UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
October 8, 2015
MGT
Capital Investments, Inc.
(Exact name of registrant as specified in
its charter)
Delaware |
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001-32698 |
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13-4148725 |
(State or other jurisdiction of
incorporation) |
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(Commission File Number) |
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(IRS Employer Identification No.) |
500
Mamaroneck Avenue, Suite 204, Harrison, NY 10528
(Address of principal executive offices,
including zip code)
(914)
630-7431
(Registrant's telephone number, including
area code)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant
to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01 Entry into a Material Definitive Agreement.
On October 8, 2015,
MGT Capital Investments, Inc. (the “Company”) entered into separate subscription agreements (the “Subscription
Agreement”) with accredited investors (the “Investors”) relating to the issuance and sale of $700,000 of units
(the “Units”) at a purchase price of $0.25 per Unit, with each Unit consisting of one share (the “Shares”)
of the Company’s common stock, par value $0.001 per share (the “Common Stock”) and a three year warrant (the “Warrants”)
to purchase two shares of Common Stock at an initial exercise price of $0.25 per share (such sale and issuance, the “Private
Placement”).
The Warrants are exercisable
at a price of $0.25 on the earlier of (i) one year from the date of issue or (ii) the occurrence of certain corporate events, including
a private or public financing, subject to approval of the lead investor, in which the Company receives gross proceeds of at least
$7,500,000; a spinoff; one or more acquisitions or sales by the Company of certain assets approved by the stockholders of the Company;
or a merger, consolidation, recapitalization, or reorganization approved by the stockholders of the Company (each, a “Qualifying
Transaction”). The Warrants may be exercised by means of a “cashless exercise” following the four month anniversary
of the date of issue, provided that the Company has consummated a Qualifying Transaction and there is no effective registration
statement registering the resale of the shares of Common Stock underlying the Warrants (the “Warrant Shares”). The
Company is prohibited from effecting an exercise of any Warrant to the extent that, as a result of any such exercise, the holder
would beneficially own more than 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon exercise of such Warrant, which beneficial ownership limitation may be increased by the
holder up to, but not exceeding, 9.99%. The Warrants are also subject to certain adjustments upon certain actions by the Company
as outlined in the Warrants.
Prior to receipt
of Shareholder Approval as discussed below, the Warrants in the aggregate shall not be exercisable into more than 19.99% of
the number of shares of Common Stock outstanding as of the closing date (the “Exercise Cap”). In
order to permit the full exercise of the Warrants in accordance with applicable listing rules of the NYSE MKT, the Company
agreed to hold a special meeting of shareholders (which may also be at the annual meeting of shareholders) for the purpose of
obtaining shareholder approval for removal of the Exercise Cap (“Shareholder Approval”), with the recommendation
of the Company’s Board of Directors that such proposal be approved (the “Proposal”). In connection with the
Shareholder Approval, the Company entered into voting agreements (the “Voting Agreements”) with each of Robert
Ladd, its Chief Executive Officer, President and a director, and Josh Silverman, a director, to vote their existing shares in
favor of the Proposal. Mr. Silverman also purchased $75,000 of Units in the Private Placement.
The Company has undertaken,
pursuant to the Subscription Agreement, to file a registration statement to register the Shares and Warrant Shares (the “Registration
Statement”) within 30 days following the closing and to use its best efforts to have the Registration Statement declared
effective 60 days from the filing date. The Subscription Agreement also provides the Investors with a 50% right of participation
in future securities offerings of the Company for a period of one year from the closing. The Company agreed not to issue new equity
securities, subject to certain exceptions, without the approval of the lead investor for a period of five months from the closing
and not to issue any securities pursuant to an at-the-market offering until the earlier of (i) the six month anniversary of the
closing or (ii) such date as the closing price of the Common Stock is at least $0.75 for five consecutive trading days and the
Registration Statement has been declared effective.
The Subscription Agreement
also contains other customary representations, warranties and agreements by the Company and the Investors. The representations,
warranties and covenants contained in the Subscription Agreement were made only for purposes of such agreement and as of specific
dates, were solely for the benefit of the parties to such agreement and may be subject to limitations agreed upon by the contracting
parties.
The offering is being
made pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities
Act”).
The foregoing descriptions
of the Subscription Agreement, the Warrants and the Voting Agreement are not complete and are qualified in their entireties by
reference to the full text of the Form of Subscription Agreement, the Form of Common Stock Purchase Warrant and Form of Voting
Agreement, copies of which are filed as Exhibit 10.1, Exhibit 10.2, and Exhibit 10.3, respectively, to this report and are incorporated
by reference herein.
The Company issued
a press release on October 9, 2015 announcing the transaction, which press release is attached as Exhibit 99.1 to this report.
Item 3.02 Unregistered Sales of Equity
Securities
On October 8, 2015,
the Company issued the Units, consisting of the Shares and the Warrants, in exchange for aggregate gross proceeds of $700,000.
The details of this transaction are described in Item 1.01, which is incorporated by reference, in its entirety, into this Item
3.02.
The Units, the Shares
and the Warrants have not been registered under the Securities Act, or the securities laws of any state, and were offered and
issued in reliance on the exemption from registration under the Securities Act, afforded by Section 4(a)(2).
Item 9.01 Financial Statements and
Exhibits.
(d) Exhibits
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10.1 |
Form of Subscription Agreement |
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10.2 |
Form of Common Stock Purchase Warrant |
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10.3 |
Form of Voting Agreement |
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99.1 |
Press Release dated October 9, 2015 |
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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MGT CAPITAL INVESTMENTS, INC. |
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Date: October 9, 2015 |
By: |
/s/ Robert B. Ladd |
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Name: Robert B. Ladd |
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Title: President and Chief Executive Officer |
Exhibit 10.1
SUBSCRIPTION
AGREEMENT
This Subscription Agreement
(this “Agreement”) is being delivered to the purchaser identified on the signature page to this Agreement (the
“Subscriber”) in connection with its investment in the securities of MGT Capital Investments, Inc., a Delaware
corporation (the “Company”). The Company is conducting a private placement (the “Offering”)
of up to Seven Hundred Thousand Dollars ($700,000) (the “Minimum Offering Amount”) of units (the “Units”)
at a purchase price of $0.25 per Unit (the “Purchase Price”) with each Unit consisting of (i) one share (the
“Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”)
and (ii) a thirty-six (36) month warrant, in the form attached hereto as Exhibit A (the “Warrant”) to purchase
two shares of Common Stock (the “Warrant Shares”) at an exercise price of $0.25 per share. For purposes of this
Agreement, the term “Securities” shall refer to the Shares, the Warrants and the Warrant Shares.
IMPORTANT INVESTOR NOTICES
NO OFFERING LITERATURE OR ADVERTISEMENT
IN ANY FORM MAY BE RELIED UPON IN THE OFFERING OF THESE SECURITIES EXCEPT FOR THIS SUBSCRIPTION AGREEMENT AND ANY SUPPLEMENTS HERETO,
AND NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY REPRESENTATIONS EXCEPT THOSE CONTAINED HEREIN.
UNTIL SUCH TIME AS A FORM 8-K IS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION DISCLOSING THE TRANSACTIONS CONTEMPLATED HEREBY, THIS AGREEMENT IS CONFIDENTIAL AND
THE CONTENTS HEREOF MAY NOT BE REPRODUCED, DISTRIBUTED OR DIVULGED BY OR TO ANY PERSONS OTHER THAN THE RECIPIENT OR ITS REPRESENTATIVE,
ACCOUNTANT OR LEGAL COUNSEL, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY. EACH PERSON WHO ACCEPTS DELIVERY OF THIS AGREEMENT,
ACKNOWLEDGES AND AGREES TO THE FOREGOING RESTRICTIONS.
THIS AGREEMENT DOES NOT CONSTITUTE AN OFFER
OR SOLICITATION OF AN OFFER TO ANY PERSON OR IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION IS UNLAWFUL OR NOT AUTHORIZED.
EACH PERSON WHO ACCEPTS DELIVERY OF THIS AGREEMENT AGREES TO RETURN IT AND ALL RELATED DOCUMENTS IF SUCH PERSON DOES NOT PURCHASE
ANY OF THE SECURITIES DESCRIBED HEREIN.
NEITHER THE DELIVERY OF THIS AGREEMENT
AT ANY TIME NOR ANY SALE OF SECURITIES HEREUNDER SHALL IMPLY THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE. THE COMPANY WILL EXTEND TO EACH PROSPECTIVE SUBSCRIBER (AND TO ITS REPRESENTATIVE, ACCOUNTANT OR LEGAL COUNSEL, IF
ANY) THE OPPORTUNITY, PRIOR TO ITS PURCHASE OF UNITS, TO ASK QUESTIONS OF AND RECEIVE ANSWERS FROM THE COMPANY CONCERNING THE OFFERING
AND TO OBTAIN ADDITIONAL INFORMATION, TO THE EXTENT THE COMPANY POSSESSES THE SAME OR CAN ACQUIRE IT WITHOUT UNREASONABLE EFFORT
OR EXPENSE, IN ORDER TO VERIFY THE ACCURACY OF THE INFORMATION SET FORTH HEREIN. ALL SUCH ADDITIONAL INFORMATION SHALL ONLY BE
PROVIDED IN WRITING AND IDENTIFIED AS SUCH BY THE COMPANY THROUGH ITS DULY AUTHORIZED OFFICERS AND/OR DIRECTORS ALONE; NO ORAL
INFORMATION OR INFORMATION PROVIDED BY ANY BROKER OR THIRD PARTY MAY BE RELIED UPON.
NO REPRESENTATIONS, WARRANTIES OR ASSURANCES
OF ANY KIND ARE MADE OR SHOULD BE INFERRED WITH RESPECT TO THE ECONOMIC RETURN, IF ANY, THAT MAY ACCRUE TO AN INVESTOR IN THE COMPANY.
FOR RESIDENTS OF ALL STATES
THIS OFFERING IS BEING MADE SOLELY TO “ACCREDITED
INVESTORS,” AS SUCH TERM IS DEFINED IN RULE 501 OF REGULATION D UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”). THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE AND WILL BE OFFERED
AND SOLD IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(a)(2) THEREUNDER AND REGULATION D (RULE 506) OF
THE SECURITIES ACT AND CORRESPONDING PROVISIONS OF STATE SECURITIES LAWS.
THE SECURITIES OFFERED HEREBY ARE SUBJECT
TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT
AND APPLICABLE STATE LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. SUBSCRIBERS SHOULD BE AWARE THAT THEY WILL BE REQUIRED
TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE SECURITIES OFFERED HEREBY HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS AGREEMENT. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
PROSPECTIVE SUBSCRIBERS SHOULD NOT CONSTRUE
THE CONTENTS OF THIS AGREEMENT AS INVESTMENT, LEGAL, BUSINESS, OR TAX ADVICE. EACH SUBSCRIBER SHOULD CONTACT HIS, HER OR ITS OWN
ADVISORS REGARDING THE APPROPRIATENESS OF THIS INVESTMENT AND THE TAX CONSEQUENCES THEREOF, WHICH MAY DIFFER DEPENDING ON A SUBSCRIBER’S
PARTICULAR FINANCIAL SITUATION. IN NO EVENT SHOULD THIS AGREEMENT BE DEEMED OR CONSIDERED TO BE TAX ADVICE PROVIDED BY THE COMPANY.
FOR FLORIDA RESIDENTS ONLY
THE SECURITIES REFERRED TO HEREIN WILL
BE SOLD TO, AND ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPT UNDER § 517.061 OF THE FLORIDA SECURITIES ACT. THE SECURITIES
HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA. IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF
VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH SUBSCRIBER TO THE COMPANY, AN
AGENT OF THE COMPANY, OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH
SUBSCRIBER, WHICHEVER OCCURS LATER.
| 1. | SUBSCRIPTION AND PURCHASE PRICE |
(a) Subscription.
Subject to the conditions set forth in Section 2 hereof, the Subscriber hereby subscribes for and agrees to purchase the number
of Units indicated on page 23 hereof on the terms and conditions described herein.
(b) Purchase
of Units. The Subscriber understands and acknowledges that the purchase price to be remitted to the Company in exchange for
the Units shall be set at $0.25 per Unit, for an aggregate purchase price as set forth on page 23 hereof (the “Aggregate
Purchase Price”), which shall be equivalent to $0.25 per Share, exclusive of the value of the Warrants. The Subscriber’s
delivery of this Agreement to the Company shall be accompanied by payment for the Units subscribed for hereunder, payable in United
States Dollars, by wire transfer of immediately available funds delivered to the Company in accordance with the wire instructions
set forth on Exhibit B attached hereto. The Subscriber understands and agrees that, subject to Section 2 and applicable laws, by
executing this Agreement, it is entering into a binding agreement.
| 2. | Acceptance,
Offering Term and Closing Procedures |
(a) Acceptance.
Subject to full, faithful and punctual performance and discharge by the Company of all of its duties, obligations and responsibilities
as set forth in this Agreement, the Warrant and any other agreement entered into between the Subscriber and the Company relating
to this subscription (collectively, the "Transaction Documents") to be performed or discharged on or prior to
the Closing in which such Subscriber participates, the Subscriber shall be legally bound to purchase the Units pursuant to the
terms and conditions set forth in this Agreement. In the event the Closing does not take place because of (i) the election not
to purchase the Units by the Subscriber or (ii) the failure to effectuate the Initial Closing (as defined below) on or prior to
October 9, 2015 (unless extended in the discretion of the Board of Directors) for any reason or no reason, this Agreement and any
other Transaction Documents shall thereafter be terminated and have no force or effect, and the parties shall take all steps, including
the execution of instructions to the Company, to ensure that the Aggregate Purchase Price shall promptly be returned or caused
to be returned to the Subscriber without interest thereon or deduction therefrom.
(b) Closing.
