Exhibit 99.1
Execution Copy
SECURITIES
PURCHASE AGREEMENT
This
SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of December 8, 2015, is by and among FreeSeas
Inc., a corporation incorporated and existing under the laws of the Republic of the ▇▇▇▇▇▇▇▇ Islands (the “Company”),
and MTR3S Holding Ltd., a British Virgin Islands company (the “Investor”).
RECITALS
A. The
Company and the Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by Rule 903 of Regulation S (“Regulation S”) as promulgated by the United States Securities and
Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”).
B. The
Company has authorized the issuance of a convertible note in the original principal amount of $600,000, in the form attached hereto
as Exhibit A (the “Note”), which Note shall be convertible into shares of Common Stock (as defined
below) (as converted, collectively, the “Conversion Shares”), in accordance with the terms of the Note.
C.
The Investor wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, the
original principal amount of the Note.
D. The
Note is entitled to interest, amortization payments and certain other amounts, which, at the option of the Company and subject
to certain conditions, may be paid in shares of Common Stock (the “Interest Shares”) or in cash.
E. The
Note, the Conversion Shares and the Interest Shares are collectively referred to herein as the “Securities.”
F. The
parties have agreed that the obligation to repay the Note shall be an unsecured obligation of the Company.
AGREEMENT
NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and the Investor hereby agree as follows:
(a) Note. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall
issue and sell to the Investor, and the Investor shall purchase from the Company on the Closing Date (as defined below), the Note.
(b) Closing. The closing (the “Closing”) of the purchase of the Note by the Investor shall occur at the
offices of the Investor at ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇. The date and time of the Closing (the
“Closing Date”) shall be 10:00 a.m., New York time, on the first (1st) Business Day on which the
conditions to the Closing set forth in Sections 6 and 7 below are satisfied or waived (or such later date as is mutually agreed
to by the Company and the Investor). As used herein “Business Day” means any day other than a Saturday, Sunday
or other day on which commercial banks in New York, New York are authorized or required by law to remain closed.
(c) Purchase Price. The purchase price for the Note to be purchased by the Investor (the “Purchase Price”)
shall be $600,000.
(d) Payment of Purchase Price; Delivery of Note. On the Closing Date, (i) the Investor shall pay the Purchase Price to the
Company for the Note by wire transfer of immediately available funds in accordance with the Company’s written wire instructions
(less the amounts withheld pursuant to Section 4(g)) and (ii) the Company shall deliver to the Investor the Note duly executed
on behalf of the Company and registered in the name of the Investor or its designee.
The
Investor represents and warrants to the Company that:
(a) Organization; Authority. The Investor is an entity duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents (as defined below) to which it is a party and otherwise to carry out its obligations
hereunder and thereunder.
(b) No Public Sale or Distribution. The Investor (i) is acquiring the Note, (ii) may acquire the Interest Shares in accordance
with the terms of the Note, and (iii) upon conversion of the Note, will acquire the Conversion Shares issuable upon conversion
thereof for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof
in violation of applicable securities laws, except pursuant to sales registered or exempted under the 1933 Act; provided, however,
by making the representations herein, the Investor does not agree, or make any representation or warranty, to hold any of the
Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the 1933 Act. The Investor does not presently have any agreement
or understanding, directly or indirectly, with any Person to distribute any of the Securities in violation of applicable securities
laws.
(c) Regulation S Representations. The Investor hereby acknowledges and agrees that:
| (i) | it
is not in the United States and is not a “U.S. Person” as defined in Rule
902 of Regulation S promulgated under the 1933 Act (a “U.S. Person”); |
| | | |
| (ii) | the
Securities were not offered to the Investor in the United States and at the time its
buy order was made, it was outside the United States; |
| | | |
| (iii) | this
Agreement was delivered to, completed, executed and delivered by, the Investor (or its
authorized signatory) outside the United States; |
| (iv) | the
Investor is not a “distributor” of securities, as that term is defined in
Regulation S under the 1933 Act, nor a dealer in securities, and is not purchasing the
Securities for the account or benefit of, directly or indirectly, any U.S. Person; |
| | | |
| (v) | the
current structure of this transaction and all transactions and activities contemplated
hereunder is not a scheme to evade the registration requirements of the 1933 Act; and |
| | | |
| (vi) | it
has not purchased the Securities as a result of any form of “directed selling efforts”
(as such term is used in Regulation S under the ▇▇▇▇ ▇▇▇) or “general solicitation”
or “general advertising” (as such terms are used under Rule 502(c) of Regulation
D promulgated under the 1933 Act), including, but not limited to, any advertisements,
articles, notices or other communications published in any newspaper, magazine or similar
media or on the Internet or broadcast over radio, television or the Internet, or any
seminar or meeting whose attendees have been invited by general solicitation or general
advertising. |
(d) Reliance on Exemptions. The Investor understands that the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state securities laws, that the offer and sale of the
Securities are intended to be exempt from the registration requirements of the 1933 Act pursuant to Rule 903 of Regulation S under
the 1933 Act, and that the Company is relying in part upon the truth and accuracy of, and the Investor’s compliance with,
the representations, warranties, agreements, acknowledgments and understandings of such Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the Investor to acquire the Securities.
(e) Information. The Investor and its advisors, if any, have been furnished with all materials relating to the business, finances
and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the
Investor. The Investor and its advisors, if any, have been afforded the opportunity to ask questions of the Company. The Investor
understands that its investment in the Securities involves a high degree of risk. The Investor has sought such accounting, legal
and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.
(f) No Governmental Review. The Investor understands that no United States federal or state agency or any other government
or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability
of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
(g) Transfer or Resale. The Investor acknowledges and agrees that, pursuant to the provisions of Regulation S, the Securities
cannot be sold, assigned, transferred, conveyed, pledged or otherwise disposed of to any U.S. Person or within the United States
of America or its territories or possessions, unless such Securities are registered for sale in the United States pursuant to
an effective registration statement under the 1933 Act or another exemption from such registration is available. Without limiting
the foregoing, the Investor understands that: (i) the Securities have not been and are not being registered under the 1933 Act
or any state securities laws, and may not be offered for sale, sold, assigned, transferred, conveyed or pledged, unless (A) subsequently
registered under the 1933 Act and applicable states securities laws, (B) the sale, assignment or transfer is made outside the
United States to a non-U.S. Person in accordance with the requirements of Rule 904 of Regulation S and in compliance with applicable
local laws and regulations, (C) such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant
to any other exemption from registration under the 1933 Act and applicable state securities laws, or (D) the Investor provides
the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144A promulgated
under the 1933 Act (or a successor rule thereto) (collectively, “Rule 144A”); (ii) any sale of the Securities
made in reliance on Rule 144A may be made only in accordance with the terms of Rule 144A, and further, if Rule 144A is not applicable,
any resale of the Securities under circumstances in which the seller (or the Person (as defined below) through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in the ▇▇▇▇ ▇▇▇) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC promulgated thereunder; and (iii) neither the Company nor any other
Person is under any obligation to register the Securities under the 1933 Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder.
(h) Validity;
Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Investor and constitutes
the legal, valid and binding obligations of the Investor enforceable against the Investor in accordance with its terms, except
as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights
and remedies.
(i) No
Conflicts. The execution, delivery and performance by the Investor of this Agreement and the consummation by the Investor
of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of the Investor, (ii)
conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument
to which the Investor is a party or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws) applicable to the Investor, except in the case of clauses (ii) and (iii) above, for such conflicts,
defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse
effect on the ability of the Investor to perform its obligations hereunder.
(j)
Residency. The Investor is a resident of the British Virgin Islands.
(k) Certain Trading Activities. The Investor has not directly or indirectly, nor has any Person acting on behalf of or pursuant
to any understanding with the Investor, engaged in any transactions in the securities of the Company (including, without limitation,
any Short Sales (as defined below) or hedging transactions involving any securities of the Company or any other transaction that
transfers some or all of the economic or other risk of ownership of securities of the Company, including any forward contract,
equity swap, put or call, put or call equivalent position, collar, non-recourse loan, or similar transaction) during the period
commencing as of the time that the Investor was first contacted regarding the specific investment in the Company contemplated
by this Agreement and ending immediately prior to the execution of this Agreement by the Investor. “Short Sales”
means all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Securities Exchange Act
of 1934, as amended (the “1934 Act”).
(l) Experience of the Investor. The Investor, 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 prospective investment
in the Securities, and has so evaluated the merits and risks of such investment. The Investor 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.
