Document:

ex10-1

 

 Exhibit
10.1

 

 

SUBSCRIPTION
AGREEMENT

 

 

This
Subscription Agreement (this “Agreement”)
has been executed by the purchaser set forth on the signature page
hereof (the “Purchaser”)
in connection with a registered direct public offering (the
“Offering”)
by Wrap Technologies, Inc., a Delaware corporation (the
“Company”).

 

R
E C I T A L S

 

A. The Company is
offering units to purchase (i) one (1) share of common stock, par
value $0.0001 (the “Common
Stock”), and (ii) a two-year warrant to purchase one
(1) share of Common Stock (the “Warrant” and together with the
Common Stock, a “Unit”),
at a purchase price of $6.00 per unit (the “Purchase
Price”), for a maximum aggregate purchase price of
$12.40 million.

 

B. The Units,
including the Common Stock and Warrant, subscribed for pursuant to
this Agreement are being issued under the Company’s
Registration Statement on Form S-3 (No. 333-228974) declared
effective by the Securities and Exchange Commission on February 14,
2019 (the “Registration
Statement”).

 

AGREEMENT

 
The
Company and the Purchaser hereby agree as follows:

 

 
1. Subscription.

 

(a)

Purchase and Sale
of the Units.

 

(i) Subject to the
terms and conditions of this Agreement, the undersigned Purchaser
agrees to purchase, and the Company agrees to sell and issue to
such Purchaser, that number of Units set forth on such
Purchaser’s Omnibus Signature Page attached hereto at the
Purchase Price per Unit, for a total aggregate Purchase Price as
set forth on such Omnibus Signature Page. The minimum subscription
amount for each Purchaser in the Offering is $50,000. The Company
may accept subscriptions for less than $50,000 from any Purchaser
in its sole discretion.

 

For the
purposes of this Agreement:

 

“Shares”
means the shares of Common Stock issued in the Offering at the
Closing (as defined below).

 

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

 

“Securities”
means each of the Shares, the Warrants and when issued, the Warrant
Shares.

 

(ii) This
Agreement is one of a series of subscription agreements issued (and
to be issued) by the Company to purchasers of Units in connection
with the Offering with substantially the same terms and conditions
set forth in this Agreement (each, a “Subscription
Agreement”, and collectively, the “Subscription
Agreements”).

 

 

-1-

 

 

 

(b)

Subscription Procedure;
Closing.

 

(i) Closing.
The purchase and sale of the Units shall take place remotely via
the exchange of documents and signatures upon the later to occur of
10:00 A.M. EST, on June 2, 2020, or the date the Company files with
the Securities Exchange Commission (the “SEC”)
a prospectus supplement (the "Supplement") to the Registration
Statement under Rule 424(b) of the Securities Act of 1933, as
amended (the “Closing”).

 

(ii) Subscription
Procedure. To complete a subscription for the Units pursuant
hereto, the Purchaser must fully comply with the subscription
procedure provided in paragraphs (A) through (C) of this Section on
or before the Closing:

 

(A) Subscription Documents. At or
before the Closing, the Purchaser shall review, complete and
execute the Omnibus Signature Page to this Agreement, Investor
Profile and Anti-Money Laundering Form, attached hereto following
the Omnibus Signature Page (collectively, the “Subscription
Documents”), if applicable, additional forms and
questionnaires distributed to the Purchaser and deliver the
Subscription Documents and such additional forms and questionnaires
to the party indicated thereon at the address set forth under the
caption “How to subscribe
for Units in the registered direct public offering of the
Company” below. Executed documents may be delivered to
such party by facsimile or .pdf sent by electronic mail
(e-mail).

 

(B) Purchase Price. At or prior to
the Closing, the Purchaser shall deliver to the Company the full
Purchase Price set forth on the Purchaser’s Omnibus Signature
Page attached hereto, by certified or other bank check or by wire
transfer of immediately available funds, pursuant to the
instructions set forth under the caption “How to subscribe for Units in the registered
direct public offering of the Company” below. Since
there is no requirement that the Company sell a minimum number of
Units, upon acceptance by the Company of the Purchaser’s
subscription, the Purchaser agrees and acknowledges that such funds
will be immediately available for use by the Company upon
Closing.

 

(C) Company Discretion. The
Purchaser understands and agrees that the Company in its sole
discretion reserves the right to accept or reject this or any other
subscription for Units, in whole or in part, notwithstanding prior
receipt by the Purchaser of notice of acceptance of this
subscription. The Company shall have no obligation hereunder until
the Company shall execute and deliver to the Purchaser an executed
copy of this Agreement. If this subscription is rejected by the
Company in whole pursuant to the first sentence of this
Section 1(b)(C), or the Offering is terminated, the Company shall
immediately return all funds paid by or on behalf of the Purchaser
pursuant to this Agreement, without interest or offset, and this
Agreement shall thereafter be of no further force or effect. If
this subscription is rejected by the Company in part, the Company
shall immediately return all funds paid by or on behalf of the
Purchaser for the rejected portion of this subscription, without
interest or offset, and this Agreement shall continue in full force
and effect to the extent this subscription was
accepted.

 

 

 

-2-

 

 

 

 

 

 

-3-

 

 

(iii) Company’s
Obligations at Closing

 

(A)  Share & Warrant
Delivery. At the Closing, the Company shall issue and
deliver to the Purchaser (i) a book entry confirmation, in the name
of such Purchaser and free of all restrictive legends, representing
the number of Shares issued and sold to the Purchaser hereunder or,
for Purchasers who provide the necessary account information to the
Company, the Company shall issue and deliver such Shares in a
balance account with The Depository Trust Company through its
Deposit Withdrawal Agent Commission System and (ii) a Warrant
registered in the name of the Purchaser.

 

(B) Prospectus
Supplement. At or prior to Closing, the Company shall file the
Supplement with respect to the Registration Statement reflecting
the sale of the Securities.

 

2.

Advisor.

 

(a) Katalyst Securities
LLC has been engaged by the Company as a financial advisor and
consultant in connection with the Offering. Throughout this
Agreement, Katalyst Securities LLC is referred to as the
“Advisor.”

 

(b) As a consulting
fee, the Advisor shall receive four percent (4%) of the gross
proceeds from the sale to the applicable prospective investor in
the Closing (the “Cash
Fee”).

 

(c) The Company will
also pay certain accountable expenses, including legal fees not to
exceed $25,000 in connection with the Offering.

 

3. Representations and
Warranties of the Company. Except as disclosed in the SEC
Reports (as defined below) filed by the Company with the SEC and
publicly available on the SEC’s Electronic Data Gathering
Analysis and Retrieval system, the Company hereby represents and
warrants to the Purchaser, as of the date of the Closing, the
following:

 

(a) Organization and Qualification.
The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of
Delaware, and has the requisite corporate power to own its
properties and to carry on its business as now being conducted. The
Company and each of its subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it
makes such qualification necessary, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the assets, business, financial
condition, results of operations or future prospects of the Company
and its subsidiaries taken as a whole (a “Material Adverse
Effect”).

 

(b) Authorization, Enforcement, Compliance
with Other Instruments. (i) the Company has the requisite
corporate power and authority to enter into and perform its
obligations under this Agreement and the Warrant (the
“Transaction
Documents”) and to issue the Securities, in accordance
with the terms hereof and thereof; (ii) the execution and delivery
by the Company of each of the Transaction Documents and the
consummation by it of the transactions contemplated hereby and
thereby, including, without limitation, the issuance of the
Securities, have been, or will be at the time of execution of such
Transaction Document, duly authorized by the Company’s Board
of Directors, and no further consent or authorization is, or will
be at the time of execution of such Transaction Document, required
by the Company, its Board of Directors or its stockholders; (iii)
each of the Transaction Documents will be duly executed and
delivered by the Company; and (iv) the Transaction Documents when
executed will constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their
terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of creditors’
rights and remedies and, with respect to any rights to indemnity or
contribution contained in the Transaction Documents, as such rights
may be limited by state or federal laws or public policy underlying
such laws.

 

 

 

 

-4-

 

 

(c) Capitalization. The authorized
capital stock of the Company consists of 150,000,000 shares of
Common Stock and 5,000,000 shares of preferred stock (the
“Preferred Stock”).
The Company has not issued any capital stock since the date of its
most recently filed SEC Report other than upon stock option and
warrant exercises that do not, individually or in the aggregate,
have a material effect on the issued and outstanding capital stock,
options and other securities. All of the outstanding shares of
Common Stock and of the capital stock of each of the
Company’s subsidiaries have been duly authorized, validly
issued and are fully paid and non-assessable. Immediately following
the Closing, and except as set forth in the SEC Reports: (i) no
shares of capital stock of the Company or any of its subsidiaries
will be subject to preemptive rights or any other similar rights or
any liens or encumbrances suffered or permitted by the Company;
(ii) there will be no outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares
of capital stock of the Company or any of its subsidiaries, or
contracts, commitments, understandings or arrangements by which the
Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its
subsidiaries; (iii) there will be no outstanding debt securities of
the Company or any of its subsidiaries; (iv), there will be no
agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of their
securities under the Securities Act; (v) there will be no
securities or instruments of the Company or any of its subsidiaries
containing anti-dilution or similar provisions, including the right
to adjust the exercise, exchange or reset price under such
securities, that will be triggered by the issuance of the
Securities as described in this Agreement; and (vi) no co-sale
right, right of first refusal or other similar right will exist
with respect to the Securities or the issuance and sale
thereof.

