the beneficial ownership of any shares
of Common Stock as a result of such dividend to such extent) and the portion of such dividend shall be held in abeyance for the
benefit of such holder until such time, if ever, as its right thereto would not result in such holder exceeding the maximum limitations
of such holder’s ownership, as set forth in Section 6(d) herein, at which time such holder shall be granted such right to
the same extent as if there had been no such limitation). For purposes hereof the Series A Preferred Stock shall participate in
all dividends (ordinary and special) declared on shares of Common Stock.

 

(c)           The
Corporation may not declare or pay any dividend or make any distribution of assets on, or redeem, purchase or otherwise acquire,
shares of capital stock of the Corporation ranking pari passu or junior to the Series A Preferred Stock as to the payment of dividends
or the distribution of assets upon liquidation, dissolution or winding up, unless all declared and unpaid dividends on the Series
A Preferred Stock have been or are contemporaneously paid.

 

(d)           If
at any time the Corporation grants, issues or sells any options, convertible securities or rights to purchase stock, warrants,
securities or other property pro rata to all of the record holders of any class of Common Stock (the “Purchase Rights”),
then each Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion
of such Holder’s shares of Series A Preferred Stock (without taking into account any limitations or restrictions on the conversion
of the Series A Preferred Stock) immediately before the date on which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined
for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that such Holder’s right
to participate in any such Purchase Right would result in such Holder exceeding such Holder’s ownership limitations as set
forth in Section 6(d) herein, then such Holder shall not be entitled to participate in such Purchase Right to such extent (or in
the beneficial ownership of any shares of Common Stock as a result of such Purchase Right to such extent) and the portion of such
Purchase Right shall be held in abeyance for the benefit of such Holder until such time, if ever, as its right thereto would not
result in such Holder exceeding the maximum limitations of such Holder’s ownership, as set forth in Section 6(d) herein,
at which time such Holder shall be granted such right to the same extent as if there had been no such limitation).

 

    	2

    	 

    

 

Section 6.            Conversion.

 

(a)          Conversion
Option. At any time and from time to time on or after the Effective Date, the Series A Preferred Stock shall be convertible
(in whole or in part), at the option of the Holder (the “Conversion Option”), into such number of fully paid
and non-assessable shares of Common Stock (the “Conversion Rate”) as is determined by dividing (x) the aggregate
Stated Value of the shares of Series A Preferred Stock that are being converted plus any accrued but unpaid dividends thereon
as of such date that the Holder elects to convert by (y) the Conversion Price (as defined in Section 6(b) hereof) then in effect
on the date (the “Conversion Date”) on which the Holder faxes a notice of conversion (the “Conversion
Notice”), substantially in the form of Exhibit A attached hereto, duly executed, to the Corporation (facsimile
number: (____) _________, Attn.: Robert Ladd (or current CEO, President or CFO), provided, however, that the Conversion Price
shall be subject to adjustment as described in Section 10 below. The Holder shall deliver the stock certificate representing the
Series A Preferred Stock to be converted to the Corporation at the at such time that the Series A Preferred Stock is fully converted.
With respect to partial conversions of the Series A Preferred Stock, the Corporation shall keep written records of the number
of shares of Series A Preferred Stock converted as of each Conversion Date. No Conversion Notice shall be required for Conversion
upon a change of control.

 

(b)           Conversion
Price. The term “Conversion Price” shall mean $3.26, subject to adjustment under Section 10 hereof for all
circumstances and in all cases set forth in such section since the Effective Date.

 

(c)           Mechanics
of Conversion

 

(i)          Not
later than three (3) Trading Days after any Conversion Date, the Corporation or its designated transfer agent, as applicable, shall
issue and deliver to the Depository Trust Company (“DTC”) account on the Holder’s behalf via the Deposit
Withdrawal Agent Commission System (“DWAC”) as specified in the Conversion Notice, registered in the name of
the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled. In the alternative,
not later than three (3) Trading Days after any Conversion Date, the Corporation shall deliver to the Holder by express courier
a certificate or certificates which shall be free of restrictive legends and trading restrictions representing the number of shares
of Common Stock being acquired upon the conversion of the Series A Preferred Stock (the “Delivery Date”). Notwithstanding
the foregoing to the contrary, the Corporation or its transfer agent shall only be obligated to issue and deliver the shares to
the DTC on the Holder’s behalf via DWAC (or certificates free of restrictive legends) if such conversion is in connection
with a sale and the Holder has complied with the applicable prospectus delivery requirements (as evidenced by documentation furnished
to and reasonably satisfactory to the Corporation) or such shares may be sold pursuant to Rule 144 or an exemption from the registration
requirements of the Securities Act of 1933, as amended. In the event the Corporation shall not electronically deliver to the Holders
upon conversion of Series A Preferred Stock shares of Common Stock through DTC pursuant to the immediately preceding sentence,
then the Corporation shall not later than three (3) Trading Days after any Conversion Date issue and dispatch to such Holder by
overnight courier to the address as specified in the Notice of Conversion, a certificate, registered in the Corporation’s
share register in the name of such Holder or its designee, for the number of shares of Common Stock to which such Holder is entitled
pursuant to such conversion. If in the case of any Conversion Notice such certificate or certificates are not delivered to or as
directed by the Holder by the Delivery Date, the Holder shall be entitled by written notice to the Corporation at any time on or
before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Corporation shall
immediately return the shares of Series A Preferred Stock tendered for conversion (if applicable), and whereupon the Corporation
and the Holder shall each be restored to their respective positions immediately prior to the delivery of such notice of revocation,
except that any amounts described in Sections 6(c)(ii) and 6(c)(iii) shall be payable through the date notice of rescission is
given to the Corporation.

