Document:

NEITHER THIS SECURITY
NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE
TRANSFEROR TO SUCH EFFECT WHICH SHALL BE ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

COMMON STOCK
PURCHASE WARRANT

 

XCEL BRANDS,
Inc.

 

Warrant No.: XB [l]

	Warrant Shares: [l]	   Initial Exercise Date: [l], 2013

 

THIS COMMON STOCK PURCHASE
WARRANT (the “Warrant”) certifies that, for value received, [l]
(the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter
set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close
of business on the five year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter,
to subscribe for and purchase from XCel Brands, Inc., a Delaware corporation (the “Company”), up to [l]
([l]) shares (the “Warrant Shares”)
of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined
in Section 2(b).

 

Section
1.          Definitions. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Subscription Agreement (the “Subscription Agreement”),
dated [l], 2013, among the Company and
the Holder. The term “Business Day” shall mean a day, other than a Saturday, Sunday or federal holiday, on which banks
in New York City are generally open for normal business. The term “Trading Day” shall mean a day on which the Common
Stock is traded on any of the following markets or exchanges: the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the American Stock Exchange, the New York Stock Exchange or the OTC Bulletin Board.

 

Section
2.          Exercise.

 

a)          Exercise
of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times
on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or
agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing
on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto; and, within three
(3) Trading Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received the original
Warrant and, except as, provided for in section 2(c) below, payment of the aggregate Exercise Price of the Warrant Shares thereby
purchased by wire transfer or cashier’s check drawn on a United States bank. In the case of the purchase of less than all
of the Warrant Shares represented by this Warrant, the Company shall, upon receipt of this Warrant, cause this Warrant to be cancelled
and shall execute and deliver a new Warrant of like tenor for the remaining Warrant Shares.

 

    	 

    	 

    

 

b)          Exercise
Price. The exercise price per share of the Common Stock under this Warrant shall be $5.00, subject to adjustment hereunder
(the “Exercise Price”).

 

c)          Cashless
Exercise. If, following the one (1) year anniversary of the date of the Initial Exercise Date and (i) the average daily trading
volume of the Common Stock for the thirty (30) Trading Day period immediately prior to the date of exercise is at least 25,000
shares and (ii) there is no effective registration statement registering, or no current prospectus available for, the resale of
the Warrant Shares by the Holder at the time the Holder intends to exercise this Warrant in whole or in part, then this Warrant
may also be exercised at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive
a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) =    the
VWAP on the Trading Day immediately preceding the date of such election;

 

(B) =     the
Exercise Price of this Warrant, as adjusted; and

 

(X) =   
the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a
cash exercise rather than a cashless exercise.

 

Notwithstanding
anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant
to this Section 2(c).

 

For purposes
of this Warrant, “VWAP” means, for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq global
Select Market, the American Stock Exchange, the New York Stock Exchange or the OTC Bulletin Board (each a “Trading Market”),
the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market
on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. New York
City time to 4:02 p.m. New York City time); or (b) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin
Board and if prices for the Common Stock are then reported by the OTC Markets, LLC (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (c) in all
other cases, the fair market value of a share of Common Stock as determined good faith by the resolution of the Board of Directors
of the Company.

 

    	 

    	 

    

 

d)          Mechanics
of Exercise. 

 

i.          Delivery
of Certificates Upon Exercise. Certificates for shares purchased hereunder shall be transmitted within five (5) Trading Days
from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant and payment of the aggregate Exercise
Price as set forth above (the “Warrant Share Delivery Date”). This Warrant shall be deemed to have been exercised
on the date the Exercise Price is received by the Company. The Warrant Shares shall be deemed to have been issued, and Holder or
any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes,
as of the date the Warrant has been exercised by payment to the Company of the Exercise Price (or by cashless exercise) and all
taxes required to be paid by the Holder, if any, pursuant to Section 2(c)(iv) prior to the issuance of such shares, have been paid.

 

ii.          Delivery
of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, upon surrender of this
Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder
a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant.

 

iii.          No
Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise
of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company
shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share.

 

iv.          Charges,
Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall
be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed
by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other
than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto
duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.

 

    	 

    	 

    

 

v.          Closing
of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.

 

Section
3.          Certain Adjustments.