 

(d) Issuance of Securities. The
Securities that are being issued to the Purchaser hereunder, when
issued, sold and delivered in accordance with the terms and for the
consideration set forth in this Agreement, will be duly and validly
issued, fully paid and non- assessable, and free of restrictions on
transfer and other liens and encumbrances. The Company has reserved
a sufficient number of duly authorized shares of Common Stock to
issue all of the Securities. At the Closing, the Shares and the
shares of Common Stock issuable upon conversion of the Warrant
(shall have been listed for trading on the Nasdaq Stock Market (the
“Trading
Market”).

 

(e) Registration Statement. The
Company’s Registration Statement was declared effective by
the Commission on February 14, 2019. The Registration Statement is
effective on the date hereof and the Company has not received
notice that the Commission has issued or intends to issue a stop
order with respect to the Registration Statement or that the
Commission otherwise has suspended or withdrawn the effectiveness
of the Registration Statement, either temporarily or permanently,
or intends or has threatened in writing to do so. The Registration
Statement (including the information or documents incorporated by
reference therein), as of the time it was declared effective, and
any amendments or supplements thereto, each as of the time of
filing, did not contain any untrue statement of material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. The
issuance of the Securities to the Purchasers is registered by the
Registration Statement.

 

(f) No Restrictions. Any book entry
confirmations and certificates evidencing the Shares, Warrants and
the Warrant Shares, as the case may be, shall not contain any
vesting conditions or restrictive legend. The Shares and Warrant
Shares shall be transmitted at the cost of the Company by the
transfer agent to the Purchaser by crediting the account of the
Purchaser’s prime broker with the Depository Trust Company
System as directed by such Purchaser.

 

(g) No Violation. The issuance and
sale of the Securities hereunder does not conflict with or violate
any rules or regulations of the Trading Market.

 

 

-5-

 

 

 

(h) No Conflicts. The execution,
delivery and performance of each of the Transaction Documents by
the Company, and the consummation by the Company of the
transactions contemplated hereby and thereby including issuance and
sale of the Securities in accordance with this Agreement will not
(i) result in a violation of the Certificate of Incorporation or
the Bylaws (or equivalent constitutive document) of the Company or
any of its subsidiaries or (ii) violate or conflict with, or result
in a breach of any provision of, or constitute a default (or an
event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any subsidiary is a
party, except for those which would not reasonably be expected to
have a Material Adverse Effect, or (iii) result in a violation of
any law, rule, regulation, order, judgment or decree (including
U.S. federal and state securities laws and regulations) applicable
to the Company or any subsidiary or by which any property or asset
of the Company or any subsidiary is bound or affected, except for
those which would not reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any subsidiary is in
violation of or in default under, any provision of its Certificate
of Incorporation or Bylaws. Neither the Company nor any subsidiary
is in violation of any term of or in default under any contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to
the Company or any subsidiary, which violation or breach has had or
would reasonably be expected to have a Material Adverse Effect.
Except as specifically contemplated by this Agreement and as
required under the Securities Act and any applicable state
securities laws, neither the Company nor any of its subsidiaries is
required to obtain any consent, authorization or order of, or make
any filing or registration with, any court or governmental agency
in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement or the other
Transaction Documents in accordance with the terms hereof or
thereof. Neither the execution and delivery by the Company of the
Transaction Documents, nor the consummation by the Company of the
transactions contemplated hereby or thereby, will require any
notice, consent or waiver under any contract or instrument to which
the Company or any subsidiary is a party or by which the Company or
any subsidiary is bound or to which any of their assets is subject,
except for any notice, consent or waiver the absence of which would
not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect. All consents, authorizations,
orders, filings and registrations which the Company or any of its
subsidiaries is required to obtain pursuant to the preceding two
sentences have been or will be obtained or effected on or prior to
the Closing.

 

(i) Absence of Litigation. There is
no action, suit, claim, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or
investigation before or by any court, public board, governmental or
administrative agency, self-regulatory organization, arbitrator,
regulatory authority, stock market, stock exchange or trading
facility (an “Action”)
now pending or, to the knowledge of the Company, threatened against
or affecting the Company or any of its subsidiaries or any of their
respective officers or directors, which would be reasonably likely
to (i) adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations
under, this Agreement or any of the other Transaction Documents, or
(ii) except as specifically disclosed in the SEC Reports, have a
Material Adverse Effect. For the purpose of this Agreement, the
knowledge of the Company means the knowledge of the officers of the
Company (both actual or constructive knowledge that they would have
had upon reasonable inquiry of the personnel of the Company
responsible for the applicable subject matter). Neither the Company
nor any of its subsidiaries is subject to any judgment, decree, or
order which has had, or would reasonably be expected to have a
Material Adverse Effect.

 

(j) No General Solicitation.
Neither the Company, nor any of its Affiliates, nor, to the
knowledge of the Company, any person acting on its or their behalf,
has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with
the offer or sale of the Securities. “Affiliate”
means, with respect to any person, any other person that, directly
or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such person, as such
terms are used in and construed under Rule 144 under the Securities
Act (“Rule
144”). With respect to a Purchaser, any investment
fund or managed account that is managed on a discretionary basis by
the same investment manager as such Purchaser will be deemed to be
an Affiliate of such Purchaser.

 

 

 

 

-6-

 

 

(k) Employee Relations. Neither
Company nor any subsidiary is involved in any labor dispute nor, to
the knowledge of the Company, is any such dispute threatened.
Neither the Company nor any subsidiary is party to any collective
bargaining agreement. The Company’s and/or its
subsidiaries’ employees are not members of any union, and the
Company believes that its and its subsidiaries’ relationship
with their respective employees is good.

 

(l) Intellectual Property Rights.
The Company and its subsidiaries own, possess, and have all right,
title, and interest in and to, free and clear of all liens and
encumbrances, or (if disclosed to be licensed by the Company in the
SEC Reports) have the valid and enforceable right to use pursuant
to a license, sublicense, agreement or permission, all Intellectual
Property disclosed to be owned, licensed or used by the Company or
its subsidiaries in the SEC Reports, except such failure(s) to own,
possess or have such rights as would not reasonably be expected to,
individually or in the aggregate, result in a Material Adverse
Effect, and to the Company’s knowledge, there are no
unreleased liens or security interests which have been filed, or
which the Company has received notice of, against any of the
patents owned by the Company. Furthermore, (A) to the
Company’s knowledge, there is no infringement,
misappropriation or violation by third parties of any such
Intellectual Property, except as such infringement,
misappropriation or violation would not result in a Material
Adverse Effect; (B) to the Company’s knowledge, there is no
pending or threatened, Action by others challenging the
Company’s or any of its subsidiaries’ rights in or to
any such Intellectual Property, and to the Company’s
knowledge, there are no facts which would form a reasonable basis
for any such Action; (C) to the Company’s knowledge, the
Intellectual Property owned by the Company and its subsidiaries,
and the Intellectual Property licensed to the Company and its
subsidiaries, has not been adjudged invalid or unenforceable, in
whole or in part, and there is no pending or, to the
Company’s knowledge, threatened Action by others challenging
the validity, enforceability or scope of any such Intellectual
Property, and, to the Company’s knowledge, there are no facts
which would form a reasonable basis for any such Action; (D) to the
Company’s knowledge, there is no pending or threatened Action
by others that the Company or any of its subsidiaries infringes,
misappropriates or otherwise violates any Intellectual Property or
other proprietary rights of others, neither the Company nor any of
its subsidiaries has received any written notice of such Action,
and, to the Company’s knowledge, there are no other facts
which would form a reasonable basis for any such Action, except in
each case for any Action as would not be reasonably expected to
have a Material Adverse Effect; and (E) to the Company’s
knowledge, no employee of the Company or any of its subsidiaries is
in violation of any term of any employment contract, patent
disclosure agreement, invention assignment agreement,
non-competition agreement, non-solicitation agreement,
nondisclosure agreement or any restrictive covenant to or with a
former employer where the basis of such violation relates to such
employee’s employment with the Company or any of its
subsidiaries or actions undertaken by the employee while employed
with the Company or any of its subsidiaries, except such violation
as would not reasonably be expected to have a Material Adverse
Effect. Except as would not reasonably be expected to have a
Material Adverse Effect, (1) to the Company’s knowledge, the
Company and its subsidiaries have disclosed to the U.S. Patent and
Trademark Office (USPTO) all information known to the Company to be
relevant to the patentability of its inventions in accordance with
37 C.F.R. Section 1.56, and (2) to the Company’s knowledge,
neither the Company nor any of its subsidiaries made any
misrepresentation or concealed any information from the USPTO in
any of the patents or patent applications owned or licensed to the
Company, or in connection with the prosecution thereof, in
violation of 37 C.F.R. Section 1.56. Except as would not reasonably
be expected to have a Material Adverse Effect and to the
Company’s knowledge, (x) there are no facts that are
reasonably likely to provide a basis for a finding that the Company
or any of its subsidiaries does not have clear title to the patents
or patent applications owned or licensed to the Company or other
proprietary information rights as being owned by the Company or any
of its subsidiaries, (y) no valid issued U.S. patent would be
infringed by the activities of the Company or any of its
subsidiaries relating to products currently or proposed to be
manufactured, used or sold by the Company or any of its
subsidiaries and (z) there are no facts with respect to any issued
patent owned that would cause any claim of any such patent not to
be valid and enforceable with applicable regulations.
“Intellectual
Property” shall mean all patents, patent applications,
trade and service marks, trade and service mark registrations,
trade names, copyrights, licenses, inventions, trade secrets,
domain names, technology and know- how.

