8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 23, 2012

Net Element, Inc.

(Exact name of registrant as specified in its charter)

Delaware	000-51108	20-0715816
(State or other jurisdiction of incorporation)	(Commission (File Number)	(I.R.S. Employer Identification No.)

1450 S. Miami Avenue, Miami, FL	33130
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (305) 507-8808

Not Applicable

Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

Subscription Agreement

On February 23, 2012, the Company entered into a Subscription Agreement (the “Subscription Agreement”) pursuant to which it agreed to sell, subject to the satisfaction of customary closing conditions, 13,333,334 newly issued shares of common stock of the Company to Kenges Rakishev for an aggregate purchase price of $2,000,000.10, or $0.15 per share. Pursuant to the Subscription Agreement, the Company granted Mr. Rakishev the right to participate in any equity-based financing of the Company so long as Mr. Rakishev and his affiliates beneficially own greater than 5% of the Company’s common stock, as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations thereunder. In connection with that participation right, Mr. Rakishev may elect to purchase all or any part of any equity or equity-based securities proposed to be issued by the Company in any financing transaction.

The foregoing description of the Subscription Agreement does not purport to be complete and is qualified in its entirety by reference to the Subscription Agreement, a copy of which is attached hereto as Exhibit 10.1.

Shareholder Rights Agreement

On February 24, 2012, the Company entered into a Shareholder Rights Agreement (the “Shareholder Rights Agreement”) with Mark Global Corporation, Kenges Rakishev, Mike Zoi, TGR Capital, LLC, MZ Capital, LLC (Delaware), MZ Capital, LLC (Florida) and Enerfund, LLC (collectively, the “Shareholders”). The companies TGR Capital, LLC, MZ Capital, LLC (Delaware), MZ Capital, LLC (Florida) and Enerfund, LLC are directly or indirectly owned and controlled by Mike Zoi. As further described below, pursuant to the Shareholder Rights Agreement, the Shareholders agreed to certain corporate governance matters pertaining to the Company and the Company granted registration rights to each of Mark Global Corporation, Kenges Rakishev, TGR Capital, LLC, Mike Zoi and certain of their assignees (collectively, the “Holders”).

The Shareholders agreed to cause the Board of Directors of the Company to be comprised of not less than four and not more than eight directors. For so long as TGR Capital, LLC, together with its affiliates, has beneficial ownership (as determined under Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder) of greater than 5% of the Company’s common stock, TGR Capital, LLC is entitled to nominate one director. For so long as Mark Global Corporation, together with its affiliates, has beneficial ownership (as determined under Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder) of greater than 5% of the Company’s common stock, Mark Global Corporation is entitled to nominate one director. For so long as the Shareholder Rights Agreement remains in effect, TGR Capital, LLC and Mark Global Corporation are entitled to nominate two independent directors mutually acceptable to TGR Capital, LLC and Mark Global Corporation. In the event that Mark Global Corporation’s director nominee is unable to attend any meeting of the Board of Directors, Mark Global Corporation is entitled to have another representative attend such meeting in a non-voting observer capacity. In addition, so long as Mark Global Corporation, together with its affiliates, has beneficial ownership (as determined under Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder) of greater than 10% of the Company’s common stock, the Shareholders agreed to cause Mark Global Corporation’s director nominee to be a member of any compensation committee, nominating committee and audit committee that the Board of Directors may establish, in each case to the extent such directors are permitted to serve on such committees under applicable Securities and Exchange Commission rules.

Additionally, the Company agreed to obtain customary director and officer indemnity insurance and the Shareholders agreed to cause the Company’s bylaws to be amended, in a manner acceptable to Mark Global Corporation, to provide mandatory indemnification and advancement of expenses for directors of the Company.

Upon demand by any of the Holders, the Company agreed to register from time to time with the Securities and Exchange Commission for resale (i) all shares of common stock of the Company from time to time owned by Mark Global Corporation, Kenges Rakishev or any other person or entity controlled by Kenges Rakishev, and (ii) all shares of common stock of the Company from time to time owned by TGR Capital, LLC, Mike Zoi or any other person or entity controlled by Mike Zoi. The Company also granted the Holders piggyback registration rights with respect to all of such shares. The Company agreed to bear substantially all expenses incidental to the registration rights granted pursuant to the Shareholder Rights Agreement.