 

    	3

    	 

    

 

(ii)         The
Corporation understands that a delay in the delivery of the shares of Common Stock upon conversion of the Series A Preferred Stock
beyond the Delivery Date could result in economic loss to the Holder. If the Corporation fails to deliver to the Holder such shares
via DWAC (or, if applicable, certificates) by the Delivery Date, the Corporation shall pay to the Holder, in cash, an amount per
Trading Day for each Trading Day until such shares are delivered via DWAC or certificates are delivered (if applicable), together
with interest on such amount at a rate of 10% per annum, accruing until such amount and any accrued interest thereon is paid in
full, equal to the greater of: (A) (i) 1% of the aggregate Stated Value of the Series A Preferred Stock requested to be converted
for the first five (5) Trading Days after the Delivery Date and (ii) 2% of the aggregate Stated Value of the Series A Preferred
Stock requested to be converted for each Trading Day thereafter; and (B) $1,000 per day (which amount shall be paid as liquidated
damages and not as a penalty). Nothing herein shall limit the Holder’s right to pursue actual damages for the Corporation’s
failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and the
Holder shall have the right to pursue all remedies available to it at law or in equity (including, without limitation, a decree
of specific performance and/or injunctive relief). Notwithstanding anything to the contrary contained herein, the Holder shall
be entitled to withdraw a Conversion Notice, and upon such withdrawal the Corporation shall only be obligated to pay the liquidated
damages accrued in accordance with this Section 6(c)(ii) through the date the Conversion Notice is withdrawn.

 

(iii)        
In addition to any other rights available to the Holder, if the Corporation fails to cause its transfer agent to transmit via DWAC
or transmit to the Holder a certificate or certificates representing the shares of Common Stock issuable upon conversion of the
Series A Preferred Stock on or before the Delivery Date, and if after such date the Holder is required by its broker to purchase
(in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the shares
of Common Stock issuable upon conversion of the Series A Preferred Stock which the Holder anticipated receiving upon such conversion
(a “Buy-In”), then the Corporation shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount
obtained by multiplying (A) the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock that
the Corporation was required to deliver to the Holder in connection with the conversion at issue times (B) the price at which the
sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion
of the Series A Preferred Stock and equivalent number of shares of Common Stock for which such conversion was not honored or deliver
to the Holder the number of shares of Common Stock that would have been issued had the Corporation timely complied with its conversion
and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000
to cover a Buy-In with respect to an attempted conversion of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Corporation shall be required to
pay the Holder $1,000. The Holder shall provide the Corporation written notice indicating the amounts payable to the Holder in
respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Corporation. Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief with respect to the Corporation’s failure to
timely deliver certificates representing shares of Common Stock upon conversion of the Series A Preferred Stock as required pursuant
to the terms hereof.

 

(d)          Ownership
Cap and Certain Conversion Restrictions.

 

(i)          Notwithstanding
anything to the contrary set forth in this Certificate of Designation, at no time may all or a portion of the Series A Preferred
Stock be converted if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated
with all other shares of Common Stock owned by the Holder at such time, the number of shares of Common Stock which would result
in the Holder beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) and the rules thereunder) more than 4.99% of all of the Common Stock outstanding at such
time (the “4.99% Beneficial Ownership Limitation”); provided, however, that upon the Holder providing
the Corporation with sixty-one (61) days’ advance notice (the “4.99% Waiver Notice”) that the Holder would
like to waive this Section 6(d)(i) with regard to any or all shares of Common Stock issuable upon conversion of the Series A Preferred
Stock, this Section 6(d)(i) will be of no force or effect with regard to all or a portion of the Series A Preferred Stock referenced
in the 4.99% Waiver Notice.

 

    	4

    	 

    

 

(ii)         Notwithstanding
anything to the contrary set forth in this Certificate of Designation, at no time may all or a portion of the Series A Preferred
Stock be converted if the number of shares of Common Stock to be issued pursuant to such conversion, when aggregated with all other
shares of Common Stock owned by the Holder at such time, would result in the Holder beneficially owning (as determined in accordance
with Section 13(d) of the Exchange Act and the rules thereunder) in excess of 9.99% of the then issued and outstanding shares of
Common Stock outstanding at such time (the “9.99% Beneficial Ownership Limitation” and the lower of the 9.99%
Beneficial Ownership Limitation and the 4.99% Beneficial Ownership Limitation then in effect, the “Maximum Percentage”)).