(m) Not a 10% Owner. The Investor is not a “beneficial owner” of more than 10% of the shares of Common Stock (as
defined for purposes of Rule 13d-3 of the 1934 Act).
The
Company represents and warrants to the Investor that:
(a) Organization
and Qualification. Each of the Company and each of its Subsidiaries are entities duly organized and validly existing and in
good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authorization to own
their properties and to carry on their business as now being conducted and as presently proposed to be conducted. Each of the
Company and each of its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction
in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to
the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. “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 and its Subsidiaries 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 timely perform any of their respective obligations under any of the Transaction Documents (as defined
below). Other than the Persons (as defined below) set forth on Schedule 3(a), the Company has no Subsidiaries. “Subsidiaries”
means any Person in which the Company, directly or indirectly, (I) owns a majority of the outstanding capital stock or holds a
majority of equity or similar interest of such Person or (II) controls or operates all or any part of the business, operations
or administration of such Person, and each of the foregoing, is individually referred to herein as a “Subsidiary.”
(b) Authorization;
Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations under this
Agreement and the other Transaction Documents and, subject to NASDAQ Approval (as such term is hereinafter defined), which shall
be obtained as soon as possible following the Closing Date, to issue the Securities in accordance with the terms hereof and thereof.
The execution and delivery of this Agreement and the other Transaction Documents by the Company, and the consummation by the Company
of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Note and the reservation
for issuance and issuance of the Conversion Shares issuable upon conversion of the Note and the Interest Shares issuable in accordance
with the terms of the Note) have been duly authorized by the Company’s board of directors (the “Signing Resolutions”),
and, except for receipt of NASDAQ Approval, which shall be obtained as soon as possible following the Closing Date, no further
filing, consent or authorization is required by the Company, its board of directors or its shareholders. The Signing Resolutions
are valid, in full force and effect and have not been modified or supplemented in any respect. The Company has delivered to the
Investor a true and correct copy of the Signing Resolutions executed by all of the members of the Company’s Board of Directors.
(c) This Agreement has been, and the other Transaction Documents will be prior to the Closing, duly executed and delivered by the
Company, and each constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance
with its respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or
state securities law and public policy, and the remedy of specific performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. “Transaction
Documents” means, collectively, this Agreement, the Note, the Irrevocable Transfer Agent Instructions (as defined below)
and each of the other agreements and instruments entered into or delivered by any of the parties hereto in connection with the
transactions contemplated hereby and thereby, as may be amended from time to time.
(d) Issuance of Securities. The issuance of the Note is duly authorized and, upon issuance in accordance with the terms of
the Transaction Documents, will be validly issued, fully paid and non-assessable and free from all preemptive or similar rights,
taxes, liens, charges and other encumbrances with respect to the issue thereof. The Company shall have reserved from its duly
authorized capital stock not less than 150% of the maximum number of Conversion Shares issuable upon conversion of the Note and
without taking into account any limitations on the conversion of the Note set forth therein). The Interest Shares, upon issuance
in accordance with the Note, and upon conversion in accordance with the Note, the Conversion Shares, when issued, will be validly
issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances
with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. Subject
to the accuracy of the representations and warranties of the Investor in this Agreement, the offer and issuance by the Company
of the Securities is exempt from registration under the 1933 Act. “Common Stock” means (i) the Company’s
shares of common stock, US$0.001 par value 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.
(e) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Note, and
the reservation for issuance and issuance of the Conversion Shares issuable upon conversion of the Note and the Interest Shares
issuable in accordance with the terms of the Note) will not (i) result in a violation of the Charter (as defined below) (including,
without limitation, any certificate of designation contained therein) or other organizational documents of the Company or any
of its Subsidiaries, any capital stock of the Company or any of its Subsidiaries or Bylaws (as defined below) or the bylaws any
of its Subsidiaries, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would
become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a party or (iii) subject to the receipt of NASDAQ Approval,
which shall be obtained as soon as possible following the Closing Date, result in a violation of any law, rule, regulation, order,
judgment or decree (including, without limitation, foreign, federal and state securities laws and regulations and the rules and
regulations of The NASDAQ Capital Market (the “Principal Market”)) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected other than, in the
case of clause (ii) above, such conflicts, defaults or rights that could not reasonably be expected to have a Material Adverse
Effect.
(f) Consents. Except for the receipt of NASDAQ Approval, which shall be obtained as soon as possible following the Closing
Date, neither the Company nor any Subsidiary is required to obtain any consent from, authorization or order of, or make any filing
or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its respective obligations under, or contemplated by, the Transaction Documents,
in each case, in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations
which the Company is required to obtain at or prior to the Closing have been obtained or effected on or prior to the Closing Date,
and the Company is not aware of any facts or circumstances which might prevent the Company from obtaining or effecting any of
the registration, application or filings contemplated by the Transaction Documents. Except as disclosed in the SEC Reports (as
defined below), the Company is not in violation of the requirements of the Principal Market and has no knowledge of any facts
or circumstances which could reasonably lead to delisting or suspension of the Common Stock in the foreseeable future.
(g) Acknowledgment Regarding Investor’s Purchase of Securities. The Company acknowledges and agrees that the Investor
is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and that the Investor is not (i) an officer or director of the Company or any of its Subsidiaries,
(ii) an “affiliate” (as defined in Rule 144 under the 1933 Act (“Rule 144”)) of the Company or
any of its Subsidiaries or (iii) to its knowledge, a “beneficial owner” of more than 10% of the shares of Common Stock
(as defined for purposes of Rule 13d-3 of the 1934 Act. The Company further acknowledges that the Investor is not acting as a
financial advisor or fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice given by the Investor or any of its representatives
or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental
to the Investor’s purchase of the Securities. The Company further represents to the Investor that the Company’s decision
to enter into the Transaction Documents to which it is a party has been based solely on the independent evaluation by the Company’s
representatives.
(h) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor any of its Subsidiaries or affiliates,
nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offer or sale of the Securities. The Company shall be responsible for the payment
of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for Persons engaged by
the Investor or its investment advisor) relating to or arising out of the transactions contemplated hereby. Neither the Company
nor any of its Subsidiaries has engaged any placement agent or other agent in connection with the offer or sale of the Securities.
(i) No Integrated Offering. None of the Company, its Subsidiaries or any of their affiliates, nor, to the knowledge of the
Company, any Person acting on 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 require registration of the issuance of any of the Securities under
the 1933 Act, whether through integration with prior offerings or otherwise, or cause this offering of the Securities to require
approval of stockholders of the Company under any applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed
or designated for quotation. None of the Company, its Subsidiaries, their affiliates nor, to the knowledge of the Company, any
Person acting on their behalf will take any action or steps that would require registration of the issuance of any of the Securities
under the 1933 Act or cause the offering of any of the Securities to be integrated with other offerings of securities of the Company.
(j) Dilutive Effect. The Company understands and acknowledges that the number of Conversion Shares will increase in certain
circumstances. The Company further acknowledges that its obligation to issue the Conversion Shares upon conversion of the Note
in accordance with this Agreement, the Note is absolute and unconditional (subject to any limitations on conversion as set forth
in the Note), regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of
the Company.
(k) Application of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary
action, if any, in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison
pill (including, without limitation, any distribution under a rights agreement), stockholder rights plan or other similar anti-takeover
provision under the Charter, Bylaws or other organizational documents or the laws of the jurisdiction of its incorporation or
otherwise which is or could become applicable to the Investor as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company’s issuance of the Securities and the Investor’s ownership of the Securities.
The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any stockholder
rights plan or similar arrangement relating to accumulations of beneficial ownership of shares of Common Stock or a change in
control of the Company or any of its Subsidiaries.
(l) Public Reports. The Company is current in its filing obligations under the 1934 Act, including without limitation as to
its filings of Annual Reports on Form 20-F and Reports on Form 6-K (collectively, the “Public Reports”). The
Public Reports do not contain any untrue statement of a material fact or omit to state any fact necessary to make any statement
therein not misleading. The financial statements included within the Public Reports for the fiscal year ended December 31, 2014
and for each filed period thereafter (the “Financial Statements”) have been prepared in accordance with generally
accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods indicated and
with each other, except that unaudited Financial Statements may not contain all footnote required by generally accepted accounting
principles. The Financial Statements fairly present, in all material respects, the financial condition and operating results of
the Company as of the dates, and for the periods, indicated therein, subject in the case of unaudited Financial Statements to
normal year-end audit adjustments.