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The Shareholder Rights Agreement is not effective until 12:01 a.m. (New York time) on the first business day immediately following the date on which Mark Global Corporation, together with its affiliates, has beneficial ownership (as determined under Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder) of greater than 10% of the Company’s common stock.

The foregoing description of the Shareholder Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the Shareholder Rights Agreement, a copy of which is attached hereto as Exhibit 4.1.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
4.1	Shareholder Rights Agreement, dated February 24, 2012, among Mark Global Corporation, Kenges Rakishev, Mike Zoi, TGR Capital, LLC, MZ Capital, LLC (Delaware), MZ Capital, LLC (Florida), Enerfund, LLC and Net Element, Inc.
10.1	Subscription Agreement, dated February 23, 2012, between Net Element, Inc. and Kenges Rakishev

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	NET ELEMENT, INC.
Date: February 28, 2012	By:	/s/ Jonathan New
	Name:	Jonathan New
	Title:	Chief Financial Officer

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 EXHIBIT INDEX

Exhibit No.	Description
4.1	Shareholder Rights Agreement, dated February 24, 2012, among Mark Global Corporation, Kenges Rakishev, Mike Zoi, TGR Capital, LLC, MZ Capital, LLC (Delaware), MZ Capital, LLC (Florida), Enerfund, LLC and Net Element, Inc.
10.1	Subscription Agreement, dated February 23, 2012, between Net Element, Inc. and Kenges Rakishev

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EX-4.1

EXECUTION COPY

SHAREHOLDER RIGHTS AGREEMENT

BY AND AMONG

MARK GLOBAL CORPORATION

KENGES RAKISHEV

MIKE ZOI

TGR CAPITAL, LLC

MZ CAPITAL, LLC (DE)

MZ CAPITAL, LLC (FL)

ENERFUND, LLC

AND

NET ELEMENT, INC.

DATED AS OF FEBRUARY 24, 2012

THIS SHAREHOLDER RIGHTS AGREEMENT (this “Agreement”), dated as of February 24, 2012, is made by and among TGR Capital, LLC, a Florida limited liability company (“TGR”), MZ Capital, LLC a Delaware limited liability company (“MZ Delaware”), MZ Capital, LLC a Florida limited liability company (“MZ Florida”), Enerfund, LLC a Florida limited liability company (“Enerfund”), Mike Zoi (“Zoi”), Mark Global Corporation, a company organized under the laws of the British Virgin Islands (“Mark Global”), Kenges Rakishev (“Rakishev”) and Net Element, Inc., a Delaware corporation (the “Company”).

RECITALS

WHEREAS, TGR currently owns (i) 402,263,749 shares of Company Common Stock (as defined below), representing 53.80% of the issued and outstanding shares of the Company Common Stock, and (ii) warrants to purchase 100,000,000 shares of the Company Common Stock, the shares and warrants set forth in items (i) and (ii) above collectively representing 49.68% of the outstanding Company Common Stock on a fully diluted basis

WHEREAS, MZ Delaware currently owns 45,937,500 shares of the Company Common Stock, representing 4.55% of the issued and outstanding shares of the Company Common Stock on a fully diluted basis;

WHEREAS, MZ Florida currently owns 29,062,500 shares of the Company Common Stock, representing 2.87% of the issued and outstanding shares of the Company Common Stock on a fully diluted basis;

WHEREAS, Enerfund currently owns (i) 177,875,000 shares of the Company Common Stock, and (ii) warrants to purchase 100,000,000 shares of the Company Common Stock, the shares and warrants set forth in items (i) and (ii) above collectively representing 27.49% of the issued and outstanding shares of the Company Common Stock on a fully diluted basis;