 

(iii)        By
written notice to the Corporation, a holder of Series A Preferred Stock may from time to time decrease the Maximum Percentage to
any other percentage specified in such notice.

 

(iv)        For
purposes hereof, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding
shares of Common Stock as reflected in (1) the Corporation’s most recent Form 10-K, Form 10-Q, Current Report on Form 8-K
or other public filing with the Securities and Exchange Commission, as the case may be, (2) a more recent public announcement by
the Corporation or (3) any other notice by the Corporation setting forth the number of shares of Common Stock outstanding. For
any reason at any time, upon the written or oral request of a holder of Series A Preferred Stock, the Corporation shall within
three (3) business days confirm orally and in writing to such holder the number of shares of Common Stock then outstanding. In
any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise
of securities of the Corporation, including the Series A Preferred Stock, by the Holder and its affiliates since the date as of
which such number of outstanding shares of Common Stock was reported, which in any event are convertible or exercisable, as the
case may be, into shares of the Corporation’s Common Stock within 60 days’ of such calculation and which are not subject
to a limitation on conversion or exercise analogous to the limitation contained herein. The provisions of this paragraph shall
be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6(d) to correct this
paragraph (or any portion hereof) which may be defective or inconsistent with the intended beneficial ownership limitation herein
contained or to make changes or supplements necessary or desirable to properly give effect to such limitation.

 

(e)          Inability
to Fully Convert.

 

(i)          Holder’s
Option if the Corporation Cannot Fully Convert. In addition to the Holder’s other remedies hereunder, if, upon the Corporation’s
receipt of a Conversion Notice, the Corporation cannot issue shares of Common Stock because the Corporation does not have a sufficient
number of shares of Common Stock authorized and available or cannot or does not issue shares of Common Stock for any other reason
within the Company's control, then the Corporation shall issue as many shares of Common Stock as it is able to issue in accordance
with the Holder’s Conversion Notice and, with respect to the unconverted portion of the Series A Preferred Stock, the Holder,
solely at Holder’s option, can elect to:

 

(A)         If
the Corporation’s inability to honor any conversion fully is pursuant to Section 6(e)(i) above, require the Corporation to
redeem such Holder’s then outstanding shares of Series A Preferred Stock (the “Mandatory Redemption”)
at a price per share equal to the greater of (1) one hundred and ten percent (110%) of the aggregate Stated Value of such Holder’s
then outstanding shares of Series A Preferred Stock plus all accrued and unpaid dividends thereon and (2) the product of (I) 100%
of such Holder’s then outstanding shares of Series A Preferred Stock plus all accrued and unpaid dividends thereon and (II)
the quotient determined by dividing (A) the greatest Closing Bid Price of the shares of Common Stock during the period beginning
on the date immediately preceding the Corporation’s failure to honor any conversion fully pursuant to Section 6(e)(i) and
ending on the date such Holder requests a Mandatory Redemption, by (B) the lowest Conversion Price in effect during such period
(the “Mandatory Redemption Price”);

 

(B)         void
its Conversion Notice and retain or have returned, as the case may be, the shares of Series A Preferred Stock that was to be converted
pursuant to the Conversion Notice (provided that the Holder’s voiding its Conversion Notice shall not affect the Corporation’s
obligations to make any payments which have accrued prior to the date of such notice);

 

    	5

    	 

    

 

(C)         exercise
its Buy-In rights pursuant to and in accordance with the terms and provisions of Section 6(c)(iii) above.

 

In the event that the
Holder shall elect to convert any portion of the Series A Preferred Stock as provided herein, the Corporation cannot refuse conversion
based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law,
violation of an agreement to which the Holder is a party or for any reason whatsoever, unless, an injunction from a court, on notice,
restraining and or adjoining conversion of all or of the Series A Preferred Stock shall have been issued and the Corporation posts
a surety bond for the benefit of the Holder in an amount equal to 130% of the aggregate Stated Value of the Series A Preferred
Stock the Holder has elected to convert, which bond shall remain in effect until the completion of arbitration/litigation of the
dispute and the proceeds of which shall be payable to such Holder in the event it obtains judgment.

 

(ii)         Mechanics
of Fulfilling Holder’s Election. The Corporation shall immediately send via facsimile to the Holder, upon receipt of
a facsimile copy of a Conversion Notice from the Holder which cannot be fully satisfied as described in Section 6(e) above, a notice
of the Corporation’s inability to fully satisfy the Conversion Notice (the “Inability to Fully Convert Notice”).
Such Inability to Fully Convert Notice shall indicate (x) the reason why the Corporation is unable to fully satisfy such holder’s
Conversion Notice, (y) the aggregate Stated Value of Series A Preferred Stock the for which conversion has been requested and which
cannot be converted and (z) the applicable Mandatory Redemption Price. The Holder shall notify the Corporation of its election
pursuant to Section 6(e) above by delivering written notice via facsimile to the Corporation (“Notice in Response to Inability
to Convert”).