 

 

 

 

-7-

 

 

(m)

Environmental
Laws.

 

(i) The Company and
each subsidiary has complied with all applicable Environmental Laws
(as defined below), except for violations of Environmental Laws
that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect. There is
no pending or, to the knowledge of the Company, threatened civil or
criminal litigation, notice of violation, formal administrative
proceeding, or investigation, inquiry or information request,
relating to any Environmental Law involving the Company or any
subsidiary, except for litigation, notices of violations, formal
administrative proceedings or investigations, inquiries or
information requests that, individually or in the aggregate, have
not had and would not reasonably be expected to have a Material
Adverse Effect. For purposes of this Agreement, “Environmental
Law” means any national, state, provincial or local
law, statute, rule or regulation or the common law relating to the
environment or occupational health and safety, including without
limitation any statute, regulation, administrative decision or
order pertaining to (i) treatment, storage, disposal, generation
and transportation of industrial, toxic or hazardous materials or
substances or solid or hazardous waste; (ii) air, water and noise
pollution; (iii) groundwater and soil contamination; the release or
threatened release into the environment of industrial, toxic or
hazardous materials or substances, or solid or hazardous waste,
including without limitation emissions, discharges, injections,
spills, escapes or dumping of pollutants, contaminants or
chemicals; (iv) the protection of wild life, marine life and
wetlands, including without limitation all endangered and
threatened species; (v) storage tanks, vessels, containers,
abandoned or discarded barrels, and other closed receptacles; (vi)
health and safety of employees and other persons; and
(vii)manufacturing, processing, using, distributing, treating,
storing, disposing, transporting or handling of materials regulated
under any law as pollutants, contaminants, toxic or hazardous
materials or substances or oil or petroleum products or solid or
hazardous waste. As used above, the terms “release” and
“environment” shall have the meaning set forth in the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended.

 

(ii) To
the knowledge of the Company there is no material environmental
liability with respect to any solid or hazardous waste transporter
or treatment, storage or disposal facility that has been used by
the Company or any subsidiary.

 

(n) Authorizations; Regulatory
Compliance. The Company and each of its subsidiaries holds,
and is operating in compliance with, all authorizations, licenses,
permits, approvals, clearances, registrations, exemptions,
consents, certificates and orders of any governmental authority and
supplements and amendments thereto (collectively,
“Authorizations”)
required for the conduct of its business as currently conducted in
all applicable jurisdictions and all such Authorizations are valid
and in full force and effect, except for Authorizations the absence
of which would not reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any of its subsidiaries is
in material violation of any terms of any such Authorizations,
except, in each case, such as would not reasonably be expected to
have a Material Adverse Effect; and neither the Company nor any of
its subsidiaries has received written notice of any revocation or
modification of any such Authorization, or written notice that such
revocation or modification is being considered, except to the
extent that any such revocation or modification would not be
reasonably expected to have a Material Adverse Effect. The Company
and each of its subsidiaries is in compliance with all applicable
federal, state, local and foreign laws, regulations, orders and
decrees, including such laws and regulations applicable to the
manufacture, distribution, import and export of regulated products
and component parts and ingredients, except as would not reasonably
be expected to have a Material Adverse Effect. Neither the Company
nor any of its subsidiaries is a party to any corporate integrity
agreement, deferred prosecution agreement, monitoring agreement,
consent decree, settlement order, or similar agreements, or has any
reporting obligations pursuant to any such agreement, plan or
correction or other remedial measure entered into with any any
other federal, state, local or foreign governmental or regulatory
authority (each a “Governmental
Authority”)..

 

 

 

 

-8-

 

 

 

(o) Title. Neither the Company nor
any of its subsidiaries owns any real property. Each of the Company
and its subsidiaries has good and marketable title to all of its
personal property and assets, free and clear of any restriction,
mortgage, deed of trust, pledge, lien, security interest or other
charge, claim or encumbrance which would have a Material Adverse
Effect. With respect to properties and assets it leases, each of
the Company and its subsidiaries is in compliance with such leases
and holds a valid leasehold interest free of any liens, claims or
encumbrances which would have a Material Adverse
Effect.

 

(p) Tax Status. The Company and
each subsidiary has made and filed (taking into account any valid
extensions) all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it
is subject and (unless and only to the extent that the Company or
such subsidiary has set aside on its books provisions reasonably
adequate for the payment of all unpaid and unreported taxes) has
paid all taxes and other governmental assessments and charges that
are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in
good faith and has set aside on its books provision reasonably
adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. To
the knowledge of the Company, there are no unpaid taxes in any
material amount claimed to be due from the Company or any
subsidiary by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such
claim.

 

(q) Certain Transactions. Except as
set forth in the SEC Reports, none of the officers or directors of
the Company and, to the Company’s knowledge, none of the
employees of the Company is presently a party to any transaction
with the Company or any subsidiary (other than for services as
employees, officers and directors), that would be required to be
disclosed pursuant to Item 404 of Regulation S-K promulgated under
the Securities Act.

 

(r) Rights of First Refusal. The
Company is not obligated to offer the securities offered hereunder
on a right of first refusal basis or otherwise to any third parties
including, but not limited to, current or former stockholders of
the Company, underwriters, brokers, agents or other third
parties.

 

(s) Insurance. The Company and its
subsidiaries have insurance policies of the type and in amounts
customarily carried by organizations conducting businesses or
owning assets similar to those of the Company and its subsidiaries.
There is no material claim pending under any such policy as to
which coverage has been questioned, denied or disputed by the
underwriter of such policy.

 

(t) SEC Reports. The Company has
filed all reports, schedules, forms, statements and other documents
required to be filed by the Company under the Securities Exchange
Act of 1934, as amended (the “Exchange
Act”) for the two (2) years preceding the date hereof
(or such shorter period since the Company was first required by law
or regulation to file such material) (the foregoing materials,
including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the
“SEC
Reports”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports
prior to the expiration of any such extension, except where the
failure to file on a timely basis would not have or reasonably be
expected to result in a Material Adverse Effect. The SEC Reports at
the time they were filed, or to the extent corrected by a
subsequent restatement, complied, in all material respects with the
Securities Act or the Exchange Act, as applicable, and the
applicable rules and regulations of the SEC thereunder. There are
no contracts, agreements or other documents that are required to be
described in the SEC Reports and/or to be filed as exhibits thereto
that are not described, in all material respects, and/or filed as
required. There has not been any material change or amendment to,
or any waiver of any material right under, any such contract or
agreement that has not been described in and/or filed as an exhibit
to the SEC Reports.

 

 

 

 

-9-

 

 

(u) Financial Statements. The
financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its
consolidated subsidiaries taken as a whole as of and for the dates
thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements,
to normal, year-end audit adjustments.

 

 (v) Material
Changes. Since the date of the
latest audited financial statements included within the SEC
Reports, except as specifically disclosed in a subsequent SEC
Report filed prior to the date hereof, (i) there have been
no events, occurrences or developments that have had or would
reasonably be expected to have a Material Adverse Effect with
respect to the Company, (ii) there have not been any changes in the
authorized capital, assets, financial condition, business or
operations of the Company from that reflected in the financial
statements contained within the SEC Reports except changes in the
ordinary course of business which have not been, either
individually or in the aggregate, materially adverse to the
business, properties, financial condition, results of operations or
future prospects of the Company, (iii) neither the Company nor any
subsidiary has incurred any material liabilities (contingent or
otherwise) other than (A) trade payables, accrued expenses and
other liabilities incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to
be reflected in the financial statements of the Company, pursuant
to GAAP or to be disclosed in the SEC Reports, (iv) neither the
Company nor any subsidiary has materially altered its method of
accounting or the manner in which it keeps its accounting books and
records, and (v) neither the Company nor any subsidiary has
declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock
(other than in connection with repurchases of unvested stock issued
to employees of the Company).

 

(w) Disclosure Controls. The
Company has established and maintains disclosure controls and
procedures (as defined in Rules 13a-14 and 15d-15 under the
Exchange Act) and such controls and procedures are effective in
ensuring that material information relating to the Company,
including its subsidiaries, is made known to the principal
executive officer and the principal financial officer.

 

(x) Sarbanes-Oxley. The Company is
in compliance in all material respects with all of the provisions
of the Sarbanes-Oxley Act of 2002 which are applicable to it as of
the Closing.

 

(y) Off-Balance Sheet Arrangements.
There is no transaction, arrangement, or other relationship between
the Company or any subsidiary and an unconsolidated or other
off-balance sheet entity that is required to be disclosed by the
Company in its SEC Reports (including, for purposes hereof, any
that are required to be disclosed in a Form 10) and is not so
disclosed or that otherwise would have a Material Adverse
Effect.

 

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

 

 

 

 

-10-

 

 

(aa) Brokers’
Fees. Neither of the Company nor any of its subsidiaries has
any liability or obligation to pay any fees or commissions to any
broker, finder or agent with respect to the transactions
contemplated by this Agreement, except for the payment of fees to
the Advisor as described in Section 2 above.

 

(bb) Disclosure
Materials. The SEC Reports taken as a whole do not contain
an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading.

