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):
December 17, 2014
MAJESCO ENTERTAINMENT COMPANY
(Exact name of registrant as specified in
its charter)
Delaware |
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000-51128 |
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06-1529524 |
(State or other jurisdiction |
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(Commission File Number) |
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(IRS Employer |
of incorporation) |
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Identification No.) |
160 Raritan Center Parkway, Suite 1
Edison, New Jersey 08837
(Address of principal executive offices
and zip code)
Registrant’s telephone number, including
area code: (732) 225-8910
(Former name or former address, if changed
since last report.)
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:
| o | Written communications pursuant to Rule 425 under
the Securities Act (17 CFR 230.425) |
| o | Soliciting material pursuant to Rule 14a-12 under
the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b)) |
| o | 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 December 17, 2014, Majesco Entertainment
Company (the “Company”) entered into separate subscription agreements (the “Subscription Agreement”) with
accredited investors (the “Investors”) relating to the issuance and sale of $6,000,000 of units (the “Units”)
at a purchase price of $0.68 per Unit, with each Unit consisting of one share of the Company’s 0% Series A Convertible Preferred
Stock (the “Preferred Shares”) and a five year warrant (the “Warrants”) to purchase one share of the Company’s
common stock, par value $0.001 per share (the “Common Stock”) at an initial exercise price of $0.68 per share (such
sale and issuance, the “Private Placement”).
The Preferred Shares are convertible into
shares of Common Stock based on a conversion calculation equal to the stated value of the of such Preferred Share, plus all accrued
and unpaid dividends, if any, on such Preferred Share, as of such date of determination, divided by the conversion price. The stated
value of each Preferred Share is $0.68 and the initial conversion price is $0.68 per share, each subject to adjustment for stock
splits, stock dividends, recapitalizations, combinations, subdivisions or other similar events. In addition, in the event the Company
issues or sells, or is deemed to issue or sell, shares of Common Stock at a per share price that is less than the conversion price
then in effect, the conversion price shall be reduced to such lower price, subject to certain exceptions. The Company is prohibited
from effecting a conversion of the Preferred Shares to the extent that, as a result of such conversion, such Investor 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 conversion of the Preferred Shares, which beneficial ownership limitation may be increased by the holder up
to, but not exceeding, 9.99%. Each holder is entitled to vote on all matters submitted to stockholders of the Company, and shall
have the number of votes equal to the number of shares of Common Stock issuable upon conversion of such holder’s Preferred
Shares, provided in no event shall the holders be entitled to cast votes in excess of the number of votes that holders would be
entitled to cast if the Preferred Shares were converted at $0.59 per share (equal to the market price as determined by NASDAQ on
the trading date immediately prior to closing) (the “Voting Floor”). The Voting Floor shall only be removed in accordance
with Nasdaq Listing Rules. Pursuant to the Certificate of Designations, Preferences and Rights of the 0% Series A Convertible Preferred
Stock (the “Certificate of Designations”), the Company is prohibited from incurring debt or liens, or entering into
new financing transactions without the consent of the Lead Investor (as defined in the Subscription Agreement). The Preferred Shares
bear no interest.
The Warrants are exercisable, at any time,
following the date the Warrants are issued, at a price of $0.68 per share, subject to adjustment, and expire five years from the
date of issuance. The holders may, subject to certain limitations, exercise the Warrants on a cashless basis. 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,
including, for twenty-four months following the initial issuance date, the issuance or sale, or deemed issuance or sale, by the
Company of shares of its Common Stock at a per share price that is less than the conversion price then in effect, as a result of
which the conversion price shall be reduced to such lower price, subject to certain exceptions.
Pursuant to the Subscription Agreement,
the Company also elected two new members to the Board of Directors upon the resignation of two outgoing members of the board of
directors. The Subscription Agreement also provides the Investors with the rights of participation in future securities offerings
of the Company. 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 proceeds of the offering were deposited
into an escrow account (the “Escrow Amount”) with Signature Bank, as escrow agent (the “Escrow Agent”)
for the Company pursuant to an escrow agreement (the “Escrow Agreement”), dated December 17, 2014, by and between the
Company, the Lead Investor and the Escrow Agent and certificates representing the Preferred Shares and Warrants purchased in the
Private Placement were deposited with the Company’s corporate secretary (the “Securities Escrow Agent”) to be
held in escrow subject to similar conditions as are provided in the Escrow Agreement. Upon the closing of the Private Placement
on December 17, 2014 (such date, the “Closing Date”), $1,000,000 of the Escrow Amount was released by the Escrow Agent
to the Company in exchange for the release of $1,000,000 of Units by the Securities Escrow Agent. Following the Closing Date, in
one or multiple tranches, the remaining $5,000,000 will be released (the “Subsequent Release”) by the Escrow Agent
to the Investors in exchange for the release of $5,000,000 of Units by the Securities Escrow Agent, provided that the approval
of NASDAQ and the Company’s stockholders has been obtained and, either, (i) the Lead Investor has approved the release, (ii)
the approval of the requisite number of Investors has been obtained, (iii) the Company has executed definitive binding documents
for certain transactions, as described in the Subscription Agreement, and such transaction(s) are to close contemporaneously with
the release, following approval by the Company’s stockholders or (iv) the following conditions are present: (a) nine months
has elapsed from the Closing Date and release is approved by each of the directors appointed at closing (being the non-continuing
directors); (b) no subsequent release of the Escrow Amount has been consummated; and (c) no more than $1,000,000 is released (the
“Release Conditions”). In the event that on and as of the twelve month anniversary of the Closing Date none of the
Release Conditions have been satisfied, the Escrow Agent shall return $5,000,000 to the Investors, without interest or deduction,
and the Securities Escrow Agent shall return the Units to the Company for cancellation.
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 Company has undertaken, pursuant to the registration rights agreement (the “Registration Rights Agreement”) between
the Company and each of the Investors, dated December 17, 2014, to file a registration statement to register the Common Stock issuable
upon exercise of the Warrants and conversion of the Preferred Shares, within forty-five days following the Closing Date and to
maintain the effectiveness of the registration statement until all of the Common Stock issuable upon exercise of the Warrants and
conversion of the Preferred Shares, have been sold or are otherwise able to be sold pursuant to Rule 144. In the event the Company
fails to file, or obtain effectiveness of, such registration statement within the forty-five day period, the Company is obligated
to liquidated damages to the Investors for every thirty-days during which such filing is not made and/or effectiveness obtained,
such fee being subject to certain exceptions.
The foregoing descriptions of the Subscription
Agreement, the Registration Rights Agreement, the Warrants and the Preferred Shares are not complete and are qualified in their
entireties by reference to the full text of the Form of Subscription Agreement, the Form of Registration Rights Agreement, the
Form of Common Stock Purchase Warrant and the Certificate of Designations, copies of which are filed as Exhibit 10.1, Exhibit 10.2,
Exhibit 4.1 and Exhibit 4.2, respectively, to this report and are incorporated by reference herein.
The Company issued a press release on December
18, 2014 announcing the transaction, which press release is attached as Exhibit 99.1 to this report.
Item 3.02 Unregistered Sales of Equity Securities
On December 17, 2014, the Company issued
the Units, consisting of the Preferred Shares and the Warrants, in exchange for aggregate gross proceeds of $6.0 million, $5.0
million of which, along with the corresponding Units, are being held in escrow. 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 Preferred 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 5.02 Departure of Directors or Certain Officers; Election
of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Director Resignations
On December 17, 2014, Jesse Sutton resigned
as a Class I member of the Board of Directors of the Company, effective immediately. Mr. Sutton will continue to serve as the Company’s
Chief Executive Officer.
On December 17, 2014, Allan I. Grafman resigned
as Chairman of, and as a Class III member of, the Board of Directors of the Company, effective immediately. In consideration for
his services Mr. Grafman received a payment in the amount of $60,000 and was permitted to (i) accelerate the vesting of all of
his unvested restricted shares as of December 17, 2014 (the “Effective Date”), (ii) accelerate the vesting of all of
his unvested stock options as of the Effective Date, and (ii) exercise his stock options vested as of the Effective Date for a
period of 12 months following the Effective Date, but not later than the original expiration date of the stock options.
New Director Appointments
On December 17, 2014, the Board of Directors
of the Company appointed Trent D. Davis a Class I member of the Board of Directors and Chairman of the Board of Directors, effective
immediately, to fill the vacancy resulting from the resignation of Mr. Sutton. Mr. Davis was appointed pursuant to the closing
condition that the Lead Investor accept the appointment of two new directors to the Board of Directors of the Company as provided
under the Subscription Agreement. Mr. Davis has been appointed to the Audit Committee, the Compensation Committee and the Nominating
and Governance Committee. Mr. Davis has no direct or indirect material interest in any transaction required to be disclosed pursuant
to Item 404(a) of Regulation S-K. Mr. Davis will be entitled to compensation as a non-employee director pursuant to the Company’s
director compensation program, as disclosed in the Company’s definitive proxy statement filed on April 25, 2014.
On December 17, 2014, the Board of Directors
of the Company appointed Mohit Bhansali as a Class III member, effective immediately, to fill the vacancy resulting from the resignation
of Mr. Grafman. Mr. Bhansali was appointed pursuant to the closing condition that the Lead Investor accept the appointment of two
new directors to the Board of Directors of the Company as provided under the Subscription Agreement. Mr. Bhansali has been appointed
to the Audit Committee, the Compensation Committee and the Nominating and Governance Committee. Mr. Bhansali has no direct or indirect
material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K. Mr. Bhansali will be entitled
to compensation as a non-employee director pursuant to the Company’s director compensation program, as disclosed in the Company’s
definitive proxy statement filed on April 25, 2014.
Item 5.03 Amendments to Articles of Incorporation or Bylaws;
Change in Fiscal Year.
On December 17, 2014, the Company filed
the Certificate of Designations with the Delaware Secretary of State. Reference is made to the disclosure set forth under Item
1.01 above, which is incorporated by reference, in its entirety, into this Item 5.03.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| 4.1 | Form of Common Stock Purchase Warrant |
| 4.2 | Certificate of Designations, Preferences and Rights of the 0% Series A Convertible Preferred Stock of Majesco Entertainment
Company |
| 10.1 | Form of Subscription Agreement |
| 10.2 | Form of Registration Rights Agreement |
| 99.1 | Press Release dated December 18, 2014 |
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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MAJESCO ENTERTAINMENT COMPANY |
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Dated: December 18, 2014 |
/s/ Jesse Sutton |
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Jesse Sutton |
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Chief Executive Officer |
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EXHIBIT INDEX
| 4.1 | Form of Common Stock Purchase Warrant |
| 4.2 | Certificate of Designations, Preferences and Rights of the 0% Series A Convertible Preferred Stock of Majesco Entertainment
Company |
| 10.1 | Form of Subscription Agreement |
| 10.2 | Form of Registration Rights Agreement |
| 99.1 | Press Release dated December 18, 2014 |
EXHIBIT 4.1
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
Majesco
entertainment company
Warrant Shares: [______] |
Initial Issuance Date: [___], 2014 |
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 Issuance Date (the “Initial Exercise Date”) and on or prior to the close of business on
the five (5) year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe
for and purchase from MAJESCO ENTERTAINMENT COMPANY, 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).
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 [____] 2014, among the Company and the purchasers signatory thereto.
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 $0.68, (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. If at any time 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
VWAP 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.
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, 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 (increasing to $20 per Trading Day after the fifth (5th) 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 Commission, 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.
(ii) Issuance
Restrictions. (i) If the Company has not obtained the approval of its shareholders in accordance with NASDAQ Listing Rule 5635(d),
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, (ii) issuable upon conversion of the Series A Preferred Stock
issued pursuant to the Subscription Agreement; (iii) issuable upon prior exercise of this or any other Warrant issued pursuant
to the Subscription Agreement and (iv) issuable pursuant to any warrants issued to any registered broker-dealer as a fee in connection
with the issuance of Securities pursuant to the Subscription Agreement, would exceed 19.99% shares of Common Stock issued and outstanding
as of the Initial Issuance Date, 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 the Common
Stock underlying the Shares and the Warrant Shares 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 the Company grants, issues or sells any Common Stock Equivalents
or rights to purchase stock, warrants, securities or other property pro rata to 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.
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.
e)
Adjustment of Exercise Price Upon Issuance
of New Securities at Less Than the Exercise Price. In the event the Company shall, at any time after the date hereof and on
or prior to the twenty-four month anniversary of the Initial Issuance Date, other than in connection an Excluded Issuance, issue
any Common Stock or Common Stock Equivalents, for a consideration less than the Exercise Price that would be in effect at the time
of such issuance, then, and thereafter successively upon each such issuance, the Exercise Price shall be reduced to such other
lower price for then outstanding Warrants. For purposes of this adjustment, any agreement entered for or the issuance of any security
or debt instrument of the Company carrying the right to convert such security or debt instrument into Common Stock or of any warrant,
right or option to purchase Common Stock shall result in an adjustment to the Exercise Price upon the issuance of the above-described
security, debt instrument, warrant, right, or option if such issuance is at a price lower than the Exercise Price in effect upon
such issuance and again at any time upon any actual, permitted, optional, or allowed issuances of shares of Common Stock upon any
actual, permitted, optional, or allowed exercise of such conversion or purchase rights if such issuance is at a price lower than
the Exercise Price in effect upon any actual, permitted, optional, or allowed such issuance. Common Stock issued or issuable by
the Company for no consideration will be deemed issuable or to have been issued for $0.001 per share of Common Stock.
f) Adjustment
of Exercise Price in Connection with Litigation Resolution. Notwithstanding anything herein to the contrary, in the event that
Post-Closing Litigation Costs (as defined below) exceed Six Hundred Thousand Dollars ($600,000) but are less than One Million Dollars
($1,000,000), then, in such event the Initial Exercise Price shall immediately be adjusted to $0.51 per share; and in the event
that Post-Closing Litigation Costs are equal to or exceed One Million Dollars ($1,000,000), then in such event the Initial Exercise
Price shall immediately be adjusted to $0.34 per share. For purposes hereof, “Post Closing Litigation Costs”
shall mean with respect to Intelligent Verification Systems LLC v Microsoft Corporation and Majesco Entertainment Co. (Case
No. 2:12-cv-00525-AWA-TEM) (the “Patent Litigation”) and incurred or paid from and following the Initial Issuance
Date, all costs associated with the Patent Litigation, including, but not limited to, any hourly or contract rates of counsel,
costs, expenses, bonuses, compensation, payments, reimbursements or any other sums (including, but not limited to, expert witness
fees, deposition expenses, trial costs, document management charges or other similar fees, expenses or charges) paid by the Company
in defending the Patent Litigation, outside contractors, experts, specialists, advisors, representatives or agents in connection
with the Patent Litigation and any payments made in connection with the settlement, judgment or other resolution of the Patent
Litigation (including the costs of any appeals and interpartes review proceedings).
g)
Calculations. All calculations under
this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section
3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of
shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
h)
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 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 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 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) “Approved
Stock Plan” shall mean any benefit or incentive plan which has been approved by the board of directors of the Company
prior to or subsequent to the date hereof pursuant to which shares of Common Stock and options or equivalent Common Stock linked
interests may be issued to any employee, officer, director, consultant for services provided to the Company.
(c) “Bloomberg”
means Bloomberg Financial Markets.
(d) “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.
(e) “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.
(f) “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.
(g) “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
(h) “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
(i) “Eligible
Market” means the Principal Market, The New York Stock Exchange, Inc., The NYSE MKT, The NASDAQ Global Market, The NASDAQ
Capital Market, the Over the Counter Bulletin Board, the OTCQX or the OTCQB.
(f)
“Excluded Issuance” shall mean any (i) 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 adopted on or following the Initial
Issuance Date, provided that (A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such
options) after the INitial Issuance Date pursuant to this clause (i) do not, in the aggregate, exceed more than 15% of the Common
Stock issued and outstanding at the time of such issuance and (B) the exercise price of any such options is not lowered after issuance
by subsequent amendment thereof, none of such options are amended subsequent to issuance to increase the number of shares issuable
thereunder and none of the terms or conditions of any such options are subsequent to issuance otherwise materially changed in any
manner that adversely affects any of the Holders of Warrants; (ii) 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 Holders; and (iii) the shares of Common
Stock issuable upon conversion of the Series A Preferred Stock issuable pursuant to the Subscription Agreement or the Warrants.
(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, 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) allow any other person to make a purchase, tender or exchange offer
that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the 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, spin-off 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), 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.
(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 The NASDAQ Capital Market or the principal securities exchange or securities market on which the Common
Stock is then quoted or traded.