 

a)          Stock
Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise
makes a distribution or distributions to all holders of Common Stock payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding
shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares
of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding immediately after such event and the number of shares
issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant
shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date
for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or re-classification.

 

b)          Calculations.
All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

c)          Notice
to Holder.

 

i.          Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly
mail to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.

 

    	 

    	 

    

 

ii.          Notice
to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the
Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the
Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last
address as it shall appear upon the Warrant Register of the Company, at least 10 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares
of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale,
transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall
not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to exercise this
Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice.

 

Section
4.          Transfer of Warrant.

 

a)          Transferability.
Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof, this Warrant and
all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender
of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination
or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned, and this Warrant shall promptly be cancelled. The Warrant, if properly assigned, may be exercised
by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

    	 

    	 

    

 

b)          New
Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the
Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by
the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants
to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Initial
Exercise Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

c)          Warrant
Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered
Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and
for all other purposes, absent actual notice to the contrary.

 

d)          Transfer
Restrictions. If, at the time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an
effective registration statement under the Securities Act and under
applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions pursuant
to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant,
as the case may be, make representations set forth in Section 1 of the Subscription Agreement to the extent such representations
and warranties relate to the undersigned and/or the purchase of Warrant Shares.

 

Section
5.          Miscellaneous.

 

a)          No
Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder
of the Company prior to the exercise hereof as set forth in Section 2(a).

 

b)          Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant
Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of
the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate,
if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation,
in lieu of such Warrant or stock certificate.

 

c)          Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding
Business Day.

 

    	 

    	 

    

 

d)          Authorized
Shares.

 

The Company
covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock the
number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.
The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged
with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise
of the purchase rights under this Warrant. The Company will take all such commercially reasonable action as may be necessary to
assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any
requirements of the trading market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which
may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented
by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created
by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such
issue).

 

Before taking
any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary
from any public regulatory body or bodies having jurisdiction thereof.

 

e)          Jurisdiction.
All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Subscription Agreement.

 

f)          Restrictions.
The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions
upon resale imposed by state and federal securities laws.

 

g)          Nonwaiver
and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate
as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights
hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this
Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings,
incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.

 

    	 

    	 

    

 

h)          Notices.
Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered
in accordance with the notice provisions of the Subscription Agreement.

 

i)          Limitation
of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase
Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for
the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.

 

j)          Successors
and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by
the Holder or holder of Warrant Shares.

 

k)          Amendment.
This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and Holders holding
Warrants at least equal to a majority of the Warrant Shares issuable upon exercise of all then outstanding Warrants.

 

l)          Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions
of this Warrant.

 

m)          Headings.
The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of
this Warrant.

 

********************

  

(Signature Pages Follow)

 

    	 

    	 

    

 

IN WITNESS WHEREOF, the
Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

	
        XCEL BRANDs, Inc.

         

         

	
        By:__________________________________________

              Name:

              Title:

         

 

    	 

    	 

    

 

NOTICE OF EXERCISE

 

To:XCEL
BRANDs, Inc.

 

(1)          The
undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only
if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes,
if any.

 

(2)          Payment
shall take the form of (check applicable box):

 

		 ̈	in lawful money of the United States; or

 

		 ̈	the cancellation of such number of Warrant Shares
as is necessary, in accordance with the formula set forth in subsection 2(c) to exercise this Warrant with respect to the maximum
number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

 

(3)          
Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name
as is specified below:

 

_______________________________

 

 

The Warrant Shares shall be delivered to
the following DWAC Account Number or by physical delivery of a certificate to:

 

_______________________________

 

_______________________________

 

_______________________________

 

(4) Accredited Investor.
The undersigned represents that the representations set forth in Section 1 of the Subscription Agreement (as such representations
and warranties relate to the undersigned and/or its purchase of Warrant Shares) are true and correct as of the date of this Notice
of Exercise.