WHEREAS, Zoi indirectly owns or Controls (as defined below) 100% of the outstanding membership interests in TGR, MZ Delaware, MZ Florida and Enerfund;

WHEREAS, (a) TGR, Zoi and Mark Global have previously entered into an Exchange and Stock Purchase Agreement (the “Exchange and Purchase Agreement”) pursuant to which Buyer will purchase 200,000,000 shares of Company Common Stock at a purchase price of $0.15 per share, representing 26.75% of the outstanding Company Common Stock, and (b) Rakishev and the Company have previously entered into a Subscription Agreement (the “Subscription Agreement”), pursuant to which Rakishev will purchase from the Company 13,333,334 shares of Company Common Stock at a purchase price of $0.15 per share;

WHEREAS, Rakishev owns 100% of the outstanding common stock of Mark Global; and

WHEREAS, it is contemplated in the Exchange and Purchase Agreement that TGR, MZ Delaware, MZ Florida, Enerfund, Zoi, Mark Global, Rakishev and the Company execute this Agreement.

NOW, THEREFORE, in consideration of the foregoing and the mutual promises, covenants and agreements of the parties hereto, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

Article I
DEFINITIONS

Section 1.1 Definitions. As used in this Agreement, the following terms shall have the following meanings:

“Affiliate” of a Person or entity means any other Person or entity Controlling, Controlled by or under common Control with such Person and any partner of such Person if such Person is a partnership. An “Affiliate” with respect to the Company includes any of the Company’s direct or indirect subsidiaries, whether or not in existence on the date hereof.

“Board of Directors” has the meaning set forth in Section 3.1(a).

“Business Day” means any day other than Saturday, Sunday or any other day on which commercial banks in New York, New York are authorized or required by law to remain closed.

“Bylaws” has the meaning set forth in the definition of “Necessary Action.”

“Breaching Shareholder” has the meaning set forth in Section 3.1(h).

“Certificate of Incorporation” has the meaning set forth in the definition of “Necessary Action.”

“Company Common Stock” means (i) the Company’s shares of common stock, $.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.

“Company Public Sale” has the meaning set forth in Section 4.2(a).

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

“Cure Period” has the meaning set forth in Section 3.1(k).

“Demand Registration Statement” shall mean a Registration Statement which covers the Registrable Securities requested to be included therein pursuant to the provisions of Section 4.1(a).

“De Minimis Transfer” means a transfer of less than 2% of the outstanding shares of Company Common Stock in any 180-day period.

“Effective Date” means the date that the applicable Registration Statement has been declared effective by the SEC.

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“Effectiveness Deadline” means (i) with respect to any Registration Statement required to be filed pursuant to Section 4.1(a), the earlier of the (A) 90^th calendar day after the applicable Request Date (or the 120^th calendar day after the applicable Request Date in the event that such Registration Statement is subject to review by the SEC) and (B) 2^nd Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Registration Statement will not be reviewed or will not be subject to further review and (ii) with respect to any additional Registration Statements that may be required to be filed by the Company pursuant to this Agreement, the earlier of the (A) 90^th calendar day following the date on which the Company was required to file such additional Registration Statement (or the 120^th calendar day after such date in the event that such Registration Statement is subject to review by the SEC) and (B) 2^nd Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Registration Statement will not be reviewed or will not be subject to further review.

“Existing Directors” has the meaning set forth in Section 3.1(c).

“Holder” means each of Mark Global, Rakishev, TGR, Zoi, any transferee or assignee of any Registrable Securities, as applicable, to whom any of the foregoing assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement and any transferee or assignee thereof to whom a transferee or assignee of any Registrable Securities assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement.

“Independent Directors” has the meaning set forth in Section 3.1(d).

“Independent Director Nominees” has the meaning set forth in Section 3.1(a).

“Initiating Holder” means, with respect to a particular registration, the Holder who initiated the Request for such registration.

“Mark Global Director” has the meaning set forth in Section 3.1(d).

“Mark Global Nominee” has the meaning set forth in Section 3.1(a).