(j) “Options”
means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities
(k) “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
(l) “Subsidiary”
means any subsidiary of the Company including any direct or indirect subsidiary of the Company formed or acquired after the date
hereof.
(m) “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).
(n) “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).
(o) “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. 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 reserve from its authorized and unissued Common Stock
125% 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 willfully and knowingly fails to comply with any provision of this
Warrant, which results in any material damages to the Holder, the Company shall pay to 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 a 60% of the then outstanding Warrants issued pursuant to the Subscription Agreement which such approval shall
include the approval of the Lead Investor.
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: majesco
entertainmetn company
(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.)
MAJESCO
ENTERTAINMENT COMPANY
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 4.2
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF THE
0% SERIES A CONVERTIBLE PREFERRED STOCK OF
MAJESCO ENTERTAINMENT COMPANY
I, Jesse Sutton, hereby
certify that I am the Chief Executive Officer of Majesco Entertainment Company (the “Company”), a corporation
organized and existing under the Delaware General Corporation Law (the “DGCL”), and further do hereby certify:
That pursuant to the
authority expressly conferred upon the Board of Directors of the Company (the “Board”) by the Company’s
Certificate of Incorporation, as amended (the “Certificate of Incorporation”), the Board on December 10, 2014
adopted the following resolutions creating a series of shares of Preferred Stock designated as 0% Series A Convertible Preferred
Stock, none of which shares have been issued:
RESOLVED, that the
Board designates the 0% Series A Convertible Preferred Stock and the number of shares constituting such series, and fixes the rights,
powers, preferences, privileges and restrictions relating to such series in addition to any set forth in the Certificate of Incorporation
as follows:
TERMS OF SERIES A CONVERTIBLE PREFERRED STOCK
1. Designation
and Number of Shares. There shall hereby be created and established a series of preferred stock of the Company designated as
“0% Series A Convertible Preferred Stock” (the “Preferred Shares”). The authorized number of Preferred
Shares shall be 8,830,000 shares. Each Preferred Share shall have $0.001 par value. Capitalized terms not defined herein shall
have the meaning as set forth in Section 23 below.
2. Ranking.
Except to the extent that the holders of at least a majority of the outstanding Preferred Shares (the “Required Holders”)
expressly consent to the creation of Parity Stock (as defined below) or Senior Preferred Stock (as defined below) in accordance
with Section 12, all shares of capital stock of the Company shall be junior in rank to all Preferred Shares with respect to the
preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company (such junior
stock is referred to herein collectively as “Junior Stock”). The rights of all such shares of capital stock
of the Company shall be subject to the rights, powers, preferences and privileges of the Preferred Shares. Without limiting any
other provision of this Certificate of Designations, without the prior express consent of the Required Holders, voting separately
as a single class, the Company shall not hereafter authorize or issue any additional or other shares of capital stock that is (i)
of senior rank to the Preferred Shares in respect of the preferences as to dividends, distributions and payments upon the liquidation,
dissolution and winding up of the Company (collectively, the “Senior Preferred Stock”), (ii) of pari passu rank
to the Preferred Shares in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution
and winding up of the Company (collectively, the “Parity Stock”) or (iii) any Junior Stock having a maturity
date (or any other date requiring redemption or repayment of such shares of Junior Stock) that is prior to the date no Preferred
Shares remain outstanding. In the event of the merger or consolidation of the Company with or into another corporation, the Preferred
Shares shall maintain their relative rights, powers, designations, privileges and preferences provided for herein and no such merger
or consolidation shall result inconsistent therewith.
3. Dividends.
In addition to Sections 5(a) and 11 below, from and after the first date of issuance of any Preferred Shares (the “Initial
Issuance Date”), each holder of a Preferred Share (each, a “Holder” and collectively, the “Holders”)
shall be entitled to receive dividends (“Dividends”) when and as declared by the Board, from time to time, in
its sole discretion, which Dividends shall be paid by the Company out of funds legally available therefor, payable, subject to
the conditions and other terms hereof, in cash on the Stated Value of such Preferred Share.
4. Conversion.
Each Preferred Share shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock (as defined
below) on the terms and conditions set forth in this Section 4.
(a) Holder’s
Conversion Right. Subject to the provisions of Section 4(e) and 4(f), at any time or times on or after the Initial Issuance
Date, each Holder shall be entitled to convert any whole number of Preferred Shares into validly issued, fully paid and non-assessable
shares of Common Stock in accordance with Section 4(c) at the Conversion Rate (as defined below).
(b) Conversion
Rate. The number of validly issued, fully paid and non-assessable shares of Common Stock issuable upon conversion of each Preferred
Share pursuant to Section 4(a) shall be determined according to the following formula (the “Conversion Rate”):
Base Amount
Conversion Price
No fractional
shares of Common Stock are to be issued upon the conversion of any Preferred Shares. If the issuance would result in the issuance
of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole
share.
(c) Mechanics
of Conversion. The conversion of each Preferred Share shall be conducted in the following manner:
(i) Holder’s
Conversion. To convert a Preferred Share into validly issued, fully paid and non-assessable shares of Common Stock on any date
(a “Conversion Date”), a Holder shall deliver (whether via facsimile or otherwise), for receipt on or prior
to 11:59 p.m., New York time, on such date, a copy of an executed notice of conversion of the share(s) of Preferred Shares subject
to such conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the Company.
If required by Section 4(c)(vi), within five (5) Trading Days following a conversion of any such Preferred Shares as aforesaid,
such Holder shall surrender to a nationally recognized overnight delivery service for delivery to the Company the original certificates
representing the share(s) of Preferred Shares (the “Preferred Share Certificates”) so converted as aforesaid.
(ii) Company’s
Response. On or before the first (1st) Trading Day following the date of receipt of a Conversion Notice, the Company
shall transmit by facsimile an acknowledgment of confirmation, in the form attached hereto as Exhibit II, of receipt
of such Conversion Notice to such Holder and the Transfer Agent, which confirmation shall constitute an instruction to the Transfer
Agent to process such Conversion Notice in accordance with the terms herein. On or before the second (2nd) Trading Day
following the date of receipt by the Company of such Conversion Notice, the Company shall (1) provided that the Transfer Agent
is participating in DTC Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which
such Holder shall be entitled to such Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal
at Custodian system, or (2) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue
and deliver (via reputable overnight courier) to the address as specified in such Conversion Notice, a certificate, registered
in the name of such Holder or its designee, for the number of shares of Common Stock to which such Holder shall be entitled. If
the number of Preferred Shares represented by the Preferred Share Certificate(s) submitted for conversion pursuant to Section 4(c)(vi)
is greater than the number of Preferred Shares being converted, then the Company shall if requested by such Holder, as soon as
practicable and in no event later than three (3) Trading Days after receipt of the Preferred Share Certificate(s) and at its own
expense, issue and deliver to such Holder (or its designee) a new Preferred Share Certificate representing the number of Preferred
Shares not converted.
(iii) Record
Holder. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of Preferred Shares
shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.
(iv) Company’s
Failure to Timely Convert. If the Company shall fail, for any reason or for no reason, to issue to a Holder within three (3)
Trading Days after the Company’s receipt of a Conversion Notice (whether via facsimile or otherwise) (the “Share
Delivery Deadline”), a certificate for the number of shares of Common Stock to which such Holder is entitled and register
such shares of Common Stock on the Company’s share register or to credit such Holder’s or its designee’s balance
account with DTC for such number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion
of any Preferred Shares (as the case may be) (a “Conversion Failure”), then, in addition to all other remedies
available to such Holder, such Holder, upon written notice to the Company, (x) may void its Conversion Notice with respect to,
and retain or have returned (as the case may be) any Preferred Shares that have not been converted pursuant to such Holder’s
Conversion Notice, provided that the voiding of a Conversion Notice shall not affect the Company’s obligations to make any
payments which have accrued prior to the date of such notice pursuant to the terms of this Certificate of Designations or otherwise
and (y) the Company shall pay in cash to such Holder on each day after such third (3rd) Trading Day that the issuance
of such shares of Common Stock is not timely effected an amount equal to 1.5% of the product of (A) the aggregate number of shares
of Common Stock not issued to such Holder on a timely basis and to which the Holder is entitled and (B) the Closing Sale Price
of the Common Stock on the Trading Day immediately preceding the last possible date on which the Company could have issued such
shares of Common Stock to the Holder without violating Section 4(c). In addition to the foregoing, if within three (3) Trading
Days after the Company’s receipt of a Conversion Notice (whether via facsimile or otherwise), the Company shall fail to issue
and deliver a certificate to such Holder and register such shares of Common Stock on the Company’s share register or credit
such Holder’s or its designee’s balance account with DTC for the number of shares of Common Stock to which such Holder
is entitled upon such Holder’s conversion hereunder (as the case may be), and if on or after such third (3rd)
Trading Day such Holder (or any other Person in respect, or on behalf, of such Holder) purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Holder of all or any portion of the number of
shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of
Common Stock, issuable upon such conversion that such Holder so anticipated receiving from the Company, then, in addition to all
other remedies available to such Holder, the Company shall, within three (3) Business Days after such Holder’s request and
in such Holder’s discretion, either (i) pay cash to such Holder in an amount equal to such Holder’s total purchase
price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including,
without limitation, by any other Person in respect, or on behalf, of such Holder) (the “Buy-In Price”), at which
point the Company’s obligation to so issue and deliver such certificate or credit such Holder’s balance account with
DTC for the number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion hereunder (as
the case may be) (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to so issue
and deliver to such Holder a certificate or certificates representing such shares of Common Stock or credit such Holder’s
balance account with DTC for the number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion
hereunder (as the case may be) and pay cash to such Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock multiplied by (B) the lowest Closing Sale Price of the Common Stock on any
Trading Day during the period commencing on the date of the applicable Conversion Notice and ending on the date of such issuance
and payment under this clause (ii).
(v) Pro
Rata Conversion; Disputes. In the event the Company receives a Conversion Notice from more than one Holder for the same Conversion
Date and the Company can convert some, but not all, of such Preferred Shares submitted for conversion, the Company shall convert
from each Holder electing to have Preferred Shares converted on such date a pro rata amount of such Holder’s Preferred Shares
submitted for conversion on such date based on the number of Preferred Shares submitted for conversion on such date by such Holder
relative to the aggregate number of Preferred Shares submitted for conversion on such date. In the event of a dispute as to the
number of shares of Common Stock issuable to a Holder in connection with a conversion of Preferred Shares, the Company shall issue
to such Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 22.
(vi) Book-Entry.
Notwithstanding anything to the contrary set forth in this Section 4, upon conversion of any Preferred Shares in accordance with
the terms hereof, no Holder thereof shall be required to physically surrender the certificate representing the Preferred Shares
to the Company following conversion thereof unless (A) the full or remaining number of Preferred Shares represented by the certificate
are being converted (in which event such certificate(s) shall be delivered to the Company as contemplated by this Section 4(c)(vi))
or (B) such Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting
reissuance of Preferred Shares upon physical surrender of any Preferred Shares. Each Holder and the Company shall maintain records
showing the number of Preferred Shares so converted by such Holder and the dates of such conversions or shall use such other method,
reasonably satisfactory to such Holder and the Company, so as not to require physical surrender of the certificate representing
the Preferred Shares upon each such conversion. In the event of any dispute or discrepancy, such records of such Company establishing
the number of Preferred Shares to which the record holder is entitled shall be controlling and determinative in the absence of
manifest error. A Holder and any transferee or assignee, by acceptance of a certificate, acknowledge and agree that, by reason
of the provisions of this paragraph, following conversion of any Preferred Shares, the number of Preferred Shares represented by
such certificate may be less than the number of Preferred Shares stated on the face thereof. Each certificate for Preferred Shares
shall bear the following legend:
ANY TRANSFEREE OR ASSIGNEE OF THIS
CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS OF THE CORPORATION’S CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF
SERIES A PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION 4(c)(vi) THEREOF. THE NUMBER OF SHARES OF SERIES A
PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF SHARES OF SERIES A PREFERRED STOCK STATED ON THE
FACE HEREOF PURSUANT TO SECTION 4(c)(vi) OF THE CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF SERIES A PREFERRED STOCK
REPRESENTED BY THIS CERTIFICATE.
(d) Taxes.
The Company shall pay any and all documentary, stamp, transfer (but only in respect of the registered holder thereof), issuance
and other similar taxes that may be payable with respect to the issuance and delivery of shares of Common Stock upon the conversion
of Preferred Shares.
(e) Limitation
on Beneficial Ownership. Notwithstanding anything to the contrary set forth in this Certificate of Designation, at no time
may all or a portion of the Series A Preferred Stock be converted if the number of shares of Common Stock to be issued pursuant
to such conversion would exceed, when aggregated with all other shares of Common Stock owned by the Holder at such time, the number
of shares of Common Stock which would result in the Holder beneficially owning (as determined in accordance with Section 13(d)
of the 1934 Act and the rules thereunder) more than 4.99% of all of the Common Stock outstanding at such time (the “4.99%
Beneficial Ownership Limitation”); provided, however, that upon the Holder providing the Corporation with sixty-one (61)
days’ advance notice (the “4.99% Waiver Notice”) that the Holder would like to waive this Section 4(e)
with regard to any or all shares of Common Stock issuable upon conversion of the Preferred Shares, this Section 4(e) will be of
no force or effect with regard to all or a portion of the Series A Preferred Stock referenced in the 4.99% Waiver Notice but shall
in no event waive the 9.99% Beneficial Ownership Limitation described below. Notwithstanding anything to the contrary set forth
in this Certificate of Designation, at no time may all or a portion of the Preferred Shares be converted if the number of shares
of Common Stock to be issued pursuant to such conversion, when aggregated with all other shares of Common Stock owned by the Holder
at such time, would result in the Holder beneficially owning (as determined in accordance with Section 13(d) of the 1934 Act and
the rules thereunder) in excess of 9.99% of the then issued and outstanding shares of Common Stock outstanding at such time (the
“9.99% Beneficial Ownership Limitation” and the lower of the 9.99% Beneficial Ownership Limitation and the 4.99%
Beneficial Ownership Limitation then in effect, the “Maximum Percentage”)). By written notice to the Company,
a holder of Preferred Shares may from time to time decrease the Maximum Percentage to any other percentage specified in such notice.
For purposes hereof, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding
shares of Common Stock as reflected in (1) the Company’s most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or
other public filing with the Securities and Exchange Commission, as the case may be, (2) a more recent public announcement by the
Company or (3) any other notice by the Company setting forth the number of shares of Common Stock outstanding. For any reason at
any time, upon the written or oral request of a holder of Preferred Shares, the Company shall within three (3) Business Days confirm
orally and in writing to such holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including
the Preferred Shares, by the Holder and its Affiliates since the date as of which such number of outstanding shares of Common Stock
was reported, which in any event are convertible or exercisable, as the case may be, into shares of the Company’s Common
Stock within 60 days’ of such calculation and which are not subject to a limitation on conversion or exercise analogous to
the limitation contained herein. The provisions of this paragraph shall be construed and implemented in a manner otherwise than
in strict conformity with the terms of this Section 4(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.
(f) Issuance
Restrictions. (i) If the Company has not obtained the approval of its shareholders in accordance with NASDAQ Listing Rule 5635(d),
then the Company may not issue upon conversion of the Preferred Shares a number of shares of Common Stock, which, when aggregated
with any shares of Common Stock (i) issued pursuant to the Subscription Agreement, (ii) underlying the Preferred Shares issued
pursuant to the Subscription Agreement; (iii) issuable upon prior exercise of any Warrants issued pursuant to the Subscription
Agreement and (iv) issuable pursuant to any warrants issued to any registered broker-dealer as a fee in connection with the issuance
of Securities pursuant to the Subscription Agreement, would exceed 19.99% of the shares of Common Stock issued and outstanding
as of the Subscription Date, 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 Preferred Shares 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 holders pursuant to the Subscription
Agreement. In addition, the Holder may allocate its pro-rata portion of the Issuable Maximum among Preferred Shares held by it
in its sole discretion. Such portion shall be adjusted upward ratably in the event a Holder no longer holds any Preferred Shares
and the amount of shares issued to such Holder pursuant to its Preferred Shares was less than such Holder’s pro-rata share
of the Issuable Maximum. For avoidance of doubt, unless and until any required 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.
5. Rights
Upon Issuance of Purchase Rights and Other Corporate Events.