(m) Absence
of Certain Changes. Except as disclosed in the Public Reports or registration statements on Form S-1 filed with the SEC since
January 1, 2015 (collectively, the “SEC Reports”), since December 31, 2014 there has been no material adverse
change and no material adverse development in the business, assets, liabilities, properties, operations (including results thereof),
condition (financial or otherwise) or prospects of the Company or any of its Subsidiaries. Except as disclosed in the SEC Reports,
since December 31, 2014, neither the Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii) sold any
assets outside of the ordinary course of business or (iii) made any capital expenditures outside of the ordinary course of business.
Neither the Company nor any of its Subsidiaries has taken any steps to seek protection pursuant to any law or statute relating
to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up, nor does the Company or any Subsidiary have
any knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy proceedings
or any actual knowledge of any fact which would reasonably lead a creditor to do so. The Company and its Subsidiaries, on a consolidated
basis, are not, and after giving effect to the transactions contemplated hereby to occur at the Closing will not be, Insolvent
(as defined below). “Insolvent” means, with respect to the Company and its Subsidiaries, on a consolidated
basis, (i) the present fair saleable value of the Company’s and its Subsidiaries’ assets is less than the amount required
to pay the Company’s and its Subsidiaries’ total Indebtedness (as defined below), (ii) the Company and its Subsidiaries
are unable to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute
and matured or (iii) the Company and its Subsidiaries intend to incur or believe that they will incur debts that would be beyond
their ability to pay as such debts mature. Neither the Company nor any of its Subsidiaries has engaged in any business or in any
transaction, and is not about to engage in any business or in any transaction, for which the Company’s or such Subsidiary’s
remaining assets constitute unreasonably small capital.
(n) No Undisclosed Events, Liabilities, Developments or Circumstances. Except as disclosed in the SEC Reports, no event, liability,
development or circumstance has occurred or exists, or is reasonably expected to occur or exist with respect to the Company, any
of its Subsidiaries or any of their respective businesses, properties, liabilities, prospects, operations (including results thereof)
or condition (financial or otherwise), that (i) would be required to be disclosed by the Company under applicable securities laws
in the Public Reports and which has not been publicly announced, (ii) could have a material adverse effect on the Investor’s
investment hereunder or (iii) could have a Material Adverse Effect.
(o) Conduct of Business; Regulatory Permits. Neither the Company nor any of its Subsidiaries is in violation of any term of
or in default under its Charter, any certificate of designation, preferences or rights of any other outstanding series of preferred
stock of the Company or any of its Subsidiaries or Bylaws or their organizational charter, certificate of formation or certificate
of incorporation or bylaws, respectively. Except as disclosed in the SEC Reports, neither the Company nor any of its Subsidiaries
is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or any
of its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business in violation of any of the
foregoing, except in all cases for possible violations which could not, individually or in the aggregate, have a Material Adverse
Effect. Except as disclosed in the SEC Reports, without limiting the generality of the foregoing, the Company is not in violation
of any of the rules, regulations or requirements of the Principal Market and has no knowledge of any facts or circumstances that
could reasonably lead to delisting or suspension of the Common Stock by the Principal Market in the foreseeable future. Since
February 19, 2013, (i) the Common Stock has been approved for listing on the Principal Market, and (ii) except as disclosed in
the SEC Reports, the Company has received no communication, written or oral, from the SEC or the Principal Market regarding the
withdrawal of such approval for listing of the Common Stock on the Principal Market. The Company and each of its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually
or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate, authorization or permit.
(p) Foreign Corrupt Practices. Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director,
officer, agent, employee or other Person acting on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company or any of its Subsidiaries (i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment
to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision
of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government official or employee.
(q) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act. The Company and each Subsidiary is in material compliance with all applicable requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act of 2002 that are effective as of the date hereof, and all applicable rules and regulations promulgated by the SEC thereunder
that are effective as of the date hereof.
(r) Transactions With Affiliates. Except as disclosed in the SEC Filings, none of the officers, directors, employees or affiliates
of the Company or any of its Subsidiaries is presently a party to any transaction with the Company or any of its Subsidiaries
(other than for ordinary course services as employees, officers or 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, or otherwise
requiring payments to or from any such officer, director, employee or affiliate or, to the knowledge of the Company or any of
its Subsidiaries, any corporation, partnership, trust or other Person in which any such officer, director, employee or affiliate
has a substantial interest or is an employee, officer, director, trustee or partner.
(s) Equity Capitalization. As of December 7, 2015, the authorized capital stock of the Company consists of (i) 750,000,000
shares of Common Stock, of which, 119,341,533 are issued and outstanding and 61,096,851 shares are reserved for issuance pursuant
to Convertible Securities (as defined below) (other than the Note) and (ii) 5,000,000 shares of preferred stock, of which, 8,160
are issued and outstanding. No shares of Common Stock are held in treasury. All of such outstanding shares are duly authorized
and have been, or upon issuance will be, validly issued and are fully paid and non-assessable. To the Company’s knowledge,
2,933,931 shares of the Company’s issued and outstanding Common Stock on the date hereof are owned by Persons who are “affiliates”
(as defined in Rule 405 of the 1933 Act and calculated based on the assumption that only executive officers, directors and holders
of at least 10% of the Company’s issued and outstanding Common Stock are “affiliates” without conceding that
any such Persons are “affiliates” for purposes of federal securities laws) of the Company or any of its Subsidiaries.
To the Company’s knowledge, except as disclosed in the Public Reports, no Person owns 10% or more of the Company’s
issued and outstanding shares of Common Stock (calculated based on the assumption that all Convertible Securities, whether or
not presently exercisable or convertible, have been fully exercised or converted (as the case may be) taking account
of any limitations on exercise or conversion (including “blockers”) contained therein without conceding that such
identified Person is a 10% stockholder for purposes of federal securities laws). (i) None of the Company’s or any Subsidiary’s
capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by
the Company or any Subsidiary; (ii) except as disclosed in the SEC Reports, there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into,
or exercisable or exchangeable for, any capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings
or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries; (iii) except as disclosed in the SEC Reports, there are no outstanding debt securities, notes,
credit agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or any
of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound; (iv) except as disclosed in the
SEC Reports, there are no financing statements securing obligations in any amounts filed in connection with the Company or any
of its Subsidiaries; (v) except as disclosed in the SEC Reports, there are no agreements or arrangements under which the Company
or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except pursuant to
the Registration Rights Agreement); (vi) except as disclosed in the SEC Reports, there are no outstanding securities or instruments
of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of
the Company or any of its Subsidiaries; (vii) there are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities; (viii) neither the Company nor any Subsidiary has any stock appreciation
rights or “phantom stock” plans or agreements or any similar plan or agreement; and (ix) neither the Company nor any
of its Subsidiaries have any liabilities or obligations required to be disclosed in the Public Filings which are not so disclosed
in the Public Filings, other than those incurred in the ordinary course of the Company’s or its Subsidiaries’ respective
businesses and which, individually or in the aggregate, do not or could not have a Material Adverse Effect. The Company has furnished
(or made available through the SEC’s ▇▇▇▇▇ system) to the Investor true, correct and complete copies of the Company’s
articles of incorporation, as amended and as in effect on the date hereof (the “Charter”), and the Company’s
bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the terms of all Convertible Securities
and the material rights of the holders thereof in respect thereto. “Convertible Securities” means any capital
stock or other security of the Company or any of its Subsidiaries 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 capital
stock or other security of the Company (including, without limitation, Common Stock) or any of its Subsidiaries.
(t) Indebtedness
and Other Contracts. Neither the Company nor any of its Subsidiaries (i) except as disclosed in the SEC Reports, 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. (x) “Indebtedness”
of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed
as the 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, lien, 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 a government or any department or agency thereof.
(u) Absence of Litigation. Except as disclosed in the SEC Reports, there is no action, suit, proceeding, inquiry or investigation
before or by the Principal Market, any court, public board, government agency, 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. 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 executive officer of the Company or any of its Subsidiaries.
(v) Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any insurance
coverage sought or applied for, and neither the Company nor any such Subsidiary has any reason to believe that it will be unable
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 at a cost that would not have a Material Adverse Effect.
(w) 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.
No executive officer (as defined in Rule 501(f) promulgated under the ▇▇▇▇ ▇▇▇) or other key employee of the Company or any of
its Subsidiaries has notified the Company or any such Subsidiary that such officer intends to leave the Company or any such Subsidiary
or otherwise terminate such officer’s employment with the Company or any such Subsidiary. To the knowledge of the Company,
no executive officer or other key employee of the Company or any of its Subsidiaries is, or is now expected to be, in violation
of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition
agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive
officer or other key employee (as the case may be) does not subject the Company or any of its Subsidiaries to any liability with
respect to any of the foregoing matters. 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 where failure to be in compliance would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
(x) Title. The Company and its Subsidiaries have good and marketable title in fee simple to all real property, and have good
and marketable title to all personal property, owned by them which is material to the business of the Company and its Subsidiaries,
in each case, free and clear of all liens, encumbrances and defects except such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of such property by the Company and any of its Subsidiaries.