The closing of the purchase and sale of the Units hereunder (the “Closing”) shall take place at such time and place
as determined by the Company and may take place in one of more closings. Closings shall take place on a Business Day promptly following
the satisfaction of the conditions set forth in Section 6 below, as determined by the Company (the “Closing Date”).
“Business Day” shall mean from the hours of 9:00 a.m. (Eastern Time) through 5:00 p.m. (Eastern Time) of a day other
than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required to be closed. The
Units purchased by the Subscriber will be delivered by the Company promptly following the Final Closing Date (as defined herein)
of the Offering. The initial closing shall be referred to as the “Initial Closing” and may be held upon receipt
and acceptance of subscriptions equal to at least the Minimum Offering Amount prior to October 9, 2015. The date of the Initial
Closing is sometimes referred to as the “Initial Closing Date.” Subsequent closings (each a “Subsequent
Closing”) will be held until the earlier to occur of: (i) termination of the Offering by the Company, and (ii) October
9, 2015 (the “Final Closing” and such date of the Final Closing, the “Final Closing Date”),
without additional notice to Subscribers. Officers, directors and affiliates of the Company and the placement agents, if any, may
purchase Units in the Offering.
(c) Following
Acceptance or Rejection. The Subscriber acknowledges and agrees that this Agreement and any other documents delivered in connection
herewith will be held by the Company. Prior to the Company’s execution, in the event that this Agreement is not accepted
by the Company for whatever reason, which the Company expressly reserves the right to do, this Agreement, the Aggregate Purchase
Price received (without interest thereon) and any other documents delivered in connection herewith will be returned to the Subscriber
at the address of the Subscriber as set forth in this Agreement. If this Agreement is accepted by the Company, the Company is entitled
to treat the Aggregate Purchase Price received as an interest free loan to the Company until such time as the Subscription is accepted.
(d) Reserved.
(e) Extraordinary
Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of Common Stock as a dividend
or other distribution on outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock, or (c) combine
its outstanding shares of the Common Stock into a smaller number of shares of Common Stock, then, in each such event, the Purchase
Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Purchase Price by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator
of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall
thereafter be the Purchase Price then in effect. The Purchase Price, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive event or events described herein. The number of Units that the Subscriber shall thereafter be entitled
to receive (including number of shares of Warrant Shares the Subscriber may thereafter be entitled to receive upon exercise of
the Warrants) shall be adjusted to a number determined by multiplying the number of shares of Common Stock that would otherwise
(but for the provisions of this Section) be issuable on such conversion or exercise by a fraction of which (a) the numerator is
the Purchase Price that would otherwise (but for the provisions of this Section) be in effect, and (b) the denominator is the Purchase
Price then in effect.
(f) Certificate
as to Adjustments. In each case of any adjustment or readjustment in (i) the Shares, (ii) the the number of Warrant Shares
issuable upon the exercise of the Warrants, or (iii) the exercise price of the Warrants, the Company, at its expense, will promptly
cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the
terms hereof and of the Warrant, and prepare a certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Company will forthwith mail a copy of each such certificate
to the Subscriber. To the extent any such certificate contains material non-public information, the Company shall, no later than
the first Business Day after the date of delivery of such certificate to the Subscriber, include such material non-public information
in a Current Report on Form 8-K filed with the United States Securities and Exchange Commission (the “SEC”).
From and after the filing of such Form 8-K, the Company shall have disclosed all material non-public information (if any) delivered
to the Subscriber by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees or agents
in connection with the transactions described in such certificate.
| 3. | THE SUBSCRIBER’s
Representations, Warranties AND cOVENANTS |
Each Subscriber, severally
and not jointly, hereby acknowledges, agrees with and represents, warrants and covenants to the Company, as follows:
(a) The
Subscriber has full power and authority to enter into this Agreement, the execution and delivery of which has been duly authorized,
if applicable, and this Agreement constitutes a valid and legally binding obligation of the Subscriber, except as may be limited
by bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement
of rights of creditors, and except as enforceability of the obligations hereunder are subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or law).
(b) The
Subscriber acknowledges its understanding that the Offering and sale of the Securities is intended to be exempt from registration
under the Securities Act, by virtue of Section 4(a)(2) of the Securities Act and the provisions of Regulation D promulgated thereunder
(“Regulation D”). In furtherance thereof, the Subscriber represents and warrants to the Company and its affiliates
as follows:
(i) The
Subscriber realizes that the basis for the exemption from registration may not be available if, notwithstanding the Subscriber’s
representations contained herein, the Subscriber is merely acquiring the Securities for a fixed or determinable period in the future,
or for a market rise, or for sale if the market does not rise. The Subscriber does not have any such intention.
(ii) The
Subscriber realizes that the basis for exemption would not be available if the Offering is part of a plan or scheme to evade registration
provisions of the Securities Act or any applicable state or federal securities laws, except sales pursuant to a registration statement
or sales that are exempted under the Securities Act.
(iii) The
Subscriber is acquiring the Securities solely for the Subscriber’s own beneficial account, for investment purposes, and not
with a view towards, or resale in connection with, any distribution of the Securities.
(iv) The
Subscriber has the financial ability to bear the economic risk of the Subscriber’s investment, has adequate means for providing
for its current needs and contingencies, and has no need for liquidity with respect to an investment in the Company.
(v) The
Subscriber and the Subscriber’s attorney, accountant, purchaser representative and/or tax advisor, if any (collectively,
the “Advisors”) has such knowledge and experience in financial and business matters as to be capable of evaluating
the merits and risks of a prospective investment in the Securities. If other than an individual, the Subscriber also represents
it has not been organized solely for the purpose of acquiring the Securities.
(vi) The
Subscriber (together with its Advisors, if any) has received all documents requested by the Subscriber, if any, and has carefully
reviewed them and understands the information contained therein, prior to the execution of this Agreement.
(c) The
Subscriber is not relying on the Company or any of its employees, agents, sub-agents or advisors with respect to the legal, tax,
economic and related considerations involved in this investment. The Subscriber has relied on the advice of, or has consulted with,
only its Advisors. Each Advisor, if any, has disclosed to the Subscriber in writing (a copy of which is annexed to this Agreement)
the specific details of any and all past, present or future relationships, actual or contemplated, between the Advisor and the
Company or any affiliate or sub-agent thereof.
(d) The
Subscriber has carefully considered the potential risks relating to the Company and a purchase of the Securities, and fully understands
that the Securities are a speculative investment that involves a high degree of risk of loss of the Subscriber’s entire investment.
Among other things, the Subscriber has carefully considered each of the risks described under the heading “Risk Factors”
and “Forward Looking Statements” in the Company’s SEC Filings (as defined below) and any additional disclosures
in the nature of Risk Factors described herein.
(e) The
Subscriber will not sell or otherwise transfer any Securities without registration under the Securities Act or an exemption therefrom,
and fully understands and agrees that the Subscriber must bear the economic risk of its purchase because, among other reasons,
the Securities have not been registered under the Securities Act or under the securities laws of any state and, therefore, cannot
be resold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Securities Act and under
the applicable securities laws of such states, or an exemption from such registration is available. In particular, the Subscriber
is aware that the Securities are “restricted securities,” as such term is defined in Rule 144 promulgated under the
Securities Act (“Rule 144”), and they may not be sold pursuant to Rule 144 unless all of the conditions of Rule
144 are met. The Subscriber also understands that the Company is under no obligation to assist the Subscriber in complying with
any exemption from registration under the Securities Act or applicable state securities laws. The Subscriber understands that any
sales or transfers of the Securities are further restricted by state securities laws and the provisions of this Agreement.
(f) No
oral or written representations or warranties have been made, or information furnished, to the Subscriber or its Advisors, if any,
by the Company or any of its officers, employees, agents, sub-agents, affiliates, advisors or subsidiaries in connection with the
Offering, other than any representations of the Company contained herein, and in subscribing for the Units the Subscriber is not
relying upon any representations other than those contained herein.
(g) The
Subscriber’s overall commitment to investments that are not readily marketable is not disproportionate to the Subscriber’s
net worth, and an investment in the Securities will not cause such overall commitment to become excessive.
(h) The
Subscriber understands and agrees that the certificates for the Securities shall bear substantially the following legend:
“[NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE
OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF
COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.”
(i) Certificates
evidencing Securities shall not be required to contain the legend set forth in Section 3(h) above or any other legend (i)
while a registration statement covering the resale of such Securities is effective under the Securities Act, (ii) following any
sale of such Securities pursuant to Rule 144 (assuming the transferor is not an affiliate of the Company), (iii) if such Securities
are eligible to be sold, assigned or transferred under Rule 144 and the Subscriber is not an affiliate of the Company (provided
that the Subscriber provides the Company with reasonable assurances that such Securities are eligible for sale, assignment or transfer
under Rule 144 which shall not include an opinion of the Subscriber’s counsel), (iv) in connection with a sale, assignment
or other transfer (other than under Rule 144), provided that the Subscriber provides the Company with an opinion of counsel (at
the expense of the Company), in a form generally acceptable to the Company, to the effect that such sale, assignment or transfer
of the Securities may be made without registration under the applicable requirements of the Securities Act or (v) if such legend
is not required under applicable requirements of the Securities Act (including, without limitation, controlling judicial interpretations
and pronouncements issued by the SEC). If a legend is not required pursuant to the foregoing, the Company shall no later than three
(3) business days following the delivery by the Subscriber to the Company or the transfer agent (with notice to the Company) of
a legended certificate representing such Securities (endorsed or with stock powers attached, signatures guaranteed, and otherwise
in form necessary to affect the reissuance and/or transfer, if applicable), together with any other deliveries from the Subscriber
as may be required above in this Section 3(i), as directed by the Subscriber, either: (A) provided that the Company’s
transfer agent is participating in the DTC Fast Automated Securities Transfer Program and such Securities are Shares or Warrant
Shares, credit the aggregate number of shares of Common Stock to which the Subscriber shall be entitled to the Subscriber’s
or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system or (B) if the Company’s
transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver (via reputable overnight
courier) to the Subscriber, a certificate representing such Securities that is free from all restrictive and other legends, registered
in the name of the Subscriber or its designee. The Company shall be responsible for any transfer agent fees or DTC fees with respect
to any issuance of Securities or the removal of any legends with respect to any Securities in accordance herewith.
(j) Neither
the SEC nor any state securities commission has approved the Securities or passed upon or endorsed the merits of the Offering.
There is no government or other insurance covering any of the Securities.
(k) The
Subscriber and its Advisors, if any, have had a reasonable opportunity to ask questions of and receive answers from a person or
persons acting on behalf of the Company concerning the Offering and the business, financial condition, results of operations and
prospects of the Company, and all such questions have been answered to the full satisfaction of the Subscriber and its Advisors,
if any.
(l) (i) In making the decision to invest
in the Securities the Subscriber has relied solely upon the information provided by the Company in the Transaction Documents. To
the extent necessary, the Subscriber has retained, at its own expense, and relied upon appropriate professional advice regarding
the investment, tax and legal merits and consequences of this Agreement and the purchase of the Securities hereunder. The Subscriber
disclaims reliance on any statements made or information provided by any person or entity in the course of Subscriber’s consideration
of an investment in the Securities other than the Transaction Documents.
(ii) The
Subscriber represents and warrants that: (i) the Subscriber was contacted regarding the sale of the Securities by the Company (or
an authorized agent or representative thereof) with whom the Subscriber had a prior substantial pre-existing relationship and (ii)
no Securities were offered or sold to it by means of any form of general solicitation or general advertising, and in connection
therewith, the Subscriber did not (A) receive or review any advertisement, article, notice or other communication published in
a newspaper or magazine or similar media or broadcast over television or radio, whether closed circuit, or generally available;
or (B) attend any seminar meeting or industry investor conference whose attendees were invited by any general solicitation or general
advertising; or (C) observe any website or filing of the Company with the SEC in which any offering of securities by the Company
was described and as a result learned of any offering of securities by the Company.
(m) The
Subscriber has taken no action that would give rise to any claim by any person for brokerage commissions, finders’ fees or
the like relating to this Agreement or the transactions contemplated hereby.
(n) The
Subscriber is not relying on the Company or any of its employees, agents, or advisors with respect to the legal, tax, economic
and related considerations of an investment in the Securities, and the Subscriber has relied on the advice of, or has consulted
with, only its own Advisors.
(o) The
Subscriber acknowledges that any estimates or forward-looking statements or projections furnished by the Company to the Subscriber
were prepared by the management of the Company in good faith, but that the attainment of any such projections, estimates or forward-looking
statements cannot be guaranteed by the Company or its management and should not be relied upon.
(p) No
oral or written representations have been made, or oral or written information furnished, to the Subscriber or its Advisors, if
any, in connection with the Offering that are in any way inconsistent with the information contained herein.
(q) (For
ERISA plans only) The fiduciary of the ERISA plan (the “Plan”) represents that such fiduciary has been informed of
and understands the Company’s investment objectives, policies and strategies, and that the decision to invest “plan
assets” (as such term is defined in ERISA) in the Company is consistent with the provisions of ERISA that require diversification
of plan assets and impose other fiduciary responsibilities. The Subscriber or Plan fiduciary (i) is responsible for the decision
to invest in the Company; (ii) is independent of the Company and any of its affiliates; (iii) is qualified to make such investment
decision; and (iv) in making such decision, the Subscriber or Plan fiduciary has not relied primarily on any advice or recommendation
of the Company or any of its affiliates.
(r) This
Agreement is not enforceable by the Subscriber unless it has been accepted by the Company, and the Subscriber acknowledges and
agrees that the Company reserves the right to reject any subscription for any reason.
(s) The
Subscriber is an “Accredited Investor” as defined in Rule 501(a) under the Securities Act. In general, an “Accredited
Investor” is deemed to be an institution with assets in excess of $5,000,000 or individuals with a net worth in excess of
$1,000,000 (excluding such person’s residence) or annual income exceeding $200,000 or $300,000 jointly with his or her spouse.