(a) Purchase
Rights. In addition to any adjustments pursuant to Section 7 below, if at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders
of any class of Common Stock (the “Purchase Rights”), then each Holder will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had
held the number of shares of Common Stock acquirable upon complete conversion of all the Preferred Shares (without taking into
account any limitations or restrictions on the convertibility of the Preferred Shares) held by such Holder 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 Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided,
however, to the extent that such Holder’s right to participate in any such Purchase Right would result in such Holder exceeding
the Maximum Percentage, then such 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 such Holder until such time, if ever, as its right thereto would not result in such Holder exceeding
the Maximum Percentage).
(b) Other
Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision
to insure that each Holder will thereafter have the right to receive upon a conversion of all the Preferred Shares held by such
Holder (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which
such Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by such
Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility
of the Preferred Shares contained in this Certificate of Designations) or (ii) in lieu of the shares of Common Stock otherwise
receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection
with the consummation of such Corporate Event in such amounts as such Holder would have been entitled to receive had the Preferred
Shares held by such Holder initially been issued with conversion rights for the form of such consideration (as opposed to shares
of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. The provisions of this Section
5(b) shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on
the conversion of the Preferred Shares contained in this Certificate of Designations.
6. Rights
Upon Fundamental Transactions.
(a) Assumption.
The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing
all of the obligations of the Company under this Certificate of Designations and the other Transaction Documents in accordance
with the provisions of this Section 6 pursuant to written agreements in form and substance satisfactory to the Required Holders
and approved by the Required Holders prior to such Fundamental Transaction, including agreements to deliver to each holder of Preferred
Shares in exchange for such Preferred Shares a security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Certificate of Designations, including, without limitation, having a stated value and dividend
rate equal to the stated value and dividend rate of the Preferred Shares held by the Holders and having similar ranking to the
Preferred Shares, and reasonably satisfactory to the Required Holders and (ii) the Successor Entity (including its Parent
Entity) is a publicly traded corporation whose shares of common stock are quoted on or listed for trading on an Eligible Market.
Upon the occurrence of any 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 Certificate of Designations 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 Certificate of Designations and the other
Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein and therein. In addition
to the foregoing, upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to each Holder confirmation
that there shall be issued upon conversion of the Preferred Shares at any time after the consummation of such Fundamental Transaction,
in lieu of the shares of Common Stock (or other securities, cash, assets or other property (except such items still issuable under
Sections 5 and 11, which shall continue to be receivable thereafter)) issuable upon the conversion of the Preferred Shares prior
to such Fundamental Transaction, such shares of publicly traded common stock (or their equivalent) of the Successor Entity (including
its Parent Entity) which each Holder would have been entitled to receive upon the happening of such Fundamental Transaction had
all the Preferred Shares held by each Holder been converted immediately prior to such Fundamental Transaction (without regard to
any limitations on the conversion of the Preferred Shares contained in this Certificate of Designations), as adjusted in accordance
with the provisions of this Certificate of Designations. The provisions of this Section 6 shall apply similarly and equally to
successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of the Preferred Shares.
7. Rights
Upon Issuance of Other Securities.
(a) Adjustment
of Conversion Price upon Issuance of Common Stock. If and whenever on or after the Subscription Date the Company issues or
sells, or in accordance with this Section 7(a) is deemed to have issued or sold, any shares of Common Stock (including the issuance
or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding any Excluded Securities issued
or sold or deemed to have been issued or sold) for a consideration per share (the “New Issuance Price”) less
than a price equal to the Conversion Price in effect immediately prior to such issuance or sale or deemed issuance or sale (such
Conversion Price then in effect is referred to as the “Applicable Price”) (the foregoing a “Dilutive
Issuance”), then, immediately after such Dilutive Issuance the Conversion Price then in effect shall be reduced to the
New Issuance Price. For all purposes of the foregoing (including, without limitation, determining the adjusted Conversion Price
and the New Issuance Price under this Section 7(a)), the following shall be applicable:
(i) Issuance
of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to
be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price
per share. For purposes of this Section 7(a)(i), the “lowest price per share for which one share of Common Stock is issuable
upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise
of any such Option” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received
or receivable by the Company with respect to any one share of Common Stock upon the granting or sale of such Option, upon exercise
of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option and
(y) the lowest exercise price set forth in such Option for which one share of Common Stock is issuable upon the exercise of any
such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option minus
(2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or sale of such
Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise
of such Option plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such
Option (or any other Person). Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the
actual issuance of such share of Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual
issuance of such share of Common Stock upon conversion, exercise or exchange of such Convertible Securities.
(ii) Issuance
of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per
share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the
time of the issuance or sale of such Convertible Securities for such price per share. For purposes of this Section 7(a)(ii), the
“lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof”
shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company
with respect to one share of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or
exchange of such Convertible Security and (y) the lowest conversion price set forth in such Convertible Security for which one
share of Common Stock is issuable upon conversion, exercise or exchange thereof minus (2) the sum of all amounts paid or payable
to the holder of such Convertible Security (or any other Person) upon the issuance or sale of such Convertible Security plus the
value of any other consideration received or receivable by, or benefit conferred on, the holder of such Convertible Security (or
any other Person). Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the actual issuance
of such share of Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale
of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price has been or is
to be made pursuant to other provisions of this Section 7(a), except as contemplated below, no further adjustment of the Conversion
Price shall be made by reason of such issue or sale.
(iii) Change
in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration,
if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time, the
Conversion Price in effect at the time of such increase or decrease shall be adjusted to the Conversion Price which would have
been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price,
additional consideration or increased or decreased conversion rate (as the case may be) at the time initially granted, issued or
sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the
Subscription Date are increased or decreased in the manner described in the immediately preceding sentence, then such Option or
Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed
to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 7(a) shall be made if such
adjustment would result in an increase of the Conversion Price then in effect.
(iv) Calculation
of Consideration Received. If any Option or Convertible Security is issued in connection with the issuance or sale or deemed
issuance or sale of any other securities of the Company (including, without limitation, any other Option or Convertible Security),
together comprising one integrated transaction, (x) such Option or Convertible Security (as applicable) will be deemed to have
been issued for consideration equal to the fair market value thereof as determined in good faith by the Company’s Board of
Directors and (y) the other securities issued or sold or deemed to have been issued or sold in such integrated transaction shall
be deemed to have been issued for consideration equal to the difference of (I) the aggregate consideration received by the Company
minus (II) the aggregate fair market value of all such Options and/or Convertible Securities (as applicable) so issued. If any
shares of Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the
consideration received therefor will be deemed to be the net amount of consideration received by the Company therefor. If any shares
of Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration
received by the Company will be the fair value of such consideration, except where such consideration consists of publicly traded
securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic average
of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of
Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger
in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any consideration other than cash or publicly traded securities will
be determined jointly by the Company and the Required Holders. If such parties are unable to reach agreement within ten (10) days
after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration
will be determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent,
reputable appraiser jointly selected by the Company and the Required Holders. The determination of such appraiser shall be final
and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.
(v) Record
Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive
a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for
or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).
(b) Adjustment
of Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision of Sections 5 and 11, if
the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision will be proportionately reduced. Without limiting any provision of Sections 5 and 11, if the Company
at any time on or after the Subscription Date combines (by combination, reverse stock split or otherwise) one or more classes of
its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such
combination will be proportionately increased. Any adjustment pursuant to this Section 7(b) shall become effective immediately
after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 7(b) occurs
during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted
appropriately to reflect such event.
(c) Other
Events. In the event that the Company (or any Subsidiary) shall take any action to which the provisions hereof are not strictly
applicable, or, if applicable, would not operate to protect any Holder from dilution or if any event occurs of the type contemplated
by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting
of stock appreciation rights, phantom stock rights or other rights with equity features), then the Board shall in good faith determine
and implement an appropriate adjustment in the Conversion Price so as to protect the rights of such Holder, provided that no such
adjustment pursuant to this Section 7(c) will increase the Conversion Price as otherwise determined pursuant to this Section 7,
provided further that if such Holder does not accept such adjustments as appropriately protecting its interests hereunder against
such dilution, then the Board and such Holder shall agree, in good faith, upon an independent investment bank of nationally recognized
standing to make such appropriate adjustments, whose determination shall be final and binding and whose fees and expenses shall
be borne by the Company.
(d) Calculations.
All calculations under this Section 7 shall be made by rounding to the nearest one-hundred thousandth of a cent or the nearest
1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue
or sale of Common Stock.
8. Authorized
Shares.
(a) Reservation.
The Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock equal to
125% of the Conversion Rate with respect to the Base Amount of each Preferred Share as of the Initial Issuance Date (assuming for
purposes hereof, that all the Preferred Shares issuable pursuant to the Subscription Agreement have been issued, such Preferred
Shares are convertible at the Conversion Price and without taking into account any limitations on the conversion of such Preferred
Shares set forth in herein) issuable pursuant to the terms of this Certificate of Designations from the Initial Issuance Date through
the second anniversary of the Initial Issuance Date assuming (assuming for purposes hereof, that all the Preferred Shares issuable
pursuant to the Subscription Agreement have been issued and without taking into account any limitations on the issuance of securities
set forth herein). So long as any of the Preferred Shares are outstanding, the Company shall take all action necessary to reserve
and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion
of the Preferred Shares, as of any given date, 125% of the number of shares of Common Stock as shall from time to time be necessary
to effect the conversion of all of the Preferred Shares issued or issuable pursuant to the Subscription Agreement assuming for
purposes hereof, that all the Preferred Shares issuable pursuant to the Subscription Agreement have been issued and without taking
into account any limitations on the issuance of securities set forth herein), provided that at no time shall the number of shares
of Common Stock so available be less than the number of shares required to be reserved by the previous sentence (without regard
to any limitations on conversions contained in this Certificate of Designations) (the “Required Amount”). The
initial number of shares of Common Stock reserved for conversions of the Preferred Shares and each increase in the number of shares
so reserved shall be allocated pro rata among the Holders based on the number of Preferred Shares held by each Holder on the Initial
Issuance Date or increase in the number of reserved shares (as the case may be) (the “Authorized Share Allocation”).
In the event a Holder shall sell or otherwise transfer any of such Holder’s Preferred Shares, each transferee shall be allocated
a pro rata portion of such Holder’s Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any
Person which ceases to hold any Preferred Shares shall be allocated to the remaining Holders of Preferred Shares, pro rata based
on the number of Preferred Shares then held by such Holders.
(b) Insufficient
Authorized Shares. If, notwithstanding Section 8(a) and not in limitation thereof, at any time while any of the Preferred Shares
remain outstanding the Company does not have a sufficient number of authorized and unissued shares of Common Stock to satisfy its
obligation to have available for issuance upon conversion of the Preferred Shares at least a number of shares of Common Stock equal
to the Required Amount (an “Authorized Share Failure”), then the Company shall promptly take all action necessary
to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve and have
available the Required Amount for all of the Preferred Shares then outstanding. Without limiting the generality of the foregoing
sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than ninety
(90) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders or conduct
a consent solicitation for the approval of an increase in the number of authorized shares of Common Stock. In connection with such
meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’
approval of such increase in authorized shares of Common Stock and to cause its Board to recommend to the stockholders that they
approve such proposal. Nothing contained in this Section 8 shall limit any obligations of the Company under any provision of the
Subscription Agreement. In the event that the Company is prohibited from issuing shares of Common Stock upon a conversion of any
Preferred Share due to the failure by the Company to have sufficient shares of Common Stock available out of the authorized but
unissued shares of Common Stock (such unavailable number of shares of Common Stock, the “Authorization Failure Shares”),
in lieu of delivering such Authorization Failure Shares to such Holder of such Preferred Shares, the Company shall pay cash in
exchange for the cancellation of such Preferred Shares convertible into such Authorized Failure Shares at a price equal to the
sum of (i) the product of (x) such number of Authorization Failure Shares and (y) the Closing Sale Price on the Trading Day immediately
preceding the date such Holder delivers the applicable Conversion Notice with respect to such Authorization Failure Shares to the
Company and (ii) to the extent such Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by such Holder of Authorization Failure Shares, any brokerage commissions and other out-of-pocket expenses,
if any, of such Holder incurred in connection therewith.
9. Voting
Rights. Except as otherwise expressly required by law, each holder of Preferred Shares shall be entitled to vote on all matters
submitted to shareholders of the Company and shall be entitled to the number of votes for each Preferred Share owned at the record
date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, at the date
such vote is taken or any written consent of shareholders is solicited, equal to the number of shares of Common Stock such Preferred
Shares are convertible into (voting as a class with Common Stock) based on the Conversion Price in effect on such date, but in
no event shall the Conversion Price used for purposes of calculating voting rights pursuant to this Section 9 be less than $0.59
(the “Voting Floor”), representing the consolidated closing bid price of the Common Stock on The NASDAQ Stock
Market LLC on the date prior to the execution of the Subscription Agreement, but not in excess of the conversion limitations set
forth in Section 4(e) and/or 4(f) herein. The Voting Floor shall only be removed in accordance with NASDAQ Listing Rules.
Except as otherwise required by law, the holders of Preferred Shares shall vote together with the holders of Common Stock on all
matters and shall not vote as a separate class. For the avoidance of doubt, the Voting Floor shall not prohibit any adjustment
to the Conversion Price below $0.59 with respect to any other section of this Certificate of Designations or any other rights of
the Holder hereunder.
10. Liquidation,
Dissolution, Winding-Up. In the event of a Liquidation Event, the Holders shall be entitled to receive in cash out of the assets
of the Company, whether from capital or from earnings available for distribution to its stockholders (the “Liquidation
Funds”), before any amount shall be paid to the holders of any of shares of Junior Stock, an amount per Preferred Share
equal to the greater of (A) the Base Amount thereof on the date of such payment and (B) the amount per share such Holder would
receive if such Holder converted such Preferred Shares into Common Stock immediately prior to the date of such payment, provided
that if the Liquidation Funds are insufficient to pay the full amount due to the Holders and holders of shares of Parity Stock,
then each Holder and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of
Liquidation Funds payable to such Holder and such holder of Parity Stock as a liquidation preference, in accordance with their
respective certificate of designations (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all
holders of Preferred Shares and all holders of shares of Parity Stock. To the extent necessary, the Company shall cause such actions
to be taken by each of its Subsidiaries so as to enable, to the maximum extent permitted by law, the proceeds of a Liquidation
Event to be distributed to the Holders in accordance with this Section 10. All the preferential amounts to be paid to the Holders
under this Section 10 shall be paid or set apart for payment before the payment or setting apart for payment of any amount for,
or the distribution of any Liquidation Funds of the Company to the holders of shares of Junior Stock in connection with a Liquidation
Event as to which this Section 10 applies.
11. Participation.
In addition to any adjustments pursuant to Section 7(b), the Holders shall, as holders of Preferred Shares, be entitled to receive
such dividends paid and distributions made to the holders of shares of Common Stock to the same extent as if such Holders had converted
each Preferred Share held by each of them into shares of Common Stock (without regard to any limitations on conversion herein or
elsewhere) and had held such shares of Common Stock on the record date for such dividends and distributions. Payments under the
preceding sentence shall be made concurrently with the dividend or distribution to the holders of shares of Common Stock (provided,
however, to the extent that a Holder’s right to participate in any such dividend or distribution would result in such Holder
exceeding the Maximum Percentage, then such Holder shall not be entitled to participate in such dividend or distribution to such
extent (or the beneficial ownership of any such shares of Common Stock as a result of such dividend or distribution to such extent)
and such dividend or distribution to such extent shall be held in abeyance for the benefit of such Holder until such time, if ever,
as its right thereto would not result in such Holder exceeding the Maximum Percentage).
12. Vote
to Change the Terms of or Issue Preferred Shares. In addition to any other rights provided by law, except where the vote or
written consent of the holders of a greater number of shares is required by law or by another provision of the Certificate of Incorporation,
without first obtaining the affirmative vote at a meeting duly called for such purpose or the written consent without a meeting
of the Required Holders, voting together as a single class, the Company shall not: (a) amend or repeal any provision of, or add
any provision to, its Certificate of Incorporation or bylaws, or file any certificate of designations or articles of amendment
of any series of shares of preferred stock, if such action would adversely alter or change in any respect the preferences, rights,
privileges or powers, or restrictions provided for the benefit, of the Preferred Shares, regardless of whether any such action
shall be by means of amendment to the Certificate of Incorporation or by merger, consolidation or otherwise; (b) increase or decrease
(other than by conversion) the authorized number of Preferred Shares; (c) without limiting any provision of Section 2, create or
authorize (by reclassification or otherwise) any new class or series of shares that has a preference over or is on a parity with
the Preferred Shares with respect to dividends or the distribution of assets on the liquidation, dissolution or winding up of the
Company; (d) purchase, repurchase or redeem any shares of capital stock of the Company junior in rank to the Preferred Shares (other
than pursuant to equity incentive agreements (that have in good faith been approved by the Board) with employees giving the Company
the right to repurchase shares upon the termination of services); (e) without limiting any provision of Section 2, pay dividends
or make any other distribution on any shares of any capital stock of the Company junior in rank to the Preferred Shares; (f) issue
any Preferred Shares other than pursuant to the Subscription Agreement; or (g) without limiting any provision of Section 16, whether
or not prohibited by the terms of the Preferred Shares, circumvent a right of the Preferred Shares.