 

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

 

(aa)
Reliance. The Company acknowledges that the Purchaser is relying on
the representations and warranties (as modified by the disclosures
in the SEC Reports made by the Company hereunder and that such
representations and warranties (as modified by the disclosures in
the SEC Reports) are a material inducement to the Purchaser
purchasing the Securities.

 

(bb)
Use of Proceeds.
The Company presently intends to use the net proceeds from the
Offering to fund (i) product development and manufacturing, (ii)
sales and marketing and (iii) working capital and other general
corporate purposes; provided, that the Company may pay Advisor fees
of four percent (4%) of the proceeds of the Offering.

 

(cc)
Bad Actor
Disqualification. No “bad actor” disqualifying
event described in Rule 506(d)(1)(i)-(viii) of the Securities Act
(a “Disqualification
Event”) is applicable to the Company or, to the
Company’s knowledge, any Company Covered Person, except for a
Disqualification Event as to which Rule 506(d)(2)(ii–iv) or
(d)(3), is applicable. “Company Covered Person” means,
with respect to the Company as an “issuer” for purposes
of Rule 506 promulgated under the Securities Act, any person listed
in the first paragraph of Rule 506(d)(1).

 

4. Representations,
Warranties and Agreements of the Purchaser. The Purchaser
represents and warrants to the Company, as of the date hereof and
as of the date of the Closing the following:

 

(a) The Purchaser has
the knowledge and experience in financial and business matters
necessary to evaluate the merits and risks of its prospective
investment in the Company, and has carefully reviewed and
understands the risks of, and other considerations relating to, the
purchase of Securities and the tax consequences of the investment,
and has the ability to bear the economic risks of the investment.
The Purchaser can afford the loss of his, her or its entire
investment.

 

 

 

 

 

 

-11-

 

 

 

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

 

(c) The Purchaser has
received, reviewed and understood the information about the
Company, including the SEC Reports, and has had an opportunity to
discuss the Company’s business, management and financial
affairs with the Company’s management. The Purchaser
understands that such discussions, as well as the SEC Reports, were
intended to describe the aspects of the Company’s business
and prospects and the Offering which the Company believes to be
material, but were not necessarily a thorough or exhaustive
description, and except as expressly set forth in this Agreement,
the Company makes no representation or warranty with respect to the
completeness of such information and makes no representation or
warranty of any kind with respect to any information provided by
any entity other than the Company. Some of such information may
include projections as to the future performance of the Company,
which projections may not be realized, may be based on assumptions
which may not be correct and may be subject to numerous factors
beyond the Company’s control. The Purchaser acknowledges that
he, she or it is not relying upon any person or entity, other than
the Company and its officers and directors, in making its
investment or decision to invest in the Company. Additionally, the
Purchaser understands and represents that he, she or it is
purchasing the Securities notwithstanding the fact that the Company
may disclose in the future certain material information the
Purchaser has not received, including (without limitation)
financial statements of the Company for the current or prior fiscal
periods, and any subsequent period financial statements that will
be filed with the SEC. Each Purchaser has sought such accounting,
legal and tax advice as the Purchaser has considered necessary to
make an informed investment decision with respect to his, her or
its acquisition of the Securities.

 

(d) The Purchaser
acknowledges that neither the Company nor the Advisor is acting as
a financial advisor or fiduciary of the Purchaser (or in any
similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby, and no investment
advice has been given by the Company, the Advisor or any of their
respective representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and
thereby. The Purchaser further represents to the Company that the
Purchaser’s decision to enter into the Transaction Documents
has been based solely on the independent evaluation by the
Purchaser and the Purchaser’s representatives.

 

 

 

 

-12-

 

 

(e) As of the Closing,
all actions on the part of Purchaser, and its officers, directors
and partners, if applicable, necessary for the authorization,
execution and delivery of this Agreement and the performance of all
obligations of the Purchaser hereunder and thereunder shall have
been taken, and this Agreement, assuming due execution by the
parties hereto and thereto, constitute valid and legally binding
obligations of the Purchaser, enforceable in accordance with their
respective terms, subject to: (i) judicial principles limiting the
availability of specific performance, injunctive relief, and other
equitable remedies and (ii) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
generally relating to or affecting creditors’
rights.

 

(f) Purchaser
represents that neither it nor, to its knowledge, any person or
entity controlling, controlled by or under common control with it,
nor any person having a beneficial interest in the Purchaser, nor
any person on whose behalf the Purchaser is acting: (i) is a person
listed in the Annex to Executive Order No. 13224 (2001) issued by
the President of the United States (Executive Order Blocking
Property and Prohibiting Transactions with Persons Who Commit,
Threaten to Commit, or Support Terrorism); (ii) is named on the
List of Specially Designated Nationals and Blocked Persons
maintained by the U.S. Office of Foreign Assets Control; (iii) is a
non-U.S. shell bank or is providing banking services indirectly to
a non-U.S. shell bank; (iv) is a senior non-U.S. political figure
or an immediate family member or close associate of such figure; or
(v) is otherwise prohibited from investing in the Company pursuant
to applicable U.S. anti-money laundering, anti-terrorist and asset
control laws, regulations, rules or orders (categories (i) through
(v), each a “Prohibited
Purchaser”). The Purchaser agrees to provide the
Company, promptly upon request, all information that the Company
reasonably deems necessary or appropriate to comply with applicable
U.S. anti- money laundering, anti-terrorist and asset control laws,
regulations, rules and orders. The Purchaser consents to the
disclosure to U.S. regulators and law enforcement authorities by
the Company and its Affiliates and agents of such information about
the Purchaser as the Company reasonably deems necessary or
appropriate to comply with applicable U.S. anti-money laundering,
anti-terrorist and asset control laws, regulations, rules and
orders. If the Purchaser is a financial institution that is subject
to the USA Patriot Act, the Purchaser represents that it has met
all of its obligations under the USA Patriot Act. The Purchaser
acknowledges that if, following its investment in the Company, the
Company reasonably believes that the Purchaser is a Prohibited
Purchaser or is otherwise engaged in suspicious activity or refuses
to promptly provide information that the Company requests, the
Company has the right or may be obligated to prohibit additional
investments, segregate the assets constituting the investment in
accordance with applicable regulations or immediately require the
Purchaser to transfer the Securities. The Purchaser further
acknowledges that neither the Purchaser nor any of the
Purchaser’s Affiliates or agents will have any claim against
the Company for any form of damages as a result of any of the
foregoing actions.

 

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

 

(h) The Purchaser or
its duly authorized representative realizes that because of the
inherently speculative nature of businesses of the kind conducted
and contemplated by the Company, the Company’s financial
results may be expected to fluctuate from month to month and from
period to period and will, generally, involve a high degree of
financial and market risk that could result in substantial or, at
times, even total losses for investors in securities of the
Company. The Purchaser has carefully read the risk factors and
other information
(including the financial statements of the Company) included in the
SEC Reports. The Purchaser has carefully considered such risk
factors before deciding to invest in the Securities.

 

 

 

 

-13-

 

 

(i) The Purchaser has
adequate means of providing for its current and anticipated
financial needs and contingencies, is able to bear the economic
risk for an indefinite period of time and has no need for liquidity
of the investment in the Securities and could afford complete loss
of such investment.

 

(j) The Purchaser is
not subscribing for Securities as a result of or subsequent to any
advertisement, article, notice or other communication, published in
any newspaper, magazine or similar media or broadcast over
television, radio, or the internet, or presented at any seminar or
meeting, or any solicitation of a subscription by a person not
previously known to the Purchaser in connection with investments in
securities generally.

 

(k) The Purchaser
acknowledges that no U.S. federal or state agency or any other
government or governmental agency has passed upon the Securities or
made any finding or determination as to the fairness, suitability
or wisdom of any investments therein.

 

(l) Other than
consummating the transactions contemplated hereunder, the Purchaser
has not directly or indirectly, nor has any individual or entity
acting on behalf of or pursuant to any understanding with such
Purchaser, executed any purchases or sales, including Short Sales
(as defined below), of the securities of the Company during the
period commencing as of the time that such Purchaser first received
a term sheet (written or oral) from the Company or any other
individual or entity representing the Company setting forth the
material terms of the transactions contemplated hereunder and
ending immediately prior to the execution hereof. Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed
investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of
such Purchaser’s assets, the representation set forth above
shall only apply with respect to the portion of assets managed by
the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement. Other than to other
individuals or entities party to this Agreement, such Purchaser has
maintained the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms
of this transaction). Notwithstanding the foregoing, for avoidance
of doubt, nothing contained herein shall constitute a
representation or warranty, or preclude any actions, with respect
to the identification of the availability of, or securing of,
available shares to borrow in order to effect Short Sales or
similar transactions in the future. For purposes of this Agreement,
“Short
Sales” means all “short sales” as defined
in Rule 200 of Regulation SHO under the Exchange Act (but shall not
be deemed to include the location and/or reservation of borrowable
shares of Common Stock).

 

(m) The Purchaser is
aware that the anti-manipulation rules of Regulation M under the
Exchange Act may apply to sales of the Securities and other
activities with respect to the Securities by the
Purchaser.

 

(n) All of the
information concerning the Purchaser set forth herein, and any
other information furnished by the Purchaser in writing to the
Company or a Advisor for use in connection with the transactions
contemplated by this Agreement, is true and correct in all material
respects as of the date of this Agreement, and, if there should be
any material change in such information prior to the
Purchaser’s purchase of the Securities, the Purchaser will
promptly furnish revised or corrected information to the
Company.