(t) The
Subscriber, either alone or together with its representatives, has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the Offering, and has so evaluated the merits and risks
of such investment. The Subscriber has not authorized any person or entity to act as its Purchaser Representative (as that term
is defined in Regulation D of the General Rules and Regulations under the Securities Act) in connection with the Offering. The
Subscriber is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete
loss of such investment.
| 4. | THE COMPANY’S
Representations, Warranties and Covenants |
The Company hereby
acknowledges, agrees with and represents, warrants and covenants to each Subscriber as of the date hereof and as of the Closing
Date, except as set forth in the disclosure schedule attached hereto (the “Company Disclosure Schedule”, which
Company Disclosure Schedules shall be deemed a part hereof and shall qualify any representation made herein only to the extent
of the disclosure contained in the corresponding section of the Disclosure Schedules, as follows:
(a) Organization
and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of its
state of incorporation. The Company is duly qualified to do business, and is in good standing in the states required due to (a)
the ownership or lease of real or personal property for use in the operation of the Company's business or (b) the nature of the
business conducted by the Company, except where the failure to so qualify would not, individually or in the aggregate, have a Material
Adverse Effect (as defined in this Section 4(a)). The Company has all requisite power, right and authority to own, operate and
lease its properties and assets, to carry on its business as now conducted, to execute, deliver and perform its obligations under
this Agreement and the other Transaction Documents to which it is a party, and to carry out the transactions contemplated hereby
and thereby, subject to the Required Approvals. All actions on the part of the Company and its officers and directors necessary
for the authorization, execution, delivery and performance of this Agreement and the other Transaction Documents, the consummation
of the transactions contemplated hereby and thereby, and the performance of all of the Company's obligations under this Agreement
and the other Transaction Documents have been taken or will be taken prior to the Closing. This Agreement has been, and the other
Transaction Documents to which the Company is a party on the Closing will be, duly executed and delivered by the Company, and this
Agreement is, and each of the other Transaction Documents to which it is a party on the Closing will be, a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with its terms, except as may be limited by bankruptcy,
reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement of rights
of creditors, and except as enforceability of the obligations hereunder are subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or law). “Material Adverse Effect” means
any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition
(financial or otherwise) or prospects of the Company or any Subsidiary, individually or taken as a whole, (ii) the transactions
contemplated hereby or in any of the other Transaction Documents or (iii) the authority or ability of the Company or any of its
Subsidiaries to perform any of their respective obligations under any of the Transaction Documents.
(b) Issuance
of Securities. The Securities to be issued to the Subscriber pursuant to this Agreement and the applicable Transaction Documents,
when issued and delivered in accordance with the terms of this Agreement and the applicable Transaction Documents, will be duly
and validly issued and will be fully paid and non-assessable and the Warrant Shares, when issued and delivered in accordance with
the Warrant, and assuming proper payment and exercise in accordance with the provisions of the Warrants, will be duly and validly
issued and will be fully paid and non-assessable.
(c) Authorization;
Enforcement. Except as set forth in Schedule 4(c), the execution, delivery and performance of this Agreement and the other
Transaction Documents by the Company, and the consummation of the transactions contemplated hereby and thereby, will not (a) constitute
a violation (with or without the giving of notice or lapse of time, or both) of any provision of any law or any judgment, decree,
order, regulation or rule of any court, agency or other governmental authority applicable to the Company, (b) except as set forth
in Section 4(d) below, require any consent, approval or authorization of, or declaration, filing or registration with, any person
(except for Shareholder Approval (as defined in Section 5(i)), (c) result in a default (with or without the giving of notice or
lapse of time, or both) under, acceleration or termination of, or the creation in any party of the right to accelerate, terminate,
modify or cancel, any agreement, lease, note or other restriction, encumbrance, obligation or liability to which the Company is
a party or by which it is bound or to which any assets of the Company are subject, (d) result in the creation of any lien or encumbrance
upon the assets of the Company, or upon any shares of Common Stock, preferred stock or other securities of the Company, (e) conflict
with or result in a breach of or constitute a default under any provision of the certificate of incorporation or bylaws of the
Company, or (f) invalidate or adversely affect any permit, license, authorization or status used in the conduct of the business
of the Company.
(d) Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i)
approval of the issuance of the securities by the NYSE MKT (“NYSE MKT Approval”), (ii) the filing of Form D
with the SEC and such filings as are required to be made under applicable state securities laws, (iii) obtaining Shareholder Approval
or (iv) as set forth on Schedule 4(d) (collectively, the “Required Approvals”).
(e) SEC
Filings. The Company is subject to, and in full compliance with, the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). The Company has made available to each Subscriber through
the EDGAR system true and complete copies of the Company’s filings for the prior two full fiscal years plus any interim period
(collectively, the “SEC Filings”), and all such SEC Filings are incorporated herein by reference. The SEC Filings,
when they were filed with the SEC (or, if any amendment with respect to any such document was filed, when such amendment was filed),
complied in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder
and did not, as of such date, contain an untrue statement of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not
misleading. All reports and statements required to be filed by the Company under the Exchange Act have been filed, together with
all exhibits required to be filed therewith. The Company and each of its direct and indirect subsidiaries, if any (collectively,
the “Subsidiaries”), are engaged in all material respects only in the business described in the SEC Filings,
and the SEC Filings contain a complete and accurate description in all material respects of the business of the Company and the
Subsidiaries.
(f) No
Financial Advisor. The Company acknowledges and agrees that each Subscriber is acting solely in the capacity of an arm’s
length purchaser with respect to the Securities and the transactions contemplated hereby. The Company further acknowledges that
Subscriber is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement
and the transactions contemplated hereby and any advice given by any Subscriber or any of its representatives or agents in connection
with this Agreement and the transactions contemplated hereby is merely incidental to such Subscriber’s purchase of the Securities.
The Company further represents to each Subscriber that the Company’s decision to enter into this Agreement has been based
solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
(g) Indemnification.
The Company will indemnify and hold harmless each Subscriber and, where applicable, its directors, officers, employees, agents,
advisors and shareholders from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not
limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against
any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any
representation or warranty of the Company contained herein or in any document furnished by the Company to the Subscriber in connection
herewith being untrue in any material respect or any breach or failure by the Company to comply with any covenant or agreement
made by the Company to the Subscriber in connection therewith.
(h) Capitalization
and Additional Issuances. The capitalization of the Company is as set forth in Schedule 4
(h). Except as set forth in Schedule 4 (h), the Company has not issued any capital stock since its most recently filed
periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation, or
any similar right to participate in the transactions contemplated by the Transaction Documents. Except as disclosed on Schedule
4 (h), there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings or arrangements by which
the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock equivalents. Except
as set forth on Schedule 4 (h), the issuance and sale of the Securities will not obligate the Company to issue shares of
Common Stock or other securities to any Person (other than the Subscribers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares
of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in material
compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive
rights or similar rights to subscribe for or purchase securities. Except for NYSE MKT Approval, no further approval or authorization
of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. Except as set forth
on Schedule 4(h), there are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s
stockholders .
(i) Private
Placements. Assuming the accuracy of each Subscriber’s representations and warranties set forth in Section 3, no registration
under the Securities Act is required for the offer and sale of the Securities by the Company to the Subscribers as contemplated
hereby.
(j) Investment
Company. The Company is not, and is not an affiliate of, and immediately after receipt of payment for the Units will not be
or be an affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act.
(k) Reporting
Company/Shell Company Status. The Company is a publicly-held company subject to reporting obligations pursuant to Sections
12(g) and 13 of the Exchange Act. Pursuant to the provisions of the Exchange Act, the Company has timely filed all reports and
other materials required to be filed by the Company thereunder with the SEC during the preceding twelve months. The Company, as
of the Closing Date, is not a “shell company”, as that term is employed in Rule 144 under the Securities Act. Except
as set forth on Schedule 4(k), the Company is in full compliance with the continued listing standards of NYSE MKT, and has no reason
to believe that it will not in the foreseeable future continue to be in compliance with all such listing and maintenance requirements.
(l) Litigation.
Except as set forth on Schedule 4 (l), there is no action, suit, proceeding, inquiry or investigation before or by the Trading
Market, any court, public board, other Governmental Entity, self-regulatory organization or body pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its Subsidiaries, the Common Stock or any of the Company’s
or its Subsidiaries’ officers or directors which is outside of the ordinary course of business or individually or in the
aggregate material to the Company or any of its Subsidiaries. No director, officer or employee of the Company or any of its
Subsidiaries has willfully violated 18 U.S.C. §1519 or engaged in spoliation in reasonable anticipation of litigation.
Without limitation of the foregoing, there has not been, and to the knowledge of the Company, there is not pending or contemplated,
any investigation by the SEC involving the Company, any of its Subsidiaries or any current or former director or officer of the
Company or any of its Subsidiaries. The SEC has not issued any stop order or other order suspending the effectiveness of
any registration statement filed by the Company under the Securities Act or the Exchange Act. “Governmental Entity”
means any nation, state, county, city, town, village, district, or other political jurisdiction of any nature, federal, state,
local, municipal, foreign, or other government, governmental or quasi-governmental authority of any nature (including any governmental
agency, branch, department, official, or entity and any court or other tribunal), multi-national organization or body; or body
exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority
or power of any nature or instrumentality of any of the foregoing, including any entity or enterprise owned or controlled by a
government or a public international organization or any of the foregoing. “Trading Market” means any of the
following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT,
The NASDAQ Capital Market, The NASDAQ Global Market, The NASDAQ Global Select Market, the New York Stock Exchange, OTCQB, OTCQX
or the OTC Bulletin Board (or any successors to any of the foregoing).
(m) Employee
Relations. Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union. The Company believes that its and its Subsidiaries’ relations with their respective employees are
good. The Company and its Subsidiaries are in compliance with all federal, state, local and foreign laws and regulations
respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except
as disclosed in Schedule 4(m) or where failure to be in compliance would not, either individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect.
(n) Tax
Status. The Company and each of its Subsidiaries (i) has timely made or filed all foreign, federal and state income and all
other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has timely 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 (iii) 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.
There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers
of the Company and its Subsidiaries know of no basis for any such claim. The Company is not operated in such a manner as
to qualify as a passive foreign investment company, as defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.
(o) Indebtedness
and Other Contracts. Except as set forth on Schedule 4(o) annexed hereto, neither the Company nor any of its Subsidiaries,
(i) has any outstanding Indebtedness (as defined below), (ii) is a party to any contract, agreement or instrument, the violation
of which, or default under which, by the other party(ies) to such contract, agreement or instrument could reasonably be expected
to result in a Material Adverse Effect, (iii) is in violation of any term of, or in default under, any contract, agreement or instrument
relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in
a Material Adverse Effect, or (iv) is a party to any contract, agreement or instrument relating to any Indebtedness, the performance
of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect. For purposes
of this Agreement: (x) “Indebtedness” of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including,
without limitation, “capital leases” in accordance with generally accepted accounting principles) (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement or payment obligations with respect to letters
of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness
created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with
respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller
or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations
under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F)
above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by)
any mortgage, claim, lien, tax, right of first refusal, pledge, charge, security interest or other encumbrance upon or in any property
or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property
has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G) above; (y) “Contingent Obligation”
means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness,
lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole
or in part) against loss with respect thereto; and (z) “Person” means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any Governmental Entity
or any department or agency thereof.
(p) No
Undisclosed Events, Liabilities, Developments or Circumstances. Since the date of the latest audited financial statements included
within the SEC Filings, except as specifically disclosed in a subsequent SEC Filing: (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any material liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in filings made with the SEC, (iii) the Company has not altered its method of
accounting, (iv) the Company has not 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 and (v) except as set forth
on Schedule 4(h), the Company has not issued any equity securities to any officer, director or Affiliate. The Company does
not have pending before the SEC any request for confidential treatment of information. Except for the issuance of the Securities
contemplated by this Agreement or as set forth on Schedule 4 (p), no event, liability, fact, circumstance, occurrence or
development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries
or their respective businesses, properties, operations, assets or financial condition, that would be required to be disclosed by
the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly
disclosed at least two Trading Days prior to the date that this representation is made.
(q) No
Additional Agreements. Neither the Company nor any of its Subsidiaries has any agreement or understanding with any Subscriber
with respect to the transactions contemplated by the Transaction Documents other than pursuant to documents substantially identical
to the Transaction Documents.
(r) No
Disqualification Events. To the Company’s knowledge, none of the Company,
any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in
the offering contemplated hereby, any beneficial owner of 20% or more of the Company's outstanding voting equity securities, calculated
on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the
Company in any capacity at the time of sale (each, an “Issuer Covered Person”) is subject to any of the "Bad
Actor" disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification
Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine whether any Issuer Covered Person is subject to a Disqualification Event.
(s) General
Solicitation. None of the Company, any of its affiliates (as defined in Rule 501(b)
under the Securities Act) or any person acting on behalf of the Company or such affiliate will solicit any offer to buy or offer
or sell the Securities by means of any form of general solicitation or general advertising within the meaning of Regulation D,
including: (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar medium
or broadcast over television or radio; and (ii) any seminar or meeting whose attendees have been invited by any general solicitation
or general advertising.
(t) Compliance.
To the Company’s knowledge, neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event
has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it
or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment,
decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule,
ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws
relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor
matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.
(u) Regulatory
Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Filings,
except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation
or modification of any Material Permit.
(v) Title
to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property (if any) owned
by them and good and marketable title in all personal property owned by them that is material to the business of the Company and
the Subsidiaries, in each case free and clear of all liens, except for (i) liens as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries
and (ii) liens for the payment of federal, state or other taxes, for which appropriate reserves have been made in accordance with
GAAP and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease
by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and
the Subsidiaries are in compliance.
(w) Intellectual
Property. Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights
and similar rights necessary or required for use in connection with their respective businesses as described in the SEC Filings
and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).
None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual
Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2)
years from the date of this Agreement except as would not reasonably be expected to have a Material Adverse Effect. Neither the
Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the SEC Filings,
a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights
of any Person, except as could not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the
Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of
the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(x) Reserved.