13. Covenants.
(a) Incurrence
of Indebtedness. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly,
incur or guarantee, assume or suffer to exist any Indebtedness (other than Permitted Indebtedness).
(b) Existence
of Liens. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, allow
or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”)
other than Permitted Liens.
(c) Limitations
on Issuances and Financings. For as long as any Preferred Shares remain outstanding, the Company shall not issue
any Common Stock or Convertible Securities (or modify any of the foregoing which may be outstanding) to any person or entity or
incur any financing debt, other than with regard to Excluded Securities, without the express written consent of the Lead Investor
(as defined in the Subscription Agreement).
14. Lost
or Stolen Certificates. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any certificates representing Preferred Shares (as to which a written certification and the indemnification
contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of an indemnification undertaking
by the applicable Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation
of the certificate(s), the Company shall execute and deliver new certificate(s) of like tenor and date.
15. Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Certificate of Designations
shall be cumulative and in addition to all other remedies available under this Certificate of Designations and any of the other
Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and no
remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy. Nothing herein shall
limit any Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms
of this Certificate of Designations. The Company covenants to each Holder that there shall be no characterization concerning this
instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion
and the like (and the computation thereof) shall be the amounts to be received by a Holder and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Holders and that the remedy at law for any such breach may
be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, each Holder shall be entitled,
in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without
the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information
and documentation to a Holder that is requested by such Holder to enable such Holder to confirm the Company’s compliance
with the terms and conditions of this Certificate of Designations.
16. Noncircumvention.
The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation, bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, 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 Certificate of
Designations, and will at all times in good faith carry out all the provisions of this Certificate of Designations and take all
action as may be required to protect the rights of the Holders. Without limiting the generality of the foregoing or any other provision
of this Certificate of Designations, the Company (i) shall not increase the par value of any shares of Common Stock receivable
upon the conversion of any Preferred Shares above the Conversion Price then in effect, (ii) shall take all such actions as
may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of
Common Stock upon the conversion of Preferred Shares and (iii) shall, so long as any Preferred Shares are outstanding, take all
action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose
of effecting the conversion of the Preferred Shares, the maximum number of shares of Common Stock as shall from time to time be
necessary to effect the conversion of the Preferred Shares then outstanding (without regard to any limitations on conversion contained
herein).
17. Failure
or Indulgence Not Waiver. No failure or delay on the part of a Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and
signed by an authorized representative of the waiving party. This Certificate of Designations shall be deemed to be jointly drafted
by the Company and all Holders and shall not be construed against any Person as the drafter hereof.
18. Notices.
The Company shall provide each Holder of Preferred Shares with prompt written notice of all actions taken pursuant to the terms
of this Certificate of Designations, including in reasonable detail a description of such action and the reason therefor. Whenever
notice is required to be given under this Certificate of Designations, unless otherwise provided herein, such notice must be in
writing and shall be given in accordance with the Subscription Agreement. Without limiting the generality of the foregoing, the
Company shall give written notice to each Holder (i) promptly following any adjustment of the Conversion Price, setting forth in
reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on
which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B)
with respect to any grant, issuances, or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities
or other property to all holders of shares of Common Stock as a class or (C) for determining rights to vote with respect to any
Fundamental Transaction, dissolution or liquidation, provided, in each case, that such information shall be made known to the public
prior to, or simultaneously with, such notice being provided to any Holder.
19. Transfer
of Preferred Shares. Subject to the restrictions set forth in Subscription Agreement, a Holder may transfer some or all of
its Preferred Shares without the consent of the Company.
20. Preferred
Shares Register. The Company shall maintain at its principal executive offices (or such other office or agency of the Company
as it may designate by notice to the Holders), a register for the Preferred Shares, in which the Company shall record the name,
address and facsimile number of the Persons in whose name the Preferred Shares have been issued, as well as the name and address
of each transferee. The Company may treat the Person in whose name any Preferred Shares is registered on the register as the owner
and holder thereof for all purposes, notwithstanding any notice to the contrary, but in all events recognizing any properly made
transfers.
21. Stockholder
Matters; Amendment.
(a) Stockholder
Matters. Any stockholder action, approval or consent required, desired or otherwise sought by the Company pursuant to the DGCL,
the Certificate of Incorporation, this Certificate of Designations or otherwise with respect to the issuance of Preferred Shares
may be effected by written consent of the Company’s stockholders or at a duly called meeting of the Company’s stockholders,
all in accordance with the applicable rules and regulations of the DGCL. This provision is intended to comply with the applicable
sections of the DGCL permitting stockholder action, approval and consent affected by written consent in lieu of a meeting.
(b) Amendment.
This Certificate of Designations or any provision hereof may be amended by obtaining the affirmative vote at a meeting duly called
for such purpose, or written consent without a meeting in accordance with the DGCL, of the Required Holders, voting separate as
a single class, and with such other stockholder approval, if any, as may then be required pursuant to the DGCL and the Certificate
of Incorporation.
22. Dispute
Resolution.
(a) Disputes
Over Closing Bid Price, Closing Sale Price, Conversion Price, VWAP or Fair Market Value.
(i) In the
case of a dispute relating to a Closing Bid Price, a Closing Sale Price, a Conversion Price, a VWAP or fair market value (as the
case may be) (including, without limitation, a dispute relating to the determination of any of the foregoing), the Company or such
applicable Holder (as the case may be) shall submit the dispute via facsimile (I) within two (2) Business Days after delivery of
the applicable notice giving rise to such dispute to the Company or such Holder (as the case may be) or (II) if no notice gave
rise to such dispute, at any time after such Holder learned of the circumstances giving rise to such dispute. If such Holder and
the Company are unable to resolve such dispute relating to such Closing Bid Price, such Closing Sale Price, such Conversion Price,
such VWAP or such fair market value (as the case may be) by 5:00 p.m. (New York time) on the third (3rd) Business Day
following such delivery by the Company or such Holder (as the case may be) of such dispute to the Company or such Holder (as the
case may be), then such Holder shall select an independent, reputable investment bank to resolve such dispute.
(ii) Such
Holder and the Company shall each deliver to such investment bank (x) a copy of the initial dispute submission so delivered in
accordance with the first sentence of this Section 22(a) and (y) written documentation supporting its position with respect to
such dispute, in each case, no later than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following
the date on which such Holder selected such investment bank (the “Dispute Submission Deadline”) (the documents
referred to in the immediately preceding clauses (x) and (y) are collectively referred to herein as the “Required Dispute
Documentation”) (it being understood and agreed that if either such Holder or the Company fails to so deliver all of
the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required
Dispute Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation
or other support to such investment bank with respect to such dispute and such investment bank shall resolve such dispute based
solely on the Required Dispute Documentation that was delivered to such investment bank prior to the Dispute Submission Deadline).
Unless otherwise agreed to in writing by both the Company and such Holder or otherwise requested by such investment bank, neither
the Company nor such Holder shall be entitled to deliver or submit any written documentation or other support to such investment
bank in connection with such dispute (other than the Required Dispute Documentation).
(iii) The
Company and such Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and
such Holder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The
fees and expenses of such investment bank shall be borne solely by the Company, and such investment bank’s resolution of
such dispute shall be final and binding upon all parties absent manifest error.
(b) Disputes
Over Arithmetic Calculation of the Conversion Rate.
(i) In the
case of a dispute as to the arithmetic calculation of a Conversion Rate, the Company or such Holder (as the case may be) shall
submit the disputed arithmetic calculation via facsimile (i) within two (2) Business Days after delivery of the applicable notice
giving rise to such dispute to the Company or such Holder (as the case may be) or (ii) if no notice gave rise to such dispute,
at any time after such Holder learned of the circumstances giving rise to such dispute. If such Holder and the Company are unable
to resolve such disputed arithmetic calculation of such Conversion Rate by 5:00 p.m. (New York time) on the third (3rd)
Business Day following such delivery by the Company or such Holder (as the case may be) of such disputed arithmetic calculation,
then such Holder shall select an independent, reputable accountant or accounting firm to perform such disputed arithmetic calculation.
(ii) Such
Holder and the Company shall each deliver to such accountant or accounting firm (as the case may be) (x) a copy of the initial
dispute submission so delivered in accordance with the first sentence of this Section 22(a) and (y) written documentation supporting
its position with respect to such disputed arithmetic calculation, in each case, no later than 5:00 p.m. (New York time) by the
fifth (5th) Business Day immediately following the date on which such Holder selected such accountant or accounting
firm (as the case may be) (the “Submission Deadline”) (the documents referred to in the immediately preceding
clauses (x) and (y) are collectively referred to herein as the “Required Documentation”) (it being understood
and agreed that if either such Holder or the Company fails to so deliver all of the Required Documentation by the Submission Deadline,
then the party who fails to so submit all of the Required Documentation shall no longer be entitled to (and hereby waives its right
to) deliver or submit any written documentation or other support to such accountant or accounting firm (as the case may be) with
respect to such disputed arithmetic calculation and such accountant or accounting firm (as the case may be) shall perform such
disputed arithmetic calculation based solely on the Required Documentation that was delivered to such accountant or accounting
firm (as the case may be) prior to the Submission Deadline). Unless otherwise agreed to in writing by both the Company and such
Holder or otherwise requested by such accountant or accounting firm (as the case may be), neither the Company nor such Holder shall
be entitled to deliver or submit any written documentation or other support to such accountant or accounting firm (as the case
may be) in connection with such disputed arithmetic calculation of the Conversion Rate (other than the Required Documentation).
(iii) The
Company and such Holder shall cause such accountant or accounting firm (as the case may be) to perform such disputed arithmetic
calculation and notify the Company and such Holder of the results no later than ten (10) Business Days immediately following the
Submission Deadline. The fees and expenses of such accountant or accounting firm (as the case may be) shall be borne solely by
the Company, and such accountant’s or accounting firm’s (as the case may be) arithmetic calculation shall be final
and binding upon all parties absent manifest error.
(c) Miscellaneous.
The Company expressly acknowledges and agrees that (i) this Section 22 constitutes an agreement to arbitrate between the Company
and such Holder (and constitutes an arbitration agreement) under § 7501, et seq. of the New York Civil Practice Law and Rules
(“CPLR”) and that each party shall be entitled to compel arbitration pursuant to CPLR § 7503(a) in order
to compel compliance with this Section 22, (ii) a dispute relating to a Conversion Price includes, without limitation, disputes
as to (1) whether an issuance or sale or deemed issuance or sale of Common Stock occurred under Section 7(a), (2) the consideration
per share at which an issuance or deemed issuance of Common Stock occurred, (3) whether any issuance or sale or deemed issuance
or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (4) whether an agreement, instrument,
security or the like constitutes and Option or Convertible Security and (5) whether a Dilutive Issuance occurred, (iii) the terms
of this Certificate of Designations and each other applicable Transaction Document shall serve as the basis for the selected investment
bank’s resolution of the applicable dispute, such investment bank shall be entitled (and is hereby expressly authorized)
to make all findings, determinations and the like that such investment bank determines are required to be made by such investment
bank in connection with its resolution of such dispute and in resolving such dispute such investment bank shall apply such findings,
determinations and the like to the terms of this Certificate of Designations and any other applicable Transaction Documents, (iv)
the terms of this Certificate of Designations and each other applicable Transaction Document shall serve as the basis for the selected
accountant’s or accounting firm’s performance of the applicable arithmetic calculation, (v) for clarification purposes
and without implication that the contrary would otherwise be true, disputes relating to matters described in Section 22(a) shall
be governed by Section 22(a) and not by Section 22(b), (vi) such Holder (and only such Holder), in its sole discretion, shall have
the right to submit any dispute described in this Section 22 to any state or federal court sitting in The City of New York, Borough
of Manhattan in lieu of utilizing the procedures set forth in this Section 22 and (vii) nothing in this Section 22 shall limit
such Holder from obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any
matters described in Section 22(a) or Section 22(b)).
23. Certain
Defined Terms. For purposes of this Certificate of Designations, the following terms shall have the following meanings:
(a) “1934
Act” means the Securities Exchange Act of 1934, as amended.
(b) “Affiliate”
as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms
“controlling”, “controlled by” and “under common control with”), as applied
to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or by contract or otherwise. For purposes of this definition,
a Person shall be deemed to be “controlled by” a Person if such latter Person possesses, directly or indirectly,
power to vote 10% or more of the securities having ordinary voting power for the election of directors of such former Person.
(c) “Approved
Stock Plan” means any benefit or incentive plan which has been approved by the board of directors of the Company prior
to or subsequent to the date hereof pursuant to which shares of Common Stock and options or equivalent Common Stock linked interests
may be issued to any employee, officer, director or consultant for services provided to the Company.
(d) “Base
Amount” means, with respect to each Preferred Share, as of the applicable date of determination, the sum of (1) the Stated
Value thereof, plus (2) the Unpaid Dividend Amount thereon as of such date of determination.
(e) “Bloomberg”
means Bloomberg, L.P.
(f) “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.
(g) “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 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 OTC Markets Group Inc. (formerly Pink Sheets 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 applicable 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. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.
(h) “Common
Stock” means (i) the Company’s shares of common stock, par value $0.001 per share, and (ii) any capital stock
into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.
(i) “Conversion
Price” means, with respect to each Preferred Share, as of any Conversion Date or other applicable date of determination,
$0.68, subject to adjustment as provided herein.
(j)
“Convertible Securities” means 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.
(k) “Eligible
Market” means The New York Stock Exchange, the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global Market, the
NASDAQ Capital Market, the OTCBB, the OTCQX, the OTCQB or the Principal Market (or any successor thereto).
(l) “Excluded
Securities” means any (i) 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 adopted on or following the Initial Issuance Date, provided that
(A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Initial
Issuance Date pursuant to this clause (i) do not, in the aggregate, exceed more than 15% of the Common Stock issued and outstanding
at the time of such issuance and (B) the exercise price of any such options is not lowered after issuance by subsequent amendment
thereof, none of such options are amended subsequent to issuance to increase the number of shares issuable thereunder and none
of the terms or conditions of any such options are subsequent to issuance otherwise materially changed in any manner that adversely
affects any of the Holders; (ii) 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 Holders; and (iii) the shares of Common Stock issuable upon conversion
of the Preferred Shares and Warrants.
(m) “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, 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) allow any other Person to make a purchase, tender or exchange
offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the 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, spin-off 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),
or (5) reorganize, recapitalize or reclassify 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 1934 Act and the rules and regulations promulgated thereunder) is
or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50%
of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.
(n)
“Holder Pro Rata Amount” means, with respect to any Holder, a fraction (i) the numerator of which is the
number of Preferred Shares issued to such Holder pursuant to the Subscription Agreement on the Initial Issuance Date and (ii) the
denominator of which is the number of Preferred Shares issued to all Holders pursuant to the Subscription Agreement on the Initial
Issuance Date.
(o) “Liquidation
Event” means, whether in a single transaction or series of transactions, the voluntary or involuntary liquidation, dissolution
or winding up of the Company or such Subsidiaries the assets of which constitute all or substantially all of the assets of the
business of the Company and its Subsidiaries, taken as a whole.
(p)
“Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible
Securities.
(q) “Parent
Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock
or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity,
the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.
(r)
“Permitted Indebtedness” means Indebtedness described in Schedule 4(o) of the Subscription Agreement as
in effect as of the Initial Issuance Date; provided, that the principal amount of such Indebtedness is not increased,
the terms of such Indebtedness are not modified to impose more burdensome terms upon the Company or any of its Subsidiaries and
the terms of such Indebtedness are not materially changed in any manner that adversely affects any Holder.
(s) “Permitted
Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings
for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course
of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation
of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business
with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings,
(iv) leases or subleases and licenses and sublicenses granted to others in the ordinary course of the Company’s business,
not interfering in any material respect with the business of the Company and its Subsidiaries taken as a whole and (v) Liens in
favor of customs and revenue authorities arising as a matter of law to secure payments of custom duties in connection with the
importation of goods.
(t) “Person”
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization,
any other entity or a government or any department or agency thereof.
(u)
“Principal Market” means The NASDAQ Capital Market.
(v)
“SEC” means the Securities and Exchange Commission or the successor thereto.