“Necessary Action” means, with respect to a specified result, all actions (to the extent such actions are permitted by law) necessary to cause such result, including, without limitation, (i) voting, in person or by proxy, all of the shares of Company Common Stock owned by such Shareholder, at any annual or special meeting of stockholders of the Company or providing a written consent in lieu of a meeting of stockholders of the Company, (ii) causing the adoption of stockholders’ resolutions and/or the adoption of one or more amendments to the certificate of incorporation of the Company (the “Certificate of Incorporation”) and/or the bylaws of the Company (the “Bylaws”), (iii) causing, to the fullest extent permitted by law, members of the Board of Directors (to the extent such members were nominated or designated by the Person obligated to undertake the Necessary Action, and subject to any fiduciary duties that such members may have as directors of the Company) to act in a certain manner or causing them to be removed in the event they do not act in such a manner, (iv) executing, delivering and performing under agreements and instruments, and (v) making, or causing to be made, with governmental, administrative or regulatory authorities, all filings, registrations or similar actions that are required to achieve such result.

“Permitted Transferee” means (i) in the case of any Shareholder that is a partnership or limited liability company, any Affiliate of such Shareholder, (ii) in the case of any Shareholder that is a corporation, any Person that owns a majority of the voting stock of such Shareholder, or any Person that is a direct or indirect wholly-owned subsidiary of such Shareholder, (iii) in the case of any Shareholder that is an individual, any successor by death or divorce, any trust created for the direct or indirect benefit of such individual or one or more of such individual’s (a) parent, spouse, child, grandchild, spouse of a child or grandchild, brother or sister and any trust created for the benefit of any of such Persons and each custodian of any property of any of such Persons or (b) family partnership, limited liability company or similar entity controlled by such individual at the time of any transfer to such partnership, company or entity, or (iv) in the case of any Shareholder that is a trust whose sole beneficiaries are individuals, such individuals or their spouses or lineal descendants.

“Person” means an individual, partnership, limited liability company, corporation, trust, association, estate, unincorporated organization or a government or any agency or political subdivision thereof.

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“Piggyback Registration” has the meaning set forth in Section 4.2(a).

“Proposed Transferee” has the meaning set forth in Section 5.1(a).

“register,” “registered,” and “registration” refer to a registration effected by preparing and filing one or more Registration Statements in compliance with the Securities Act and the declaration of effectiveness of such Registration Statement(s) by the SEC.

“Registrable Securities” means collectively, (i) the shares of Company Common Stock owned from time to time by Mark Global, Rakishev or any other Person controlled by Rakishev (expressly excluding the Company if Rakishev Controls the Company) (collectively, the “Mark Global Shares”), (ii) the shares of Company Common Stock owned from time to time by TGR, Zoi or any other Person controlled by Zoi (expressly excluding the Company if Zoi Controls the Company) (collectively, the “Zoi Shares”) and (iii) any capital stock of the Company issued or issuable with respect to the Mark Global Shares or the Zoi Shares, including, without limitation, (1) as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise and (2) shares of capital stock of the Company into which the shares of Company Common Stock are converted or exchanged and shares of capital stock of a successor entity to the Company into which the shares of Company Common Stock are converted or exchanged.

“Registration Statement” means a registration statement or registration statements of the Company filed under the Securities Act covering Registrable Securities.

“Rule 415” means Rule 415 promulgated by the SEC under the Securities Act, as such rule may be amended from time to time, or any other similar or successor rule or regulation of the SEC providing for offering securities on a delayed or continuous basis at then-prevailing market prices (and not fixed prices).

“SEC” means the United States Securities and Exchange Commission or any successor thereto.

“Securities Act” means, collectively, the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute

“Shareholder” means each of Mark Global, Rakishev, MZ Delaware, MZ Florida, Enerfund, Zoi and TGR, and their permitted successors and assigns.

“Shelf Registration” means a registration of securities pursuant to a Shelf Registration Statement.

“Shelf Registration Statement” means a Registration Statement covering the resale of the Registrable Securities by the Investors pursuant to Rule 415.