Any real property and facilities held under lease by the Company or any of its Subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company or any of its Subsidiaries.
(y) Intellectual
Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade
names, service marks, service ▇▇▇▇ registrations, service names, patents, patent rights, copyrights, original works, inventions,
licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications and
registrations therefor (“Intellectual Property Rights”) necessary to conduct their respective businesses as
now conducted and as presently proposed to be conducted. None of the Company’s or its Subsidiaries’ Intellectual Property
Rights have expired, terminated or been abandoned, or are expected to expire, terminate or be abandoned, within two years from
the date of this Agreement. The Company has no knowledge of any infringement by the Company or any of its Subsidiaries of Intellectual
Property Rights of others. There is no claim, action or proceeding being made or brought, or to the knowledge of the Company or
any of its Subsidiaries, being threatened, against the Company or any of its Subsidiaries regarding their Intellectual Property
Rights. The Company is not aware of any facts or circumstances which might give rise to any of the foregoing infringements or
claims, actions or proceedings. The Company and each of its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their Intellectual Property Rights, except where failure to take such measures would
not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
(z) Environmental Laws. The Company and its Subsidiaries (i) are in compliance with all Environmental Laws (as defined below),
(ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval where,
in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually
or in the aggregate, a Material Adverse Effect. “Environmental Laws” means all federal, state, local or foreign
laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively,
“Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees,
demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations
issued, entered, promulgated or approved thereunder.
(aa) Subsidiary Rights. The Company or one of its Subsidiaries has the unrestricted right to vote, and (subject to limitations
imposed by applicable law) to receive dividends and distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.
(bb) 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 (the
“Code”).
(cc) Internal Accounting and Disclosure Controls. The Company and each of its Subsidiaries maintains internal control over financial
reporting (as such term is defined in Rule 13a-15(f) under the ▇▇▇▇ ▇▇▇) that is effective to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles, including 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 generally accepted accounting principles and to maintain asset and liability accountability, (iii) access to assets or incurrence
of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded
accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate
action is taken with respect to any difference. The Company maintains disclosure controls and procedures (as such term is defined
in Rule 13a-15(e) under the ▇▇▇▇ ▇▇▇) that are effective in ensuring that information required to be disclosed by the Company
in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within the time periods
specified in the rules and forms of the SEC, including, without limitation, controls and procedures designed to ensure that information
required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is accumulated and communicated
to the Company’s management, including its principal executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required disclosure. Neither the Company nor any of its Subsidiaries
has received any notice or correspondence from any accountant or other Person relating to any potential material weakness or significant
deficiency in any part of the internal controls over financial reporting of the Company or any of its Subsidiaries.
(dd) Off Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company or any
of its Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in
its 1934 Act filings and is not so disclosed or that otherwise could be reasonably likely to have a Material Adverse Effect.
(ee) Investment Company Status. The Company is not, and upon consummation of the sale of the Securities will not be, an “investment
company,” an affiliate of an “investment company,” a company controlled by an “investment company”
or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment
company” as such terms are defined in the Investment Company Act of 1940, as amended.
(ff) U.S. Real Property Holding Corporation. Neither the Company nor any of its Subsidiaries is, or has ever been, and so long
as any of the Securities are held by the Investor, shall become, a U.S. real property holding corporation within the meaning of
Section 897 of the Code, and the Company and each Subsidiary shall so certify upon the Investor’s request.
(gg) No Disqualification Events. 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 ▇▇▇▇ ▇▇▇) 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 1933 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.
(hh) Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are required
to be paid in connection with the issuance, sale and transfer of the Securities to be sold to the Investor hereunder will be,
or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied
with.
(ii) 1933 Act Exemption. The Company is a “foreign private issuer” as defined in Rule 405 under the 1933 Act. The
offer, sale and issuance of the Securities in accordance with the Transaction Documents are exempt from the registration requirements
of the 1933 Act pursuant to Regulation S promulgated under the 1933 Act. Neither the Company nor any of its affiliates, nor, to
the knowledge of the Company, any Person acting on their behalf, has made or will make any offer to sell or any solicitation of
an offer to buy any of the Securities to any U.S. person (as defined in Rule 902 of Regulation S). During the period in which
the Securities are offered for sale, neither the Company nor any of its affiliates nor, to the knowledge of the Company,
any Person acting on their behalf has made or will make any “directed selling efforts” (as such term is defined in
Rule 902(b) of Regulation S promulgated under the ▇▇▇▇ ▇▇▇) in the United States or has taken or will take any action that would
cause the exemption afforded by Regulation S under the 1933 Act to be unavailable for offers and sales of the Securities outside
of the United States. The Company has implemented all necessary offering restrictions applicable to the transactions contemplated
by this Agreement under Regulation S promulgated under the 1933 Act.
(jj)
Shell Company Status. The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i).
(kk) [Reserved]
(ll)
[Reserved]
(mm) No Additional Agreements. The Company does not have any agreement or understanding with the Investor with respect to the
transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.
(nn)
Real Property. Each of the Company and its Subsidiaries holds good title to all real property, leases in real property,
or other interests in real property owned or held by the Company or any of its Subsidiaries (the “Real Property”)
owned by the Company or any of its Subsidiaries (as applicable). The Real Property is free and clear of all mortgages, defects,
claims, liens, pledges, charges, taxes, rights of first refusal, encumbrances, security interests and other encumbrances (collectively
“Encumbrances”) and is not subject to any rights of way, building use restrictions, exceptions, variances,
reservations, or limitations of any nature except for (a) liens for current taxes not yet due and (b) zoning laws and other land
use restrictions that do not impair the present or anticipated use of the property subject thereto.
(oo)
Fixtures and Equipment. Each of the Company and its Subsidiaries (as applicable) has good title to, or a valid leasehold
interest in, the tangible personal property, equipment, improvements, fixtures, and other personal property and appurtenances
that are used by the Company or its Subsidiary in connection with the conduct of its business (the “Fixtures and Equipment”).
The Fixtures and Equipment are structurally sound, are in good operating condition and repair, are adequate for the uses to which
they are being put, are not in need of maintenance or repairs except for ordinary, routine maintenance and repairs and are sufficient
for the conduct of the Company’s and/or its Subsidiaries’ businesses (as applicable) in the manner as conducted prior
to the Closing. Each of the Company and its Subsidiaries owns all of its Fixtures and Equipment free and clear of all Encumbrances
except for (a) liens for current taxes not yet due and (b) zoning laws and other land use restrictions that do not impair the
present or anticipated use of the property subject thereto.
(pp)
Illegal or Unauthorized Payments; Political Contributions. Neither the Company nor any of its Subsidiaries nor, to the
Company’s knowledge (after reasonable inquiry of its officers and directors), any of the officers, directors, employees,
agents or other representatives of the Company or any of its Subsidiaries or any other business entity or enterprise with which
the Company or any Subsidiary is or has been affiliated or associated, has, directly or indirectly, made or authorized any payment,
contribution or gift of money, property, or services, whether or not in contravention of applicable law, (a) as a kickback or
bribe to any Person or (b) to any political organization, or the holder of or any aspirant to any elective or appointive public
office except for personal political contributions not involving the direct or indirect use of funds of the Company or any of
its Subsidiaries.
(qq)
Money Laundering. The Company and its Subsidiaries are in compliance with, and have not previously violated, the USA Patriot
Act of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, without limitation,
the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including,
without limitation, (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions
With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations
contained in 31 CFR, Subtitle B, Chapter V.
(rr)
[Reserved]
(ss) Disclosure. The Company understands and confirms that the Investor will rely on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the Investor regarding the Company and its Subsidiaries,
their businesses and the transactions contemplated hereby, including the schedules to this Agreement, furnished by or on behalf
of the Company or any of its Subsidiaries is true and correct in all material respects and does not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. The Company acknowledges and agrees that no Investor makes or has
made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set
forth in Section 2.
(a) Reasonable Best Efforts. The Investor shall use its reasonable best efforts to timely satisfy each of the conditions to
be satisfied by it as provided in Section 6 of this Agreement. The Company shall use its reasonable best efforts to timely satisfy
each of the conditions to be satisfied by it as provided in Section 7 of this Agreement.