(w) “Securities”
means, collectively, the Preferred Shares and the shares of Common Stock issuable upon conversion of (or otherwise in accordance
with) the Preferred Shares.
(x) “Stated
Value” shall mean $0.68 per share, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations,
reclassifications, combinations, subdivisions or other similar events occurring after the Initial Issuance Date with respect to
the Preferred Shares.
(y) “Subscription
Agreement” means that certain Subscription Agreement by and among the Company and the initial holders of Preferred Shares,
dated as of the Subscription Date, as may be amended from time in accordance with the terms thereof.
(z) “Subscription
Date” means the Closing Date (as defined in the Subscription Agreement).
(aa) “Subsidiaries”
shall have the meaning as set forth in the Subscription Agreement.
(bb) “Successor
Entity” means the Person (or, if so elected by the Required Holders, the Parent Entity) formed by, resulting from or
surviving any Fundamental Transaction or the Person (or, if so elected by the Required Holders, the Parent Entity) with which such
Fundamental Transaction shall have been entered into.
(cc) “Trading
Day” means, as applicable, (x) with respect to all price determinations relating to the Common Stock, any day on which
the Common Stock is 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 is then traded, provided that “Trading
Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is 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) unless such day is otherwise designated as a Trading Day in writing by the Required
Holders or (y) with respect to all determinations other than price determinations relating to the Common Stock, any day on which
The New York Stock Exchange (or any successor thereto) is open for trading of securities.
(dd) “Transaction
Documents” shall have the meaning ascribed to it in the Subscription Agreement.
(bb)
“Unpaid Dividend Amount” means, as of the applicable date of determination, with respect to each Preferred Share,
all accrued and unpaid Dividends on such Preferred Share.
(ff)
“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).
(gg) “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. All such determinations
shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such
period.
24. Disclosure.
Upon receipt or delivery by the Company of any notice in accordance with the terms of this Certificate of Designations, unless
the Company has in good faith determined that the matters relating to such notice do not constitute material, non-public information
relating to the Company or any of its Subsidiaries, the Company shall simultaneously with any such receipt or delivery publicly
disclose such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company believes
that a notice contains material, non-public information relating to the Company or any of its Subsidiaries, the Company so shall
indicate to each Holder contemporaneously with delivery of such notice, and in the absence of any such indication, each Holder
shall be allowed to presume that all matters relating to such notice do not constitute material, non-public information relating
to the Company or its Subsidiaries. Nothing contained in this Section 24 shall limit any obligations of the Company, or any rights
of any Holder, under the Subscription Agreement.
* * * * *
IN WITNESS
WHEREOF, the Corporation has caused this Certificate of Designations of 0% Series A Convertible Preferred Stock of Majesco
Entertainment Company to be signed by its Chief Executive Officer on this 17th day of December, 2014.
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MAJESCO ENTERTAINMENT COMPANY |
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/s/ Jesse Sutton |
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Name: |
Jesse Sutton |
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Title: |
Chief Executive Officer |
EXHIBIT I
MAJESCO ENTERTAINMENT COMPANY
CONVERSION NOTICE
Reference is made to
the Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock of Majesco Entertainment Company
(the “Certificate of Designations”). In accordance with and pursuant to the Certificate of Designations, the
undersigned hereby elects to convert the number of shares of Series A Convertible Preferred Stock, $0.001 par value per share (the
“Preferred Shares”), of Majesco Entertainment Company, a Delaware corporation (the “Company”),
indicated below into shares of common stock, $0.001 par value per share (the “Common Stock”), of the Company,
as of the date specified below.
Date of Conversion:_________________________________________________________________________
Number of Preferred Shares to be converted:______________________________________________________
Share certificate no(s). of Preferred Shares
to be converted:__________________________________________
Tax ID Number (If applicable): ________________________________________________________________
Conversion Price:____________________________________________________________
Number of shares of Common Stock to be
issued:__________________________________________________
Please issue the shares of Common Stock
into which the Preferred Shares are being converted in the following name and to the following address:
Issue to:___________________________________________
___________________________________________
Address: _________________________________________
Telephone Number: ________________________________
Facsimile Number:____________________________________
Holder:_____________________________________________
By:______________________________________
Title:_____________________________________
Dated:____________________________________
Account Number (if electronic book entry
transfer):________________________________________________
Transaction Code Number (if electronic
book entry transfer):_________________________________________
EXHIBIT II
ACKNOWLEDGMENT
The Company hereby
acknowledges this Conversion Notice and hereby directs __________________ to issue the above indicated number of shares of Common
Stock in accordance with the Irrevocable Transfer Agent Instructions dated __________, 2014 from the Company and acknowledged and
agreed to by _______________.
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MAJESCO ENTERTAINMENT COMPANY |
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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 Majesco Entertainment Company, a Delaware
corporation (the “Company”). The Company is conducting a private placement (the “Offering”)
of Six Million Dollars ($6,000,000) of units (the “Units”) at a purchase price of $0.68 per Unit (the “Purchase
Price”) with each Unit consisting of (i) one share (the “Shares”) of the Company’s Series A
Convertible Preferred Stock, par value $0.001 per share, which is convertible into shares of the Company’s common stock $0.001
par value per share (the “Common Stock”), with such rights and designations as set forth in the form of Certificate
of Designations, Preferences and Rights of the 0% Series A Convertible Preferred Stock, attached hereto as Exhibit A, (the
“Series A Certificate of Designation”) and (ii) a five year warrant, in the form attached hereto as Exhibit
B (the “Warrant”) to purchase one (1) share of Common Stock (the “Warrant Shares”) at
an exercise price of $0.68 per share. For purposes of this Agreement, the term “Securities” shall refer to the
Shares, the Common Stock into which the Shares are convertible, the Warrants and the Warrant Shares.
IMPORTANT INVESTOR NOTICES
NO OFFERING LITERATURE OR ADVERTISEMENT
IN ANY FORM MAY BE RELIED UPON IN THE OFFERING OF THESE SECURITIES EXCEPT FOR THIS SUBSCRIPTION AGREEMENT AND ANY SUPPLEMENTS HERETO,
AND NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY REPRESENTATIONS EXCEPT THOSE CONTAINED HEREIN.
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.
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.
THE COMPANY RESERVES THE RIGHT, IN ITS
SOLE DISCRETION, TO REJECT ANY SUBSCRIPTION IN WHOLE OR IN PART FOR ANY REASON OR FOR NO REASON PRIOR TO ITS COUNTER-EXECUTION
OF ANY SUBSCRIPTION AGREEMENT DELIVERED TO IT BY ANY POTENTIAL SUBSCRIBER. THE COMPANY IS NOT OBLIGATED TO NOTIFY RECIPIENTS OF
THIS AGREEMENT WHETHER ALL OF THE SECURITIES OFFERED HEREBY HAVE BEEN SOLD.
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 HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT 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
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.
THE SECURITIES OFFERED HEREBY HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER
REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY
OR ADEQUACY OF THIS AGREEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE
THE CONTENTS OF THIS AGREEMENT AS INVESTMENT, LEGAL, BUSINESS, OR TAX ADVICE. EACH INVESTOR SHOULD CONTACT HIS, HER OR ITS OWN
ADVISORS REGARDING THE APPROPRIATENESS OF THIS INVESTMENT AND THE TAX CONSEQUENCES THEREOF, WHICH MAY DIFFER DEPENDING ON AN INVESTOR’S
PARTICULAR FINANCIAL SITUATION. IN NO EVENT SHOULD THIS AGREEMENT BE DEEMED OR CONSIDERED TO BE TAX ADVICE PROVIDED BY THE COMPANY.
FOR FLORIDA RESIDENTS ONLY
THE 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 24 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 $0.68 per Unit, for an aggregate purchase price as set forth on page 24 hereof (the “Aggregate
Purchase Price”), which shall be equivalent to $0.68 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 Signature Bank, as escrow agent (the “Escrow
Agent”) pursuant to the terms of the escrow agreement(the “Escrow Agreement”) in accordance with the
wire instructions set forth on Exhibit C attached hereto. Additionally, the Company shall deposit certificates evidencing
the Shares and Warrants so subscribed for with the Company’s corporate secretary, as escrow agent for the Securities (the
“Securities Escrow Agent”). The Subscriber understands and agrees that, subject to Section 2 and applicable
laws, by executing this Agreement, it is entering into a binding agreement. Notwithstanding anything to the contrary herein, the
Securities shall be held by the Securities Escrow Agent and the Aggregate Purchase Price shall be held by the Escrow Agent in accordance
with Section 5(k) herein and the terms of the Escrow Agreement. The Company and the Subscriber acknowledge that the Offering, the
issuance of the Securities and the Listing of Additional Shares Application covering the listing of the Common Stock underlying
the Shares and the Warrant Shares shall be subject to certain required approvals by The NASDAQ Capital Market (“NASDAQ”),
including approval of the Offering, the issuance of the Securities and any potential change of control resulting from the consummation
of the Offering (if required), by the Company’s stockholders, if required (such approval, “NASDAQ Approval”).
The Company agrees that it will inform the Subscriber of any requirements of NASDAQ for NASDAQ Approval of the Offering and the
Subscriber shall, within twenty-four hours of such notification have the right to request a return of such Subscriber’s subscription.
2. Acceptance,
Offering Term and Closing Procedures
(a) Offering
of Securities. The Company hereby agrees to sell, and 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 Escrow Agreement, the Series
A Certificate of Designation, the Warrant and any other agreement entered into between the Subscriber and the Company relating
to this subscription (collectively, the "Transaction Documents"), the Subscriber hereby agrees to purchase the
Units pursuant to the terms and conditions set forth in this Agreement. For the avoidance of doubt, upon the occurrence of the
failure by the Company to fully, faithfully and punctually perform and discharge any of its duties, obligations and responsibilities
as set forth in any of the Transaction Documents, which shall have been performed or otherwise discharged prior to the Closing
(as defined below), the Subscriber may, on or prior to the Closing, at its sole and absolute discretion, elect not to purchase
the Units and, to the extent the Subscriber has delivered all or any part of the Aggregate Purchase Price to the Company or an
escrow account at the direction of the Company, receive the full and immediate refund of the Aggregate Purchase Price. 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 Closing on or prior to December 31, 2014 (unless extended by agreement of the parties hereto) 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 parties hereto. The Closing shall take place on a Business Day promptly following the satisfaction of
the conditions set forth in Section 7 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 Shares and the
Warrants purchased by the Subscriber will be delivered by the Company promptly following the Closing Date of the Offering.
(c) Extraordinary
Events Regarding Common Stock. In the event that prior to the Closing 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 Common Stock or Warrant Shares the Subscriber
may thereafter be entitled to receive upon conversion of the Shares or exercise of the Warrants, as the case may be) 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.
(d) Certificate
as to Adjustments. In each case of any adjustment or readjustment in (i) the Shares (ii) the number of Warrant Shares issuable
upon the exercise of the Warrants, (iii) the exercise price of the Warrants and/or (iv) the conversion price or conversion ratio
of the Shares, 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 Series A Certificate of Designation or the Warrant,
as applicable, 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 of 1933, as amended (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”
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 register the Securities on behalf of the
Subscriber or 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 CONVERTIBLE
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 (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 to the Subscriber, in a generally acceptable form, 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 of Common Stock issuable upon conversion of the 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, fees of legal counsel to the Company 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) 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.
(s) 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.
(t) The
Subscriber has reviewed, or had the opportunity to review, all of the SEC Filings (as defined below) and all “Risk Factors”
and “Forward Looking Statements” disclaimers contained therein. In addition, the Subscriber has reviewed and acknowledges
it has such knowledge, sophistication and experience in securities matters.
(u) The
foregoing representations and warranties shall survive the Closing.
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. 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).
(b) Issuance
of Securities. The Shares and Warrants 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, will be duly and validly issued and will be
fully paid and non-assessable and the Warrant Shares and the Common Stock issuable upon conversion of the Shares, when issued and
delivered in accordance with Warrant and the Series A Certificate of Designation, as applicable, and assuming proper payment (with
respect to the Warrant Shares) and exercise in accordance with the provisions of such documents, 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,
(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)
NASDAQ Approval, and (ii) the filing of Form D with the Commission and such filings as are required to be made under applicable
state securities laws (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 (each, an “Indemnitee”, 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)
(the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (i) any
misrepresentation or breach of any representation or warranty made by the Company or any Subsidiary in any of the Transaction Documents,
(ii) any breach of any covenant, agreement or obligation of the Company or any Subsidiary contained in any of the Transaction Documents
or (iii) any cause of action, suit, proceeding or claim brought or made against such Indemnitee by a third party (including for
these purposes a derivative action brought on behalf of the Company or any Subsidiary) or which otherwise involves such Indemnitee
that arises out of or results from (A) the execution, delivery, performance or enforcement of any of the Transaction Documents,
(B) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of
the Securities, or (C) the status of such Subscriber or holder of the Securities either as an investor in the Company pursuant
to the transactions contemplated by the Transaction Documents or as a party to this Agreement (including, without limitation, as
a party in interest or otherwise in any action or proceeding for injunctive or other equitable relief). To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.
(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 NASDAQ 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. Other than the Voting Agreements (as defined below), 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 The NASDAQ Capital Market,
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. “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.
(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 Commission, (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.
1. The
term “Intellectual Property Rights” includes:
(a) the
name of the Company and each Subsidiary, all fictional business names, trading names, registered and unregistered trademarks, service
marks, and applications of the Company and each Subsidiary (collectively, “Marks'');
(b) all
patents, patent applications, and inventions and discoveries that may be patentable of the Company and each Subsidiary (collectively,
“Patents'');
(c) all
copyrights in both published works and published works of the Company and each Subsidiary (collectively, “Copyrights”);
(d) all
rights in mask works of the Company and each Subsidiary (collectively, “Rights in Mask Works''); and
(e) all
know-how, trade secrets, confidential information, customer lists, software, technical information, data, process technology, plans,
drawings, and blue prints (collectively, “Trade Secrets''); owned, used, or licensed by the Company and each Subsidiary
as licensee or licensor.
2. Know-How
Necessary for the Business. The Intellectual Property Rights are all those necessary for the operation of the Company’s
businesses as it is currently conducted or as represented, in writing, to the Subscriber to be conducted. The Company is the owner
of all right, title, and interest in and to each of the Intellectual Property Rights, free and clear of all liens, security interests,
charges, encumbrances, equities, and other adverse claims, and has the right to use all of the Intellectual Property Rights. To
the Company’s knowledge, no employee of the Company has entered into any contract that restricts or limits in any way the
scope or type of work in which the employee may be engaged or requires the employee to transfer, assign, or disclose information
concerning his work to anyone other than of the Company.
3. Patents.
The Company is the owner of all right, title and interest in and to each of the Patents, free and clear of all liens and other
adverse claims, purchase price payments, or license agreements now or hereafter existing).
4. Trademarks.
The Company is the owner of all right, title, and interest in and to each of the Marks, free and clear of all liens and other adverse
claims. All Marks that have been registered with the United States Patent and Trademark Office are currently in compliance with
all formal legal requirements (including the timely post-registration filing of affidavits of use and incontestability and renewal
applications), are valid and enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety
days after the Closing Date.
5. Copyrights.
The Company is the owner of all right, title, and interest in and to each of the Copyrights, free and clear of all liens and other
adverse claims. All the Copyrights have been registered and are currently in compliance with formal requirements, are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety days after the date of the
Closing
6. Trade
Secrets. With respect to each Trade Secret, the documentation relating to such Trade Secret is current, accurate, and sufficient
in detail and content to identify and explain it and to allow its full and proper use without reliance on the knowledge or memory
of any individual. The Company has taken all reasonable precautions to protect the secrecy, confidentiality, and value of its Trade
Secrets. The Company has good title and an absolute (but not necessarily exclusive) right to use the Trade Secrets. The Trade Secrets
are not part of the public knowledge or literature, and, to the Company’s knowledge, have not been used, divulged, or appropriated
either for the benefit of any Person (other the Company) or to the detriment of the Company. No Trade Secret is subject to any
adverse claim or has been challenged or threatened in any way.
(x) Stock
Option Plans. Since commencement of trading of the Company’s Common Stock on The NASDAQ Capital Market, each stock option
granted by the Company under the stock option plan was granted (i) in accordance with the terms of such stock option plan and
(ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such stock option would be
considered granted under GAAP and applicable law. No stock option granted under any stock option plan has been backdated. The
Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options
prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their financial results or prospects.