 

[SIGNATURE
OF HOLDER]

 

Name of Investing Entity: ________________________________________________________________________

Signature of Authorized Signatory of
Investing Entity: _________________________________________________

Name of Authorized Signatory: ___________________________________________________________________

Title of Authorized Signatory: ____________________________________________________________________

Date: ________________________________________________________________________________________

 

    	 

    	 

    

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

 

 

FOR VALUE RECEIVED, [____]
all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

 

_______________________________________________
whose address is

 

_______________________________________________________________.

 

_______________________________________________________________

 

Dated: ______________, _______

 

 

Holder’s Signature:_____________________________

 

Holder’s Address:_____________________________

 

_____________________________

 

 

Signature Guaranteed: ___________________________________________

 

 

NOTE: The signature to this Assignment
Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever,
and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing Warrant.SUBSCRIPTION AGREEMENT

 

XCel Brands, Inc.

475 Tenth Avenue

New York, New York 10018

 

Ladies and Gentlemen:

 

This Subscription Agreement
(the “Subscription Agreement”) sets forth the agreement of XCel Brands, Inc. (the “Company”) and the undersigned
with respect to the sale by the Company to the undersigned of (i) the number of shares of common stock, $0.001 par value per share,
of the Company (“Common Stock”) set forth on the signature page hereto (the “Shares”) and (ii) warrants
(the “Warrants”), each warrant to purchase one share of Common Stock at an exercise price of $5.00 per share, in the
form attached as Exhibit A hereto, for the purchase price set forth on the signature page hereto (the “Purchase Price”).
Together with this Subscription Agreement, the undersigned is delivering to Xcel either (1) a check payable to XCel Brands, Inc.
or (2) funds by wire transfer as instructed by the Company, in either case in the full amount of the purchase price for the Shares
and Warrants which the undersigned is hereby subscribing for pursuant hereto. This Subscription Agreement is part of an offering
of up to [●]
shares of Common Stock and [●]
Warrants.

 

1.                 
Subscriber Representations and Warranties. In order to induce the Company to accept this subscription, the
undersigned hereby represents and warrants to, and covenants with, the Company as follows:

 

(i)                
The undersigned acknowledges that it or its representatives has access to or has received from the Company copies
of the Company’s filings with the SEC since October 1, 2011 (the “SEC Filings”);

 

(ii)              
Other than its review of the SEC Filings, the undersigned has not been furnished, by the Company or an agent or representative
thereof, with any other materials or literature relating to the Company or the offer and sale of the Shares and Warrants;

 

(iii)            
The undersigned has performed its own due diligence in connection with its subscription for the Shares and Warrants
and has had a reasonable opportunity to ask questions of and receive answers from the Company concerning the Company and the offering,
and all such questions, if any, have been answered to the full satisfaction of the undersigned;

 

(iv)            
The undersigned or its representatives are sophisticated investors familiar with the type of risks inherent in the
acquisition of securities such as the Shares and Warrants and that, by reason of its or its representatives knowledge and experience
in financial and business matters in general, and investments of this type in particular, it or its representatives are capable
of evaluating the merits and risks of an investment in the Shares and Warrants;

 

    	 

    	 

    

 

(v)              
The undersigned understands that the Company has determined that the exemption from the registration provisions of
the Securities Act of 1933, as amended (the “Act”), for transactions not involving a public offering is applicable
to the offer and sale of the Shares and Warrants, based, in part, upon the representations, warranties and agreements made by the
undersigned herein;

 

(vi)            
The undersigned acknowledges that the undersigned has had the opportunity to review this Subscription Agreement and
the transactions contemplated by this Subscription Agreement with its own legal counsel and investment and tax advisors. The undersigned
is not relying on any statements or representations of the Company or any of the Company’s affiliates, representatives or
agents for legal, tax or investment advice with respect to this Agreement or the transactions contemplated by the Subscription
Agreement, other than those set forth in this Subscription Agreement. The undersigned further acknowledges that, except as set
forth in this Subscription Agreement, no representations have been made by the Company or its representatives about the Company
or the SEC filings;

 

(vii)          
The undersigned understands that: (A) neither the Shares nor the Warrants have been registered under the Act or the
securities laws of any state, based upon an exemption from such registration requirements for non-public offerings pursuant to
Regulation D under the Act; (B) the Shares, Warrants and shares of Common Stock issuable upon exercise of the Warrants (the “Warrant
Shares”) are and will be “restricted securities”, as said term is defined in Rule 144 of the Rules and Regulations
promulgated under the Act; (C) neither the Shares, Warrants or Warrant Shares may be sold or otherwise transferred unless they
have been first registered under the Act and all applicable state securities laws, or unless exemptions from such registration
provisions are available with respect to said resale or transfer; (D) except as set forth in this Subscription Agreement, the Company
is under no obligation to register the Shares, Warrants or Warrant Shares under the Act or any state securities laws, or to take
any action to make any exemption from any such registration provisions available; (E) the certificates for the Shares, Warrants
and Warrant Shares will bear a legend to the effect that the transfer of the securities represented thereby is subject to the provisions
hereof; and (F) stop transfer instructions will be placed with the transfer agent for the Shares;