 

(o) The Purchaser has
reviewed with its own tax advisors the U.S. federal, state, local
and foreign tax consequences of this investment and the
transactions contemplated by the Transaction Documents. With
respect to such matters, such Purchaser relies solely on such
advisors and not on any statements or representations of the
Company or any of its agents, written or oral. The Purchaser
understands that it (and not the Company) shall be responsible for
its own tax liability that may arise as a result of this investment
or the transactions contemplated by the Transaction
Documents.

 

 

 

 

-14-

 

 

(p) If the Purchaser is
not a United States person (as defined by Section 7701(a)(30) of
the Internal Revenue Code of 1986, as amended), the Purchaser
hereby represents that it has satisfied itself as to the full
observance of the laws of its jurisdiction in connection with any
invitation to subscribe for the Securities or any use of this
Agreement, including (a) the legal requirements within its
jurisdiction for the purchase of the Securities;

 

(dd) any
foreign exchange restrictions applicable to such purchase; (c) any
governmental or other consents that may need to be obtained; and
(d) the income tax and other tax consequences, if any, that may be
relevant to the purchase, holding, redemption, sale or transfer of
the Securities. The Purchaser’s subscription and payment for
and continued beneficial ownership of the Securities will not
violate any applicable securities or other laws of the
Purchaser’s jurisdiction.

 

(q) (For ERISA plans only) If the Purchaser
is a fiduciary of the Employee Retirement Income Security Act of
1974 (“ERISA”)
plan (the “Plan”),
the Purchaser represents that (i) 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; and (ii) the Purchaser fiduciary or Plan (a) is
responsible for the decision to invest in the Company; (b) is
independent of the Company or any of its Affiliates; (c) is
qualified to make such investment decision; and (d) in making such
decision, the Purchaser fiduciary or Plan has not relied primarily
on any advice or recommendation of the Company or any of its
Affiliates.

 

(r) Neither the
Purchaser nor, to the Purchaser’s knowledge, any of its
directors, executive officers, other officers that may serve as a
director or officer of any company in which it invests, general
partners or managing members is subject to any Disqualification
Events, except for Disqualification Events covered by Rule
506(d)(2)(ii) or (iii) under the
Securities Act, and disclosed in writing in reasonable detail to
the Company.

 

(s) If the Purchaser is
an individual, then the Purchaser resides in the state or province
identified in the address of the Purchaser set forth on such
Purchaser’s Omnibus Signature Page to this Agreement; if the
Purchaser is a partnership, corporation, limited liability company
or other entity, then the office or offices of the Purchaser in
which its principal place of business is identified in the address
or addresses of the Purchaser set forth on such Purchaser’s
Omnibus Signature Page to this Agreement.

 

5. Conditions to
Company’s Obligations. The Company’s obligation
to complete the sale and issuance of the Units and deliver the
Shares and Warrants to the Purchaser, individually, at the Closing
shall be subject to the following conditions to the extent not
waived by the Company:

 

(a) Receipt of Payment. The Company
shall have received payment, by certified or other bank check or by
wire transfer of immediately available funds, in the full amount of
the Purchase Price for the number of Units being purchased by such
Purchaser at the Closing.

 

(b) Representations and Warranties.
The representations and warranties made by the Purchaser in Section
4 hereof shall be true and correct in all material respects (except
to the extent any such representation and warranty is qualified by
materiality or reference to Material Adverse Effect, in which case,
such representation and warranty shall be true and correct in all
respects as so qualified) when made, and shall be true and correct
in all material respects (except to the extent any such
representation and warranty is qualified by materiality or
reference to Material Adverse Effect, in which case, such
representation and warranty shall be true and correct in all
respects as so qualified) on the Closing date, with the same force
and effect as if they had been made on and as of said
date.

 

 

 

-15-

 

 

(c) Performance. The Purchaser
shall have performed in all material respects all obligations and
covenants herein required to be performed by it on or prior to the
Closing.

 

(d) Receipt of Executed Documents.
Each Purchaser participating in the Closing shall have executed and
delivered to the Company the Omnibus Signature Page.

 

(e) Supplement. The Supplement to
the Registration Statement shall be on file with the
SEC.

 

6. Conditions to
Purchasers’ Obligations. The Purchaser’s
obligation to accept delivery of the Shares and Warrants and to pay
for the Units at the Closing shall be subject to the following
conditions to the extent not waived by the holders of at least a
majority of the Units issued to the Purchaser and the other
purchasers pursuant to the other Subscription Agreements of like
tenor used in the Offering (the “Held
Shares”) to be purchased at the Closing:

 

(a) Representations and Warranties.
The representations and warranties made by the Company in Section 3
hereof (as modified by the disclosures in the SEC Reports) shall be
true and correct in all material respects (except to the extent any
such representation and warranty is qualified by materiality or
reference to Material Adverse Effect, in which case, such
representation and warranty shall be true and correct in all
respects as so qualified) as of, and as if made on, the date of the
Closing, except to the extent any such representation or warranty
expressly speaks as of an earlier date, in which case such
representation or warranty shall be true and in all material
respects correct as of such earlier date (except in each case to
the extent any such representation and warranty is qualified by
materiality or reference to Material Adverse Effect, in which case,
such representation and warranty shall be true and correct in all
respects as so qualified).

  

(b) Performance. The Company shall
have performed in all material respects all obligations and
covenants herein which are required to be performed by it on or
prior to the date of the Closing.

 

(c)
Receipt of Executed Transaction
Documents. The Company shall have executed and delivered to
the Purchaser the executed Subscription Agreement.

 

 (d) Certificate. In connection with
the Closing only, the Chief Executive Officer of the Company shall
execute and deliver to the Purchaser a certificate addressed to the
purchasers under the Subscription Agreements participating in the
Closing to the effect that the representations and warranties of
the Company in Section 1.1(d) hereof (as modified by the
disclosures in the SEC Reports) shall be true and correct in all
material respects (except to the extent any such representation and
warranty is qualified by materiality or reference to Material
Adverse Effect, in which case, such representation and warranty
shall be true and correct in all respects as so qualified) as of,
and as if made on, the date of the Closing.

 

(e) Registration Statement. The
Registration Statement shall be effective on the Closing Date as to
all Securities, not subject to any threatened or actual stop order
and will not on the Closing Date contain any untrue statement of
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading.

 

(f) Good Standing. The Company and
each of its subsidiaries is a corporation or other business entity
duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its formation.

 

(g) Judgments. No judgment, writ,
order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or
any order of or by any Governmental Authority, shall have been
issued, and no action or proceeding shall have been instituted by
any Governmental Authority, enjoining or preventing the
consummation of the transactions contemplated hereby.

 

 

 

 

-16-

 

 

7.

Indemnification.

  

(a) The Company agrees
to indemnify and hold harmless the Purchaser, and its directors,
officers, stockholders, members, partners, employees and agents
(and any other persons with a functionally equivalent role of a
person holding such titles notwithstanding a lack of such title or
any other title), each person who controls such Purchaser (within
the meaning of Section 15 of the Securities Act and Section 20 of
the Exchange Act), and the directors, officers, stockholders,
agents, members, partners or employees (and any other persons with
a functionally equivalent role of a person holding such titles
notwithstanding a lack of such title or any other title) of such
controlling person (collectively, the “Purchaser Indemnitees”),
from and against all losses, liabilities, claims, damages, costs,
fees and expenses whatsoever (including, but not limited to, any
and all expenses incurred in investigating, preparing or defending
against any litigation commenced or threatened) based upon or
arising out of the Company’s breach of any representation,
warranty or covenant contained herein; provided, however, that the
Company will not be liable in any such case to the extent and only
to the extent that any such loss, liability, claim, damage, cost,
fee or expense arises out of or is based upon the inaccuracy of any
representations made by such indemnified party in this Agreement,
or the failure of such indemnified party to comply with the
covenants and agreements contained herein. The liability of the
Company under this paragraph shall not exceed the total Purchase
Price paid by the Purchaser hereunder, except in the case of
fraud.

 

Promptly after
receipt by an indemnified party under this Section 7 of notice of
the commencement of any Action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying
party under this Section 7, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify
the indemnifying party will not relieve it from any liability which
it may have to any indemnified party otherwise than under this
Section 7 except to the extent the indemnified party is actually
prejudiced by such omission. In case any such Action is brought
against any indemnified party, and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be
entitled to participate therein, and to the extent that it may
elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof, with counsel satisfactory to such
indemnified party; provided, however, if the defendants in any such
Action include both the indemnified party and the indemnifying
party and either (i) the indemnifying party or parties and the
indemnified party or parties mutually agree or (ii) representation
of both the indemnifying party or parties and the indemnified party
or parties by the same counsel is inappropriate under applicable
standards of professional conduct due to actual or potential
differing interests between them, the indemnified party or parties
shall have the right to select separate counsel to assume such
legal defenses and to otherwise participate in the defense of such
Action on behalf of such indemnified party or parties. Upon receipt
of notice from the indemnifying party to such indemnified party of
its election so to assume the defense of such Action and approval
by the indemnified party of counsel, the indemnifying party will
not be liable to such indemnified party under this Section 7 for
any reasonable legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof
unless (i) the indemnified party shall have employed counsel in
connection with the assumption of legal defenses in accordance with
the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel in such circumstance),
(ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the
Action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of
the indemnifying party. No indemnifying party shall (i) without the
prior written consent of the indemnified parties (which consent
shall not be unreasonably withheld), settle or compromise or
consent to the entry of any judgment with respect to any pending or
threatened Action in respect of which indemnification or
contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such Action)
unless such settlement, compromise or consent requires only the
payment of money damages, does not subject the indemnified party to
any continuing obligation or require any admission of criminal or
civil responsibility, and includes an unconditional release of each
indemnified party from all liability arising out of such Action, or
(ii) be liable for any settlement of any such Action effected
without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or
if there be a final judgment of the plaintiff in any such Action,
the indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by reason
of such settlement or judgment.