(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 NASDAQ Capital Market under the symbol COOL. 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) Acknowledgment
Regarding Subscriber’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary
notwithstanding, it is understood and acknowledged by the Company that: (i) none of the Subscribers has been asked by the Company
to agree, nor has any Subscriber agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or
“derivative” securities based on securities issued by the Company or to hold the Securities for any specified term,
(ii) past or future open market or other transactions by any Subscriber, specifically including, without limitation, Short Sales
or “derivative” transactions, before or after the closing of this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded securities, (iii) any Subscriber, and counter-parties in “derivative”
transactions to which any such Subscriber is a party, directly or indirectly, may presently have a “short” position
in the Common Stock and (iv) each Subscriber shall not be deemed to have any affiliation with or control over any arm’s
length counter-party in any “derivative” transaction. The Company further understands and acknowledges that (y)
one or more Subscribers may engage in hedging activities at various times during the period that the Securities are outstanding,
including, without limitation, during the periods that the value of the Underlying Shares deliverable with respect to Securities
are being determined, and (z) such hedging activities (if any) could reduce the value of the existing stockholders' equity interests
in the Company at and after the time that the hedging activities are being conducted. The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the Transaction Documents. There are no disagreements of
any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers
formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and
lawyers which could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.
(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. 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. The Subscribers shall
have no obligation with respect to any such fees or with respect to any claims made by or on behalf of other Persons for fees of
a type contemplated in this Section 4(hh) that may be due in connection with 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) 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 first Business Day after this Agreement
has been executed, issue a press release disclosing the material terms of the transactions contemplated hereby and (b) within
four (4) Business Days after this Agreement has been executed, file a Current Report on Form 8-K with the SEC, including the Transaction
Documents as exhibits thereto. From and after the issuance of such press release and the filing of the Current Report on Form
8-K, 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 in which case the Company
shall provide the Subscribers with prior notice of such disclosure. The Company understands that any such disclosure shall cause
irreparable harm and each Subscriber shall be entitled to injunctive relief and liquidated damages in connection therewith.
(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.
(i) 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 then be required to fulfill its obligations in full under the Transaction Documents, but not less than 125%
of the maximum number of shares of Common Stock issuable pursuant to the Transaction Documents (the “Required Minimum”).
(ii) If,
on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required
Minimum on such date, then the Board of Directors shall amend the Company’s certificate or articles of incorporation to increase
the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible
and in any event not later than the 60th day after such date.
(iii) The
Company shall, if applicable: (i) in the time and manner required by the principal Trading Market, prepare and file with such Trading
Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum
on the date of such application, (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing
or quotation on such Trading Market as soon as possible thereafter, (iii) provide to the Subscribers evidence of such listing or
quotation and (iv) maintain the listing or quotation of such Common Stock on any date at least equal to the Required Minimum on
such date on such Trading Market or another Trading Market. The Company will then take all commercially reasonable action necessary
to continue the listing or quotation and trading of its Common Stock on a Trading Market for as long as any Subscriber holds Securities,
and will comply in all material respects with the Company’s reporting, filing and other obligations under the bylaws or rules
of the Trading Market at least until five years after the Closing Date. In the event the aforedescribed listing is not continuously
maintained for five years after the Closing Date (a “Listing Default”), then in addition to any other rights
the Subscribers may have hereunder or under applicable law, on the first day of a Listing Default and on each monthly anniversary
of each such Listing Default date (if the applicable Listing Default shall not have been cured by such date) until the applicable
Listing Default is cured, the Company shall pay to each Subscriber an amount in cash, as partial liquidated damages and not as
a penalty, equal to 1% of the aggregate Subscription Amount and purchase price of Warrant Shares held by such Subscriber on the
day of a Listing Default and on every thirtieth day (pro-rated for periods less than thirty days) thereafter until the date such
Listing Default is cured. If the Company fails to pay any liquidated damages pursuant to this Section in a timely manner, the Company
will pay interest thereon at a rate of 1.5% per month (pro-rated for partial months) to the Subscriber, up to a maximum of sixteen
(16%) percent for such interest and liquidated damages amounts, collectively.
(f) Use
of Proceeds. The Company anticipates using the gross proceeds from the Offering for general working capital purposes or for
such other purposes as may be approved in writing by the Lead Investor.
(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 or could constitute 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 Subscriber shall have executed a written agreement with the
Company regarding the willingness to accept receipt of such material non-public information and acknowledges the confidentiality
and use of such information and the Company’s covenant to file a further SEC filing or report and the period in which such
information shall remain confidential or be required to not be disclosed. The Company understands and confirms that each Subscriber
shall be relying on the foregoing covenant in effecting transactions in securities of the Company. In addition, effective upon
the filing of the 8-K Filing, the Company acknowledges and agrees that any and all confidentiality or similar obligations under
any agreement, whether written or oral, between the Company and any of its Subsidiaries or any of their respective officers, directors,
affiliates, employees or agents, on the one hand, and the Subscriber or any of its affiliates on the other hand, shall terminate.
(j) Right
of Participation. The Company acknowledges and agrees that the right set forth in this Section 5(j) is a right granted
by the Company, separately, to each Subscriber.
(i) At
least five (5) trading days prior to any proposed or intended sale by the Company of its Common Stock or other securities or equity
linked debt obligations (each, a “Subsequent Placement”), the Company shall deliver to each Subscriber a written
notice of its proposal or intention to effect a Subsequent Placement (each such notice, a “Pre-Notice”), which
Pre-Notice shall not contain any information (including, without limitation, material, non-public information) other than: (A)
a statement that the Company proposes or intends to effect a Subsequent Placement, (B) a statement that the statement in clause
(A) above does not constitute material, non-public information and (C) a statement informing such Subscriber that it is entitled
to receive an Offer Notice (as defined below) with respect to such Subsequent Placement upon its written request. Upon the written
request of a Subscriber within five (5) business days after the Company’s delivery to such Subscriber of such Pre-Notice,
and only upon a written request by such Subscriber, the Company shall promptly, but no later than one (1) business day after such
request, deliver to such Subscriber an irrevocable written notice (the “Offer Notice”) of any proposed or intended
issuance or sale or exchange (the “Offer”) of the securities being offered (the “Offered Securities”)
in a Subsequent Placement, which Offer Notice shall (I) identify and describe the Offered Securities, (II) describe the price and
other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued,
sold or exchanged, (III) identify the persons (if known) to which or with which the Offered Securities are to be offered, issued,
sold or exchanged and (IV) offer to issue and sell to or exchange with such Subscriber in accordance with the terms of the Offer
such Subscriber’s pro rata portion of 100% of the Offered Securities, provided that the number of Offered Securities which
such Subscriber shall have the right to subscribe for under this Section 5(j) shall be (x) based on such Subscriber’s pro
rata portion of the aggregate original amount of the Units purchased hereunder by all Subscribers (the “Basic Amount”),
and (y) with respect to each Subscriber that elects to purchase its Basic Amount, any additional portion of the Offered Securities
attributable to the Basic Amounts of other Subscribers as such Subscribers shall indicate it will purchase or acquire should the
other Subscribers subscribe for less than their Basic Amounts (the “Undersubscription Amount”).
(ii) To
accept an Offer, in whole or in part, such Subscriber must deliver a written notice to the Company prior to the end of the fifth
(5th) Business Day after such Subscriber’s receipt of the Offer Notice (the “Offer Period”),
setting forth the portion of such Subscriber’s Basic Amount that such Subscriber elects to purchase and, if such Subscriber
shall elect to purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Subscriber elects to purchase
(in either case, the “Notice of Acceptance”). If the Basic Amounts subscribed for by all Subscribers are less
than the total of all of the Basic Amounts, then such Subscriber who has set forth an Undersubscription Amount in its Notice of
Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed for, the Undersubscription Amount it has
subscribed for; provided, however, if the Undersubscription Amounts subscribed for exceed the difference between the total of all
the Basic Amounts and the Basic Amounts subscribed for (the “Available Undersubscription Amount”), such Subscriber
who has subscribed for any Undersubscription Amount shall be entitled to purchase only that portion of the Available Undersubscription
Amount as the Basic Amount of such Subscriber bears to the total Basic Amounts of all Subscribers that have subscribed for Undersubscription
Amounts, subject to rounding by the Company to the extent it deems reasonably necessary. Notwithstanding the foregoing, if the
Company desires to modify or amend the terms and conditions of the Offer prior to the expiration of the Offer Period, the Company
may deliver to each Subscriber a new Offer Notice and the Offer Period shall expire on the fifth(5th) Business Day after
such Subscriber’s receipt of such new Offer Notice.
(iii) The
Company shall have five (5) Business Days from the expiration of the Offer Period above (A) to offer, issue, sell or exchange all
or any part of such Offered Securities as to which a Notice of Acceptance has not been given by a Subscriber (the “Refused
Securities”) pursuant to a definitive agreement(s) (the “Subsequent Placement Agreement”), but only
to the offerees described in the Offer Notice (if so described therein) and only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more favorable to the acquiring person or persons or less favorable to
the Company than those set forth in the Offer Notice and (B) to publicly announce (I) the execution of such Subsequent Placement
Agreement, and (II) either (x) the consummation of the transactions contemplated by such Subsequent Placement Agreement or (y)
the termination of such Subsequent Placement Agreement, which shall be filed with the SEC on a Current Report on Form 8-K with
such Subsequent Placement Agreement and any documents contemplated therein filed as exhibits thereto.
(iv) In
the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the
terms specified in Section 5(j)(iii) above), then such Subscriber may, at its sole option and in its sole discretion, reduce
the number or amount of the Offered Securities specified in its Notice of Acceptance to an amount that shall be not less than the
number or amount of the Offered Securities that such Subscriber elected to purchase pursuant to Section 5(j)(ii)1(a)(ii) above
multiplied by a fraction, (A) the numerator of which shall be the number or amount of Offered Securities the Company actually proposes
to issue, sell or exchange (including Offered Securities to be issued or sold to Subscribers pursuant to this Section 5(j) prior
to such reduction) and (B) the denominator of which shall be the original amount of the Offered Securities. In the event that any
Subscriber so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may
not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless and until such securities have
again been offered to the Subscribers in accordance with Section 5(j)(i) above.
(v) Upon
the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, such Subscriber shall acquire
from the Company, and the Company shall issue to such Subscriber, the number or amount of Offered Securities specified in its Notice
of Acceptance. The purchase by such Subscriber of any Offered Securities is subject in all cases to the preparation, execution
and delivery by the Company and such Subscriber of a separate purchase agreement relating to such Offered Securities reasonably
satisfactory in form and substance to such Subscriber and its counsel.
(vi) Any
Offered Securities not acquired by a Subscriber or other persons in accordance with this Section 5(j) may not be issued,
sold or exchanged until they are again offered to such Subscriber under the procedures specified in this Agreement.
(vii) The
Company and each Subscriber agree that if any Subscriber elects to participate in the Offer, neither the Subsequent Placement Agreement
with respect to such Offer nor any other transaction documents related thereto (collectively, the “Subsequent Placement
Documents”) shall include any term or provision whereby such Subscriber shall be required to agree to any restrictions
on trading as to any securities of the Company or be required to consent to any amendment to or termination of, or grant any waiver,
release or the like under or in connection with, any agreement previously entered into with the Company or any instrument received
from the Company.
(viii) Notwithstanding
anything to the contrary in this Section 5(j) and unless otherwise agreed to by such Subscriber, the Company shall either confirm
in writing to such Subscriber that the transaction with respect to the Subsequent Placement has been abandoned or shall publicly
disclose its intention to issue the Offered Securities, in either case, in such a manner such that such Subscriber will not be
in possession of any material, non-public information, by the fifth (5th) business day following delivery of the Offer
Notice. If by such fifth (5th) business day, no public disclosure regarding a transaction with respect to the Offered
Securities has been made, and no notice regarding the abandonment of such transaction has been received by such Subscriber, such
transaction shall be deemed to have been abandoned and such Subscriber shall not be in possession of any material, non-public information
with respect to the Company or any of its subsidiaries. Should the Company decide to pursue such transaction with respect to the
Offered Securities, the Company shall provide such Subscriber with another Offer Notice in accordance with, and subject to, the
terms of this Section 5(j) and such Subscriber will again have the right of participation set forth in this Section 5(j) The Company
shall not be permitted to deliver more than one such Offer Notice to such Subscriber in any sixty (60) day period, except as expressly
contemplated by the last sentence of Section 5(j)(ii).
The Right of Participation
set forth in this Section 5(j) shall terminate on the twenty four month anniversary of the Closing Date.
(k) Capital
Changes. Until the one year anniversary of the Closing Date, the Company shall not undertake a reverse or forward stock split
or reclassification of the Common Stock without 10 days prior written notice to the Subscribers, unless such reverse split is made
in conjunction with the listing of the Common Stock on a national securities exchange or maintaining compliance with such listing.
(l) DTC
Program. At all times that any Subscriber holds Securities, the Company shall use its best efforts to employ as the transfer
agent for the Common Stock 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.
(j) Equity
Incentive Plan. Within thirty (30) days of the Closing Date, the Company’s Board of Directors will approve the Equity
Incentive Plan (the “Plan”), substantially in the form attached hereto as Exhibit E, and the reservation
of 2.25 million shares of Common Stock thereunder. The Company will use its reasonable best efforts to cause its stockholders
to ratify the adoption of the Plan within one (1) year of the Closing Date and shall submit such Plan for shareholder approval
as a proposal with the next proxy filed by the Company for approval of the Securities.
(k) Investor
Relations. For so long as any Subscriber holds Securities, the Company shall engage an investor relations firm and public relations
firm, acceptable to the investor set forth on Exhibit F (the “Lead Investor”).
(l) Board
Rights. Within three (3) days from the Closing Date, the Board of Directors shall appoint two (2) designees of the Lead Investor
to the Board of Directors and present such appointment to the Company’s stockholders for ratification at the Company’s
next special or annual meeting of its stockholders.
(j) Limitations
on Issuances and Financings. For as long as any Subscriber holds Securities, 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 or incur any financing debt, other than with regard to Excluded Securities (as defined in the Series A
Certificate of Designation), without the express written consent of the Lead Investor.
(k) Escrow
Release. The Aggregate Purchase Price shall be held by the Escrow Agent and shall be released as follows:
(i) On
the Closing Date: One Million Dollars ($1,000,000) shall be released by the Escrow Agent and One Million Dollars ($1,000,000) of
Units shall be released by the Securities Escrow Agent on a pro rata basis based on the Subscriber’s subscription amount,
in accordance with the written instructions of the Company and the Lead Investor provided that the Lead Investor and the Company
certify that all conditions and obligations of the Company for such release set forth in Section 7 herein have been satisfied (the
“Initial Escrow Release”).
(ii) Subsequent
to the Closing Date, in one or multiple tranches (each, a “Subsequent Escrow Release”), all or part of Five
Million Dollars ($5,000,000) of cash shall be released by the Escrow Agent and Five Million Dollars ($5,000,000) of Units shall
be released by the Securities Escrow Agent on a pro rata basis based on the Subscriber’s subscription amount, in accordance
with the written instructions of the Company and the Lead Investor provided that the Lead Investor and the Company certify that
the below conditions and obligations of the Company for such release set forth below have been satisfied (the “Release
Conditions”):
| (A) | The NASDAQ Approval has been obtained and; and |
| a. | The Lead Investor has approved the Subsequent Escrow Release in writing; or |
| b. | Requisite Approval of the Subscribers has been obtained; or |
| c. | The Company has executed definitive binding documents for a Qualified Transaction and the Qualified
Transaction shall close contemporaneously with the Subsequent Escrow Release following approval of the Company’s stockholders
as required by NASDAQ, which Qualified Transaction requires the filing by the Company of a Current Report on Form 8-K with the
inclusion of audited financial statements of the target. For purposes hereof, a “Qualified Transaction” shall mean
one or more acquisitions 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 any acquisition involving assets, shares of capital
stock, any purchase, merger, consolidation, recapitalization, or reorganization or involving any licensing, royalties, sharing
arrangement or otherwise, which value of such Qualified Transaction is in excess of $25,000,000 for the Company’s interest
therein. For purposes hereof, the value of a Qualified Transaction shall take into account all cash, stock, present value
of all royalties, settlement amounts, future payments, license fees received or owed, and all other consideration associated with
such acquisition of any kind whatsoever; or |
| d. | The following conditions are present: (i) nine (9) months has elapsed from the Closing Date; (ii)
the Subsequent Escrow Release has not been consummated pursuant to Sections (a)-(c) above; (iii) the Subsequent Escrow Release
does not release in excess of One Million Dollars ($1,000,000) and (iv) the two (2) directors appointed on the Closing Date have
approved the One Million Dollar ($1,000,000) Subsequent Escrow Release in Writing |
(iii) If prior to the twelve
(12) month anniversary of the Closing Date, unless extended by the Lead Investor or by Requisite Approval, none of the Release
Conditions have been satisfied, Escrow Agent shall return Five Million Dollars ($5,000,000) to the Subscribers, without interest
or deduction, and the Securities Escrow Agent shall return the Units held to the Company for cancellation. Notwithstanding anything
herein to the contrary until cancelled, the Units (Series A Preferred Stock and Warrants) shall be issued and outstanding securities
of the Company for all purposes.