“Tagging Shareholder” has the meaning set forth in Section 5.1(a).

“TGR Nominee” has the meaning set forth in Section 3.1(a).

“Transfer” means any transfer, sale, assignment, pledge, encumbrance or other disposition (irrespective of whether any of the foregoing are effected, with or without consideration, voluntarily or involuntarily, by operation of law or otherwise, or whether inter vivos or upon death).

“Transferring Shareholder” has the meaning set forth in Section 5.1(a).

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“Underwriters” means the underwriters, if any, of the offering being registered under the Securities Act.

“Underwritten Offering” means a sale of securities of the Company to an Underwriter or Underwriters for re-offering to the public.

Section 1.2            Other Interpretive Provisions.

(a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.

(b) The words “hereof”, “herein”, “hereunder” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and any subsection and Section references are to this Agreement unless otherwise specified.

(c) The term “including” is not limiting and means “including without limitation.”

(d) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.

(e) Whenever the context requires, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms.

Article II
REPRESENTATIONS AND WARRANTIES

Each of the parties to this Agreement hereby represents and warrants to each other party to this Agreement that as of the date such party executes this Agreement:

Section 2.1           Existence; Authority; Enforceability. Such party has the power and authority to enter into this Agreement and to carry out its obligations hereunder. Such party, if not an individual, is duly organized and validly existing under the laws of its jurisdiction of organization, and the execution of this Agreement, and the consummation of the transactions contemplated herein, have been authorized by all necessary action, and no other act or proceeding on its part is necessary to authorize the execution of this Agreement or the consummation of any of the transactions contemplated hereby. This Agreement has been duly executed by it and constitutes its legal, valid and binding obligations, enforceable against it in accordance with its terms.

Section 2.2           Absence of Conflicts. The execution and delivery by such party of this Agreement and the performance of its obligations hereunder does not and will not (a) if not an individual, conflict with, or result in the breach of any provision of the constitutive documents of such party; (b) result in any violation, breach, conflict, default or event of default (or an event which with notice, lapse of time, or both, would constitute a default or event of default), or give rise to any right of acceleration or termination or any additional payment obligation, under the terms of any contract, agreement or permit to which such party is a party or by which such party’s assets or operations are bound or affected; or (c) violate any law applicable to such party.

 Section 2.3         Consents. Other than any consents which have already been obtained, no consent, waiver, approval, authorization, exemption, registration, license or declaration is required to be made or obtained by such party in connection with (a) the execution, delivery or performance of this Agreement or (b) the consummation of any of the transactions contemplated herein.

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Article III
GOVERNANCE

 Section 3.1          Board of Directors.

(a)          Each of the Shareholders shall take all Necessary Action to cause the Board of Directors of the Company (the “Board of Directors”) to be comprised of not less than four (4) and not more than eight (8) directors, four (4) of whom shall be nominated in accordance with this Section 3.1. For so long as TGR, together with its Affiliates, has beneficial ownership (as determined under Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder by the SEC) of greater than 5% of the Company Common Stock, TGR shall be entitled to nominate one (1) director (the “TGR Nominee”). For so long as Mark Global, together with its Affiliates, has beneficial ownership (as determined under Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder by the SEC) of greater than 5% of the Company Common Stock, Mark Global shall be entitled to nominate one (1) director (the “Mark Global Nominee”). For so long as this Agreement shall remain in effect, TGR and Mark Global shall be entitled to nominate two (2) independent directors to the Board of Directors mutually acceptable to TGR and Mark Global (together, the “Independent Director Nominees”).

(b)          The Company shall submit to the stockholders of the Company for election at any meeting of Shareholders held for the purpose of electing directors, any and all nominations made in accordance with Section 3.1 hereof. Each of the Shareholders agrees to take all Necessary Action to elect the directors nominated in accordance with Section 3.1(a) to the Board of Directors.