(y) Office
of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company's knowledge, any director, officer, agent,
employee or affiliate of the Company is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control
of the U.S. Treasury Department (“OFAC”).
(z) Listing
and Maintenance Requirements. The Common Stock is quoted on the NYSE MKT under the symbol MGT. Except as set forth on
Schedule 4(z), the Company has not, in the twenty-four (24) months preceding the date hereof, received notice from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing
or maintenance requirements of such Trading Market.
(aa) Regulation
M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate
the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of,
any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other
securities of the Company.
(bb) Money
Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance in all
material respects with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions
Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively,
the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending
or, to the knowledge of the Company or any Subsidiary, threatened
(cc) Reserved.
(dd) Acknowledgment
Regarding Subscribers’ Purchase of Securities. The Company acknowledges and agrees that each of the Subscribers is acting
solely in the capacity of an arm’s length Subscriber with respect to the Transaction Documents and the transactions contemplated
thereby. The Company further acknowledges that no Subscriber is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given
by any Subscriber or any of their respective representatives or agents in connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to the Subscribers’ purchase of the Securities. The Company further represents
to each Subscriber that the Company’s decision to enter into this Agreement and the other Transaction Documents has been
based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
(ee) No
Integrated Offering. Assuming the accuracy of the Subscribers’ representations and warranties set forth in Section 3,
neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering
of the Securities to be integrated with prior offerings by the Company for purposes of: (i) the Securities Act which would require
the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any
Trading Market on which any of the securities of the Company are listed or designated.
(ff) Application
of Takeover Protections. The Company and the Board of Directors will have taken as of the Closing Date all necessary action,
if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar
charter documents) or the laws of its state of incorporation that is or could become applicable to the Subscribers as a result
of the Subscribers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including
without limitation as a result of the Company’s issuance of the Securities and the Subscribers’ ownership of the Securities.
(gg) Registration
Rights. Other than as set forth on Schedule 4(gg), no Person other than the Subscribers herein has any right to cause
the Company or any Subsidiary to effect the registration under the Securities Act of any securities of the Company or any Subsidiary.
(hh) Certain
Fees. Except as disclosed on Schedule 4(hh), no brokerage, finder’s fees, commissions or due diligence fees are
or will be payable by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents.
(ii) Sarbanes-Oxley;
Internal Accounting Controls. The Company and the Subsidiaries are in material compliance with any and all applicable requirements
of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated
by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. Except as set forth on Schedule
4(ii), the Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. Except as disclosed in the SEC Filings, the Company and the Subsidiaries have established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed
such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files
or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s
rules and forms. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures
of the Company and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange
Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under
the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over
financial reporting (as such term is defined in the Exchange Act) of the Company and its Subsidiaries that have materially affected,
or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.
(jj) Transactions
With Affiliates and Employees. Except as set forth on Schedule 4(jj), none of the officers or directors of the Company
or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party
to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or
personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case
in excess of $50,000 other than for: (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan
of the Company except as disclosed on Schedule 4(jj).
(kk) Insurance.
The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including,
but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount. Neither the
Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without
a significant increase in cost.
(ll)
Disclosure.
The Company confirms
that neither it nor any other Person acting on its behalf has provided any of the Subscribers or their agents or counsel with any
information that constitutes or could reasonably be expected to constitute material, non-public information regarding the Company
or any of its Subsidiaries, other than the existence of the transactions contemplated by this Agreement and the other Transaction
Documents. The Company understands and confirms that each of the Subscribers will rely on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the Subscribers regarding the Company and its Subsidiaries,
their businesses and the transactions contemplated hereby, including the schedules to this Agreement, furnished by or on behalf
of the Company or any of its Subsidiaries is true and correct and does not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which
they were made, not misleading. No event or circumstance has occurred or information exists with respect to the Company or any
of its Subsidiaries or its or their business, properties, liabilities, prospects, operations (including results thereof) or conditions
(financial or otherwise), which, under applicable law, rule or regulation, requires public disclosure at or before the date hereof
or announcement by the Company but which has not been so publicly disclosed. The Company acknowledges and agrees that no Subscriber
makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically
set forth in Section 3.
(mm) Survival.
The foregoing representations and warranties shall survive the Closing.
| 5. | OTHER AGREEMENTS OF THE PARTIES |
(a) Furnishing
of Information. As long as any Subscriber owns Securities, the Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant
to the Exchange Act. As long as any Subscriber owns Securities, if the Company is not required to file reports pursuant to the
Exchange Act, it will prepare and furnish to the Subscribers and make publicly available in accordance with Rule 144(c) under the
Securities Act such information as is required for the Subscribers to sell the Securities under Rule 144. The Company further covenants
that it will take such further action as any holder of Securities may reasonably request, at the sole cost and expense of the Company
including transfer agent and legal opinion fees and expenses, all to the extent required from time to time to enable such person
to sell such Securities without registration under the Securities Act within the limitation of the exemptions proved by Rule 144
under the Securities Act.
(b) Shareholder
Rights Plan. No claim will be made or enforced by the Company or, to the knowledge of the Company, any other person that any
Subscriber is an “Acquiring Person” under any shareholder rights plan or similar plan or arrangement in effect or hereafter
adopted by the Company, or that any Subscriber could be deemed to trigger the provisions of any such plan or arrangement, by virtue
of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Subscribers.
(c) Securities
Laws Disclosure; Publicity. The Company shall by 8:30 a.m. (New York City time) (a) on the third Business Day after this Agreement
has been executed, file a Current Report on Form 8-K with the SEC (the “8-K Filing”), including the Transaction
Documents as exhibits thereto. From and after the issuance of the 8-K Filing, the Company shall have publicly disclosed all material,
non-public information delivered to any of the Subscribers by the Company or any of its Subsidiaries, or any of their respective
officers, directors, employees or agents. The Company and each Subscriber shall consult with each other in issuing any press releases
with respect to the transactions contemplated hereby, and no Subscriber shall issue any such press release or otherwise make any
such public statement without the prior consent of the Company, which consent shall not unreasonably be withheld. Notwithstanding
the foregoing, the Company shall not publicly disclose the name of any Subscriber, or include the name of any Subscriber in any
filing with the SEC or any regulatory agency, without the prior written consent of such Subscriber, except to the extent such disclosure
is required by law or in connection with the Transaction Documents, in which case the Company shall provide the Subscribers with
prior notice of such disclosure.
(d) Integration.
The Company shall not, and shall use its best efforts to ensure that no affiliate of the Company shall, after the date hereof,
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security that would be integrated with the
offer or sale of the Units in a manner that would require the registration under the Securities Act of the sale of the Units to
the Subscribers.
(e) Reservation
of Securities. The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to
the Transaction Documents in such amount as may be required to fulfill its obligations in full under the Transaction Documents.
In the event that at any time the then authorized shares of Common Stock are insufficient for the Company to satisfy its obligations
in full under the Transaction Documents, the Company shall promptly take such actions as may be required to increase the number
of authorized shares, including without limitation promptly preparing and filing any proxy or information statement with the SEC
for purposes of a special meeting to authorize the issuance of additions shares to Subscribers, which in no event shall be filed
more than ten (10) Business Days following the date on which the Company becomes aware that it may have inadequate authorized capital.
(f) Right
of Participation. Until twelve (12) months following the Closing Date, GRQ Consultants, Inc. 401K FBO Barry Honig (the “Lead Investor”) shall be
given not less than ten (10) days prior written notice of any proposed sale by the Company of its Common Stock or other securities
or equity linked debt obligations (“Other Offering”). If the Lead Investor elects to exercise its rights pursuant
to this Section 5(f), the Lead Investor shall have the right during the ten (10) days following receipt of the notice, to purchase
in the aggregate up to fifty percent (50%) of all of such offered Common Stock, debt or other securities in accordance with
the terms and conditions set forth in the notice of sale, relative to each other in proportion to the amount of Units issued to
them as of the Closing Date. In the event such terms and conditions are modified during the notice period, the Lead Investor shall
be given prompt notice of such modification and shall have the right during the five (5) days following the notice of modification
to exercise such right. Notwithstanding the foregoing, the Lead Investor shall have no right of participation with respect to any
offering of securities incrementally at market prices on the Principal Market, where a broker-dealer, acting as the Company’s
agent, can continuously change the amount and manner of sales depending on market conditions and instructions from the Company
(an “ATM Offering”).
(g) Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the
Transaction Documents, the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide
any Subscriber or its agents or counsel with any information that the Company believes constitutes material non-public information,
and each Subscriber agrees, and shall direct its agents and counsel not to, request any material non-public information from the
Company or any Person acting on its behalf, unless prior thereto such Purchaser shall have executed a written agreement with the
Company regarding the confidentiality and use of such information. The Company understands and confirms that each Subscriber shall
be relying on the foregoing covenant in effecting transactions in securities of the Company.
(h) Limitations
on Issuances and Financings. Until the five (5) month anniversary of the Final Closing Date, without the prior written consent
of the Lead Investor and other than in connection with (i) the issuance of shares of Common Stock or options to purchase Common
Stock issued to directors, officers, employees or consultants of the Company pursuant to any Approved Stock Plan; (ii) the issuance
of shares of Common Stock issued upon the conversion or exercise of Convertible Securities or contractual agreements (other than
options to purchase Common Stock or other equity incentive awards issued pursuant to an Approved Stock Plan that are covered by
clause (i) above) issued prior to the date hereof, provided that the conversion price of any such Convertible Securities (other
than options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) is not lowered
by subsequent amendment, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant
to an Approved Stock Plan that are covered by clause (i) above) are subsequently amended to increase the number of shares issuable
thereunder and none of the terms or conditions of any such Convertible Securities (other than options to purchase Common Stock
issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are otherwise materially changed in any manner
that adversely affects any of the Subscribers; (iii) the shares of Common Stock issuable upon exercise of the Warrants; and (iv)
the Company’s issuance of securities in connection with strategic license agreements and other partnering arrangements so
long as such issuances are not primarily for the purpose of raising capital, the Company shall not issue any Common
Stock or securities convertible into or exercisable for shares of Common Stock (or modify any of the foregoing which may be outstanding)
to any person or entity. For purposes of this Section 5(h), “Approved Stock Plan” shall mean any employee benefit
plan which has been approved by the board of directors of the Company on or prior to the date hereof pursuant to which shares of
Common Stock and standard options to purchase Common Stock may be issued to any employee, officer or director for services provided
to the Company in their capacity as such (including, without limitation, any adjustments to the number of shares reserved for issuance
thereunder as a result of the operation of any evergreen provisions), “Convertible Securities” shall mean any
stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible
into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock, and
“Options” shall mean any rights, warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities. In addition to the foregoing, the Company shall not issue any shares of Common Stock pursuant to an
ATM Offering at a price per share lower than $0.75 until the earlier of (i) the six (6) month anniversary of the Final Closing
Date or (ii) such date as the closing price of the Common Stock on the NYSE MKT is at least $0.75 for five (5) consecutive Trading
Days and a Registration Statement (as defined in Section 7(a)) registering all of the Shares and Warrant Shares has been declared
effective.
(i) Shareholder
Approval. If it is required in order to permit the full exercise of the Warrants issued pursuant to this Agreement into shares
of Common Stock in accordance with applicable listing rules of the NYSE MKT (the “Shareholder Approval”), the
Company shall hold a special meeting of shareholders (which may also be at the annual meeting of shareholders) as soon as reasonably
practicable, for the purpose of obtaining Shareholder Approval, with the recommendation of the Company’s Board of Directors
that such proposal be approved, and the Company shall solicit proxies from its shareholders in connection therewith in the same
manner as all other management proposals in such proxy statement and all management-appointed proxyholders shall vote their proxies
in favor of such proposal. If the Company does not obtain Shareholder Approval at the first special meeting, the Company shall
call a meeting every three months thereafter to seek Shareholder Approval until the earlier of the date Shareholder Approval is
obtained or the Warrants are no longer outstanding. In connection with the Shareholder Approval, the Company shall enter into a
voting agreement in the form attached hereto as Exhibit C.
(j) Use
of Proceeds. The Company anticipates using the gross proceeds from the Offering for general corporate purposes.
(k) DTC
Program. From the Closing Date until such time as no Subscriber holds any of the Securities, the Company shall use its best
efforts to employ as the transfer agent for the Shares, and Warrant Shares a participant in the Depository Trust Company Automated
Securities Transfer Program (FAST) and cause the Common Stock to be transferable pursuant to such program.
(k) Closing
Documents. On or prior to fourteen (14) calendar days after each Closing Date, the Company agrees to deliver, or cause to be
delivered, to each Subscriber executed copies of the Transaction Documents, Securities and other document required to be delivered
to any party pursuant to this Agreement.
| 6. | CONDITIONS TO ACCEPTANCE OF SUBSCRIPTION |
(a) The Closing of
the sale of the Units is conditioned upon satisfaction of the following conditions precedent on or before the Closing Date:
(i) As
of the Closing, no legal action, suit or proceeding shall be pending against the Company that seeks to restrain or prohibit the
transactions contemplated by this Agreement.
(ii) The
representations and warranties of the Company and the Subscribers contained in this Agreement shall have been true and correct
in all material respects on the date of this Agreement (except whether such representations are qualified by material or material
adverse effect, which shall be true and correct in all respects) and shall be true and correct as of the Closing as if made on
the Closing Date and the Company shall have performed, satisfied and complied in all respects with the covenants, agreements and
conditions required to be performed, satisfied or complied with by the Company in connection with the consummation of the transactions
contemplated by the Transaction Documents at or prior to the Closing Date and the Company shall deliver a certificate, executed
by its Chief Executive Officer, dated as of the Closing Date, certifying that the foregoing is true.