 

 

 

 

-17-

 

 

(b) Purchaser
acknowledges on behalf of itself and each Purchaser Indemnitee
that, other than for actions seeking specific performance of the
obligations under this Agreement or in the case of fraud, the sole
and exclusive remedy of the Purchaser and the Purchaser Indemnitee
with respect to any and all claims relating to this Agreement shall
be pursuant to the indemnification provisions set forth in this
Section 7.

 

8. Revocability;
Binding Effect. The subscription hereunder may be revoked
prior to the Closing thereon, provided that written notice of
revocation is sent and is received by the Company or the Advisor at
least one Business Day prior to the Closing on such subscription.
The Purchaser hereby acknowledges and agrees that this Agreement
shall survive the death or disability of the Purchaser and shall be
binding upon and inure to the benefit of the parties and their
heirs, executors, administrators, successors, legal representatives
and permitted assigns. If the Purchaser is more than one person,
the obligations of the Purchaser hereunder shall be joint and
several and the agreements, representations, warranties and
acknowledgments herein shall be deemed to be made by and be binding
upon each such person and such person’s heirs, executors,
administrators, successors, legal representatives and permitted
assigns. For the purposes of this Agreement, “Business
Day” means a day, other than a Saturday or Sunday, on
which banks in New York City are open for the general transaction
of business. Notwithstanding the foregoing revocation provisions,
in no case may a Purchaser revoke its purchase of Securities after
the Purchaser’s funds have been closed upon.

 

9.

Miscellaneous.

  

(a) Modification. This Agreement
shall not be amended, modified or waived except by an instrument in
writing signed by the Company and the holders of at least a
majority of the then Held Shares (as defined above). Any amendment,
modification or waiver effected in accordance with this Section
9(a) shall be binding upon the Purchaser and each transferee of the
Securities, each future holder of all such Securities, and the
Company.

 

(b) Third-Party Beneficiary. This
Agreement is intended for the benefit of the parties hereto and
their respective successors and permitted assigns and is not for
the benefit of, nor may any provision hereof be enforced by, any
other Person, except as otherwise set forth in Section 7(a) and
this Section 9(c).

 

(c) Notices. Any notice, consents,
waivers or other communication required or permitted to be given
hereunder shall be in writing and will be deemed to have been
delivered: (i) upon receipt, when personally delivered; (ii) upon
receipt when sent by certified mail, return receipt requested,
postage prepaid; (iii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party);
(iv) when sent, if by e-mail, (provided that such sent e-mail is
kept on file (whether electronically or otherwise) by the sending
party and the sending party does not receive an automatically
generated message from the recipient’s e-mail server that
such e- mail could not be delivered to such recipient); or (v) one
(1) Business Day after deposit with an overnight courier service
with next day delivery specified, in each case, properly addressed
to the party to receive the same. The addresses, facsimile numbers
and email addresses for such communications shall be:

 

(i) if to the Company,
at

 

Wrap
Technologies, Inc.

1817
W 4th Street

Tempe,
Arizona 85281

Attention: David
Norris, Chief Executive Officer Email: david@wraptechnologies.com

 

with
copies (which shall not constitute notice) to:

 

Disclosure Law
Group, a Professional Corporation

655
West Broadway, Suite 870

San
Diego, CA 92101

Attention: Daniel
W. Rumsey Facsimile: 619-330-2101

Email:
drumsey@disclosurelawgroup.com

 

 

 

 

-18-

 

 

 

(ii) if
to the Purchaser, at the address set forth on the Omnibus Signature
Page hereof (or, in either case, to such other address as the party
shall have furnished in writing in accordance with the provisions
of this Section). Any notice or other communication given by
certified mail shall be deemed given at the time of certification
thereof, except for a notice changing a party’s address which
shall be deemed given at the time of receipt thereof.

 

(d) Assignability. This Agreement
and the rights, interests and obligations hereunder are not
transferable or assignable by the Purchaser, and the transfer or
assignment of the Securities shall be made only in accordance with
all applicable laws.

 

(e) Applicable Law. This Agreement
shall be governed by and construed in accordance with the laws of
the State of Delaware, without reference to the principles thereof
relating to the conflict of laws.

 

(f) Arbitration. All disputes
arising out of or in connection with this Agreement shall be
submitted to the International Court of Arbitration of the
International Chamber of Commerce and shall be finally settled
under the Rules of Arbitration of the International Chamber of
Commerce by one or more arbitrators appointed in accordance with
the said Rules. The place of arbitration shall be New York, New
York.

  

(g) Use of Pronouns. All pronouns
and any variations thereof used herein shall be deemed to refer to
the masculine, feminine, neuter, singular or plural as the identity
of the person or persons referred to may require.

 

(h) Securities Law Disclosure;
Publicity. The Company shall on the date this Agreement is
executed (but in no event later than 8:30am EST on the one (1)
Trading Day following the execution date hereof issue a press
release reasonably acceptable to the Purchasers disclosing
definitive agreements have been executed and all material terms of
the transactions contemplated hereby. The Company shall file a
press release within one (1) Trading Day of the Closing and file a
Current Report on Form 8-K with the Commission (the
“8-K
Filing”) describing the terms of the
transactions contemplated by this Agreement and including as
exhibits to such 8-K Filing this Agreement, in the form required by
the Exchange Act. The Company shall not publicly disclose the name
of any Purchaser or an Affiliate of any Purchaser, or include the
name of any Purchaser or an Affiliate of any Purchaser in any press
release or filing with the SEC or any regulatory agency or
principal trading market, without the prior written consent of such
Purchaser, except (i) as required by federal securities law in
connection with (A) any registration statement contemplated by the
Registration Rights Agreement and (B) the filing of final
Transaction Documents with the SEC or (ii) to the extent such
disclosure is required by law, request of the staff of the SEC or
of any regulatory agency or principal trading market regulations,
in which case the Company shall provide the Purchasers with prior
written notice of such disclosure permitted under this sub-clause
(ii). From and after the issuance by the Company of a press release
and/Current Report on Form 8-K describing the transactions
contemplated by the Subscription Agreements (the
“Public
Disclosure”), no Purchaser shall be in possession of
any material, non-public information received from the Company or
any of its respective officers, directors, employees or agents that
is not disclosed in the Public Disclosure unless a Purchaser shall
have executed a written agreement regarding the confidentiality and
use of such information. Each Purchaser, severally and not jointly
with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed
by the Company as described in this Section 9, such Purchaser will
maintain the confidentiality of all disclosures made to it in
connection with such transactions (including the existence and
terms of such transactions).

 

 

 

 

-19-

 

 

(i) Non-Public Information. Except
for information (including the terms of this Agreement and the
transactions contemplated hereby) disclosed and that will be
disclosed in the SEC Reports, the Company shall not and shall cause
each of its officers, directors, employees and agents, not to,
provide any Purchaser with any material, non-public information
regarding the Company without the express written consent of such
Purchaser.

 

(j) This Agreement,
together with all exhibits, schedules and attachments hereto and
thereto and any confidentiality agreement between the Purchaser and
the Company, constitute the entire agreement between the Purchaser
and the Company with respect to the Offering and supersede all
prior oral or written agreements and understandings, if any,
relating to the subject matter hereof. The terms and provisions of
this Agreement may be waived, or consent for the departure
therefrom granted, only by a written document executed by the party
entitled to the benefits of such terms or provisions.

 

(k) If the Securities
are certificated and any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company and the
Company’s transfer agent of such loss, theft or destruction
and the execution by the holder thereof of a customary lost
certificate affidavit of that fact and an agreement to indemnify
and hold harmless the Company and the Company’s transfer
agent for any losses in connection therewith, or, if required by
the transfer agent in connection with Shares, a bond in such form
and amount as is required by the transfer agent. The applicants for
a new certificate or instrument under such circumstances shall also
pay any reasonable third-party costs associated with the issuance
of such replacement Securities. If a replacement certificate or
instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such
mutilated certificate or instrument as a condition precedent to any
issuance of a replacement.

 

(l) Each of the parties
hereto shall pay its own fees and expenses (including the fees of
any attorneys, accountants, appraisers or others engaged by such
party) in connection with this Agreement and the transactions
contemplated hereby, whether or not the transactions contemplated
hereby are consummated, except that the Company shall up to $25,000
for the Advisor’s legal expenses, as set forth in Section
2(c).