 

(iii)        Payment
of the Mandatory Redemption Price. If the Holder shall elect to have its Series A Preferred Stock redeemed pursuant to Section
6 (e)(i) above, the Corporation shall pay the Mandatory Redemption Price to the Holder within ten (10) days of the Corporation’s
receipt of the Holder’s Notice in Response to Inability to Convert, provided, that, prior to the Corporation’s
receipt of the Holder’s Notice in Response to Inability to Convert the Corporation has not delivered a notice to the Holder
stating, to the satisfaction of the Holder, that the event or condition resulting in the Mandatory Redemption has been cured and
all Conversion Shares issuable to the Holder can and actually are delivered to the Holder in accordance with the terms set forth
herein. If the Corporation shall fail to pay the applicable Mandatory Redemption Price to the Holder on the date that is five (5)
Business Days following the Corporation’s receipt of the Holder’s Notice in Response to Inability to Convert (other
than pursuant to a dispute as to the determination of the arithmetic calculation of the Mandatory Redemption Price), in addition
to any remedy the Holder may have hereunder, such unpaid amount shall bear interest at the rate of two percent (2%) per month (prorated
for partial months) until paid in full (or, if less, the highest rate permitted by law). Until the full Mandatory Redemption Price
is paid in full to the Holder, the Holder may (i) void the Mandatory Redemption with respect to that portion of the Series A Preferred
Stock for which the full Mandatory Redemption Price has not been paid, (ii) receive back such shares of Series A Preferred Stock,
and (iii) require that the Conversion Price of such returned shares of Series A Preferred Stock be adjusted to the lesser of (A)
the Conversion Price as in effect on the date on which the Holder voided the Mandatory Redemption and (B) the lowest Closing Bid
Price during the period beginning on the Conversion Date and ending on the date the Holder voided the Mandatory Redemption.

 

Section 7.            Other
Provisions.

 

(a)          Reservation
of Common Stock. The Corporation shall at all times reserve from its authorized Common Stock a sufficient number of shares
to provide for conversion of all Series A Preferred Stock from time to time outstanding.

 

(b)          Record
Holders. The Corporation and its transfer agent, if any, for the Series A Preferred Stock may deem and treat the record holder
of any shares of Series A Preferred Stock as reflected on the books and records of the Corporation as the sole true and lawful
owner thereof for all purposes, and neither the Corporation nor any such transfer agent shall be affected by any notice to the
contrary.

 

    	6

    	 

    

 

Section 8.            Restriction
and Limitations. Except as expressly provided herein or as required by law so long as any shares of Series A Preferred Stock
remain outstanding, the Corporation shall not, without the vote or written consent of the holders of at least sixty percent (60%)
of the then outstanding shares of the Series A Preferred Stock, take any action which would adversely and materially affect any
of the preferences, limitations or relative rights of the Series A Preferred Stock.

 

Section 9.            Voting
Rights.

 

(a)          Generally.
The Holders shall have the right to receive notice of any meeting of holders of Common Stock or Series A Preferred Stock and to
vote upon any matter submitted to a vote of the holders of Common Stock or Series A Preferred Stock. Except as otherwise expressly
set forth in the Certificate of Incorporation (including this Certificate of Designation), the Holders shall vote on each matter
submitted to them with the holders of Common Stock and all other classes and series of Capital Stock entitled to vote on such matter,
taken together as a single class, if any.

 

(b)          Number
of Votes. In any case in which the holders of the Series A Preferred Stock shall be entitled to vote pursuant to this Certificate
of Designation or pursuant to the DGCL or other applicable law, each Holder entitled to vote with respect to such matter shall
be entitled to vote, with respect to each share of such Series A Preferred Stock, the number of votes that equals the number of
shares of Common Stock into which such share of Series A Preferred Stock is then convertible.

 

Section 10.          Certain
Adjustments.

 

(a)          So
long as any Series A Preferred Stock shall be outstanding, from and after the Effective Date, the Conversion Price shall be subject
to adjustment from time to time as follows (but shall not be increased, other than pursuant to Section 10(a)(i) hereof):

 

(i)          
Adjustments for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Effective
Date, effect a stock split of the outstanding Common Stock, the applicable Conversion Price in effect immediately prior to the
stock split shall be proportionately decreased. If the Corporation shall at any time or from time to time after the Effective Date,
combine the outstanding shares of Common Stock, the applicable Conversion Price in effect immediately prior to the combination
shall be proportionately increased. Any adjustments under this Section 10(a)(i) shall be effective at the close of business on
the date the stock split or combination occurs.

 

(ii)         
Adjustments for Certain Dividends and Distributions. If the Corporation shall at any time or from time to time after the
Effective Date, make or issue or set a record date for the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in shares of Common Stock, then, and in each event, the applicable Conversion Price in effect immediately
prior to such event shall be decreased as of the time of such issuance or, in the event such record date shall have been fixed,
as of the close of business on such record date, by multiplying, the applicable Conversion Price then in effect by a fraction:

 

(1)          the
numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date; and

 

(2)          the
denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such
dividend or distribution.