(b) [Intentionally Omitted]
(c) Reporting Status. Until the date on which the Investor shall have sold all of the Conversion Shares and Interest Shares
(the “Reporting Period”), the Company shall timely file all reports required to be filed with the SEC pursuant
to the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even
if the 1934 Act or the rules and regulations thereunder would no longer require or otherwise permit such termination.
(d) Use of Proceeds. The Company shall use the proceeds from the sale of the Securities solely for general working capital
purposes. Without limiting the foregoing, none of such proceeds shall be used, directly or indirectly, (i) for the redemption
of any securities of the Company or (ii) with respect to any litigation involving the Company or any of its Subsidiaries (including,
without limitation, (x) any settlement thereof or (y) the payment of any costs or expenses related thereto).
(e) Financial Information. As long as the Note remains outstanding, the Company agrees to send the following to the Investor
during the Reporting Period unless the following are filed with the SEC through ▇▇▇▇▇ and are available to the public through
the ▇▇▇▇▇ system, (i) within one (1) Business Day after the filing thereof with the SEC, a copy of its Annual Reports on Form
20-F, any interim reports or any consolidated balance sheets, income statements, stockholders’ equity statements and/or
cash flow statements for any period other than annual, any Reports on Form 6-K and any registration statements or amendments filed
pursuant to the 1933 Act and (ii) copies of any notices and other information made available or given to the stockholders of the
Company generally, contemporaneously with the making available or giving thereof to the stockholders.
(f) Listing. The Company shall secure the approval for listing of all of the Common Shares and Interest Shares upon any Eligible
Market (subject to official notice of issuance) as soon as possible after the Closing Date and shall maintain such listing of
all Conversion Shares and Interest Shares from time to time issuable under the terms of the Transaction Documents on any Eligible
Market. The Company shall maintain the Common Stock’s listing on the Principal Market, The New York Stock Exchange, the
NYSE MKT, The NASDAQ Global Select Market or The NASDAQ Global Market (each, an “Eligible Market”). Neither
the Company nor any of its Subsidiaries shall take any action which could be reasonably expected to result in the delisting or
suspension of the Common Stock on an Eligible Market. The Company shall pay all fees and expenses in connection with satisfying
its obligations under this Section 4(f).
(g) Fees. The Company shall reimburse the Investor or its designee(s) for all costs and expenses incurred by it or its affiliates
in connection with the transactions contemplated by the Transaction Documents (including, without limitation, all legal fees and
disbursements in connection therewith, structuring, documentation and implementation of the transactions contemplated by the Transaction
Documents and due diligence and regulatory filings in connection therewith) in a non-accountable amount equal to $20,000, which
amount shall be withheld by the Investor from its Purchase Price at the Closing. The Company shall be responsible for the payment
of any placement agent’s fees, financial advisory fees, or broker’s commissions (other than for Persons engaged by
the Investor) relating to or arising out of the transactions contemplated hereby. The Company shall pay, and hold the Investor
harmless against, any liability, loss or expense (including, without limitation, reasonable attorneys’ fees and out-of-pocket
expenses) arising in connection with any claim relating to any such payment. Except as otherwise set forth in the Transaction
Documents, each party to this Agreement shall bear its own expenses in connection with the sale of the Securities to the Investor.
(h) Reserved.
(i) Disclosure of Transactions and Other Material Information. The Company shall by 9:00 a.m. (New York City time) on the second
Trading Day immediately following the Closing Date, issue a Report on Form 6-K (the “Current Report”) disclosing
the material terms of the transactions contemplated hereby, and including the Transaction Documents as exhibits thereto, within
the time required by the 1934 Act. From and after the filing of the Current Report, the Company represents to the Investor that
the Company shall have publicly disclosed all material, non-public information delivered to the Investor as of such time by the
Company or any of its Subsidiaries, or any of their respective officers, directors, employees or agents in connection with the
transactions contemplated by the Transaction Documents. In addition, effective upon the filing of the Current Report, the Company
acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral,
between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents,
on the one hand, and the Investor or any of its affiliates, on the other hand, shall terminate. The Company shall not, and the
Company shall cause each of its Subsidiaries and each of its and their respective officers, directors, employees and agents not
to, provide the Investor with any material, non-public information regarding the Company or any of its Subsidiaries from and after
the date hereof without the express prior written consent of the Investor (which may be granted or withheld in the Investor’s
sole discretion). To the extent that the Company delivers any material, non-public information to the Investor without the Investor’s
consent, the Company hereby covenants and agrees that the Investor shall not have any duty of confidentiality with respect to,
or a duty not to trade on the basis of, such material, non-public information. The Company shall afford the Investor and its counsel
with a reasonable opportunity to review and comment upon, shall consult with the Investor and its counsel on the form and substance
of, and shall give due consideration to all such comments from the Investor or its counsel on, any press release, Commission filing
or any other public disclosure made by or on behalf of the Company relating to the Investor, its purchases hereunder or any aspect
of the Transaction Documents or the transactions contemplated thereby, prior to the issuance, filing or public disclosure thereof,
and the Company shall not issue, file or publicly disclose any such information to which the Investor shall object. For the avoidance
of doubt, the Company shall not be required to submit for review any such disclosure contained in periodic reports filed with
the Commission under the 1934 Act if it shall have previously provided the same disclosure for review in connection with a previous
filing.
(j) [Reserved]
(k) [Reserved]
(l) Reservation of Shares. So long as the Note remains outstanding, the Company shall take all action necessary to at all times
have authorized, and reserved for the purpose of issuance, no less than the number of shares of Common Stock required to be reserved
for issuance to effect the conversion of the Note in full under Section 8 of the Note.
(m) Conduct of Business. The business of the Company and its Subsidiaries shall not be conducted in violation of any law, ordinance
or regulation of any governmental entity, except where such violations would not result reasonably be expected to result, either
individually or in the aggregate, in a Material Adverse Effect.
(n) Prohibited
Transaction. So long as the Note remains outstanding, the Company and each Subsidiary shall be prohibited from effecting or
entering into an agreement to effect any Prohibited Transaction. “Prohibited Transaction” means (i) any, direct
or indirect, issuance, offer, sale, grant of any option or right to purchase, or otherwise disposition of (or announcement of
any issuance, offer, sale, grant of any option or right to purchase or other disposition of) any equity or debt security or any
equity-linked or related security (including, without limitation, any “equity security” (as that term is defined under
Rule 405 promulgated under the 1933 Act), any Convertible Securities, any debt, any preferred stock or any purchase rights) of
the Company or any of its Subsidiaries pursuant to (A) Regulation S under the 1933 Act, (B) Section 3(a)(9) of the 1933 Act or
(C) Section 3(a)(10) of the 1933 Act, or (ii) the execution by the Company or any of its Subsidiaries of any agreement (including,
without limitation, an “equity line of credit” or an “at the market offering”) whereby the Company or
any Subsidiary may sell securities at a future determined price (other than standard and customary “preemptive” or
“participation” rights). “Convertible Securities” means any capital stock or other security of
the Company or any of its Subsidiaries 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 capital stock or other security
of the Company (including, without limitation, Common Stock) or any of its Subsidiaries.
(o) No Hedging or Short Sales During Distribution Compliance Period. The Investor shall not directly or indirectly, nor shall
any Person acting on behalf of or pursuant to any understanding with the Investor, engage in any Short Sales or hedging transactions
involving any securities of the Company or any other transaction which would transfer some or all of the economic or other risk
of ownership of securities of the Company, including any forward contract, equity swap, put or call, put or call equivalent position,
collar, non-recourse loan, or similar transaction, during the applicable distribution compliance period under Rule 903 of Regulation
S, and thereafter may engage in such transactions only in compliance with the 1933 Act and the provisions of Section 4(p) below.