 

(viii)        
The undersigned will not sell or otherwise transfer any of the Shares, Warrants or Warrant Shares or any interest
therein, unless and until: (A) said Shares, Warrants or Warrant Shares shall have first been registered under the Act and all applicable
state securities laws; or (B) the undersigned shall have first delivered to the Company a written opinion of counsel (which counsel
and opinion (in form and substance) shall be satisfactory to the Company), to the effect that the proposed sale or transfer is
exempt from the registration provisions of the Act and all applicable state securities laws;

 

(ix)            
The undersigned has full power and authority to execute and deliver this Subscription Agreement and to perform the
obligations of the undersigned hereunder, and such agreement is a legally binding obligation of the undersigned in accordance with
its terms;

 

    	-2-

    	 

    

 

 

(x)              
The undersigned is an “accredited investor,” as such term is defined in Regulation D of the Rules and
Regulations promulgated under the Act and as set forth below by checking the appropriate box(es):

 

 ̈A
bank as defined in Section 3(a)(2) of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”),
or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Exchange Act whether
acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Securities Exchange
Act; an insurance company as defined in section 2(13) of the Securities Exchange Act; an investment company registered under the
Investment Company Act of 1940 or a business development company, as defined in section 2(a)(48) of that act; a Small Business
Investment Company licensed by the U.S. Small Business Administration under Section 301 (c) or (d) of the Small Business Investment
Act of 1958; a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state
or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; an employee
benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a
plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company,
or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed
plan, with investment decisions made solely by persons that are accredited investors;

 

 ̈A
private business development company as defined in Section 202(a)22 of the Investment Advisers Act of 1940;

 

 ̈An
organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;

 

 ̈A
director or executive officer of the Company;

 

 ̈A
natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds
$1,000,000, excluding the value of the primary residence of such natural person*;

 

 ̈A
natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that
person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income
level in the current year;

 

 

*
Note: - Although the value of the primary residence is excluded, the excess of debt secured by the primary residence over its
estimated market value (i.e., underwriter mortgage) is included as a liability in the net worth calculation and reduces the nature
person’s net worth. Moreover, if the amount of debt secured by the primary residence outstanding on the closing date of
the sale of the Shares and Warrants exceeds the amount of such debt during the prior 60 days, the amount of such excess is viewed
as a liability reducing the net worth.

 

    	-3-

    	 

    

 

 

 ̈A
trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii); and

 

 ̈An
entity in which all of the equity owners are accredited investors.

 

(xi)            
The address set forth below is the undersigned’s true and correct residence, and the undersigned has no present
intention of becoming a resident of any other state or jurisdiction. (If a corporation, trust or partnership, the undersigned has
its principal place of business at the address set forth below and was not organized for the specific purpose of subscribing to
this offering);

 

(xii)          
The undersigned is acquiring the Shares and Warrants for its own account and for the purpose of investment and not
with a view to, or for resale in connection with, any distribution within the meaning of the Act in violation of the Act.

 

The undersigned
does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to
such person or to any third person, with respect to any of the Shares or Warrants for which the undersigned is subscribing;

 

(xiii)        
The undersigned has the financial ability to bear the economic risk of the undersigned’s investment in the
Company, has no need for liquidity with respect to such investment, and has adequate means for providing for his or its current
needs and contingencies;

 

(xiv)        
The undersigned has determined that the Shares and Warrants are a suitable investment for the undersigned and that
the undersigned could bear a complete loss of such investment;

  

 (xv)          
The undersigned understands that an investment in the Shares and Warrants is a speculative investment which involves
a high degree of risk of loss of the undersigned’s entire investment;

 

(xvi)        
The undersigned’s overall commitment to investments which are not readily marketable is not disproportionate
to the undersigned’s net worth, and an investment in the Shares and Warrants will not cause such overall commitment to become
excessive;

 

(xvii)      
The undersigned has carefully reviewed the jurisdictional notices listed below and agrees to abide by any restrictions
contained therein applicable to the undersigned:

 

    	-4-

    	 

    

JURISDICTIONAL NOTICES

 

Residents of All States:

 

THE SECURITIES OFFERED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF CERTAIN STATES AND ARE
BEING OFFERED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT
AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING
AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE MEMORANDUM. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.