 

    	7

    	 

    

 

(iii)        
Adjustment for Other Dividends and Distributions. If the Corporation shall at any time or from time to time after the Effective
Date, make or issue or set a record date for the determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in other than shares of Common Stock, then, and in each event, an appropriate revision to the applicable Conversion
Price shall be made and provision shall be made (by adjustments of the Conversion Price or otherwise) so that the Holders of the
Series A Preferred Stock shall receive upon conversions thereof, in addition to the number of shares of Common Stock receivable
thereon, the number of securities of the Corporation which they would have received had the Series A Preferred Stock been converted
into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including
the Conversion Date, retained such securities (together with any distributions payable thereon during such period), giving application
to all adjustments called for during such period under this Section 10(a)(iii) with respect to the rights of the Holder; provided,
however, that if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not
fully made on the date fixed therefor, the Conversion Price shall be adjusted pursuant to this Section 10(a)(iii) as of the time
of actual payment of such dividends or distributions.

 

(iv)        
Adjustments for Reclassification, Exchange or Substitution. If the Common Stock issuable upon conversion of the Series A
Preferred Stock at any time or from time to time after the Effective Date shall be changed to the same or different number of shares
of any class or classes of stock, whether by reclassification, exchange, substitution or otherwise (other than by way of a stock
split or combination of shares or stock dividends provided for in Sections 10(a)(i), 10(a)(ii) and 10(a)(iii), or a Fundamental
Transaction provided for in Section 10(a)(v)), then, and in each event, an appropriate revision to the Conversion Price shall be
made and provisions shall be made (by adjustments of the Conversion Price or otherwise) so that the Holder shall have the right
thereafter to convert the Series A Preferred Stock into the kind and amount of shares of stock and other securities receivable
upon reclassification, exchange, substitution or other change, by holders of the number of shares of Common Stock into which such
Series A Preferred Stock might have been converted immediately prior to such reclassification, exchange, substitution or other
change, all subject to further adjustment as provided herein.

 

(v)         
Adjustments for Reorganization, Merger, Consolidation or Sales of Assets. If at any time or from time to time after
the Effective Date there shall be a Fundamental Transaction, then as a part of such Fundamental Transaction, (A) if the surviving
entity in any such Fundamental Transaction is a public company that is registered pursuant to the Exchange
Act, its common stock is listed or quoted on a national exchange or the OTC Bulletin Board and the surviving entity’s publicly
traded common stock is issued to the holders of Common Stock of the Corporation pursuant to such Fundamental Transaction, an
appropriate revision to the Conversion Price shall be made and provision shall be made (by adjustments of the Conversion Price
or otherwise) so that the Holder shall have the right thereafter to convert the Series A Preferred Stock into the kind and amount
of shares of stock and other securities or property of the Corporation or any successor corporation resulting from such Fundamental
Transaction, and (B) if the surviving entity in any such Fundamental Transaction is not a public company that is
registered pursuant to the Exchange Act, or its common stock is not listed or quoted on a national exchange or the OTC Bulletin
Board or the publicly traded common stock of the surviving entity is not issued to holders of Common Stock of the Corporation pursuant
to such Fundamental Transaction, each Holder shall have the right to receive (a “Fundamental Transaction Redemption”)
the greater of (1) one hundred and ten percent (110%) of the aggregate Stated Value of such Holder’s then outstanding shares
of Series A Preferred Stock plus all accrued and unpaid dividends thereon and (2) the product of (I) 100% of such Holder’s
then outstanding shares of Series A Preferred Stock plus all accrued and unpaid dividends thereon and (II) the quotient determined
by dividing (A) the greatest Closing Bid Price of the shares of Common Stock during the period beginning on the date immediately
preceding the earlier to occur of (I) the consummation of such Fundamental Transaction and (II) the public announcement of such
Fundamental Transaction and ending on the date the Holder requests in writing a Fundamental Transaction Redemption, by (B) the
lowest Conversion Price in effect during such period. In any such case, appropriate adjustment shall be made in the application
of the provisions of this Section 10 (a)(v) with respect to the rights of the Holder after the Fundamental Transaction to the end
that the provisions of this Section 10 (a)(v) (including any adjustment in the applicable Conversion Price then in effect and the
number of shares of stock or other securities deliverable upon conversion of the Series A Preferred Stock) shall be applied after
that event in as nearly an equivalent manner as may be practicable.

 

(vi)        Consideration
for Stock. In case any shares of Common Stock or any Common Stock Equivalents shall be issued or sold, at any time, from time
to time after the Effective Date:

 

(A)         in
connection with any merger or consolidation in which the Corporation is the surviving corporation (other than any consolidation
or merger in which the previously outstanding shares of Common Stock of the Corporation shall be changed to or exchanged for the
stock or other securities of another corporation), the amount of consideration therefor shall be, deemed to be the fair value,
as determined reasonably and in good faith by the Board of Directors of the Corporation, of such portion of the assets and business
of the non-surviving corporation as such Board of Directors of the Corporation may determine to be attributable to such shares
of Common Stock, rights or warrants or options, as the case may be; or

 

    	8

    	 

    

 