(l) The Company shall use
its reasonable best efforts to obtain all approvals required by The NASDAQ Market as soon as possible but in no event later than
four (4) months from the Closing Date.
(a) The
Company shall file a “resale” registration statement with the SEC covering the shares of Common Stock issuable upon
conversion of the Series A Preferred Stock and the Warrant Shares, so that such shares of Common Stock will be registered under
the Securities Act. The Company will maintain the effectiveness of the “resale” registration statement from the effective
date of the registration statement until all Registrable Securities (as defined in the Registration Rights Agreement) covered by
such registration statement have been sold, or may be sold without the requirement to be in compliance with Rule 144(c)(1) and
otherwise without restriction or limitation pursuant to Rule 144. The Company will use its reasonable best efforts to have such
“resale” registration statement filed by the Filing Date (as defined in the Registration Rights Agreement) and declared
effective by the SEC as soon as possible and, in any event, by the Effectiveness Date (as defined in the Registration Rights Agreement),
unless extended by Subscribers in the Offering holding 60% of the Units issued in the Offering which shall include the approval
of the Lead Investor (“Requisite Approval”).
The Company is obligated
to pay to the Subscribers a fee of 1% per month of the investors’ investment, payable in cash, up to a maximum of twelve
(12%) percent, on the Filing Date and the Effectiveness Date if the registration obligations set forth herein have not been met,
and pro- rata for each month, or partial month, in excess of the Filing Date and/or the Effectiveness Date that the registration
statement has not been declared effective; provided, however, that the Company shall not be obligated to pay any such liquidated
damages if the Company is unable to fulfill its registration obligations as a result of rules, regulations, positions or releases
issued or actions taken by the SEC pursuant to its authority with respect to “Rule 415”, provided the Company registers
at such time the maximum number of shares of Common Stock permissible upon consultation with the staff of the SEC.
The description of registration
rights is qualified in its entirety by reference to Registration Rights Agreement annexed hereto as Exhibit D.
| 7. | CONDITIONS TO ACCEPTANCE OF SUBSCRIPTION |
(a) The Closing of
the sale of the Shares 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) On
the Closing Date, the Company shall only possess such residual business assets of the reduced workforce activities of the historical
operations of the Company and its interest in Majesco Europe Limited. The Company shall deliver to the Subscribers on the Closing
Date, evidence of a minimum of $750,000 in positive working capital, inclusive of cash and marketable securities, giving effect
to all claims and liabilities, but excluding any liability associated with outstanding litigation as disclosed in the SEC Filings,
including any change of control or severance requirements on a pro forma basis.
(v) The
Company shall deliver to the Subscribers a file stamped copy of the filed Series A Certificate of Designation, filed with the Secretary
of State of the State of Delaware, which shall not have been amended, waived, modified or revoked by the Company.
(vi) The
Company shall deliver to the Subscribers an opinion of its legal counsel substantially in the form attached hereto as Exhibit
G.
(vii) The
Company shall deliver voting agreements (the “Voting Agreements”), in the form attached hereto as Exhibit
H, executed by all officers, directors holders of at least 5% of the Company’s issued and outstanding Common Stock.
| 8. | MISCELLANEOUS PROVISIONS |
(a) All
parties hereto have been represented by counsel, and no inference shall be drawn in favor of or against any party by virtue of
the fact that such party’s counsel was or was not the principal draftsman of this Agreement.
(b) 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 Closing Date.
(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 and the other Transaction Documents sets forth the entire agreement
and understanding between the parties as to the Offering contemplated hereby and merges and supersedes all prior discussions, agreements
and understandings of any and every nature among them.
(g) The
Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Subscriber,
including, without limitation, by way of a Fundamental Transaction (as defined in the Series A Certificate of Designations) (unless
the Company is in compliance with the applicable provisions governing such Fundamental Transaction set forth in the Series A Certificate
of Designations). The Subscriber may assign some or all of its rights hereunder in connection with any transfer of any of its Securities
without the consent of the Company, in which event such assignee shall be deemed to be the Subscriber hereunder with respect to
such assigned rights.
(h) The
Company hereby represents and warrants as of the date hereof and as of the 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, unless waived by the Subscriber, 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 Series A Certificate of Designation or 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 except in writing signed by both (a) the
Company and (b) Subscribers in the Offering holding 60% of the Units issued in the Offering then held by the original Subscribers.
The Company shall be prohibited from offering any additional consideration 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 _____, 2014.
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Manner in which Title is to be held (Please Check One):
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Individual |
7. |
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Trust/Estate/Pension or Profit sharing Plan
Date Opened:______________ |
2. |
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Joint Tenants with Right of Survivorship |
8. |
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As a Custodian for
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Under the Uniform Gift to Minors Act of the State of
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3. |
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Community Property |
9. |
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Married with Separate Property |
4. |
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Tenants in Common |
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Keogh |
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Corporation/Partnership/ Limited Liability Company |
11. |
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Tenants by the Entirety |
6. |
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IRA |
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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 25.
SUBSCRIBERS WHICH ARE ENTITIES MUST COMPLETE PAGE 26.
EXECUTION
BY NATURAL PERSONS
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Exact Name in Which Title is to be Held |
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Residence: Number and Street |
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ACCEPTED this ___ day of _________ 2014, on behalf of the Company.
[SIGNATURE PAGE FOR SUBSCRIPTION AGREEMENT]
EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY
(Corporation, Partnership, LLC, Trust, Etc.)
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ACCEPTED this ____ day of __________ 2014, 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. |
| ¨ | You are a private business development company as defined in Section 202(a)(22) of the Investment
Advisers Act of 1940, as amended. |
| ¨ | 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. |
| ¨ | You are a director or executive officer of the Company. |
| ¨ | 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. |
| ¨ | 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. |
| ¨ | 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. |
| ¨ | 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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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:
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I/We understand that this investment is not guaranteed. |
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I/We are aware that this investment is not liquid. |
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I/We are sophisticated in financial and business affairs and are able to evaluate the risks and merits of an investment in this offering. |
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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.
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Name of Purchaser [please print] |
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Name of Co-Purchaser [please print] |
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Signature of Purchaser (Entities please provide signature of Purchaser’s duly authorized signatory.) |
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[SIGNATURE PAGE FOR INVESTOR QUESTIONNAIRE]
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS
AGREEMENT (this “Agreement”) is made as of _________ 2014, among the undersigned corporation (the “Company”),
and each signatory hereto (each, an “Investor” and collectively, the “Investors”). Capitalized
terms not otherwise defined herein shall have the meaning ascribed to them in the Subscription Agreement (as defined below).
RECITALS
WHEREAS, the Company
and the Investors are parties to Subscription Agreements (the “Subscription Agreements”), dated as of the date
hereof, as such may be amended and supplemented from time to time;
WHEREAS, the Investors’
obligations under the Subscription Agreements are conditioned upon certain registration rights under the Securities Act of 1933,
as amended (the “Securities Act”); and
WHEREAS, the Investors
and the Company desire to provide for the rights of registration under the Securities Act as are provided herein upon the execution
and delivery of this Agreement by such Investors and the Company.
NOW, THEREFORE, in
consideration of the promises, covenants and conditions set forth herein, the parties hereto hereby agree as follows:
1.1 Definitions.
As used in this Agreement, the following terms shall have the meanings set forth below:
(a)
“Commission” means the United States Securities and Exchange Commission.
(b)
“Common Stock” means the Company’s common stock, par value $0.001 per share.
(c)
“Effectiveness Date” means the date that is ninety (90) days after the Filing Date.
(d)
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
(e)
“Filing Date” means the date that is forty five (45) days after the Trigger Date.
(f)
“Investor” means any person owning Registrable Securities who becomes party to this Agreement by executing a
counterpart signature page hereto, or other agreement in writing to be bound by the terms hereof, which is accepted by the Company.
(g) The
terms “register,” “registered” and “registration” refer to a registration
effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration
or ordering of effectiveness of such registration statement or document.
(h)
“Registrable Securities” 125% of the maximum number of shares of Common Stock (i) issuable upon conversion of
the Series A Preferred Stock and (ii)Warrant Shares issuable upon exercise of the Warrants as of the Trading Day (as defined in
the Series A Certificate of Designation) immediately preceding the applicable date of determination (without taking into account
any limitations on the conversion of the Series A Preferred Stock or exercise of the Warrants, as set forth therein); provided,
however, that Registrable Securities shall not include any securities of the Company that have previously been registered
and remain subject to a currently effective registration statement or which have been sold to the public either pursuant to a registration
statement or Rule 144, or which have been sold in a private transaction in which the transferor’s rights under this Section
1 are not assigned, or which may be sold immediately without registration under the Securities Act and without restriction or imitation
pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1).
(i)
“Rule 144” means Rule 144 as promulgated by the Commission under the Securities Act, as such Rule may be amended
from time to time, or any similar successor rule that may be promulgated by the Commission.
(j)
“Rule 415” means Rule 415 as promulgated by the Commission under the Securities Act, as such Rule may be amended
from time to time, or any similar successor rule that may be promulgated by the Commission.
(k)
“Series A Preferred Stock” means the Company’s Series A Convertible Preferred Stock, $0.001 par value
per share, issuable pursuant to the Subscription Agreement.
(l)
“Shares” means the shares of Common Stock issuable upon conversion of the Series A Preferred Stock and the Warrant
Shares.
(m)
“Trigger Date” means the Closing Date.
1.2 Company
Registration.
(a) On
or prior to the Filing Date, the Company shall prepare and file with the Commission a registration statement covering the Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule 415. The registration statement shall be on Form S-1
or, if the Company is so eligible, on Form S-3 (except if the Company is not then eligible to register for resale the Registrable
Securities on Form S-1 or Form S-3, as the case may be, in which case such registration shall be on another appropriate form in
accordance herewith) and shall contain (unless otherwise directed by Investors holding an aggregate of at least 60% of the Registrable
Securities on a fully diluted basis including the approval of the Lead Investor) substantially the “Plan of Distribution”
attached hereto as Annex A. The Company shall cause the registration statement to become effective and remain effective
as provided herein. The Company shall use its reasonable best efforts to cause the registration statement to be declared effective
under the Securities Act as soon as possible and, in any event, by the Effectiveness Date. The Company shall use its reasonable
best efforts to keep the registration statement continuously effective under the Securities Act until all Registrable Securities
covered by such registration statement have been sold, or may be sold without the requirement to be in compliance with Rule 144(c)(1)
and otherwise without restriction or limitation pursuant to Rule 144, as determined by the counsel to the Company (the “Effectiveness
Period”).
(b) The
Company shall pay to Investors a fee of 1% per month of the Investors’ investment, payable in cash, for every thirty (30)
day period up to a maximum of 12%, (i) following the Filing Date that the registration statement has not been filed and (ii) following
the Effectiveness Date that the registration statement has not been declared effective; provided, however, that the
Company shall not be obligated to pay any such liquidated damages if (i) the Registrable Securities that would other be covered
by the registration statement may be sold without the requirement to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144 under the Securities Act or (ii) the Company is unable to fulfill its registration
obligations as a result of rules, regulations, positions or releases issued or actions taken by the Commission pursuant to its
authority with respect to “Rule 415”, and the Company registers at such time the maximum number of shares of Common
Stock permissible upon consultation with the staff of the Commission.
(c) If
during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of shares of Common
Stock then registered in a registration statement, the Company shall file as soon as reasonably practicable an additional registration
statement covering the resale of not less than the number of such Registrable Securities.
(d) The
Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of Registrable Securities
with respect to the registrations pursuant to this Section 1.2 for each Investor, including (without limitation) all registration,
filing and qualification fees, printer’s fees, accounting fees and fees and disbursements of counsel for the Company, but
excluding any brokerage or underwriting fees, discounts and commissions relating to Registrable Securities and fees and disbursements
of counsel for the Investors.
(e) If
at any time during the Effectiveness Period there is not an effective Registration Statement covering all of the Registrable Securities,
then the Company shall notify each Investor in writing at least fifteen (15) days prior to the filing of any registration statement
under the Securities Act, in connection with a public offering of shares of Common Stock (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company but excluding any registration statements (i) on Form S-4
or S-8 (or any successor or substantially similar form), or of any employee stock option, stock purchase or compensation plan or
of securities issued or issuable pursuant to any such plan, or a dividend reinvestment plan, (ii) otherwise relating to any employee,
benefit plan or corporate reorganization or other transactions covered by Rule 145 promulgated under the Securities Act, (iii)
on any registration form which does not permit secondary sales or does not include substantially the same information as would
be required to be included in a registration statement covering the resale of the Registrable Securities. In the event an Investor
desires to include in any such registration statement all or any part of the Registrable Securities held by such Investor, the
Investor shall within ten (10) days after the above-described notice from the Company, so notify the Company in writing, including
the number of such Registrable Securities such Investor wishes to include in such registration statement. If an Investor decides
not to include all of its Registrable Securities in any registration statement thereafter filed by the Company such Investor shall
nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration
statements as may be filed by the Company with respect to the offering of the securities, all upon the terms and conditions set
forth herein.
1.3 Obligations
of the Company. Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare
and file with the Commission a registration statement with respect to such Registrable Securities and use its reasonable best efforts
to cause such registration statement to become effective and to keep such registration statement effective during the Effectiveness
Period;
(b) Prepare
and file with the Commission such amendments and supplements to such registration statement and the prospectus 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 securities covered by such registration statement;
(c) Furnish
to the Investors such numbers of copies 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 by them (provided that the Company would not be required to print such prospectuses if readily available to Investors
from any electronic service, such as on the EDGAR filing database maintained at www.sec.gov);
(d) Use
its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities’
or blue sky laws of such jurisdictions as shall be reasonably requested by the Investors; provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions;
(e) In
the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter(s) of such offering (each Investor participating in such underwriting shall also
enter into and perform its obligations under such an agreement);
(f) Promptly
notify each Investor holding Registrable Securities covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, within one business day, (i) of the effectiveness of such registration
statement, or (ii) of the happening of any event as a result of which the prospectus included in such registration statement, 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 not misleading in the light of the circumstances then existing;
(g) Cause
all such Registrable Securities registered pursuant hereto to be listed on each securities exchange or nationally recognized quotation
system on which similar securities issued by the Company are then listed; and
(h) Provide
a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration.
1.4 Furnish
Information. It shall be a condition precedent to the Company’s obligations to take any action pursuant
to this Section 1 with respect to the Registrable Securities of any selling Investor that such Investor shall furnish to the Company
such information regarding such Investor, the Registrable Securities held by such Investor, and the intended method of disposition
of such securities in the form attached to this Agreement as Annex B, or as otherwise reasonably required by the Company or the
managing underwriters, if any, to effect the registration of such Investor’s Registrable Securities.
1.5 Delay
of Registration. No Investor shall have any right to obtain or seek an injunction restraining or otherwise
delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation
of this Section 1.
1.6 Indemnification.
(a) To
the extent permitted by law, the Company will indemnify and hold harmless each Investor, any underwriter (as defined in the Securities
Act) for such Investor and each person, if any, who controls such Investor or underwriter within the meaning of the Securities
Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons
may become subject under the Securities Act, the Exchange Act or other federal or state securities law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, a “Violation”): (i) any untrue statement or alleged untrue statement
of a material fact contained in a registration statement, including any preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereto (collectively, the “Filings”), (ii) the omission or alleged omission
to state in the Filings a material fact required to be stated therein, or necessary to make the statements therein not misleading,
or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or
any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will
pay any legal or other expenses reasonably incurred by any person to be indemnified pursuant to this Section 1.6(a) in connection
with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 1.6(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises
out of or is based upon a Violation that occurs in reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by any such Investor, underwriter or controlling person.
(b) To
the extent permitted by law, each Investor will indemnify and hold harmless the Company, each of its directors, each of its officers
who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Securities Act
or the Exchange Act, any underwriter, any other Investor selling securities in such registration statement and any controlling
person of any such underwriter or other Investor, against any losses, claims, damages or liabilities (joint or several) to which
any of the foregoing persons may become subject under the Securities Act, the Exchange Act or other federal or state securities
law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Investor expressly for use in connection with such registration; and each such Investor will
pay any legal or other expenses reasonably incurred by any person to be indemnified pursuant to this Section 1.6(b) in connection
with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 1.6(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Investor (which consent shall not be unreasonably withheld);
provided, however, in no event shall any indemnity under this subsection 1.6(b) exceed the net proceeds received
by such Investor upon the sale of the Registrable Securities giving rise to such indemnification obligation.