 

2.                 
Company Representations and Warranties. The Company hereby represents and warrants to, and covenants with,
the undersigned as follows:

 

(i)                
The Company has been duly organized and is validly existing as a corporation and is in good standing under the laws
of the state of its incorporation.

 

(ii)              
Prior to the closing, (i) this Subscription Agreement and the Shares and Warrants will have been duly and validly
authorized by the Company, (ii) this Subscription Agreement, when accepted, and the Common Stock Purchase Warrant attached hereto
as Exhibit A, when executed, will be the legal, valid and binding obligations of the Company, enforceable in accordance with their
respective terms, and (ii) the issuance and sale of the Shares and Warrants will have been duly authorized and, when the Shares
have been issued and duly delivered against payment therefore as contemplated by this Subscription Agreement, the Shares will be
validly issued, fully paid and nonassessable.

 

(iii)            
The execution and delivery of this Subscription Agreement and the Warrant do not, and the performance and consummation
of the terms and transactions set forth or contemplated therein or herein will not, contravene or result in a default under any
provision of existing law or regulations to which the Company is subject, the provisions of the charter, bylaws or other governing
documents of the Company or any indenture, mortgage or other agreement or instrument to which the Company is a party or by which
it is bound and does not require on the part of the Company any approval, authorization, license, or filing from or with any foreign,
federal, state or municipal authority or agency that has not been obtained or made.

 

    	-5-

    	 

    

 

3.                 
Registration Rights. The Company shall use commercially reasonable efforts to file a registration statement
with the Securities and Exchange Commission (the “SEC”) within sixty (60) days following the date of the Company’s
acceptance of this subscription and use commercially reasonable efforts to have the registration statement declared effective by
the SEC within one hundred twenty (120) days following the date of the Company’s acceptance of this subscription, to register
for resale the Shares and the Warrant Shares, and the costs of such registration statement (other than fees and disbursements of
counsel and other advisors to the undersigned), including without limitation the preparation and filing thereof, shall be borne
solely by the Company.

 

4.                 
Board Observer. [INSERT FOR TRAFALET] The Board shall appoint Remy Trafelet as a non-voting observer to the
Board and Mr. Trafelet shall have such right so long as he or his affiliates beneficially own (as defined in accordance with Rule
13d-3 under the Securities Exchange Act) 15% or more of the Company’s Common Stock.

 

5.                 
Miscellaneous.

 

(i)                
The undersigned understands that this subscription is not binding upon the Company until the Company accepts it,
which acceptance is at the sole discretion of the Company and is to be evidenced by the Company’s execution of this Subscription
Agreement where indicated. This Subscription Agreement shall be null and void if the Company does not accept it as aforesaid.

 

(ii)              
The undersigned agrees to indemnify the Company and hold it harmless from and against any and all losses, damages,
liabilities, costs, and expenses which it may sustain or incur in connection with the breach by the undersigned of any representation,
warranty, or covenant made by the undersigned.

 

(iii)            
Neither this Subscription Agreement nor any of the rights of the undersigned hereunder may be transferred or assigned
by the undersigned.

 

(iv)            
In the event of rejection of this subscription, or in the event the sale of the Shares and Warrants subscribed for
by the undersigned is not consummated by the Company for any reason (in which event this Subscription Agreement shall be deemed
to be rejected), this Subscription Agreement and any other agreement entered into between the undersigned and the Company relating
to this subscription shall thereafter have no force or effect and the Company shall promptly return or cause to be returned to
the undersigned the Purchase Price remitted to the Company by the undersigned, without interest thereon or deduction therefrom.