(c)          It is hereby represented and warranted by the Company and TGR, MZ Delaware, MZ Florida and Enerfund that, as of the date hereof, and until the election of the Mark Global Director and the Independent Directors in accordance with Section 3.1(d), the number of directors constituting the full Board of Directors is five (5), consisting of the following members (other than Mike Zoi, the “Existing Directors”):

Name of Director	Type of Nominee per Section 3.1
Mike Zoi	TGR Nominee and Director as of the date hereof
James Caan	Director as of the date hereof
Felix Vulis	Director as of the date hereof
Curtis Wolfe	Director as of the date hereof
Dmitry Kozko	Director as of the date hereof

(d)          Upon a request by Mark Global, each of the Shareholders shall promptly take all Necessary Action, including, without limitation, amending the Bylaws to increase the number of directors by one (1) or removing one (1) of the Existing Directors, as may be requested by Mark Global, in order to cause the Mark Global Nominee to be elected to the Board of Directors (the “Mark Global Director”). Upon a request by either Mark Global or TGR, each of the Shareholders shall promptly take all Necessary Action, including, without limitation, amending the Bylaws to increase the number of directors by one or more and/or removing one or more Existing Directors, as may be mutually requested by TGR and Mark Global in order to cause the Independent Director Nominees to be elected to the Board of Directors (together, the “Independent Directors”). Each Independent Director shall qualify as an independent director as defined in Rule 5605(a)(2) of the Nasdaq Stock Market.

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(e)          Each of the Existing Directors and each of the Mark Global Director and the Independent Directors (once appointed or elected in accordance with Section 3.1(d)) shall hold office until the next annual meeting of stockholders of the Company following their appointment and/or election, when his/her successor shall be nominated in accordance with this Section 3.1 and shall be appointed and/or elected and qualified, subject to his/her earlier death, removal or resignation as provided in the Certificate of Incorporation and Bylaws.

(f)          Upon the request of any Shareholder to remove a director previously nominated by such Shareholder in accordance with this Section 3.1, the Shareholders shall take all Necessary Action to remove such director and elect any replacement director as may be nominated by such party in accordance with the provisions of this Section 3.1. Except as otherwise provided in this Section 3.1 (such as, by way of example only, in connection with any Necessary Action), and including, without limitation, this subsection (f), each of the Shareholders agrees not to take any action to remove, with or without cause, any director of the Company nominated by another Shareholder (other than an Independent Director).

(g)          Each Shareholder shall take all Necessary Action to ensure that the Certificate of Incorporation and the Bylaws do not at any time conflict with the provisions of this Agreement.

(h)          In the event a newly-created directorship is created or a vacancy is created on the Board of Directors by reason of the death, removal (in accordance with Section 3.1(f) above) or resignation of any one of the directors, each of the Shareholders hereby agrees to take all Necessary Action so as to (i) cause the Company to hold a special meeting of stockholders for the election of a director to fill such newly-created directorship or vacancy, or act by written consent in lieu of a meeting of stockholders of the Company and (ii) fill the vacancy with a nominee made in accordance with the nomination procedures in this Section 3.1.

(i)          The Company shall reimburse the directors for all reasonable out-of-pocket expenses incurred in connection with their attendance at meetings of the Board of Directors and any committees thereof, including, without limitation, travel, lodging and meal expenses.

(j)          The Company shall obtain customary director and officer indemnity insurance. Each of the Shareholders shall take all Necessary Action to cause the Bylaws to be amended, in a manner acceptable to Mark Global, to provide mandatory indemnification and advancements for directors of the Company, including, without limitation, the Mark Global Director and the Independent Directors.