(p) No Net Short Sales. Subject to and without limiting the provisions of Section 4(o) above, so long as the Notes remain outstanding,
neither the Investor nor any of its affiliates nor any entity managed or controlled by the Investor (collectively, the “Restricted
Persons” and each of the foregoing is referred to herein as a “Restricted Person”) shall maintain,
in the aggregate, a Net Short Position. For purposes hereof, a “Net Short Position” by a Restricted
Person means a position whereby such Restricted Person has executed one or more sales of Common Stock that is marked as a short
sale (but not including any sale marked “short exempt”) and that is executed at a time when such Restricted Person
does not have an equivalent offsetting long position in the Common Stock (or is deemed to have a long position hereunder or otherwise
in accordance with Regulation SHO under the 1934 Act); provided, further that no “Short Sale” shall be deemed to exist
as a result of any failure by the Company (or its agents) to deliver Conversion Shares upon conversion of the Notes to any Restricted
Person converting such Notes. For purposes of determining whether a Restricted Person has an equivalent offsetting long position
in the Common Stock, such Restricted Person shall be deemed to hold “long” all Common Stock that is either (i) then
owned by such Restricted Person, if any, or (ii) then issuable to such Restricted Person as Conversion Shares or Interest Shares
pursuant to the terms of the Notes then held by such Restricted Person, if any (without regard to any limitations on conversion
set forth in the Notes and giving effect to any conversion price adjustments that would take effect given only the passage of
time). Notwithstanding the foregoing, nothing contained herein shall (without implication that the contrary would otherwise
be true) prohibit any Restricted Person from selling “long” (as defined under Rule 200 promulgated under Regulation
SHO under the ▇▇▇▇ ▇▇▇) the Securities or any other Common Stock then owned by such Restricted Person.
(q) Passive
Foreign Investment Company. The Company shall conduct its business, and shall cause its Subsidiaries to conduct their respective
businesses, in such a manner as will ensure that the Company will not be deemed to constitute a passive foreign investment company
within the meaning of Section 1297 of the Code.
(r) Restriction on Redemption and Cash Dividends. So long as the Note is outstanding, the Company shall not, directly or indirectly,
redeem, or declare or pay any cash dividend or distribution on, any securities of the Company without the prior express written
consent of the Investor.
(s) Corporate Existence. So long as the Investor owns the Note, the Company shall not be party to any Fundamental Transaction
(as defined in the Note) unless the Company is in compliance with the applicable provisions governing Fundamental Transactions
set forth in the Note.
(a) 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 each holder of Securities), a register for the Note in which the Company shall record the name and address of the
Person in whose name the Note have been issued (including the name and address of each transferee), the principal amount of the
Note held by such Person, the number of Conversion Shares issuable upon conversion of the Note held by such Person. The Company
shall keep the register open and available at all times during business hours for inspection of the Investor or its legal representatives.
(b) Transfer
Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent and any subsequent transfer agent
in a form acceptable to the Investor (the “Irrevocable Transfer Agent Instructions”) to issue certificates
or credit shares to the applicable balance accounts at The Depository Trust Company (“DTC”), registered in
the name of the Investor or its respective nominee(s), for the Conversion Shares in such amounts as specified from time to time
by the Investor to the Company upon conversion of the Note and for the Interest Shares in such amounts as specified by the Company
in accordance with the terms of the Note. The Company represents and warrants that no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section 5(b), and stop transfer instructions to give effect to Section 2(g) hereof, will
be given by the Company to its transfer agent with respect to the Securities, and that the Securities shall otherwise be freely
transferable on the books and records of the Company, as applicable, to the extent provided in this Agreement and the other Transaction
Documents. If the Investor effects a sale, assignment or transfer of the Securities in accordance with Section 2(g), the Company
shall permit the transfer and shall promptly instruct its transfer agent to issue one or more certificates or credit shares to
the applicable balance accounts at DTC in such name and in such denominations as specified by such Investor to effect such sale,
transfer or assignment and the transfer agent shall issue such shares to such Investor, assignee or transferee (as the case may
be) without any restrictive legend in accordance with Section 5(d) below. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Investor. Accordingly, the Company acknowledges that the remedy at law
for a breach of its obligations under this Section 5(b) will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section 5(b), that the Investor shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity
of showing economic loss and without any bond or other security being required. The Company shall cause its counsel to issue the
legal opinion referred to in the Irrevocable Transfer Agent Instructions to the Company’s transfer agent upon the satisfaction
of any requirements under Regulations S. Any fees (with respect to the transfer agent, counsel to the Company or otherwise) associated
with the issuance of such opinion or the removal of any legends on any of the Securities shall be borne by the Company.
(c) Legends.
The Investor understands that the Securities have been issued (or will be issued in the case of the Conversion Shares or the Interest
Shares) pursuant to an exemption from registration or qualification under the 1933 Act and applicable state securities laws, and
except as set forth in Section 5(d) below, the Securities shall bear any legend as required by the “blue sky” laws
of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer
of such stock certificates and the Company shall be required to refuse to register any transfer of the Securities not made in
accordance with applicable U.S. securities laws):
THESE
SECURITIES WERE ISSUED IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED HEREIN) PURSUANT TO REGULATIONS
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”). ACCORDINGLY, NONE OF THE SECURITIES TO
WHICH THIS CERTIFICATE RELATES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE] HAVE BEEN REGISTERED UNDER THE
1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE UNITED STATES (AS DEFINED
HEREIN OR, DIRECTLY OR INDIRECTLY, TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH
CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY
NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED
BY REGULATION S UNDER THE 1933 ACT.
(d) Removal
of Legends. Certificates evidencing Securities shall not be required to contain the legend set forth in Section 5(c) above
or any other legend (i) while a registration statement covering the resale of such Securities is effective under the 1933 Act,
(ii) if such Securities are sold, assigned or transferred outside the United States to a non-U.S. Person in accordance with the
requirements of Rule 904 of Regulation S and in compliance with applicable local laws and regulations, (iii) if such Securities
are eligible to be sold, assigned or transferred under Rule 144A (provided that the Investor provides the Company with reasonable
assurances that such Securities are eligible for sale, assignment or transfer under Rule 144A which shall not include an opinion
of counsel), (iv) in connection with any other sale, assignment or other transfer of such Securities, provided that such sale,
assignment or transfer of such Securities may be made without registration under the applicable requirements of the 1933 Act or
(v) if such legend is otherwise not required under applicable requirements of the 1933 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) Trading Days following the delivery by the Investor 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), as directed by such Investor, either:
(A) provided that the Company’s transfer agent is participating in the DTC Fast Automated Securities Transfer Program and
such Securities are Conversion Shares or Interest Shares, credit the aggregate number of shares of Common Stock to which such
Investor shall be entitled to such Investor’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 at the Company’s expense (via reputable overnight courier) to such Investor, a certificate representing
such Securities that is free from all restrictive and other legends, registered in the name of such Investor or its designee (the
date by which such credit is so required to be made to the balance account of such Investor’s or such Investor’s nominee
with DTC or such certificate is required to be delivered to such Investor pursuant to the foregoing is referred to herein as the
“Required Delivery Date”).
(e) Failure
to Timely Deliver; Buy-In. If the Company fails to (i) issue and deliver (or cause to be delivered) to the Investor by the
Required Delivery Date a certificate representing the Securities so delivered to the Company by such Investor that is free from
all restrictive and other legends or (ii) credit the balance account of such Investor’s or such Investor’s nominee
with DTC for such number of Conversion Shares so delivered to the Company, then, in addition to all other remedies available to
such Investor, the Company shall pay in cash to such Investor on each day after the Required Delivery Date that the issuance or
credit of such shares is not timely effected an amount equal to 2% of the original principal amount of such Investor’s Note.
In addition to the foregoing, if the Company fails to so properly deliver such unlegended certificates or so properly credit the
balance account of such Investor’s or such Investor’s nominee with DTC by the Required Delivery Date, and if on or
after the Required Delivery Date such Investor (or any other Person in respect, or on behalf, of such Investor) purchases (in
an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Investor 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, that such Investor so anticipated receiving from the Company without any restrictive
legend, then, in addition to all other remedies available to such Investor, the Company shall, within three (3) Trading Days after
such Investor’s request and in such Investor’s sole discretion, either (i) pay cash to such Investor in an amount
equal to such Investor’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any)
for the shares of Common Stock so purchased (including brokerage commissions and other out-of-pocket expenses, if any) (the “Buy-In
Price”), at which point the Company’s obligation to so deliver such certificate or credit such Investor’s
balance account shall terminate and such shares shall be cancelled, or (ii) promptly honor its obligation to so deliver to such
Investor a certificate or certificates or credit such Investor’s DTC account representing such number of shares of Common
Stock that would have been so delivered if the Company timely complied with its obligations hereunder and pay cash to such Investor
in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Conversion Shares
that the Company was required to deliver to such Investor by the Required Delivery Date multiplied by (B) the lowest Closing Sale
Price (as define in the Note) of the Common Stock on any Trading Day during the period commencing on the date of the delivery
by such Investor to the Company of the applicable Conversion Shares and ending on the date of such delivery and payment under
this clause (ii).