(iii) The
Company shall deliver to the Subscribers, a certificate from the Company, signed by its Secretary or Assistant Secretary, including
incumbency specimen signatures of any signatory of any Transaction Document of the Company and certifying that the attached copies
of the Company’s Certificate of Incorporation, as amended and Bylaws, as amended, and resolutions of the Board of Directors
of the Company approving this the Offering, are all true, complete and correct and remain in full force and effect.
(iv) The
Company shall have submitted to NYSE MKT, a “Listing of Additional Shares” application (the “LAS”)
for the listing of the Shares and the Warrant Shares thereon and NYSE MKT shall have completed its review of the LAS without comment.
(a) Required
Registration. Subject to Shareholder Approval and the provisions hereof, on or before thirty (30) days following the
Final Closing Date (the “Required Registration Date”), the Company shall file a registration statement on Form
S-1 or Form S-3, if available, registering for resale all Registrable Securities (such Registration Statement, a “Required
Registration Statement”) and use its best efforts to cause such Required Registration Statement to be declared effective
by the SEC sixty (60) days after filing. “Registrable Securities” means the Shares and Warrant Shares.
Registrable Securities shall continue to be Registrable Securities (whether they continue to be held by the Subscribers or they
are sold to other Persons) until (i) they are sold pursuant to an effective registration statement under the Securities Act;
(ii) they may be sold by their holder pursuant to Rule 144 without limitation thereunder on volume or manner of sale;
or (iii) they shall have otherwise been transferred and new securities not subject to transfer restrictions under any federal
securities laws and not bearing any legend restricting further transfer shall have been delivered by the Company, all applicable
holding periods shall have expired, and no other applicable and legally binding restriction on transfer by the Subscriber thereof
shall exist under the Securities Act.
(i) Upon the date
of effectiveness of the Required Registration Statement, the Company shall cause the Required Registration Statement to remain
effective until such time as all of the Registrable Securities covered by such Required Registration Statement have been sold pursuant
to such Required Registration Statement.
(b) Piggyback
Registration Rights. (i) If at any time the Company has registered or has determined to register any of its securities
for its own account or for the account of other security holders of the Company on any registration form (other than Form S-4
or S-8) which permits the inclusion of the Registrable Securities (a “Piggyback Registration”), the Company
will give the Subscribers written notice thereof promptly (but in no event less than fifteen (15) days prior to the anticipated
filing date) and, subject to Section 7(b)(iv), shall include in such registration all Registrable Securities requested
to be included therein pursuant to the written request of one or more Subscriber received within 10 days after delivery of
the Company’s notice. If a Piggyback Registration is initiated as a primary underwritten offering on behalf of the
Company, and the managing underwriters advise the Company and the Subscribers that in their reasonable opinion the number of shares
of Common Stock and other Registrable Securities proposed to be included in such registration exceeds the Maximum Number of Shares,
the Company shall include in such registration: (i) first, the number of shares of Common Stock that the Company proposes
to sell; and (ii) second, the number of shares of Common Stock and other Registrable Securities requested to be included therein
by holders of Common Stock and other Registrable Securities, including Subscribers who have provided notice in accordance with
this Section 7(b)(i) pro rata among all such holders on the basis of the number of shares of Common Stock and other Registrable
Securities requested to be included therein by all such holders or as such holders and the Company may otherwise agree. “Maximum
Number of Shares” means the number of Registrable Securities proposed to be included in a Registration Statement that
can be sold in an underwritten offering without materially delaying or jeopardizing the success of the subject offering (including
the offering price per share).
(ii) If a Piggyback
Registration is initiated as an underwritten registration on behalf of a holder of shares of Common Stock other than the Subscribers,
and the managing underwriters advise the Company that in their reasonable opinion the number of shares of Common Stock and other
Registrable Securities proposed to be included in such registration exceeds the Maximum Number of Shares, then the Company shall
include in such registration: (i) first, the number of shares of Common Stock requested to be included therein by the
holder(s) requesting such registration; (ii) second, the number of shares of Common Stock and other Registrable Securities
requested to be included therein by other holders of shares of Common Stock and other Registrable Securities, including the Subscribers
(if the Subscribers have elected to include Registrable Securities in such Piggyback Registration), pro rata among such holders
on the basis of the number of shares of Common Stock and other Registrable Securities requested to be included therein by such
holders or as such holders and the Company may otherwise agree; and (iii) third, the number of shares of Common Stock that
the Company proposes to sell.
(iii) If any Piggyback
Registration is a primary or secondary underwritten offering, the Company shall have the right to select, in its sole discretion,
the managing underwriter or underwriters to administer any such offering.
(c) Expenses
of Registration and Selling. All Expenses incurred in connection with any registration, qualification or compliance hereunder
shall be borne by the Company. All Expenses (including, for the avoidance of doubt, any underwriting discount or commission
applicable to the sale by a Subscriber) incurred in connection with the sale of any securities registered hereunder shall also
be borne by the Company.
(d) Obligations
of the Company. Whenever required to effect the registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably practicable, subject to the other provisions of this Section 7:
(i) Prepare and
file with the SEC a Registration Statement with respect to a proposed offering of Registrable Securities and use commercially reasonable
efforts to have such Registration Statement declared effective as promptly as practicable.
(ii) Prepare and
file with the SEC such amendments and supplements to the applicable Registration Statement and the Prospectus or prospectus supplement
used in connection with such Registration Statement as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by such Registration Statement.
(iii) Furnish to
the selling Subscriber or Subscribers and any underwriters such number of copies of the applicable Registration Statement and each
such amendment and supplement thereto (including in each case all exhibits) and of a Prospectus, including a preliminary prospectus,
in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned or to be distributed by them.
(iv) Notify the
selling Subscriber or Subscribers at any time when a prospectus relating thereto is required to be delivered under the Securities
Act of the happening of any event as a result of which the applicable prospectus, as then in effect, includes an untrue statement
of a material fact or omits 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 such statements were made, not misleading.
(v) Give
written notice to the selling Subscriber or Subscribers:
(1) when
any Registration Statement filed pursuant to Section 7(a) or 7(b) or any amendment thereto has been filed with
the SEC and when such Registration Statement or any post-effective amendment thereto has become effective;
(2) of
any request by the SEC for amendments or supplements to any Registration Statement or the prospectus included therein or for additional
information;
(3) of
the issuance by the SEC of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings
for that purpose;
(4) of
the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and
(5) of
the happening of any event that requires the Company to make changes in any effective Registration Statement or prospectus in order
to make the statements therein not misleading (in the case of the prospectus, in the light of the circumstances under which such
statements were made) (which notice shall be accompanied by an instruction to suspend the use of the Prospectus until the requisite
changes have been made).
(vi) Use
commercially reasonable efforts to prevent the issuance or obtain the withdrawal of any order suspending the effectiveness of any
Registration Statement referred to in Section 7(d)(v)(3) at the earliest practicable time.
(vii) Upon
the occurrence of any event contemplated by Section 7(d)(v)(5), promptly prepare a post-effective amendment to such
Registration Statement or a supplement to the related Prospectus or file any other required document so that, as thereafter delivered
to the selling Subscriber or Subscribers and any underwriters, the prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which
they were made, not misleading. If the Company notifies the selling Subscriber or Subscribers in accordance with Section 7(d)(v)(5)
to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the selling Subscriber
or Subscribers and any underwriters shall suspend use of such prospectus and use commercially reasonable efforts to return to the
Company all copies of such prospectus (at the Company’s expense) other than permanently filed copies then in the possession
of the selling Subscriber or Subscribers or the underwriter.
(e) Suspension
of Sales. Upon receipt of written notice from the Company that a Registration Statement, prospectus or prospectus supplement
contains or may contain an untrue statement of a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that circumstances exist that make the use of such Registration
Statement, prospectus or prospectus supplement inadvisable, the selling Subscriber or Subscribers shall forthwith discontinue disposition
of Registrable Securities until the selling Subscriber or Subscribers have received copies of a supplemented or amended Prospectus
or prospectus supplement, or until the selling Subscriber or Subscribers are advised in writing by the Company that the use of
the Prospectus and, if applicable, prospectus supplement may be resumed. If so directed by the Company, the selling Subscriber
or Subscribers shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then
in the selling Subscriber’s or Subscribers’ possession, of the prospectus and, if applicable, prospectus supplement
covering such Registrable Securities current at the time of receipt of such suspension notice. The total number of days that
any such suspension may be in effect in any 180-day period shall not exceed 60 days.
(f) Furnishing
Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 7(d)
that the selling Subscriber or Subscribers and the underwriter(s), if any, shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required
to effect the registered offering of their Registrable Securities.
(g) Indemnification.
(i) In connection with each registration pursuant to Section 7, the Company agrees to indemnify and hold harmless
each selling Subscriber, and each Person, if any, who controls any selling Subscriber within the meaning of Section 15 of
the Securities Act, as follows:
(1) against
any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of an untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any amendment thereto), or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising
out of an untrue statement of a material fact included in any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading; and
(2) against
any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement
of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement
is effected with the written consent of the Company, which consent shall not be unreasonably withheld;
provided, however, that,
with respect to any selling Subscriber, this indemnity shall not apply to any loss, liability, claim, damage or expense to
the extent arising out of an untrue statement or omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by such selling Subscriber expressly for use in the Registration Statement
(or any amendment thereto), or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto).
(ii) Each
selling Subscriber agrees severally, and not jointly, to indemnify and hold harmless the Company, its directors, each of its officers
who signed a Registration Statement, and the other selling Subscribers, and each Person, if any, who controls the Company and any
other selling Subscriber within the meaning of Section 15 of the Securities Act, against any and all loss, liability, claim,
damage and expense described in the indemnity contained in Section 7(g)(i), as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto),
or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such selling Subscriber expressly for use in the Registration Statement (or any
amendment thereto), or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto); provided that
no such selling Subscriber shall be liable under this Section 7(g) for any amounts exceeding the product of the sales
price per Registrable Security and the number of Registrable Securities being sold pursuant to such Registration Statement or prospectus
by such selling Subscriber.
(iii) Each indemnified
party shall give prompt notice to each indemnifying party of any action commenced against it in respect of which indemnity may
be sought hereunder, but failure to so notify an indemnifying party shall not relieve the indemnifying party from any liability
it may have under this Agreement, except to the extent that the indemnifying party is prejudiced thereby. If it so elects,
after receipt of such notice, an indemnifying party, jointly with any other indemnifying parties receiving such notice, may assume
the defense of such action with counsel chosen by it; provided, however, that the indemnified party shall
be entitled to participate in (but not control) the defense of such action with counsel chosen by it, the reasonable fees and expenses
of which shall be paid by such indemnified party, unless a conflict would arise if one counsel were to represent both the indemnified
party and the indemnifying party, in which case the reasonable fees and expenses of counsel to the indemnified party shall be paid
by the indemnifying party or parties. In no event shall the indemnifying party or parties be liable for a settlement of an
action with respect to which they have assumed the defense if such settlement is effected without the written consent of such indemnifying
party, or for the reasonable fees and expenses of more than one counsel for (i) the Company, its officers, directors and controlling
persons as a group, and (ii) the selling Subscribers and their controlling persons as a group, in each case, in connection
with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations
or circumstances; provided, however, that if, in the reasonable judgment of an indemnified party, a conflict
of interest may exist between such indemnified party and the Company or any other of such indemnified parties with respect to such
claim, the indemnifying party shall be obligated to pay the reasonable fees and expenses of such additional counsel.
(h) Contribution.
(i) If the indemnification provided for in or pursuant to Section 7(g) is due in accordance with the terms
hereof, but held by a court of competent jurisdiction to be unavailable or unenforceable in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities
or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the statements or omissions which result in such losses, claims, damages,
liabilities or expenses as well as any other relevant equitable considerations. The relative fault of the indemnifying party
on the one hand and of the indemnified party on the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party, and by such party’s relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission. In no event shall the liability of the selling
Subscribers be greater in amount than the amount for which such indemnifying party would have been obligated to pay by way of indemnification
if the indemnification provided for under Section 7(g)(i) had been available under the circumstances.
(ii) No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7(h)(ii)),
each director of the Company, each officer of the Company who signed a Registration Statement, and each Person, if any, who controls
the Company or a selling Subscriber within the meaning of Section 15 of the Securities Act shall have the same rights to contribution
as the Company or such selling Subscriber, as the case may be.
(i) Representations,
Warranties and Indemnities to Survive. The indemnity and contribution agreements contained in this Section 7 shall remain
operative and in full force and effect regardless of (i) any termination of any underwriting or agency agreement; (ii) any
investigation made by or on behalf of the selling Subscriber or Subscribers, the Company or any underwriter or agent or controlling
Person; or (iii) the consummation of the sale or successive resales of the Registered Securities.
| 8. | MISCELLANEOUS PROVISIONS |
(a) Each
party hereto acknowledges that (i) Sichenzia Ross Friedman Ference LLP (“SRFF”) has served as counsel to the Company
in connection with this Agreement and the matters described herein and (ii) SRFF has represented the Lead Investor and certain
Subscribers in the past and may continue to do so in the future. Each party has been advised by the foregoing counsel
that in connection with this Agreement and the matters described herein, it should retain counsel of its choice inasmuch as important
rights may be involved or affected relative to the matters herein. Each party has been represented by its own separate
legal counsel in connection with this Agreement. No presumption against any party to this Agreement shall be asserted as a result
of the drafting of or in connection with the drafting and negotiation of this Agreement and ancillary agreements.
(b) Each
of the parties hereto shall be responsible to pay the costs and expenses of its own legal counsel in connection with the preparation
and review of this Agreement and related documentation.
(c) Neither
this Agreement, nor any provisions hereof, shall be waived, modified, discharged or terminated except by an instrument in writing
signed by the party against whom any waiver, modification, discharge or termination is sought.
(d) The
representations, warranties and agreement of each Subscriber and the Company made in this Agreement shall survive the execution
and delivery of this Agreement and the delivery of the Securities.
(e) Any
party may send any notice, request, demand, claim or other communication hereunder to the Subscriber at the address set forth on
the signature page of this Agreement or to the Company at its primary office (including personal delivery, expedited courier, messenger
service, fax, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication will be deemed
to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to
which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other parties written
notice in the manner herein set forth.