(B)         in
the event of any consolidation or merger of the Corporation in which the Corporation is not the surviving corporation or in which
the previously outstanding shares of Common Stock of the Corporation shall be changed into or exchanged for the stock or other
securities of another corporation, or in the event of any sale of all or substantially all of the assets of the Corporation for
stock or other securities of any corporation, the Corporation shall be deemed to have issued a number of shares of its Common Stock
for stock or securities or other property of the other corporation computed on the basis of the actual exchange ratio on which
the transaction was predicated, and for a consideration equal to the Fair Market Value on the date of such transaction of all such
stock or securities or other property of the other corporation. If any such calculation results in adjustment of the applicable
Conversion Price, or the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock, the determination
of the applicable Conversion Price or the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock
immediately prior to such merger, consolidation or sale, shall be made after giving effect to such adjustment of the number of
shares of Common Stock issuable upon conversion of the Series A Preferred Stock. In the event Common Stock is issued with other
shares or securities or other assets of the Corporation for consideration which covers both, the consideration computed as provided
in this Section 10 (a)(vi) shall be allocated among such securities and assets as determined in good faith by the Board of Directors
of the Corporation; or

 

(C)         for
services, other than as permitted pursuant to Section 10(c) hereof, the amount of consideration therefor shall be deemed to be
the par value of the Common Stock.

 

(b)          Record
Date. In case the Corporation shall take record of the holders of its Common Stock for the purpose of entitling them to subscribe
for or purchase Common Stock or Common Stock Equivalents, then the date of the issue or sale of the shares of Common Stock shall
be deemed to be such record date.

 

(c)          No
Impairment. The Corporation shall not, by amendment of its Certificate of Incorporation, Bylaws or other constitutional documents,
or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder
by the Corporation, but will at all times in good faith, assist in the carrying out of all the provisions of this Section 10
and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the Holder
against impairment. In the event a Holder shall elect to convert any portion of the Series A Preferred Stock as provided herein,
the Corporation cannot refuse conversion based on any claim that such Holder or anyone associated or affiliated with such Holder
has been engaged in any violation of law, violation of an agreement to which such Holder is a party or for any reason whatsoever,
unless, an injunction from a court, or notice, restraining and or adjoining conversion of all or of the Series A Preferred Stock
shall have issued and the Corporation posts a surety bond for the benefit of such Holder in an amount equal to one hundred thirty
percent (130%) of the aggregate Stated Value of the Series A Preferred Stock that the Holder has elected to convert, which bond
shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Holder (as liquidated damages) in the event it obtains judgment.

 

(d)          Certificates
as to Adjustments. Upon occurrence of each adjustment or readjustment of the Conversion Price or number of shares of Common
Stock issuable upon conversion of the Series A Preferred Stock pursuant to this Section 10, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to the Holder a certificate setting
forth such adjustment and readjustment, showing in detail the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon written request of the Holder, at any time, furnish or cause to be furnished to the Holder a like certificate setting
forth such adjustments and readjustments, the applicable Conversion Price in effect at the time, and the number of shares of Common
Stock and the amount, if any, of other securities or property which at the time would be received upon the conversion of the Series
A Preferred Stock. Notwithstanding the foregoing, the Corporation shall not be obligated to deliver a certificate unless such certificate
would reflect an increase or decrease of at least one percent (1%) of such adjusted amount.

 

    	9

    	 

    

 

(e)          Issue
Taxes. The Corporation shall pay any and all issue and other taxes, excluding federal, state or local income taxes, that may
be payable in respect of any issue or delivery of shares of Common Stock on conversion of the Series A Preferred Stock pursuant
thereto; provided, however, that the Corporation shall not be obligated to pay any transfer taxes resulting from
any transfer requested by the Holder in connection with any such conversion.

 

(f)          Fractional
Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series A Preferred Stock. All fractional
shares shall be rounded up to the nearest whole share.

 

(g)          Reservation
of Common Stock. The Corporation shall at all times when the Series A Preferred Stock shall be outstanding, reserve and keep
available out of its authorized but unissued Common Stock, such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of the Series A Preferred Stock and all dividends accrued thereon; provided that the
number of shares of Common Stock so reserved shall at no time be less than one hundred twenty percent (120%) of the number of shares
of Common Stock for which the Series A Preferred Stock and all dividends accrued thereon are at any time convertible. The Corporation
shall, from time to time in accordance with Nevada law, increase the authorized number of shares of Common Stock if at any time
the unissued number of authorized shares shall not be sufficient to satisfy the Corporation’s obligations under this Section
10(g).

 

(h)          Regulatory
Compliance. If any shares of Common Stock to be reserved for the purpose of conversion of the Series A Preferred Stock or any
dividends accrued thereon require registration or listing with or approval of any governmental authority, stock exchange or other
regulatory body under any federal or state law or regulation or otherwise before such shares may be validly issued or delivered
upon conversion, the Corporation shall, at its sole cost and expense, in good faith and as expeditiously as possible, endeavor
to secure such registration, listing or approval, as the case may be.