(a) The
obligation of the Company hereunder to issue and sell the Note to the Investor at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s
sole benefit and may be waived by the Company at any time in its sole discretion by providing the Investor with prior written
notice thereof:
(i) The
Investor shall have executed each of the other Transaction Documents to which it is a party and delivered the same to the Company.
(ii) The
Investor shall have delivered to the Company the Purchase Price (less the amounts withheld pursuant to Section 4(g)) for the Note
being purchased by the Investor at the Closing by wire transfer of immediately available funds pursuant to the wire instructions
provided by the Company.
(iii) The
representations and warranties of the Investor shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such date), and the Investor shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with
by such Investor at or prior to the Closing Date.
(a) The
obligation of the Investor hereunder to purchase the Note at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these conditions are for the Investor’s sole benefit and
may be waived by the Investor at any time in its sole discretion by providing the Company with prior written notice thereof:
(i) The
Company and each Subsidiary (as the case may be) shall have duly executed and delivered to the Investor each of the Transaction
Documents to which it is a party and the Company shall have duly executed and delivered to the Investor the Note being
purchased by the Investor at the Closing pursuant to this Agreement.
(ii) The
Investor shall have received the opinion of Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, the Company’s U.S. counsel, dated as of
the Closing Date, in the form acceptable to such Investor.
(iii) The
Investor shall have received the opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ P.C., the Company’s ▇▇▇▇▇▇▇▇ Islands counsel, dated as
of the Closing Date, in the form acceptable to such Investor.
(iv) The
Company shall have delivered to the Investor a copy of the Irrevocable Transfer Agent Instructions, in the form acceptable to
the Investor.
(v) The
Company shall have delivered to the Investor a certificate evidencing the formation and good standing of the Company issued by
the Secretary of State (or comparable office) of such jurisdiction of formation as of a date within ten (10) days of the Closing
Date.
(vi) The
Company shall have delivered to such Investor a certificate, in the form acceptable to the Investor, executed by the Secretary
of the Company and dated as of the Closing Date, as to the Signing Resolutions consistent with Section 3(b) as adopted by the
Company’s board of directors in a form reasonably acceptable to the Investor, together with a copy of the Signing Resolutions
signed by each member of the Company’s board of directors.
(vii) Each
and every representation and warranty of the Company shall be true and correct as of the date when made and as of the Closing
Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which
shall be true and correct as of such 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 at or prior to the Closing
Date. The Investor shall have received a certificate, executed by the Chief Executive Officer of the Company, dated as of the
Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Investor in the form
acceptable to the Investor.
(viii) The
Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities, except NASDAQ Approval, for which the Company shall have submitted the necessary application for approval as
of the date hereof. The Company shall have submitted the listing of additional shares request for approval of the Principal Market
to list the Conversion Shares (without taking into account any limitations on the conversion of the Note set forth therein) and
the Interest Shares (subject to official notice of issuance).
(ix)
No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the
transactions contemplated by the Transaction Documents.
(x)
Since the date of execution of this Agreement, no event or series of events shall have occurred that reasonably
would have or result in a Material Adverse Effect.
(xi)
Trading in the Common Stock shall not have been suspended by the SEC or the Principal Market, the Company shall not have
received any final and non-appealable notice that the listing or quotation of the Common Stock on the Principal Market shall
be terminated on a date certain, there shall not have been imposed any suspension of electronic trading or settlement
services by DTC with respect to the Common Stock that is continuing, and the Company shall not have received any notice from
DTC to the effect that a suspension of electronic trading or settlement services by DTC with respect to the Common Stock is
being imposed or is contemplated.
(xii) All
reports, schedules, registrations, forms, statements, information and other documents required to have been filed by the Company
with the Commission pursuant to the reporting requirements of the 1934 Act, including all material required to have been filed
pursuant to Section 13(a) or 15(d) of the 1934 Act, shall have been filed with the Commission under the 1934 Act.
(xiii) The
Company and its Subsidiaries shall have delivered to the Investor such other documents, instruments or certificates relating to
the transactions contemplated by this Agreement as the Investor or its counsel may reasonably request.
In
the event that the Closing shall not have occurred within five (5) days after the date hereof, then the Investor shall have the
right to terminate its obligations under this Agreement at any time on or after the close of business on such date without liability
of the Investor to any other party; provided, however, the right to terminate its obligations under this Agreement pursuant to
this Section 8 shall not be available to the Investor if the failure of the transactions contemplated by this Agreement to have
been consummated by such date is the result of the Investor’s breach of this Agreement; and provided, further that no such
termination shall affect any obligation of the Company under this Agreement to reimburse the Investor for the expenses described
in Section 4(g) above. Nothing contained in this Section 8 shall be deemed to release any party from any liability for any breach
by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party
to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents.
(a) Governing
Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder
or under any of the other Transaction Documents or in connection herewith or with any transaction contemplated hereby or thereby
or discussed herein or therein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is improper. By the execution and delivery of this
Agreement, the Company acknowledges that it has, by separate written instrument, irrevocably designated and appointed Sichenzia
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, at ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (together with any successor, the “Agent
for Service”) as its authorized agent upon which process may be served in any suit or proceeding arising out of or relating
to this Agreement or the Securities that may be instituted in any state or federal court sitting in The City of New York, Borough
of Manhattan, or brought under federal or state securities laws, and acknowledges that the Agent for Service has accepted such
designation. The Company further agrees to take any and all action, including the execution and filing of any and all such documents
and instruments, as may be necessary to continue such designation and appointment of the Agent for Service in full force and effect
so long as the Note shall be outstanding. Service upon such Agent for Service in accordance with this Section 9(a) shall be deemed
completed whether or not forwarded to or received by the Company. If such Agent for Service ceases to be able to act as such,
resigns as such Agent for Service or to have an address in New York, New York, the Company agrees to irrevocably appoint a new
agent acceptable to the Investor to receive on behalf of the Company service of any legal process and to deliver to the Investor
within 14 days a copy of a written acceptance of appointment by such agent. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party
at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service
of process and notice thereof. Nothing contained herein shall (i) limit, or be deemed to limit, in any way any right to serve
process in any manner permitted by law, (ii) operate, or shall be deemed to operate, to preclude the Investor from bringing suit
or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to such
Investor or to enforce a judgment or other court ruling in favor of such Investor or (iii) limit, or be deemed to limit, any provision
of Section 22 of the Note. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT
OF THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.
(b) Counterparts.
This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature
is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature
page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature
is executed) with the same force and effect as if such signature page were an original thereof.
(c) Headings;
Gender. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation
of, this Agreement. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine,
feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include”
and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,”
“hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision
in which they are found.
(d) Severability.
If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect
the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity
or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations
of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will
endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s),
the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s). Notwithstanding
anything to the contrary contained in this Agreement or any other Transaction Document (and without implication that the following
is required or applicable), it is the intention of the parties that in no event shall amounts and value paid by the Company and/or
its Subsidiaries (as the case may be), or payable to or received by the Investor, under the Transaction Documents (including without
limitation, any amounts that would be characterized as “interest” under applicable law) exceed amounts permitted under
any applicable law. Accordingly, if any obligation to pay, payment made to the Investor, or collection by the Investor pursuant
the Transaction Documents is finally judicially determined to be contrary to any such applicable law, such obligation to pay,
payment or collection shall be deemed to have been made by mutual mistake of such Investor, the Company and its Subsidiaries and
such amount shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case
may be, as would not be so prohibited by the applicable law. Such adjustment shall be effected, to the extent necessary, by reducing
or refunding, at the option of such Investor, the amount of interest or any other amounts which would constitute unlawful amounts
required to be paid or actually paid to such Investor under the Transaction Documents. For greater certainty, to the extent that
any interest, charges, fees, expenses or other amounts required to be paid to or received by such Investor under any of the Transaction
Documents or related thereto are held to be within the meaning of “interest” or another applicable term to otherwise
be violative of applicable law, such amounts shall be pro-rated over the period of time to which they relate.