(f) Except
as otherwise provided herein, this Agreement shall be binding upon, and inure to the benefit of, the parties to this Agreement
and their heirs, executors, administrators, successors, legal representatives and assigns. If any Subscriber is more than one person
or entity, the obligation of any Subscriber shall be joint and several and the agreements, representations, warranties and acknowledgments
contained herein shall be deemed to be made by, and be binding upon, each such person or entity and its heirs, executors, administrators,
successors, legal representatives and assigns. This Agreement sets forth the entire agreement and understanding between the parties
as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every
nature among them.
(g) This
Agreement is not transferable or assignable by the Company.
(h) The
Company hereby represents and warrants as of the date hereof and as of any Closing Date that none of the terms offered to any Person
with respect to any offer, sale or subscription of Securities (each a "Subscription Document"), is or will be
more favorable to such Person than those of the Subscriber and this Agreement shall be, without any further action by the Subscriber
or the Company, deemed amended and modified in an economically and legally equivalent manner such that the Subscriber shall receive
the benefit of the more favorable terms contained in such Subscription Document. Notwithstanding the foregoing, the Company agrees,
at its expense, to take such other actions (such as entering into amendments to the Transaction Documents) as the Subscriber may
reasonably request to further effectuate the foregoing.
(i) The
obligations of each Subscriber under any Transaction Document are several and not joint with the obligations of any other Subscriber,
and no Subscriber shall be responsible in any way for the performance or non-performance of the obligations of any other Subscriber
under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Subscriber
pursuant hereto or thereto, shall be deemed to constitute the Subscribers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Subscribers are in any way acting in concert or as a group with respect
to such obligations or the transactions contemplated by the Transaction Documents. Each Subscriber shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction
Documents, and it shall not be necessary for any other Subscriber to be joined as an additional party in any proceeding for such
purpose. Each Subscriber has been represented by its own separate legal counsel in its review and negotiation of the Transaction
Documents. The Company has elected to provide all Subscribers with the same terms and Transaction Documents for the convenience
of the Company and not because it was required or requested to do so by any of the Subscribers. It is expressly understood and
agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Subscriber,
solely, and not between the Company and the Subscribers collectively and not between and among the Subscribers. The Company acknowledges
that any actions of Subscribers now, and in the future, in which (A) any review or approval is sought by the Company, including,
without limitation, review, approval or acceptance of any reportable event required to be reported in any SEC filing or report
by the Company; or (B) any amendment, waiver, right of first refusal, participation right, acquisition or financing, including
any acquisition or financing is proposed, introduced, offered or arranged by any one or more Subscribers or their affiliates or
sought by the Company, shall not be claimed by the Company or any person seeking to assert such a claim on behalf of the Company,
to constitute the forming of any “Group” as such term is defined under Section 13(d) or Section 16 of the Exchange
Act, nor shall any activity permit the Company or any third party holder of securities of the Company to assert any claim that
any beneficial ownership limitations or conversion limitations of the Warrants have been exceeded and such Subscriber, alone or
in conjunction with others, constitutes a “Group” for purposes of the Exchange Act as a result thereof.
(j) Except
as otherwise provided herein, this Agreement shall not be changed, modified or amended and no right hereunder shall be waived,
except in writing signed by both (a) the Company and (b) Subscribers holding at least 60% of the Units sold in the Offering outstanding
on the date of determination (including the Lead Investor). The Company shall be prohibited from offering any additional consideration
to any Subscriber in this Offering (or such original Subscriber’s transferee) for the purposes of inducing such person to
change, modify, waive or amend any term of this Agreement or any other Transaction Document without making the same offer on a
pro-rata basis to all other Subscribers (and those transferees) in this Offering allocable to the securities acquired by such transferee(s).
(k) This
Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts
of law principles.
(l) The
Company and each Subscriber hereby agree that any dispute that may arise between them arising out of or in connection with this
Agreement shall be adjudicated before a court located in the City of New York, Borough of Manhattan, and they hereby submit to
the exclusive jurisdiction of the federal and state courts of the State of New York located in the City of New York, Borough of
Manhattan with respect to any action or legal proceeding commenced by any party, and irrevocably waive any objection they now or
hereafter may have respecting the venue of any such action or proceeding brought in such a court or respecting the fact that such
court is an inconvenient forum, relating to or arising out of this Agreement or any acts or omissions relating to the sale of the
securities hereunder, and consent to the service of process in any such action or legal proceeding by means of registered or certified
mail, return receipt requested, postage prepaid, in care of the address set forth herein or such other address as either party
shall furnish in writing to the other.
(m) WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES
EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY
AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
(n) This
Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
[Signature Pages Follow]
ALL
SUBSCRIBERS MUST COMPLETE THIS PAGE
IN WITNESS WHEREOF,
the Subscriber has executed this Agreement on the ____ day of _____, 2015.
|
x $0.25 for per Unit = |
|
Units subscribed for |
|
Aggregate Purchase Price |
Manner in which Title is to be held (Please Check One):
1. |
___ |
Individual |
7. |
___ |
Trust/Estate/Pension or Profit sharing Plan
Date Opened:______________ |
2. |
___ |
Joint Tenants with Right of Survivorship |
8. |
___ |
As a Custodian for
________________________________
Under the Uniform Gift to Minors Act of the State of
________________________________ |
3. |
___ |
Community Property |
9. |
___ |
Married with Separate Property |
4. |
___ |
Tenants in Common |
10. |
___ |
Keogh |
5. |
___ |
Corporation/Partnership/ Limited Liability Company |
11. |
___ |
Tenants by the Entirety |
6. |
___ |
IRA |
|
|
|
ALTERNATIVE DISTRIBUTION INFORMATION
To direct distribution
to a party other than the registered owner, complete the information below. YOU MUST COMPLETE THIS SECTION IF THIS IS AN IRA INVESTMENT.
Name of Firm (Bank, Brokerage, Custodian):
Account Name:
Account Number:
Representative Name:
Representative Phone Number:
Address:
City, State, Zip:
IF MORE THAN ONE SUBSCRIBER, EACH SUBSCRIBER
MUST SIGN.
INDIVIDUAL SUBSCRIBERS MUST COMPLETE THIS PAGE 24
SUBSCRIBERS WHICH ARE ENTITIES MUST COMPLETE PAGE 25.
EXECUTION
BY NATURAL PERSONS
_____________________________________________________________________________
Exact Name in Which Title is to be Held
_________________________________
Name (Please Print) |
|
_________________________________
Name of Additional Purchaser |
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|
_________________________________
Residence: Number and Street |
|
_________________________________
Address of Additional Purchaser |
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|
|
_________________________________
City, State and Zip Code |
|
_________________________________
City, State and Zip Code |
|
|
|
_________________________________
Social Security Number |
|
_________________________________
Social Security Number |
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|
|
_________________________________
Telephone Number |
|
_________________________________
Telephone Number |
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_________________________________
Fax Number (if available) |
|
________________________________
Fax Number (if available) |
|
|
|
_________________________________
E-Mail (if available) |
|
________________________________
E-Mail (if available) |
|
|
|
__________________________________
(Signature)
|
|
________________________________
(Signature of Additional Purchaser) |
ACCEPTED this ___ day of _________ 2015, on behalf of the Company. |
[SIGNATURE PAGE FOR SUBSCRIPTION AGREEMENT]
EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY
(Corporation, Partnership, LLC, Trust, Etc.)
_____________________________________________________________________________
Name of Entity (Please Print)
Date of Incorporation or Organization: |
|
State of Principal Office: |
|
Federal Taxpayer Identification Number:
____________________________________________
Office Address
____________________________________________
City, State and Zip Code
____________________________________________
Telephone Number
____________________________________________
Fax Number (if available)
____________________________________________
E-Mail (if available) |
[seal]
Attest: _________________________________
(If Entity is a Corporation) |
_________________________________
_________________________________
Address |
|
|
ACCEPTED this ____ day of __________ 2015 , on behalf of the Company. |
[SIGNATURE PAGE FOR SUBSCRIPTION AGREEMENT]
INVESTOR QUESTIONNAIRE
Instructions: Check all boxes below
which correctly describe you.
¨ |
You are (i) a bank, as defined in Section 3(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), (ii) a savings and loan association or other institution, as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in an individual or fiduciary capacity, (iii) a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (iv) an insurance company as defined in Section 2(13) of the Securities Act, (v) an investment company registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), (vi) a business development company as defined in Section 2(a)(48) of the Investment Company Act, (vii) a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301 (c) or (d) of the Small Business Investment Act of 1958, as amended, (viii) a plan established and maintained by a state, its political subdivisions, or an agency or instrumentality of a state or its political subdivisions, for the benefit of its employees and you have total assets in excess of $5,000,000, or (ix) an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and (1) the decision that you shall subscribe for and purchase shares of common stock or preferred stock, is made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or (2) you have total assets in excess of $5,000,000 and the decision that you shall subscribe for and purchase the Units is made solely by persons or entities that are accredited investors, as defined in Rule 501 of Regulation D promulgated under the Securities Act (“Regulation D”) or (3) you are a self-directed plan and the decision that you shall subscribe for and purchase the Securities is made solely by persons or entities that are accredited investors. |
|
|
o |
You are a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended. |
|
|
o |
You are an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation, Massachusetts or similar business trust or a partnership, in each case not formed for the specific purpose of making an investment in the Securities and its underlying securities in excess of $5,000,000. |
|
|
o |
You are a director or executive officer of the Company. |
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|
o |
You are a natural person whose individual net worth, or joint net worth with your spouse, exceeds $1,000,000 (excluding residence) at the time of your subscription for and purchase of the Securities. |
|
|
o |
You are a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with your spouse in excess of $300,000 in each of the two most recent years, and who has a reasonable expectation of reaching the same income level in the current year. |
|
|
o |
You are a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities and whose subscription for and purchase of the Securities is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D. |
|
|
o |
You are an entity in which all of the equity owners are persons or entities described in one of the preceding paragraphs. |
Check all boxes below which correctly describe you.
With respect to this investment in the Securities, your:
|
Investment Objectives: |
¨ Aggressive Growth |
¨ Speculation |
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|
|
|
|
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Risk Tolerance: |
¨ Low Risk |
¨ Moderate Risk |
¨ High Risk |
Are you associated with a FINRA Member Firm? ¨
Yes ¨ No
Your initials (purchaser and co-purchaser, if applicable)
are required for each item below:
____ ____ |
I/We understand that this investment is not guaranteed. |
|
|
____ ____ |
I/We are aware that this investment is not liquid. |
|
|
____ ____ |
I/We are sophisticated in financial and business affairs and are able to evaluate the risks and merits of an investment in this offering. |
|
|
____ ____ |
I/We confirm that this investment is considered “high risk.” (This type of investment is considered high risk due to the inherent risks including lack of liquidity and lack of diversification. Success or failure of private placements such as this is dependent on the corporate issuer of these securities and is outside the control of the investors. While potential loss is limited to the amount invested, such loss is possible.) |
The Subscriber hereby
represents and warrants that all of its answers to this Investor Questionnaire are true as of the date of its execution of the
Subscription Agreement pursuant to which it purchased the Securities.
___________________________________
Name of Purchaser [please print]
___________________________________
Signature of Purchaser (Entities please
provide signature of Purchaser’s duly
authorized signatory.)
___________________________________
Name of Signatory (Entities only)
___________________________________
Title of Signatory (Entities only) |
___________________________________
Name of Co-Purchaser [please print]
___________________________________
Signature of Co-Purchaser |
[SIGNATURE PAGE FOR INVESTOR QUESTIONNAIRE]
EXHIBIT A
Form
of Warrant
See attached.
EXHIBIT B
Wire
Instructions
Bank of America
ABA# 026 009593
MGT Capital Investments, Inc.
Account# 4830 5243 1914
EXHIBIT C
Form
of VOTING AGREEMENT
See attached.
Exhibit 10.2
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, THE SUBSTANCE OF WHICH SHALL BE REASONABLY 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.
FORM OF COMMON STOCK PURCHASE WARRANT
MGT
Capital Investments, Inc.
Warrant Shares: [______] |
Initial Issuance Date: [___], 2015 |
Warrant No: [______]
THIS COMMON STOCK PURCHASE
WARRANT (the “Warrant”) certifies that, for value received, [______] or its assigns (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 Initial Exercise Date (as defined herein) and on or prior to the close of business on the thirty six (36) month anniversary
of the Initial Issuance Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from
MGT CAPITAL INVESTMENTS, INC., a Delaware corporation (the “Company”), up to [____] shares (as
subject to adjustment hereunder, 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). The “Initial Exercise Date”
shall be the earlier of (i) the twelve month anniversary of the Initial Issuance Date or (ii) a private or public financing, subject
to approval of the Lead Investor, in which the Company receives gross proceeds of at least $7,500,000 in one or more transactions;
a spinoff; one or more acquisitions or sales by the Company of any business, assets, stock, licenses, interests or properties (including,
without limitation, intellectual property rights) approved by the stockholders of the Company; or a merger, consolidation, recapitalization,
or reorganization approved by the stockholders of the Company (individually, each a “Qualifying Transaction”).
Each Unit is comprised of one Share and a Warrant to purchase two Warrant Shares.
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 [____] 2015, among the Company and the Holder.
Section 2. Exercise.
a) 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. Within two (2) Trading Days following the date
of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice
of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified
in Section 2(c) below is specified in the applicable Notice of Exercise. Notwithstanding anything herein to the contrary (although
the Holder may surrender the Warrant to, and receive a replacement Warrant from, the Company), the Holder shall not be required
to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder
and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation
within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering
the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.
The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases.