 

Section 11.          If
the Corporations fails to pay to any Holder any Liquidation Amount, Dividends, interest or other amounts, whether in cash or otherwise,
when and as due under this Certificate of Designation (including, without limitation, the Corporation's failure to pay any redemption
amounts hereunder), such Holder may require the Corporation to redeem such Holder’s then outstanding Series A Preferred Stock
(the “Payment Failure Redemption”) at a price per share equal to the greater of (1) one hundred and ten percent
(110%) of the aggregate Stated Value of such Holder’s then outstanding shares of Series A Preferred Stock plus all accrued
and unpaid dividends thereon and (2) the product of (I) 100% of such Holder’s then outstanding shares of Series A Preferred
Stock plus all accrued and unpaid dividends thereon and (II) the quotient determined by dividing (A) the greatest Closing Bid Price
of the shares of Common Stock during the period beginning on the date immediately preceding the Corporation’s failure to
make any such payment and ending on the date such Holder requests a Payment Failure Redemption, by (B) the lowest Conversion Price
in effect during such period (the “Payment Failure Redemption Price”). If the Holder shall elect to have
its Series A Preferred Stock redeemed pursuant to this Section 11, the Corporation shall pay the Payment Failure Redemption Price
to the Holder within ten (10) days of the Corporation’s receipt of the Holder’s written request for a Payment Failure
Redemption. If the Corporation shall fail to pay the applicable Payment Failure Redemption Price to the Holder on the date that
is five (5) Business Days following the Corporation’s receipt of the Holder’s request for a Payment Failure Redemption
(other than pursuant to a dispute as to the determination of the arithmetic calculation of the Payment Failure Redemption Price),
in addition to any remedy the Holder may have hereunder, such unpaid amount shall bear interest at the rate of two percent (2%)
per month (prorated for partial months) until paid in full (or, if less, the highest rate permitted by law). Until the full Payment
Failure Redemption Price is paid in full to the Holder, the Holder may (i) void the Payment Failure Redemption with respect to
that portion of the Series A Preferred Stock for which the full Payment Failure Redemption Price has not been paid, (ii) receive
back such shares of Series A Preferred Stock, and (iii) require that the Conversion Price of such returned shares of Series A Preferred
Stock be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the Holder voided the Payment Failure
Redemption and (B) the lowest Closing Bid Price during the period beginning on the date such payment was due and ending on the
date the Holder voided the Payment Failure Redemption.

 

    	10

    	 

    

 

Section 12.         Definitions.
As used in this Certificate of Designation, the following terms shall have the following meanings (with terms defined in the singular
having comparable meanings when used in the plural and vice versa), unless the context otherwise requires:

 

“Affiliate”
as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms
“controlling”, “controlled by” and “under common control with”), as applied
to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or by contract or otherwise. For purposes of this definition,
a Person shall be deemed to be “controlled by” a Person if such latter Person possesses, directly or indirectly,
power to vote 10% or more of the securities having ordinary voting power for the election of directors of such former Person.

 

“Board of Directors”
shall have the meaning provided in the first paragraph of this Certificate of Designation.

 

“Business Day”
means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day
on which banking institutions located in such state are authorized or required by law or other governmental action to close.

 

“Capital Stock”
means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interest
in (however designated) capital stock.

 

“Certificate
of Designation” means this Certificate of Designation creating the Series A Preferred Stock.

 

“Closing
Bid Price” shall mean, on any particular date (i) the last trading price per share of the Common Stock on such date on
the OTC Bulletin Board or another registered national stock exchange on which the Common Stock
is then listed, or if there is no such price on such date, then the last trading price on such exchange or quotation system on
the date nearest preceding such date, or (ii) if the Common Stock is not then listed or traded on a registered national securities
exchange or quoted on the OTC Bulletin Board, then the average of the “Pink Sheet” quotes for the relevant conversion
period, as determined in good faith by the Holder, or (iii) if the Common Stock is not then publicly traded the Fair Market Value
of a share of Common Stock as determined by the Holder and reasonably acceptable to the Corporation.

 

“Commission”
means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time
after the Effective Date such Commission is not existing and performing the duties now assigned to it under the Exchange Act, the
body performing such duties at such time.

 

“Common Stock”
means the Corporation’s Common Stock, par value $0.001 per share.

 

“Conversion
Price” shall have the meaning set forth in Section 6(b) above.

 

“Corporation”
shall have the meaning provided in the first paragraph of this Certificate of Designation.

 

“Effective Date”
shall have the meaning provided in the first paragraph of this Certificate of Designation.

 

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

 

“Fair
Market Value” means, with respect to any asset or property, the price which would be negotiated in an arm’s-length
transaction, for cash, between an informed and willing seller under no compulsion to sell and an informed and willing buyer under
no compulsion to buy. Fair Market Value shall be mutually determined by (i) the legally adopted vote or consent of the Board of
Directors and certified in a board resolution and (ii) the Required Holders (as defined in the Subscription Agreement).