(c) Promptly
after receipt by an indemnified party under this Section 1.6 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section
1.6, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right
to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified
party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right
to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability
to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.6,
but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 1.6.
(d) If
the indemnification provided for in Sections 1.6(a) and (b) is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, claim, damage or expense referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or expense 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 or alleged statements
or omissions that resulted in such loss, liability, claim or expense as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact relates to information supplied by the indemnifying party or
by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. In no event shall any Investor be required to contribute an amount in excess of the net proceeds
received by such Investor upon the sale of the Registrable Securities giving rise to such indemnification obligation.
(e) The
obligations of the Company and Investors under this Section 1.6 shall survive the completion of any offering of Registrable Securities
in a registration statement under this Section 1, and otherwise.
1.7 Reports
Under Securities Exchange Act. With a view to making available the benefits of certain rules and regulations of the Commission,
including Rule 144, that may at any time permit an Investor to sell securities of the Company to the public without registration
or pursuant to a registration on Form S-1 or Form S-3, the Company agrees to:
(a) make
and keep public information available, as those terms are understood and defined in Rule 144, at all times after the Final Closing
Date;
(b) take
such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to
enable the Investors to utilize Form S-1 for the sale of their Registrable Securities, such action to be taken as soon as practicable
after the end of the fiscal year in which the registration statement is declared effective;
(c) file
with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the
Exchange Act; and
(d) furnish
to any Investor, so long as the Investor owns any Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 the Securities Act and the Exchange Act (at any time after
it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant
to Form S-1 or Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in
availing any Investor of any rule or regulation of the Commission that permits the selling of any such securities without registration
or pursuant to such form.
1.8 Transfer
or Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section
1 may be transferred or assigned, but only with all related obligations, by an Investor to a transferee or assignee who (a) acquires
at least 25,000 Shares or at least 25,000 Warrant Shares (subject to appropriate adjustment for stock splits, stock dividends and
combinations) from such transferring Investor, unless waived in writing by the Company, or (b) holds Registrable Securities immediately
prior to such transfer or assignment; provided, that in the case of (a), (i) prior to such transfer or assignment, the Company
is furnished with written notice stating the name and address of such transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned, (ii) such transferee or assignee agrees in writing
to be bound by and subject to the terms and conditions of this Agreement and (iii) such transfer or assignment shall be effective
only if immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee
is restricted under the Securities Act.
(a) Each
certificate representing Shares of Common Stock held by the Investors shall be endorsed with the following legend:
“THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT 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. 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.”
(b) The
legend set forth above shall be removed, and the Company shall issue a certificate without such legend to the transferee of the
Shares represented thereby, if, unless otherwise required by state securities laws, (i) such Shares have been sold under an effective
registration statement under the Securities Act, (ii) in connection with a sale, assignment or other transfer, such holder provides
the Company with an opinion of counsel, reasonably acceptable to the Company, to the effect that such sale, assignment or transfer
is being made pursuant to an exemption from the registration requirements of the Securities Act, or (iii) such holder provides
the Company with reasonable assurance that the Shares are being sold, assigned or transferred pursuant to Rule 144 or Rule 144A
under the Securities Act.
3.1 Governing
Law. The parties hereby agree that any dispute which may arise between them arising out of or in connection
with this Agreement shall be adjudicated only before a federal court located in the State of New York and they hereby submit to
the exclusive jurisdiction of the federal and state courts of the State of New York 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 registration 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, in care of
the address set forth below or such other address as the undersigned shall furnish in writing to the other.
3.2 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
3.3 Waivers
and Amendments. This Agreement may be terminated and any term of this Agreement may be amended or waived (either
generally or in a particular instance and either retroactively or prospectively) with the written consent of the Company and Investors
holding at least a 60% of the Registrable Securities then outstanding, including the Lead Investor (the “Majority Investors”).
Notwithstanding the foregoing, additional parties may be added as Investors under this Agreement, and the definition of Registrable
Securities expanded, with the written consent of the Company and the Majority Investors. No such amendment or waiver shall reduce
the aforesaid percentage of the Registrable Securities, the holders of which are required to consent to any termination, amendment
or waiver without the consent of the record holders of all of the Registrable Securities. Any termination, amendment or waiver
effected in accordance with this Section 3.3 shall be binding upon each holder of Registrable Securities then outstanding, each
future holder of all such Registrable Securities and the Company.
3.4 Successors
and Assigns. Except as otherwise expressly provided herein, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.
3.5 Entire
Agreement. This Agreement constitutes the full and entire understanding and agreement among the parties with
regard to the subject matter hereof, and no party shall be liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein.
3.6 Notices. All
notices and other communications required or permitted under this Agreement shall be in writing and shall be delivered personally
by hand or by overnight courier, mailed by United States first-class mail, postage prepaid, sent by facsimile or sent by electronic
mail directed (a) if to an Investor, at such Investor’s address, facsimile number or electronic mail address set forth in
the Company’s records, or at such other address, facsimile number or electronic mail address as such Investor may designate
by ten (10) days’ advance written notice to the other parties hereto or (b) if to the Company, to its address, facsimile
number or electronic mail address set forth on its signature page to this Agreement and directed to the attention of its President,
or at such other address, facsimile number or electronic mail address as the Company may designate by ten (10) days’ advance
written notice to the other parties hereto. All such notices and other communications shall be effective or deemed given upon delivery,
on the date that is three (3) days following the date of mailing, upon confirmation of facsimile transfer or upon confirmation
of electronic mail delivery.
3.7 Interpretation. The
words “include,” “includes” and “including” when used herein shall be deemed in each case to
be followed by the words “without limitation.” The titles and subtitles used in this Agreement are used for convenience
only and are not considered in construing or interpreting this Agreement.
3.8 Severability. If
one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from
this Agreement, and the balance of the Agreement shall be interpreted as if such provision were so excluded, and shall be enforceable
in accordance with its terms.
3.9 Independent
Nature of Investors’ Obligations and Rights. The obligations of each Investor hereunder are several and not joint with
the obligations of any other Investor hereunder, and no Investor shall be responsible in any way for the performance of the obligations
of any other Investor hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no
action taken by any Investor pursuant hereto or thereto, shall be deemed to constitute the Investors as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert with respect
to such obligations or the transactions contemplated by this Agreement. Each Investor shall be entitled to protect and enforce
its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such purpose.
3.10 Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute
one instrument.
3.11 Telecopy
Execution and Delivery. A facsimile, telecopy or other reproduction of this Agreement may be executed by one
or more parties hereto, and an executed copy of this Agreement may be delivered by one or more parties hereto by facsimile or similar
electronic transmission device pursuant to which the signature of or on behalf of such party can be seen, and such execution and
delivery shall be considered valid, binding and effective for all purposes. At the request of any party hereto, all parties hereto
agree to execute an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF,
the Company has caused this Agreement to be executed by its duly authorized officer, as of the date, month and year first set forth
above.
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[COMPANY SIGNATURE PAGE TO REGISTRATION
RIGHTS AGREEMENT]
IN WITNESS WHEREOF,
the undersigned Investor has executed this Agreement as of the date, month and year that such Investor became the owner of Registrable
Securities.
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[INVESTOR COUNTERPART SIGNATURE PAGE
TO
REGISTRATION RIGHTS AGREEMENT]
Annex A
Plan of Distribution
Each selling stockholder
of the common stock and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of
their shares of common stock on The NASDAQ Capital Market or any other stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or negotiated prices. A selling stockholder may use any
one or more of the following methods when selling shares:
| · | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| · | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction; |
| · | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| · | an exchange distribution in accordance with the rules of the applicable exchange; |
| · | privately negotiated transactions; |
| · | settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a
part; |
| · | broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per
share; |
| · | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
| · | a combination of any such methods of sale; or |
| · | any other method permitted pursuant to applicable law. |
The selling stockholders
may also sell shares under Rule 144 under the Securities Act of 1933, as amended, if available, rather than under this prospectus.
Broker-dealers engaged
by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser)
in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction
not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction
a markup or markdown in compliance with FINRA IM-2440.
In connection with
the sale of the common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions
they assume. The selling stockholders may also sell shares of the common stock short and deliver these securities to close out
their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation
of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares
offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus
(as supplemented or amended to reflect such transaction).
The selling stockholders
and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within
the meaning of the Securities Act of 1933, as amended, in connection with such sales. In such event, any commissions received by
such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act of 1933, as amended. Each selling stockholder has informed us that it does not have any written
or oral agreement or understanding, directly or indirectly, with any person to distribute the common stock.
We are required to
pay certain fees and expenses incurred by us incident to the registration of the shares. We have agreed to indemnify the selling
stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act of 1933, as
amended.
Because selling stockholders
may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, they will be subject
to the prospectus delivery requirements of the Securities Act of 1933, as amended, including Rule 172 thereunder. In addition,
any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act of 1933, as amended
may be sold under Rule 144 rather than under this prospectus. There is no underwriter or coordinating broker acting in connection
with the proposed sale of the resale shares by the selling stockholders.
We agreed to keep this
prospectus effective until the earlier of (i) the date on which the shares may be resold by the selling stockholders without registration
and without the requirement to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to
Rule 144 or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other
rule of similar effect. The resale shares will be sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale shares may not be sold unless they have been registered
or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and
is complied with.
Under applicable rules
and regulations under the Securities Exchange Act of 1934, as amended, any person engaged in the distribution of the resale shares
may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period,
as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling stockholders will be subject
to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including
Regulation M, which may limit the timing of purchases and sales of shares of the common stock by the selling stockholders or any
other person. We will make copies of this prospectus available to the selling stockholders and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172
under the Securities Act of 1933, as amended).
Annex B
Selling Securityholder Notice and Questionnaire
The undersigned beneficial owner of common
stock (the “Registrable Securities”) of Majesco Entertainment Company, a Delaware corporation (the “Company”),
understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”)
a registration statement (the “Registration Statement”) for the registration and resale under Rule 415 of the
Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with
the terms of the Registration Rights Agreement (the “Registration Rights Agreement”) to which this document
is annexed. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below.
All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.
Certain legal consequences arise from being
named as a selling securityholder in the Registration Statement and the related prospectus. Accordingly, holders and beneficial
owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named
or not being named as a selling securityholder in the Registration Statement and the related prospectus.
NOTICE
The undersigned beneficial owner (the “Selling
Securityholder”) of Registrable Securities hereby elects to include the Registrable Securities owned by it in the Registration
Statement.
The undersigned hereby provides the following information to
the Company and represents and warrants that such information is accurate:
QUESTIONNAIRE
1. Name.
(a) Full
Legal Name of Selling Securityholder
(b) Full
Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities are held:
(c) Full
Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to
vote or dispose of the securities covered by this Questionnaire):
| 2. | Address for Notices to Selling Securityholder: |
Telephone:
Fax:
Contact Person:
(a) Are
you a broker-dealer?
Yes No
(b) If
“yes” to Section 3(a), did you receive your Registrable Securities as compensation for investment banking services
to the Company?
Yes No
Note: If “no”
to Section 3(b), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration
Statement.
(c) Are you an affiliate
of a broker-dealer?
Yes No
(d) If
you are an affiliate of a broker-dealer, do you certify that you purchased the Registrable Securities in the ordinary course of
business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings,
directly or indirectly, with any person to distribute the Registrable Securities?
Yes No
Note: If “no”
to Section 3(d), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration
Statement.
4. Beneficial Ownership of Securities of the Company Owned
by the Selling Securityholder.
Except as set forth below in this Item
4, the undersigned is not the beneficial or registered owner of any securities of the Company other than the securities issuable
pursuant to the Subscription Agreement.
(a) Type
and Amount of other securities beneficially owned by the Selling Securityholder:
5. Relationships with the Company:
Except as set forth below, neither the
undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities
of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors
or affiliates) during the past three years.
State any exceptions here:
The undersigned agrees to promptly notify
the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any
time while the Registration Statement remains effective.
By signing below, the undersigned consents
to the disclosure of the information contained herein in its answers to Items 1 through 5 and the inclusion of such information
in the Registration Statement and the related prospectus and any amendments or supplements thereto. The undersigned understands
that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement
and the related prospectus.
IN WITNESS WHEREOF the undersigned, by
authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized
agent.
Date:
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[SIGNATURE PAGE FOR SELLING SECURITYHOLDER
NOTICE AND QUESTIONNAIRE]
EXHIBIT 99.1
Majesco Entertainment Completes Fund
Raising and Appoints Two New Directors
EDISON, N.J., December 18, 2014 -- Majesco
Entertainment Company (NASDAQ: COOL), an innovative provider of video games for the mass market, today announced it has closed
on a financing for $6,000,000 with certain accredited investors, approximately $1,000,000 of which has been released to the Company.
In conjunction with the closing, two new Directors have been appointed to the Company’s Board, replacing two former Directors
who have stepped down.
On December 17, 2014, Majesco issued Units
at a purchase price of $0.68 per Unit. Each Unit consists of one share of the Company’s newly designated 0% Series A Convertible
Preferred Stock and one five-year Warrant to purchase one share of the Company’s common stock at an initial exercise price
of $0.68. Of the $6,000,000 raised, approximately $1,000,000 has been released to the Company and the balance of $5,000,000 will
remain in escrow, to be subsequently released in one or more tranches, pending certain conditions being met, including the approval
of the Company’s stockholders to allow for the full conversion of the preferred shares and exercise of the warrants.
Jesse Sutton will continue to serve as
Majesco’s Chief Executive Officer and has resigned from the Company’s Board of Directors. Allan I. Grafman has resigned
as Chairman and Member of the Company’s Board of Directors.
Effective at the closing, the two board
vacancies were filled by Trent D. Davis, who will serve as the Company’s Chairman and a Member of its Board of Directors
and Mohit Bhansali, who will serve as a Member of the Board of Directors. Mr. Davis and Mr. Bhansali have each been appointed to
the Company’s Audit Committee, the Compensation Committee and the Nominating and Governance Committee.
“This financing and the changes to
our board position us well as we continue to pursue strategic alternatives to maximize shareholder value.” said Jesse Sutton,
Chief Executive Officer of Majesco Entertainment.
About Majesco Entertainment Company
Majesco Entertainment Company is an innovative
developer, marketer, publisher and distributor of interactive entertainment for consumers around the world. Building on more than
25 years of operating history, the company develops and publishes a wide range of video games on console, handheld and mobile platforms,
as well as digital networks. Majesco is headquartered in Edison, NJ and the company's shares are traded on the Nasdaq Stock Market
under the symbol: COOL. More info can be found online at majescoent.com or on Twitter at twitter.com/majesco.
Safe Harbor
Some statements set forth in this release,
including the estimates under the headings "Fiscal 2014 Outlook" contain forward-looking statements that are subject
to change. Examples of forward-looking statements include statements relating to industry prospects, our future economic performance
including anticipated revenues and expenditures, results of operations or financial position, and other financial items, our business
plans and objectives, including our intended product releases, and may include certain assumptions that underlie forward-looking
statements. Statements including words such as "anticipate," "believe," "estimate" or "expect"
and statements in the future tense are forward-looking statements. These statements are subject to business and economic risk and
reflect management’s current expectations, and involve subjects that are inherently uncertain and difficult to predict. Some
of the risks and uncertainties which could cause our results to differ materially from our expectations include the following:
consumer demand for our products, the availability of an adequate supply of current-generation and next-generation gaming hardware;
our ability to predict consumer preferences among competing hardware platforms; consumer spending trends; the seasonal and cyclical
nature of the interactive game segment; timely development and release of our products; competition in the interactive entertainment
industry; developments in the law regarding protection of our products; our ability to secure licenses to valuable entertainment
properties on favorable terms; our ability to manage expenses; our ability to attract and retain key personnel; adoption of new
accounting regulations and standards; adverse changes in the securities markets; our ability to comply with continued listing requirements
of the Nasdaq stock exchange; the availability of and costs associated with sources of liquidity; and other factors described in
our filings with the SEC, including our Annual Report on Form 10-K for the year ended October 31, 2013. The Company does not undertake,
and specifically disclaims any obligation, to release publicly the results of any revisions that may be made to any forward-looking
statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
For additional information, please contact:
Company Contact:
Michael Vesey
Chief Financial Officer
732.476.1956
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