The Company shall deliver any objection to any Notice of Exercise Form within one (1) Trading Day of delivery of such notice. The
Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder
at any given time may be less than the amount stated on the face hereof.
b) Exercise
Price. The initial exercise price per share of the Common Stock under this Warrant shall be $0.25, (the “Initial
Exercise Price”) subject to adjustment hereunder (as adjusted, the “Exercise Price”), payable, subject
to Section 2(c) below, in immediately available funds.
c) Cashless
Exercise. Following the four (4) month anniversary of the Initial Issuance Date, provided the Company has consummated a Qualifying
Transaction and there is no effective registration statement registering, or no current prospectus available for the resale of
the Warrant Shares by the Holder, then this Warrant may also be exercised at the Holder’s election, in whole or in part,
at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
|
(A) = |
the Closing Sale Price on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise; |
|
|
|
|
(B) = |
the Exercise Price of this Warrant, as adjusted hereunder; and |
|
|
|
|
(X) = |
the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise. |
For the avoidance
of doubt, Rule 144 shall not be available until at least the six (6) month anniversary of the Initial Issuance Date. Notwithstanding
anything herein to the contrary, on the Termination Date, unless the Holder notifies the Company otherwise, if there is no effective
Registration Statement registering, or no current prospectus available for, the resale of the Warrant Shares by the Holder and
the Exercise Price is greater than the Closing Sale Price on the Trading Day immediately preceding the date on which the Warrant
would otherwise expire, then this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).
d) Mechanics
of Exercise.
(a) Delivery
of Certificates Upon Exercise. Certificates for shares purchased hereunder shall be transmitted by the Company’s transfer
agent for its Common Stock (the “Transfer Agent”) to the Holder by crediting the account of the Holder’s
prime broker with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”)
if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the
issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) this Warrant is being exercised via cashless
exercise and Rule 144 is available, and otherwise by physical delivery to the address specified by the Holder in the Notice of
Exercise by the date that is three (3) Trading Days after the latest of (A) the delivery to the Company of the Notice of Exercise,
(B) surrender of this Warrant (if required) and (C) payment of the aggregate Exercise Price as set forth above (including by cashless
exercise, if permitted) (such date, the “Warrant Share Delivery Date”). 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, with payment to the Company of the Exercise Price
(or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior
to the issuance of such shares, having been paid. The Company understands that a delay in the delivery of the Warrant Shares after
the Warrant Share Delivery Date could result in economic loss to the Holder. As compensation to the Holder for such loss, the Company
agrees to pay (as liquidated damages and not as a penalty) to the Holder for late issuance of Warrant Shares upon exercise of this
Warrant the proportionate amount of $10 per Trading Day after the Warrant Share Delivery Date for each $1,000 of Exercise Price
of Warrant Shares for which this Warrant is exercised which are not timely delivered. The Company shall pay any payments incurred
under this Section in immediately available funds upon demand. Furthermore, in addition to any other remedies which may be available
to the Holder, in the event that the Company fails for any reason to effect delivery of the Warrant Shares by the Warrant Share
Delivery Date, the Holder may revoke all or part of the relevant Warrant exercise by delivery of a notice to such effect to the
Company, whereupon the Company and the Holder shall each be restored to their respective positions immediately prior to the exercise
of the relevant portion of this Warrant, except that the liquidated damages described above shall be payable through the date notice
of revocation or rescission is given to the Company.
i. Delivery
of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder
and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights of the 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.
ii. Rescission
Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing
the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right, at any
time prior to issuance of such Warrant Shares, to rescind such exercise.
iii. Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Exercise. In addition to any other rights available to the Holder,
if the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant
Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its
broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares
of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving
upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased
exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the
Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation
was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant
Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder
the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery
obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In
with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation
of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon
request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other
remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock
upon exercise of the Warrant as required pursuant to the terms hereof.
iv. 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 the 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.
v. 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. The Company shall pay all Transfer Agent fees required for same-day processing of any
Notice of Exercise.
vi. 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.
e) Holder’s
Exercise Limitations. (i) The Company shall not effect any exercise
of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise,
to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder
(together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s
Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of
the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include
the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made,
but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised
or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents)
subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder
or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership
shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder,
it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with
Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.
To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable
shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s
determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates)
and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company
shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder
may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual
report filed with the SEC, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written
notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written
or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates
since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation”
shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares
of Common Stock issuable upon exercise of this Warrant. The Holder may decrease the Beneficial Ownership Limitation at any time
and the Holder, upon not less than 61 days’ prior notice to the Company, may increase the Beneficial Ownership Limitation
provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares
of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this
Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any such increase will not be effective
until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or
any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or
to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in
this paragraph shall apply to a successor holder of this Warrant.
f) Issuance
Restrictions. If the Company has not obtained the approval of its shareholders in accordance with the rules of the NYSE MKT,
then the Company may not issue upon exercise of this Warrant a number of Warrant Shares, which, when aggregated with any shares
of Common Stock (i) issued pursuant to the Subscription Agreement, and (ii) issuable upon prior exercise of this or any other Warrant
issued pursuant to the Subscription Agreement, would exceed Two Million Eight Hundred and Forty Thousand (2,840,000) shares of
Common Stock, in the aggregate, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations
and other similar transactions of the Common Stock that occur after the date of the Subscription Agreement (such number of shares,
the “Issuable Maximum”). The Holder and the holders of the other Warrants issued pursuant to the Subscription
Agreement shall be entitled to a portion of the Issuable Maximum equal to the quotient obtained by dividing (x) the Holder’s
original Aggregate Purchase Price by (y) the aggregate original Aggregate Purchase Price of all Purchasers pursuant to the Subscription
Agreement. In addition, the Holder may allocate its pro-rata portion of the Issuable Maximum among Warrants held by it in its sole
discretion. Such portion shall be adjusted upward ratably in the event a Holder no longer holds any Warrants and the amount of
shares issued to such Holder pursuant to its Warrants was less than such Holder’s pro-rata share of the Issuable Maximum.
For avoidance of doubt, unless and until any required approval of the Company’s shareholders of the issuance of in excess
of Two Million Eight Hundred and Forty Thousand (2,840,000) shares of Common Stock pursuant to the Subscription Agreement (“Shareholder
Approval”) is obtained and effective, warrants issued to any registered broker-dealer as a fee in connection with the
Securities issued pursuant to the Subscription Agreement as described in clause (iii) above shall provide that such warrants shall
not be allocated any portion of the Issuable Maximum and shall be unexercisable unless and until such Shareholder Approval is obtained
and effective. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
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 on shares of its Common Stock or any other equity or equity equivalent securities 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 or pursuant to any of the other Transaction Documents), (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) Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time after the Initial Exercise
Date the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other
property pro rata to all of the record holders of any class of shares of Common Stock (the “Purchase Rights”),
then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which
the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of
this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase
Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate
in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right
to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its
right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
c) Pro
Rata Distributions. If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common
Stock (and not to the Holder) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants
to subscribe for or purchase any security other than the Common Stock (which shall be subject to Section 3(c)), then in each such
case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed
for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP
determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then
per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable
to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments
shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed
or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution
is made and shall become effective immediately after the record date mentioned above. Notwithstanding the foregoing and for the
avoidance of doubt, a spinoff shall not trigger an adjustment to the Exercise Price pursuant to this Section 3(c).
d) Fundamental
Transaction. If, at any time while this Warrant is outstanding, the Company enters into a Fundamental Transaction then, upon
any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been
issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without
regard to any limitation in Section 2(e) on the exercise of this Warrant) the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate
Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation
in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall
be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in
respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among
the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of
this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction
in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations
of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant
to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable
delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this
Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this
Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity)
equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations
on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise
price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant
to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such
exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of
such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of
any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date
of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company”
shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity
had been named as the Company herein. Notwithstanding the foregoing, the Warrant holder will not be entitled to redeem these warrants
for cash in any fundamental transaction that is not approved by the Company’s board of directors or that occurs in a transaction
or as a result of an event that was not within the Company’s sole control.
e) Calculations.
All calculations under this Section 3 shall be made to the nearest cent or the nearest whole 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.
f) 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 any resulting adjustment to the number of
Warrant Shares 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, or any compulsory share exchange whereby the Common Stock is converted
into other securities, 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, to the extent that such information constitutes material non-public information
(as determined in good faith by the Company) the Company shall deliver to the Holder at its last address as it shall appear upon
the Warrant Register of the Company, at least 20 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. To the extent that any notice provided hereunder constitutes, or contains, material,
non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with
the Commission SEC pursuant to a Current Report on Form 8-K. The Holder shall remain 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 except as may otherwise
be expressly set forth herein.
Section 4. Transfer
of Warrant.
a) Transferability.
Subject to compliance with any applicable securities laws and the provisions of the Subscription Agreement, 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 in accordance
herewith, 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
issuance date of this Warrant 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 or its transfer agent 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.
Section 5. Certain
Definitions. For purposes of this Warrant, the following terms shall have the following meanings:
(a) “Affiliate”
shall mean as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common
control with, that Person. For the purposes of this definition, “control” (including, with correlative meanings, the
terms “controlling”, “controlled by” and “under common control with”), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities or by contract or otherwise. For purposes of this definition, a Person
shall be deemed to be “controlled by” a Person if such latter Person possesses, directly or indirectly, power
to vote 10% or more of the securities having ordinary voting power for the election of directors of such former Person
(b) “Bloomberg”
means Bloomberg Financial Markets.
(c) “Business
Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.
(d) “Closing
Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price
and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal
Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as
the case may be, then the last bid price or the last trade price, respectively, of such security prior to 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such
security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing
bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security
by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported
in the “pink sheets” by the OTC Markets Group LLC. If the Closing Bid Price or the Closing Sale Price cannot be calculated
for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case
may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All
such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.
(e) “Common
Stock” means (i) the Company’s shares of Common Stock, par value $0.001 per share, and (ii) any share capital into
which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.
(f) “Common
Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument
that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock
(g) “Fundamental
Transaction” means that (i) the Company or any of its Subsidiaries shall, directly or indirectly, in one or more related
transactions, (1) consolidate or merge with or into (whether or not the Company or any of its Subsidiaries is the surviving corporation)
any other person unless immediately following the closing of such transaction or series of related transactions the persons holding
more than 50% of the Voting Stock of the Company prior to such closing continue to hold more than 50% of the Voting Stock of the
Company following such closing or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially
all of its respective properties or assets to any other person, or (3) assist any other person in making a purchase, tender or
exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including
any shares of Voting Stock of the Company held by the person or persons making or party to, or associated or affiliated with the
persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or
other business combination (including, without limitation, a reorganization, recapitalization, or scheme of arrangement) with any
other person whereby such other person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including
any shares of Voting Stock of the Company held by the other person or other persons making or party to, or associated or affiliated
with the other persons making or party to, such stock or share purchase agreement or other business combination) excluding any
equity financing transaction in which shares of Voting Stock are issued, or (5) (I) reorganize, recapitalize or reclassify the
Common Stock, (II) effect or consummate a stock combination, reverse stock split or other similar transaction involving the Common
Stock or (III) make any public announcement or disclosure with respect to any stock combination, reverse stock split or other similar
transaction involving the Common Stock (including, without limitation, any public announcement or disclosure of (x) any potential,
possible or actual stock combination, reverse stock split or other similar transaction involving the Common Stock or (y) board
or stockholder approval thereof, or the intention of the Company to seek board or stockholder approval of any stock combination,
reverse stock split or other similar transaction involving the Common Stock), or (ii) any “person” or “group”
(as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act and the rules and regulations promulgated
thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company. For
the avoidance of doubt, a spinoff shall not be considered a Fundamental Transaction.
(h) “Person”
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization,
any other entity and a government or any department or agency thereof.
(i) “Principal
Market” means NYSE MKT or the principal securities exchange or securities market on which the Common Stock is then quoted
or traded.
(j) “Rule
144” means Rule 144 promulgated by the SEC pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule
(k) “Subsidiary”
means any subsidiary of the Company including any direct or indirect subsidiary of the Company formed or acquired after the date
hereof.
(l) “Trading
Day” means any day on which the Common Stock are traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common
Stock are then traded; provided that “Trading Day” shall not include any day on which the Common Stock are scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock are suspended from trading during
the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time
of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time).
(m) “Voting
Stock” of a person means capital stock of such person of the class or classes pursuant to which the holders thereof have
the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers, trustees
or other similar governing body of such person (irrespective of whether or not at the time capital stock of any other class or
classes shall have or might have voting power by reason of the happening of any contingency).
(n) “VWAP”
means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or,
if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities
market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00
p.m., New York time, as reported by Bloomberg through its “HP” function set to “weighted average” or, if
the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such
hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security
as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated
for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value
as mutually determined by the Company and such Holder. If the Company and such Holder are unable to agree upon the fair market
value of such security, then such dispute shall be resolved in accordance with the procedures in Section 22 of the Series C Certificate
of Designations. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination
or other similar transaction during such period
Section 6. Miscellaneous.
a) No
Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights
as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i).
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 Trading Day, then, such action may be taken or such right may be exercised on the next succeeding
Trading Day.
d) Authorized
Shares.
(i) The
Company covenants that, during the period the Warrant is outstanding, it will maintain a reserve from its authorized and unissued
Common Stock 100% of the maximum number of shares 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 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 Principal 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 and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully
paid and non-assessable 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).
(ii) Except
and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without
limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount
payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise
of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under
this Warrant.
(iii) 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, or unless exercised
in a cashless exercise when Rule 144 is available, and the Holder does not utilize cashless exercise, will have restrictions upon
resale imposed by state and federal securities laws.
g) Non-waiver
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 the Holder’s rights, powers or remedies. Without limiting any other provision
of this Warrant or the Subscription Agreement, if the Company intentionally 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 the 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 the 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 the Holder to exercise this Warrant to purchase
Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the 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) Remedies.
The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled
to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert
the defense in any action for specific performance that a remedy at law would be adequate.
k) 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 and permitted assigns of the Company and the successors and permitted assigns
of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and
shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment.