 

    	11

    	 

    

 

“Fundamental
Transaction” means that (A) the Corporation shall, directly or indirectly, in one or more related transactions, (i) consolidate
or merge with or into (whether or not the Corporation is the surviving corporation) another Person or Persons, or (ii) sell, assign,
transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Corporation or any of its
Subsidiaries to another Person, or (iii) allow another Person to make a purchase, tender or exchange offer that is accepted by
the holders of more than 50% of the outstanding shares of Voting Stock of the Corporation (not including any shares of Voting Stock
of the Corporation held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party
to, such purchase, tender or exchange offer), or (iv) consummate a stock purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other
Person acquires more than 50% of the outstanding shares of Voting Stock of the Corporation (not including any shares of Voting
Stock of the Corporation held by the other Person or other Persons making or party to, or associated or affiliated with the other
Persons making or party to, such stock purchase agreement or other business combination, or any Person who is a holder of the Corporation’s
securities on the date hereof or who is a Holder), or (v) reorganize, recapitalize or reclassify its Common Stock or (B) any “person”
or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become
the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act ), directly or indirectly, of either (x) 50%
of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock (other than any Person who
is a holder of the Corporation’s securities on the date hereof or who is a Holder) or (y) 50% or more of the shares of Voting
Stock of the Corporation not held by such Person or Persons as of the date hereof (other than any Person who is a holder of the
Corporation’s securities on the date hereof or who is a Holder).

 

“Holder”
means a holder of shares of Series A Preferred Stock as reflected in the register maintained by the Corporation or the transfer
agent for the Series A Preferred Stock.

 

“Issuance Date”
means the Closing Date under various Subscription Agreements pursuant to which the Corporation shall issue, and certain initial
Holders shall purchase, shares of Series A Preferred Stock.

 

“Junior Securities”
shall have the meaning provided in Section 4

 

“Liquidation
Amount” shall have the meaning provided in Section 3(a).

 

“Person”
means an individual, corporation, partnership, limited liability company, trust or trustee thereof, estate or executor thereof,
unincorporated organization or joint venture, court or governmental unit or any agency or subdivision thereof, or any other legally
recognizable entity.

 

“Preferred Stock”
means, with respect to any Person, Capital Stock of any class or classes (however designated) of such Person which is preferred
as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation
or dissolution of such Person, over Capital Stock of any other class of such Person.

 

“Series A Preferred
Stock” shall have the meaning provided in Section 1.

 

“Subsidiary”
means any entity in which the Corporation, directly or indirectly, owns any of the capital stock or holds an equity or similar
interest.

 

“Trading Day”
means (a) a day on which the Common Stock is traded on the OTC Bulletin Board or a registered national securities exchange, or
(b) if the Common Stock is not traded on the OTC Bulletin Board or a registered national securities exchange, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the
Common Stock is not listed or quoted as set forth in (a) or (b) hereof, then Trading Day shall mean any day except Saturday, Sunday
and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required
by law or other government action to close.

 

    	12

    	 

    

 

“Trading Market”
means the Over the Counter Bulletin Board, the OTC QB, the OTC QX, the New York Stock Exchange, the Nasdaq Capital Markets, the
Nasdaq Global Markets, the Nasdaq Global Select Market or the NYSE MKT.

 

“Voting Stock”
of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting
power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person
(irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by
reason of the happening of any contingency).

 

“VWAP”
means, for any date, (i) the daily volume weighted average price of the Common Stock for such date on the OTC Bulletin Board or
other Trading Market as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern
Time); (ii) if the Common Stock is not then listed or quoted on a Trading Market for which the daily volume weighted average
price of the Common Stock is available on Bloomberg L.P., or if prices for the Common Stock are then reported in the “Pink
Sheets” published by the Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported; or (iii) in all other cases, the fair market value of
a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable
to the Corporation.

 

    	13

    	 

    

 

IN WITNESS WHEREOF, the undersigned
has executed this Certificate this ___st day of October 2012.

 

	 	MGT Capital Investments, Inc.
	 	 	 
	 	By:	Robert Ladd
	 	Name:	Robert Ladd
	 	Title:	President

 

    	14

    	 

    

 

EXHIBIT A

 

NOTICE OF CONVERSION

 

SERIES A CONVERTIBLE PREFERRED STOCK

 

The undersigned hereby elects to convert
the number of shares of Series A Convertible Preferred Stock indicated below into shares of common stock, $.001 par value per share
(the “Common Stock”), of MGT Capital Investments, Inc., a Delaware corporation (the “Corporation”),
according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a Person
other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. No fee will be charged to
the Holders for any conversion, except for any such transfer taxes.

 

Conversion calculations:

 

	Date to Effect Conversion:	 	 

 

	Number of shares of Series A Preferred Stock owned prior to Conversion:	 	 	 

 

	Number of shares of Series A Preferred Stock to be Converted:	 	 

 

	Stated Value of shares of  Series A Preferred Stock to be Converted:	 	 

 

	Number of shares of Common Stock to be issued upon Conversion:	 	 

 

	Number of shares of Series A Preferred Stock subsequent to Conversion:	 	 

 

HOLDER

 

	 	 	 
	 	Name:	 
	 	Title:	 

 

    	15

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