(e) Entire
Agreement; Amendments. This Agreement, the other Transaction Documents and the schedules and exhibits attached hereto and
thereto and the instruments referenced herein and therein supersede all other prior oral or written agreements between the Investor,
the Company, its Subsidiaries, their affiliates and Persons acting on their behalf solely with respect to the matters contained
herein and therein, and this Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto
and the instruments referenced herein and therein contain the entire understanding of the parties solely with respect to the matters
covered herein and therein; provided, however, nothing contained in this Agreement or any other Transaction Document shall (or
shall be deemed to) (i) have any effect on any agreements the Investor has entered into with the Company or any of its Subsidiaries
prior to the date hereof with respect to any prior investment made by the Investor in the Company or (ii) waive, alter, modify
or amend in any respect any obligations of the Company or any of its Subsidiaries, or any rights of or benefits to the Investor
or any other Person, in any agreement entered into prior to the date hereof between or among the Company and/or any of its Subsidiaries
and the Investor, and all such agreements shall continue in full force and effect. Except as specifically set forth herein or
therein, neither the Company nor the Investor makes any representation, warranty, covenant or undertaking with respect to such
matters. For clarification purposes, the Recitals are part of this Agreement. No provision of this Agreement may be amended other
than by an instrument in writing signed by the Company and the Investor, and any amendment to any provision of this Agreement
made in conformity with the provisions of this Section 9(e) shall be binding on the Investor and holders of Securities, as applicable,
provided that no such amendment shall be effective to the extent that it (1) applies to less than all of the holders of the Securities
then outstanding or (2) imposes any obligation or liability on the Investor without the Investor’s prior written consent
(which may be granted or withheld in the Investor’s sole discretion). No waiver shall be effective unless it is in writing
and signed by an authorized representative of the waiving party, provided that the Investor may waive any provision of this Agreement,
and any waiver of any provision of this Agreement made in conformity with the provisions of this Section 9(e) shall be binding
on the Investor and holders of Securities, as applicable, provided that no such waiver shall be effective to the extent that it
(1) applies to less than all of the holders of the Securities then outstanding (unless a party gives a waiver as to itself only)
or (2) imposes any obligation or liability on the Investor without such Investor’s prior written consent (which may be granted
or withheld in the Investor’s sole discretion). The Company has not, directly or indirectly, made any agreements with the
Investor relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth
in the Transaction Documents. Without limiting the foregoing, the Company confirms that, except as set forth in this Agreement,
the Investor has not made any commitment or promise or has any other obligation to provide any financing to the Company, any Subsidiary
or otherwise. As a material inducement for the Investor to enter into this Agreement, the Company expressly acknowledges and agrees
that (i) no due diligence or other investigation or inquiry conducted by the Investor, any of its advisors or any of its representatives
shall affect the Investor’s right to rely on, or shall modify or qualify in any manner or be an exception to any of, the
Company’s representations and warranties contained in this Agreement or any other Transaction Document and (ii) unless a
provision of this Agreement or any other Transaction Document is expressly preceded by the phrase “except as disclosed in
the Public Reports,” nothing contained in the Public Reports shall affect the Investor’s right to rely on, or shall
modify or qualify in any manner or be an exception to any of, the Company’s representations and warranties contained in
this Agreement or any other Transaction Document.
(f) Notices.
Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must
be in writing and will be deemed to have been delivered: (i) upon receipt, if delivered personally; (ii) when sent, if sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party);
(iii) when sent, if sent by e-mail (provided that such sent e-mail is kept on file (whether electronically or otherwise) by the
sending party and the sending party does not receive an automatically generated message from the recipient’s e-mail server
that such e-mail could not be delivered to such recipient) and (iv) if sent by overnight courier service, one (1) Business Day
after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party
to receive the same. The addresses, facsimile numbers and/or e-mail addresses for such communications are as follows:
If
to the Company:
FreeSeas
Inc.
▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, (▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇.)
▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇
Facsimile:
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇
E-mail
address: ▇▇▇@▇▇▇▇▇▇▇▇.▇▇
Attention: Chief Executive Officer
With
a copy (for informational purposes only) to:
Sichenzia
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail
address: ▇▇▇▇▇@▇▇▇▇.▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
If
to the Investor:
MTR3S
Holding Ltd.
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile:
E-mail
address:
Attention:
With
a copy (for informational purposes only) to:
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, LLP
The
MetLife Building
▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Email
address: ▇▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
or
to such other address, facsimile number or e-mail address and/or to the attention of such other Person as the recipient party
has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation
of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically
generated by the sender’s facsimile machine containing the time, date and recipient facsimile number or (C) provided by
an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iv) above, respectively. A copy of the e-mail transmission containing
the time, date and recipient e-mail address shall be rebuttable evidence of receipt by e-mail in accordance with clause (iii)
above.
(g) Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors
and assigns, including, as contemplated below, any assignee or transferee of any of the Securities. The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written consent of each of the Investor (which may be
granted or withheld in the sole discretion of the Investor), including, without limitation, by way of a Fundamental Transaction
(as defined in the Note) (unless the Company is in compliance with the applicable provisions governing Fundamental Transactions
set forth in the Note). The Investor may assign some or all of its rights hereunder in connection with any assignment or transfer
of any of its Securities without the consent of the Company, in which event such assignee or transferee (as the case may be) shall
be deemed to be an Investor hereunder with respect to such assigned rights.
(h) No
Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, other than
the Indemnitees referred to in Section 9(k).
(i) Survival.
The representations, warranties, agreements and covenants shall survive the Closing.
(j) Further
Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request
in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(k) Indemnification.
In consideration of the Investor’s execution and delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless the Investor and each holder of any Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing Persons’ agents or other representatives
(including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively,
the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the
“Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the Company in any of the Transaction Documents, (b)
any breach of any covenant, agreement or obligation of the Company contained in any of the Transaction Documents, (c) any failure
by the Company to obtain the approval for listing of all of the Conversion Shares and Interest Shares on the Principal Market
promptly following the date hereof, or (d) 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 (i) the execution, delivery, performance or enforcement
of any of the Transaction Documents, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly,
with the proceeds of the issuance of the Securities, (iii) any disclosure properly made by the Investor pursuant to Section 4(i),
or (iv) the status of the Investor 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.
(l) Construction.
The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and
no rules of strict construction will be applied against any party. No specific representation or warranty shall limit the generality
or applicability of a more general representation or warranty. Each and every reference to share prices, shares of Common Stock
and any other numbers in this Agreement that relate to the Common Stock shall be automatically adjusted for stock splits, stock
dividends, stock combinations and other similar transactions that occur with respect to the Common Stock after the date of this
Agreement.
(m) Remedies.
The Investor and each holder of any Securities shall have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights
which such holders have under any law. Any Person having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company recognizes that in the event
that it or any Subsidiary fails to perform, observe, or discharge any or all of its or such Subsidiary’s (as the case may
be) obligations under the Transaction Documents, any remedy at law may prove to be inadequate relief to the Investor. The Company
therefore agrees that the Investor shall be entitled to seek specific performance and/or temporary, preliminary and permanent
injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving
actual damages and without posting a bond or other security. The remedies provided in this Agreement and the other Transaction
Documents shall be cumulative and in addition to all other remedies available under this Agreement and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other injunctive relief).
(n) Withdrawal
Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever the Investor exercises a right, election, demand or option under a Transaction Document and the Company does
not timely perform its related obligations within the periods therein provided, then the Investor may rescind or withdraw, in
its sole discretion from time to time upon written notice to the Company or such Subsidiary (as the case may be), any relevant
notice, demand or election in whole or in part without prejudice to its future actions and rights
(o) Payment
Set Aside; Currency. To the extent that the Company makes a payment or payments to the Investor hereunder or pursuant to any
of the other Transaction Documents or the Investor enforces or exercises its rights hereunder or thereunder, and such payment
or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred. Until the Note is no longer outstanding, the Company shall not effect any stock combination,
reverse stock split or other similar transaction (or make any public announcement or disclosure with respect to any of the foregoing)
without the prior written consent of the Investor (which may be granted or withheld in the sole discretion of the Investor), provided,
however, that the Company may effect one or more reverse stock splits without the Investor’s consent solely for purposes
of the Company achieving compliance with the rules and regulations of the Principal Market and maintaining the listing of the
Company’s Common Stock on the Principal Market. Unless otherwise expressly indicated, all dollar amounts referred to in
this Agreement and the other Transaction Documents are in United States Dollars (“U.S. Dollars”), and all amounts
owing under this Agreement and all other Transaction Documents shall be paid in U.S. Dollars. All amounts denominated in other
currencies (if any) shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date
of calculation. “Exchange Rate” means, in relation to any amount of currency to be converted into U.S. Dollars
pursuant to this Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation.
[signature
pages follow]
IN
WITNESS WHEREOF, Investor and the Company have caused their respective signature page to this Agreement to be duly executed
as of the date first written above.
IN
WITNESS WHEREOF, Investor and the Company have caused their respective signature page to this Agreement to be duly executed
as of the date first written above.
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INVESTOR: |
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MTR3S HOLDING LTD. |
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By: |
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Name: |
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Title: |
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