This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holders
of not less than 60% of the then outstanding Warrants issued pursuant to the Subscription Agreement which such approval shall include
the approval of the Lead Investor (as defined in the Subscription Agreement).
m) 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.
n) 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 Page Follows)
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.
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NOTICE OF EXERCISE
| To: | MGT CAPITAL INVESTMENTS,
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
¨
[if permitted] 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:
_______________________________
(4) After
giving effect to this Notice of Exercise, the undersigned will not have exceeded the Beneficial Ownership Limitation.
The Warrant Shares shall be delivered to
the following DWAC Account Number or by physical delivery of a certificate to:
_______________________________
_______________________________
_______________________________
[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.)
MGT
CAPITAL INVESTMENTS, INC.
FOR VALUE RECEIVED, [____]
all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to
_______________________________________________
whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________, _______
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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.
Exhibit 10.3
MGT CAPITAL INVESTMENTS, INC.
VOTING AGREEMENT
This
Voting Agreement (the “Agreement”) is made and entered into as of this __day of October, 2015, by
and among MGT Capital Investments, Inc., a Delaware corporation (the
“Company”), and the person identified on the signature page to this Agreement (the “Shareholder”).
Terms not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement (as defined below).
Witnesseth
Whereas,
certain investors, who may include the Shareholder (the “Buyers”), are severally purchasing up to $700,000
of units of the Company’s securities with each unit consisting of one share of common stock and a warrant to purchase two
shares of common stock pursuant to a subscription agreement (the “Purchase Agreement”) of even date herewith
(the “Financing”); and
Whereas,
in connection with the consummation of the Financing, the Company and the Shareholder have agreed to provide for certain and specific
obligations with respect to the future voting of its shares of the Company’s capital stock as set forth below and the Company
has agreed to deliver this Agreement.
Now,
Therefore, in consideration of these premises and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Voting.
1.1 Subject
Shares.
The Shareholder
agrees to hold all shares of voting capital stock of the Company registered in its name or beneficially owned by it as of the
date hereof and any and all other securities of the Company legally or beneficially acquired by the Shareholder after the
date hereof other than securities purchased in the Financing (hereinafter collectively referred to as the
“Subject Shares”) subject to, and to vote the Subject Shares in accordance with, the provisions of this
Agreement. Notwithstanding the foregoing, the Shareholder may transfer any Subject Shares if the transferee agrees to be
bound by the terms of this Agreement as provided for in Section 1.4 herein.
1.2 Shareholder
Approval. On each and all actions or matters relating to obtaining shareholder approval
to permit the full exercise of the Warrants in accordance with applicable listing rules of the NYSE MKT (the “Proposal”),
the Shareholder agrees to vote all Subject Shares held by it (or the holder thereof shall consent pursuant to an action by written
consent of the holders of capital stock of the Company) to approve the Proposal.
1.3 Legend.
(a) Concurrently
with the execution of this Agreement, there shall be imprinted or otherwise placed, on certificates representing the Subject Shares
the following restrictive legend (the “Legend”):
“THE SHARES REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A VOTING AGREEMENT WHICH PLACES CERTAIN RESTRICTIONS ON THE VOTING
OF THE SHARES REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN SUCH SHARES SHALL BE DEEMED TO AGREE TO AND SHALL BECOME
BOUND BY ALL THE PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH VOTING AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE
WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.”
(b) The
Company agrees that, during the term of this Agreement, it will not remove, and will not permit to be removed (upon registration
of transfer, reissuance of otherwise), the Legend from any such certificate and will place or cause to be placed the Legend on
any new certificate issued to represent Subject Shares theretofore represented by a certificate carrying the Legend. If at any
time or from time to time any Investor holds any certificate representing shares of the Company’s capital stock not bearing
the aforementioned legend, the Shareholder agrees to deliver such certificate to the Company promptly to have such legend placed
on such certificate.
1.4 Successors.
The provisions of this Agreement shall be binding upon the successors in interest to any of the Subject Shares. The Company shall
not permit the transfer of any of the Subject Shares on its books or issue a new certificate representing any of the Subject Shares
unless and until the person to whom such security is to be transferred shall have executed a written agreement, substantially in
the form of this Agreement, pursuant to which such person becomes a party to this Agreement and agrees to be bound by all the provisions
hereof as if such person were an Investor.
1.5 Other
Rights. Except as provided by this Agreement or any other Transaction Document, the Shareholder
shall exercise the full rights of a holder of capital stock of the Company with respect to the Subject Shares.
1.6 Irrevocable
Proxy. To secure the Shareholder’s obligations to vote the Subject Shares in accordance
with this Agreement, the Shareholder hereby appoints the Chairman of the Company or its designees, as the Shareholder’s true
and lawful proxy and attorney, with the power to act alone and with full power of substitution, to vote all of the Shareholder’s
Subject Shares solely in connection with the Proposal, as set forth in this Agreement and to execute all appropriate instruments
consistent with this Agreement on behalf of the Shareholder if, and only if, the Shareholder fails to vote all of the Shareholder’s
Subject Shares or execute such other instruments in accordance with the provisions of this Agreement within five (5) days of the
Company’s or any other party’s written request for the Shareholder’s written consent or signature. The proxy
and power granted by the Shareholder pursuant to this Section are coupled with an interest and are given to secure the performance
of such party’s duties under this Agreement. Such proxy and power will be irrevocable for the term hereof. The proxy and
power, so long as any party hereto is an individual, will survive the death, incompetency and disability of such party or any other
individual holder of the Shares and, so long as any party hereto is an entity, will survive the merger or reorganization of such
party or any other entity holding any Subject Shares.
2. Termination.
2.1 This
Agreement shall continue in full force and effect from the date hereof through the earliest of the following dates, on which date
it shall terminate in its entirety:
(a) the
date of the approval of the Proposal; and
(b) the
date as of which the parties hereto terminate this Agreement by written consent.
2.2 Notwithstanding
anything in Section 2.1 to the contrary, if this Agreement is terminated, then the obligations of the Shareholder under Section
3.1, 3.2 and 3.10 shall survive such termination.
3. Miscellaneous.
3.1 Specific
Performance. The parties hereto hereby declare that it is impossible to measure in money
the damages which will accrue to a party hereto or to their heirs, personal representatives, or assigns by reason of a failure
to perform any of the obligations under this Agreement and agree that the terms of this Agreement shall be specifically enforceable.
If any party hereto or his heirs, personal representatives, or assigns institutes any action or proceeding to specifically enforce
the provisions hereof, any person against whom such action or proceeding is brought hereby waives the claim or defense therein
that such party or such personal representative has an adequate remedy at law, and such person shall not offer in any such action
or proceeding the claim or defense that such remedy at law exists.
3.2 Governing
Law. This Agreement shall be governed by and construed and enforced in accordance with
the internal laws of the State of New York, and shall be binding upon the parties hereto in the United States and worldwide.
3.3 Amendment
or Waiver. This Agreement may be amended or modified (or provisions of this Agreement
waived) only upon the written consent of parties hereto. Any amendment or waiver so effected shall be binding upon the Company,
the Shareholder hereto and any assignee of any such party.
3.4 Severability.
In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this
Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.
3.5 Successors
and Assigns. The provisions hereof shall inure to the benefit of, and be binding upon,
the parties hereto and their respective successors, assigns, heirs, executors and administrators and other legal representatives.
3.6 Additional
Shares. In the event that subsequent to the date of this Agreement any shares or other
securities are issued on, or in exchange for, any of the Subject Shares by reason of any stock dividend, stock split, combination
of shares, reclassification or the like, such shares or securities shall be deemed to be Subject Shares, as the case may be, for
purposes of this Agreement.
3.7 Counterparts.
This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together
shall constitute one instrument.
3.8 Waiver.
No waivers of any breach of this Agreement extended by any party hereto to any other party shall be construed as a waiver of any
rights or remedies of any other party hereto or with respect to any subsequent breach.
3.9 Delays
or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy
accruing to any party, upon any breach, default or noncompliance by another party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein,
or of or in any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent
or approval of any kind or character on any party’s part of any breach, default or noncompliance under this Agreement or
any waiver on such party’s part of any provisions or conditions of the Agreement must be in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies, either under this Agreement by law, or otherwise afforded
to any party, shall be cumulative and not alternative.
3.10 Costs
and Attorney’s Fees. In the event that any action, suit or other proceeding is instituted
based upon or arising out of this Agreement or the matters contemplated herein (whether based on breach of contract, tort, breach
of duty or any other theory), the prevailing party shall recover all of such party's costs (including, but not limited to expert
witness costs) and reasonable attorneys' fees incurred in each such action, suit or other proceeding, including any and all appeals
or petitions therefrom.
3.11 Notices.
All notices required in connection with this Agreement shall be in writing and shall be deemed effectively given: (a) upon
personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal
business hours of the recipient; if not, then on the next business day, (c) five (5) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written notification of receipt. All communications shall be sent to the
address appearing on the books of the Company or at such other address or electronic mail address as such party may designate by
10 days advance written notice to the other parties hereto.
3.12 Entire
Agreement. This Agreement, along with the Purchase Agreement, the Transaction Documents
and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof and no party shall be liable or bound to any other in any manner by any oral or
written representations, warranties, covenants and agreements except as specifically set forth herein and therein. Each party expressly
represents and warrants that it is not relying on any oral or written representations, warranties, covenants or agreements outside
of this Agreement.
3.13
No Ownership Interest. Except as otherwise provided herein, nothing contained in this Agreement shall be deemed to vest
in Company any direct or indirect ownership or incidence of ownership of or with respect to the Subject Shares. Except as otherwise
provided herein, all rights, ownership and economic benefits of and relating to the Subject Shares shall remain vested in and belong
to the Shareholder, and the Company shall not have any authority to manage, direct, restrict, regulate, govern, or administer any
of the policies or operations (as applicable) of the Shareholder or exercise any power or authority to direct the Shareholder in
the voting of any of the Subject Shares.
[THIS SPACE INTENTIONALLY LEFT BLANK]
In
Witness Whereof, the parties hereto have executed this Voting Agreement as
of the date first above written.
COMPANY: |
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SHAREHOLDER: |
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MGT CAPITAL INVESTMENTS,INC. |
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Exhibit 99.1
MGT Capital Raises Capital as it Intensifies
Focus on Shareholder Value
HARRISON,
NY (October 9, 2015) MGT Capital Investments, Inc.
(NYSE MKT: MGT) announced today it has entered into agreements with several accredited investors providing $700,000 of equity
capital. The capital raise is comprised of the sale of 2.8 million Units, with
each Unit consisting of one share of the Company’s common stock, and a three-year warrant to purchase two shares of common
stock.
The
Warrants are exercisable at a price of $0.25 per common share on the earlier of (i) one year from the date of issue or (ii) the
occurrence of certain corporate events, including a private or public financing, subject to approval of the lead investor, in which
the Company receives gross proceeds of at least $7,500,000; a spinoff; one or more acquisitions or sales by the Company of certain
assets approved by the stockholders of the Company; or a merger, consolidation, recapitalization, or reorganization approved by
the stockholders of the Company.
The
investment was led by Barry Honig, a private investor and a specialist in corporate finance. Mr. Honig is currently Co-Chairman
and Chief Executive Officer of Majesco Entertainment Company (COOL), and was a former founder and Co-Chairman of interClick, which
was acquired by Yahoo in 2011 for $280 million. He was also the former Co-Chairman of ChromaDex Corporation (CDXC), and is a current
Director and the largest investor in Pershing Gold Corporation (PGLC).
As
recently reported, MGT closed the sale of its daily fantasy sports business and received approximately $5.5 million of cash and
securities in total consideration. "With MGT’s further enhanced balance sheet and reduced cost structure, I believe
the time is perfect to consider all methods to create value for shareholders," stated Robert Ladd, the Company’s Chief
Executive Officer.
The
offering was made in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act
of 1933, as amended, and Rule 506 of Regulation D, as promulgated by the United States Securities and Exchange Commission under
the 1933 Act. The foregoing description of the offering is not complete and is qualified by reference to the full text of the transaction
agreements, which are filed as Exhibits to the Company’s Current Report on Form 8-K filed with the SEC on October 9, 2015.
About MGT Capital Investments, Inc.
MGT Capital and its subsidiaries own and
operate social and real money gaming sites online and in the mobile space, including MGTplay.com
and SlotChamp™. In addition, the Company owns intellectual property relating to slot machines and
has asserted its claims via patent infringement lawsuits. MGT also has ownership stakes in DraftDay.com, a top daily fantasy sports
wagering platform and Viggle Inc., operator of an online entertainment marketing and rewards platform with 10 million registered
users.
Forward-looking Statements
This press release contains forward-looking
statements. The words or phrases "would be," "will allow," "intends to," "will likely result,"
"are expected to," "will continue," "is anticipated," "estimate," "project,"
or similar expressions are intended to identify "forward-looking statements." MGT's financial and operational results
reflected above should not be construed by any means as representative of the current or future value of its common stock. All
information set forth in this news release, except historical and factual information, represents forward-looking statements. This
includes all statements about the Company's plans, beliefs, estimates and expectations. These statements are based on current estimates
and projections, which involve certain risks and uncertainties that could cause actual results to differ materially from those
in the forward-looking statements. These risks and uncertainties include issues related to: rapidly changing technology and evolving
standards in the industries in which the Company and its subsidiaries operate; the ability to obtain sufficient funding to continue
operations, maintain adequate cash flow, profitably exploit new business, license and sign new agreements; the unpredictable nature
of consumer preferences; and other factors set forth in the Company's most recently filed annual report and registration statement.
Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only
as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof. Readers should carefully review the risks and uncertainties described in other
documents that the Company files from time to time with the U.S. Securities and Exchange Commission.
Company Contact
MGT Capital Investments, Inc.
Robert Traversa, Chief Financial Officer
rtraversa@mgtci.com
914-630-7431
MGT Capital Investments (PK) (USOTC:MGTI)
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