 

(m) This Agreement may
be executed in one or more original or facsimile or by an e-mail
which contains a portable document format (.pdf) file of an
executed signature page counterpart, each of which shall be deemed
an original, but all of which shall together constitute one and the
same instrument and which shall be enforceable against the parties
actually executing such counterparts. The exchange of copies of
this Agreement and of signature pages by facsimile transmission or
in .pdf format shall constitute effective execution and delivery of
this Agreement as to the parties and may be used in lieu of the
original Agreement for all purposes. Signatures of the parties
transmitted by facsimile or by e- mail of a document in pdf format
shall be deemed to be their original signatures for all
purposes.

 

(n) Each provision of
this Agreement shall be considered separable and, if for any reason
any provision or provisions hereof are determined to be invalid or
contrary to applicable law, such invalidity or illegality shall not
impair the operation of or affect the remaining portions of this
Agreement.

 

(o) Paragraph titles
are for descriptive purposes only and shall not control or alter
the meaning of this Agreement as set forth in the
text.

 

(p) The Purchaser
understands and acknowledges that there may be multiple Subsequent
Closings for the Offering.

 

 

 

 

-20-

 

 

(q) The Purchaser
hereby agrees to furnish the Company such other information as the
Company may request prior to the Closing with respect to its
subscription hereunder.

 

(r) The representations
and warranties of the Company and each Purchaser contained in or
made pursuant to this Agreement shall survive the execution and
delivery of this Agreement for a period of one (1) year from the
date of the Closing and shall in no way be affected by any
investigation or knowledge of the subject matter thereof made by or
on behalf of the Purchasers or the Company.

 

(s) Omnibus Signature Page. This
Agreement is intended to be read and construed in conjunction with
the Registration Rights Agreement. Accordingly, pursuant to the
terms and conditions of this Agreement and the Registration Rights
Agreement, it is hereby agreed that the execution by the Purchaser
of this Agreement, in the place set forth on the Omnibus Signature
Page below, shall constitute agreement to be bound by the terms and
conditions hereof and the terms and conditions of the Registration
Rights Agreement, with the same effect as if each of such separate
but related agreements were separately signed.

 

(t) Public Disclosure. Neither the
Purchaser nor any officer, manager, director, member, partner,
stockholder, employee, Affiliate, Affiliated person or entity of
the Purchaser shall make or issue any press releases or otherwise
make any public statements or make any disclosures to any third
person or entity with respect to the transactions contemplated
herein and will not make or issue any press releases or otherwise
make any public statements of any nature whatsoever with respect to
the Company without the Company’s express prior approval
(which may be withheld in the Company’s sole discretion),
except to the extent such disclosure is required by law, request of
the staff of the SEC or of any regulatory agency or principal
trading market regulations.

 

(u) Potential Conflicts. The
Advisors, their sub-agents, legal counsel to the Company, or the
Advisor and/or their respective Affiliates, principals,
representatives or employees may now or hereafter own shares of the
Company.

 

(v) Independent Nature of Each
Purchaser’s Obligations and Rights. For avoidance of
doubt, the obligations of the Purchaser under this Agreement are
several and not joint with the obligations of any other purchaser
under any other Subscription Agreement, and the Purchaser shall not
be responsible in any way for the performance of the obligations of
any other purchaser under any other Subscription Agreement. Nothing
contained herein and no action taken by the Purchaser shall be
deemed to constitute the Purchaser as a partnership, an
association, a joint venture, or any other kind of entity, or
create a presumption that the purchasers Subscription Agreements
are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by this Agreement and
any other Subscription Agreements. The Purchaser shall be entitled
to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement, and it shall
not be necessary for any other purchaser under any other
Subscription Agreement to be joined as an additional party in any
proceeding for such purpose.

 

 

 

[Signature page follows.]

 

 

 

-21-Exhibit 10.1

 

FIRST AMENDMENT TO

LOAN AND SECURITY AGREEMENT

 

This FIRST AMENDMENT
to Loan and Security Agreement (this “Amendment”) is entered into as of June 1, 2020, by and among Silicon
Valley Bank, a California corporation (“Bank”), LEAF GROUP LTD., a Delaware corporation (“Parent”),
SOCIETY6, LLC, a Delaware limited liability company, WELL+GOOD LLC, a New York limited liability company, LS MEDIA
HOLDINGS, LLC, a Delaware limited liability company, DENY DESIGNS, LLC, a Delaware limited liability company, SAATCHI
ONLINE, INC., a Delaware corporation, OTHER ART FAIRS, LLC, a Delaware limited liability company, LEAF GROUP SERVICES,
LLC, a Delaware limited liability company and LEAF OIYS, LLC, a Delaware limited liability company (together with Parent,
each a “Co-Borrower” and collectively, “Co-Borrowers”).

 

Recitals

 

A.           Bank and Co-Borrowers have entered into that certain Loan and Security Agreement dated as of November 7, 2019 (as the
same may from time to time be amended, modified, supplemented or restated, the “Loan Agreement”).

 

B.           Bank has extended credit to Co-Borrowers for the purposes permitted in the Loan Agreement.

 

C.           Co-Borrowers have requested that Bank amend the Loan Agreement to (i) modify the borrowing formula, (ii) add a financial
covenant, (iii) extend the maturity date, and (iv) make certain other revisions to the Loan Agreement as more fully set forth herein.

 

D.           Bank has agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the
terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

 

Agreement

 

Now,
Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

 

1.            Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to
them in the Loan Agreement.

 

2.            Amendments to Loan Agreement.

 

2.1          Section 2.3 (Overadvances). Section 2.3 of the Loan Agreement hereby is amended and restated in its entirety to read
as follows:

 

“2.3        Overadvances.
If, at any time, the outstanding principal amount of any Advances exceeds the lesser of either (a) the Revolving Line or (b) the
sum of (i) the Borrowing Base plus (ii) the Non-Formula Sublimit, Co-Borrowers shall immediately pay to Bank in cash the amount
of such excess (such excess, the “Overadvance”). Without limiting Co-Borrowers’ obligation to repay Bank
any Overadvance, Co-Borrowers agree to pay Bank interest on the outstanding amount of any Overadvance, on demand, at a per annum
rate equal to the rate that is otherwise applicable to Advances plus five percent (5.0%).”

 

    

     

    

 

2.2          Section 6.3 (Accounts Receivable). Sections 6.3(b) and 6.3(c) of the Loan Agreement hereby are amended and restated
in their entirety to read as follows:

 

“(b)          Disputes.
Co-Borrowers shall promptly notify Bank of all disputes or claims in excess of Fifty Thousand Dollars ($50,000) relating to Accounts.
Co-Borrowers may forgive (completely or partially), compromise, or settle any Account for less than payment in full, or agree to
do any of the foregoing so long as (i) Co-Borrowers do so in good faith, in a commercially reasonable manner, in the ordinary course
of business, in arm’s-length transactions, and, to the extent such Accounts exceed Fifty Thousand Dollars ($50,000) reports
the same to Bank in the regular reports provided to Bank; (ii) no Event of Default has occurred and is continuing; and (iii) after
taking into account all such discounts, settlements and forgiveness, the total outstanding Advances will not exceed the lesser
of (i) the Revolving Line or (ii) the sum of (A) the Borrowing Base plus (B) the Non-Formula Sublimit.

 

(c)          Collection
of Accounts. Co-Borrowers shall direct Account Debtors to deliver or transmit all proceeds of Accounts into a lockbox account,
or via electronic deposit capture into a “blocked account” as specified by Bank (either such account, the “Cash
Collateral Account”). Whether or not an Event of Default has occurred and is continuing, Co-Borrowers shall promptly
deliver all payments on and proceeds of Accounts to the Cash Collateral Account. Subject to Bank’s right to maintain a reserve
pursuant to Section 6.3(d), all amounts received in the Cash Collateral Account shall be (i) when a Streamline Period is not in
effect, applied to immediately reduce the Obligations (other than Obligations owing under the Non-Formula Sublimit) under the Revolving
Line (unless Bank, in its sole discretion, at times when an Event of Default exists, elects not to so apply such amounts), or (ii)
when a Streamline Period is in effect, transferred on a daily basis to Co-Borrowers’ operating account with Bank. Co-Borrowers
hereby authorize Bank to transfer to the Cash Collateral Account any amounts that Bank reasonably determines are proceeds of the
Accounts (provided that Bank is under no obligation to do so and this allowance shall in no event relieve Co-Borrowers of their
obligations hereunder).”

 

2.3          Section 6.9 (Financial Covenant). Section 6.9 of the Loan Agreement hereby is amended and restated in its entirety to
read as follows:

 

“6.9          Financial
Covenant. Co-Borrowers shall, at all times, but tested as of the last day of each calendar month, maintain a Liquidity Ratio
of at least 1.50 to 1.00.”

 

2.4          Section 6.15 (Post-Closing Deliverables). Section 6.15(c) of the Loan Agreement hereby is amended and restated in its
entirety to read as follows:

 

“(c)          Co-Borrowers
shall, on or prior to August 31, 2020, close the Barclay’s Account and the NAB Account and transfer all amounts therein
to Co-Borrowers accounts at Bank or Bank’s Affiliates. Notwithstanding the foregoing, any failure to complete such
closure and transfer of the Barclay’s Account and/or the NAB Account within the timeframe set forth herein that is
solely a result of Bank’s or its Affiliates’ failure to timely open and make available substantially equivalent
replacement accounts shall not constitute an Event of Default hereunder.”