 

(v)              
Except as otherwise provided herein, this Subscription Agreement shall be binding upon and inure to the benefit of
the parties and their heirs, executors, administrators, successors, legal representatives and assigns. If the undersigned is more
than one person, the obligation of the undersigned shall be joint and several and the agreements, representations, warranties and
acknowledgements herein contained shall be deemed to be made by and be binding upon each such person and his heirs, executors,
administrators and successors.

 

    	-6-

    	 

    

 

(vi)            
This Subscription Agreement and the documents referenced herein contain the entire agreement of the parties and there
are no representations, covenants or other agreements except as stated or referred to herein and therein.

 

(vii)          
 The parties (1) agree that any legal suit, action or proceeding arising out of or relating to this Subscription
Agreement shall be instituted exclusively in New York State Supreme Court, County of New York, or in the United States District
Court for the Southern District of New York, (2) waive any objection which either such party may have now or hereafter to the venue
of any such suit, action or proceeding, and (3) irrevocably consent to the jurisdiction of the New York State Supreme Court, County
of New York, and the United States District Court for the Southern District of New York in any such suit, action or proceeding.
The parties further agree to accept and acknowledge service of any and all process which may be served in any such suit, action
or proceeding in the New York State Supreme Court, County of New York, or in the United States District Court for the Southern
District of New York and agree that service of process upon either such party mailed by certified mail to the party's respective
address (set forth in this Subscription Agreement or such other address provided in writing by a party to this Subscription Agreement
to the other parties to this Subscription Agreement) shall be deemed in every respect effective service of process upon such party,
in any such suit, action or proceeding.

 

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

 

(ix)            
This Subscription Agreement may only be modified by a written instrument executed by the undersigned and the Company.

 

(x)              
Unless the context otherwise requires, all personal pronouns used in this Subscription Agreement, whether in the
masculine, feminine or neuter gender, shall include all other genders.

 

(xi)            
All notices or other communications hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally or mailed by certified or registered mail, return receipt requested, postage prepaid, as follows: if to the
undersigned, to the address set forth on the signature page; and if to the Company, to XCel Brands, Inc., 475 Tenth Avenue, New
York, New York 10018 Attention: Mr. James Haran, Chief Financial Officer, or to such other address as the Company or the undersigned
shall have designated to the other by like notice.

 

    	-7-

    	 

    

 

SIGNATURE PAGE

 

 

	 	Organization Signature: 

	 	
        Individual
Signature(s): 

	 	 	 	 	 
	 	 	 	 
	 	Print Name of Subscriber Organization	 	 
	 	 	 	 	 
		By:	 	 	 
	 	 	(Signature and Title)	 	Signature(s)
	 	 	 	 	 
	 	 	 	 
	 	Print Name and Title of Person Signing	 	Print Name
        of Subscriber
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	Print Name
        of Subscriber
	 	 	 	 	 
	 	 	 	 	 

 

 

Total Purchase Price: $ ______

Number of Shares Subscribed for: ___________

Number of Warrants Subscribed for: ________

 

 

 

(All
Subscribers should please print information

below exactly
as you wish it to appear

in the records
of the Company)

 

	 	 	 	 
	 	Name and capacity in which subscription
        is made -- see below for particular requirements	 	 Social Security Number of Individual or other Taxpayer I.D. Number 
	 	 	 	 
	 	Address:	 	Address for notices, if different:
	 	 	 	 
		 	 	 
	 	Number and Street	 	Number and Street
	 	 	 	 
	 	 	 	 
	 	City                                          State                                        Zip Code	 	City                                        State                                        Zip Code
	 	 	 	 

 

Please
check the appropriate box to indicate form of ownership (if applicable):

 

	 	 ̈   	TENANTS-IN-COMMON	 	  ̈ 	JOINT TENANTS WITH RIGHT OF SURVIVORSHIP
	 	 	(Both Parties must sign above)	 	 	Both Parties must sign above)

 

 

    	-8-

    	 

    

 

  

ACCEPTANCE OF SUBSCRIPTION

 

XCel Brands,
Inc.

 

The foregoing subscription
is hereby accepted by XCel Brands, Inc., this _____ day of __________ 2013, for ___________ Shares and Warrants to purchase ________
shares of Common Stock.

 

 

	 	XCEL BRANDS,
INC.
	 	 
	 	 
	 	By: 	
	 	 	Name:
Title:

 

    	-9-

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