 

    2

     

    

 

2.5          Section 8.2 (Covenant Default). Section 8.2(a) of the Loan Agreement hereby is amended and restated in its entirety
to read as follows:

 

“(a)          (i)
A Co-Borrower fails or neglects to perform any obligation in Sections 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.10, 6.12, 6.14 or 6.15
or violates any covenant in Section 7, or (ii) Co-Borrowers fail to maintain compliance with the financial covenant set forth in
Section 6.9 hereof, unless any such failure to comply is cured within three (3) Business Days after the occurrence thereof; or”

 

2.6          Section 13 (Definitions). The following terms and their respective definitions hereby are added or amended and restated
in their entirety in Section 13.1 of the Loan Agreement, as appropriate, as follows:

 

“Availability
Amount” is (a) the lesser of (i) the Revolving Line or (ii) the amount available under the Borrowing Base plus
the Non-Formula Sublimit, minus, in each case, (b) the outstanding principal balance of any Advances.

 

“First Amendment
Effective Date” means June 1, 2020.

 

“Liquidity
Ratio” means a ratio of (a) (i) unrestricted cash and Cash Equivalents held by Co-Borrowers in accounts at Bank, plus
(ii) an amount equal to the product of (A) Co-Borrower’s net trade accounts receivable (determined in accordance with GAAP),
multiplied by (B) sixty percent (60%), to (b) (i) the outstanding principal balance of any Advances (other than amounts
outstanding in connection with the PPP Loan), plus (ii) Co-Borrowers’ accounts payable owing to artists selling works
on Co-Borrowers’ platforms, as defined in Financial Statements delivered in accordance with Section 6.2.

 

“Non-Formula
Sublimit” is availability for Advances under the Revolving Line without regard to Eligible Accounts in an aggregate
amount equal to (a) at all times during the period of time from the First Amendment Effective Date through and including December
1, 2020, One Million Dollars ($1,000,000), and (b) at all times after December 1, 2020, Zero Dollars ($0.00).

 

“PPP Loan”
means that certain loan made by Bank to Parent under the Paycheck Protection Program established pursuant to the Coronavirus Aid,
Relief and Economic Security Act (as amended, and the related rules and regulations).

 

“Revolving
Line Maturity Date” is May 5, 2021.

 

    3

     

    

 

“Streamline
Period” is, on and after the First Amendment Effective Date, provided no Event of Default has occurred and is
continuing, the period (a) commencing on the first day of the month following the day that Co-Borrowers provide to Bank a
written report confirming that Co-Borrowers have, for each consecutive day in the immediately preceding month maintained a
Liquidity Ratio no less than 1.75:1.00, as determined by Bank in its good faith business discretion, (the
 “Streamline Ratio”); and (b) terminating on the earlier to occur of (i) the occurrence of an Event of
Default, and (ii) the first day thereafter on which Co-Borrowers fail to maintain the Streamline Ratio, as calculated by
Bank. Upon termination of a Streamline Period, Co-Borrowers must maintain the required Streamline Ratio each consecutive day
for one (1) fiscal quarter as determined by Bank, prior to entering into a subsequent Streamline Period. Each Streamline
Period shall commence on the first day of the monthly period following the date Bank determines that the conditions set forth
herein have been achieved.

 

“Streamline
Ratio” is defined in the definition of Streamline Period.

 

2.7          Section 13 (Definitions). Subsection (a) of the defined term “Permitted Indebtedness” set forth in Section
13.1 of the Loan Agreement hereby is amended and restated to read as follows:

 

“(a)          Co-Borrowers’
Indebtedness to Bank under this Agreement, the other Loan Documents and in connection with the PPP Loan;”

 

2.8          Exhibit B of the Loan Agreement hereby is replaced with Exhibit B attached hereto.

 

3.            Limitation of Amendments.

 

3.1          The amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited
precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or
condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future
under or in connection with any Loan Document.

 

3.2          This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations,
warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed
and shall remain in full force and effect.

 

4.            Representations and Warranties. To induce Bank to enter into this Amendment, each Co-Borrower hereby represents
and warrants to Bank as follows:

 

4.1          Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents
are true and correct in all material respects as of the date hereof (except to the extent such representations and warranties relate
to an earlier date, in which case they are true and correct in all material respects as of such date), and (b) no Event of Default
has occurred and is continuing;

 

4.2          Co-Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the
Loan Agreement, as amended by this Amendment;

 

4.3          The organizational documents of Co-Borrower delivered to Bank on the Effective Date remain true, accurate and complete
and have not been amended, supplemented or restated and are and continue to be in full force and effect;

 

    4

     

    

 

4.4          The execution and delivery by Co-Borrower of this Amendment and the performance by Co-Borrower of its obligations under
the Loan Agreement, as amended by this Amendment, have been duly authorized;

 

4.5          The execution and delivery by Co-Borrower of this Amendment and the performance by Co-Borrower of its obligations under
the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any material Requirement of Law, (b) any material
agreement binding on Co-Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority,
or subdivision thereof, binding on Co-Borrower, or (d) the organizational documents of Co-Borrower;

 

4.6          The execution and delivery by Co-Borrower of this Amendment and the performance by Co-Borrower of its obligations under
the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation
of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof,
binding on Co-Borrower, except as already has been obtained or made; and

 

4.7          This Amendment has been duly executed and delivered by Co-Borrower and is the binding obligation of Co-Borrower, enforceable
against Co-Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization,
liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’
rights.

 

5.            Ratification of Intellectual Property Security Agreement. Each Co-Borrower hereby ratifies, confirms and
reaffirms, all and singular, the terms and conditions of those certain Intellectual Property Security Agreements dated as of the
Effective Date between each Co-Borrower and Bank, and acknowledges, confirms and agrees that said Intellectual Property Security
Agreement (a) except as set forth on Schedule 1 hereto, contains an accurate and complete listing of all Intellectual Property
Collateral (as defined therein) and (b) shall remain in full force and effect.

 

6.            Ratification of Perfection Certificate.  Each Co-Borrower hereby ratifies, confirms and reaffirms,
all and singular, the terms and disclosures contained in those certain Perfection Certificates dated on or prior to the Effective
Date and acknowledges, confirms and agrees that, except as set forth on Schedule 1 hereto, the disclosures and information
such Co-Borrower provided to Bank in such Perfection Certificate have not changed, as of the date hereof.

 

7.            Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts
taken together shall be deemed to constitute one and the same instrument.

 

8.            Effectiveness. This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank
of this Amendment by each party hereto, and (b) Co-Borrowers’ payment to Bank of (i) a commitment fee in an amount equal
to Twenty Five Thousand Dollars ($25,000), and (ii) all Bank Expenses due and owing as of the date hereof, which may be debited
from any of Co-Borrowers’ accounts at Bank.

 

[Balance of Page
Intentionally Left Blank]

 

    5

     

    

 

In
Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first
written above.

 

	CO-BORROWERS:	 	 	 
	 	 	 	 	 
	LEAF GROUP LTD.	 	DENY DESIGNS, LLC, by Leaf Group Ltd., its sole member
	 	 	 	 	 
	By:	/s/ Sean Moriarty	 	By:	/s/ Sean Moriarty
	 	 	 	 	 
	Name:	Sean Moriarty	 	Name:	Sean Moriarty
	 	 	 	 	 
	Title:	Chief Executive Officer 	 	Title:	Chief Executive Officer
	 	 	 	 	 
	SOCIETY6, LLC, by Leaf Group Ltd., its sole member	 	SAATCHI ONLINE, INC.
	 	 	 	 	 
	By:	/s/ Sean Moriarty	 	By:	/s/ Sean Moriarty
	 	 	 	 	 
	Name:	Sean Moriarty	 	Name:	Sean Moriarty
	 	 	 	 	 
	Title:	Chief Executive Officer	 	Title:	Chief Executive Officer
	 	 	 	 	 
	WELL+GOOD LLC, by Leaf Group Ltd., its sole member	 	OTHER ART FAIRS, LLC, by Leaf Group Ltd., its sole member
	 	 	 	 	 
	By:	/s/ Adam Wergeles	 	By:	/s/ Sean Moriarty
	 	 	 	 	 
	Name:	Adam Wergeles	 	Name:	Sean Moriarty
	 	 	 	 	 
	Title:	Executive Vice President and Secretary	 	Title:	Chief Executive Officer
	 	 	 	 	 
	LS MEDIA HOLDINGS, LLC, by Leaf Group Ltd., its sole member	 	LEAF GROUP SERVICES, LLC, by Leaf Group Ltd., its sole member
	 	 	 	 	 
	By:	/s/ Sean Moriarty	 	By:	/s/ Sean Moriarty
	 	 	 	 	 
	Name:	Sean Moriarty	 	Name:	Sean Moriarty
	 	 	 	 	 
	Title:	Chief Executive Officer	 	Title:	Chief Executive Officer
	 	 	 	 	 
	LEAF OIYS, LLC, by Leaf Group Ltd., its sole member	 	 	 
	 	 	 	 	 
	By:	/s/ Sean Moriarty	 	 	 
	 	 	 	 	 
	Name:	Sean Moriarty	 	 	 
	 	 	 	 	 
	Title:	Chief Executive Officer	 	 	 

 

[Signature
Page to First Amendment to Loan and Security Agreement]

 

    

     

    

 

IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be executed as of the Effective Date.

 

BANK:

 

SILICON VALLEY BANK

 

	By	/s/ Andrea Jones	                                                 
	 	 	 
	Name:  	Andrea Jones	 
	 	 	 
	Title:	Vice President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00310-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00310-of-00352.parquet"}]]