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(k)          Solely for purposes of Section 3.1, and in order to secure the performance of each Shareholder’s obligations under Section 3.1, (i) Mark Global hereby irrevocably appoints TGR and (ii) each of TGR, MZ Delaware, MZ Florida and Enerfund hereby irrevocably appoint Mark Global, the durable attorney-in-fact and lawful proxy of such Shareholder(s) (with full power of substitution) to vote or provide a written consent with respect to its shares of Company Common Stock if, and only in the event that, such Shareholder(s) fails to take any Necessary Action in accordance with the terms of Section 3.1 (each such Shareholder, a “Breaching Shareholder”). Each Breaching Shareholder shall have five (5) Business Days from the date of a request to take such Necessary Action (the “Cure Period”) to cure such failure. If after the Cure Period, the Breaching Shareholder has not cured such failure, the other Shareholder (Mark Global (if any one or more of TGR. MZ Delaware, MZ Florida or Enerfund is a Breaching Shareholder), on the one hand, or TGR (if Mark Global is a Breaching Shareholder), on the other hand), shall have and is hereby irrevocably granted a durable attorney-in-fact and lawful proxy to take vote or provide a written consent with respect to such Necessary Action. Each Shareholder intends the durable attorney-in-fact and lawful proxy granted hereby to be, and it shall be, irrevocable, coupled with an interest and be in full force and effect for so long as this ARTICLE III shall be in effect. Each Shareholder will take such further action and execute, deliver and perform under such other instruments as may be necessary to effectuate the intent of this durable attorney-in-fact- and lawful proxy and hereby revoke any proxy previously granted by it with respect to the matters set forth in Section 3.1 with respect to the shares of Company Common Stock owned by such Shareholder.

(l)          In the event that the Mark Global Director is unable at any time to attend any meeting of the Board of Directors, Mark Global shall be entitled to have a representative of Mark Global attend such meeting of the Board of Directors in a non-voting observer capacity, and, in this respect, the Company shall provide such representative with copies of all notices, minutes, consents and other materials that it provides to the members of the Board of Directors for such meeting.

Section 3.2          Additional Management Provisions. For so long as Mark Global, together with its Affiliates, has beneficial ownership (as determined under Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder by the SEC) of greater than 10% of the Company Common Stock, each of the Shareholders shall take all Necessary Actions to cause the director nominated by Mark Global to be a member of any of the following committees that the Board of Directors may establish: (i) the Compensation Committee, (ii) the Nominating Committee and (iii) the Audit Committee, in each case to the extent such directors are permitted to serve on such committees under SEC rules applicable to the Company.

Article IV
REGISTRATION RIGHTS

Section 4.1          Request for Registration.

(a)          Demand Registration.

(i)          Right to Demand Registration.

(1)         Subject to Section 4.1(a)(iii), at any time or from time to time, each Holder shall have the right to request in writing that the Company register all or part of such Holder’s Registrable Securities (a “Request”) by filing with the SEC a Demand Registration Statement.

(A)         Each Request from an Initiating Holder shall specify the amount of Registrable Securities intended to be disposed of by such Initiating Holder and whether such Demand Registration Statement will be a Shelf Registration or an Underwritten Offering.

(B)         As promptly as practicable after the Company’s receipt of a Request from an Initiating Holder with respect to such Shelf Registration or Underwritten Offering (as the case may be) (such date of receipt by the Company is referred to herein as the “Request Date”), but no later than five (5) calendar days after the Request Date, the Company shall give written notice of such requested registration to all other Holders who then hold Registrable Securities.

(C)         Subject to Section 4.1(a)(ii), the Company shall include in a Demand Registration (i) the Registrable Securities intended to be disposed of by the Initiating Holder and (ii) the Registrable Securities intended to be disposed of by any other Holder which shall have made a written request (which request shall specify the amount of Registrable Securities to be registered and the intended method of disposition thereof) to the Company for inclusion thereof in such registration within ten (10) days after the receipt of such written notice from the Company.

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(D)         The Company, as expeditiously as possible, but in any event within thirty (30) days following the Request Date (the “Filing Deadline”), shall cause to be filed with the SEC a Demand Registration Statement providing for the registration under the Securities Act of the Registrable Securities which the Company has been so requested to register by all such Holders, to the extent necessary to permit the disposition of such Registrable Securities to be so registered in accordance with the intended methods of disposition thereof specified in such Request or further requests (including, without limitation, by means of a Shelf Registration if so requested and if the Company is then eligible to use such a registration).

(E)         The Company shall use its reasonable best efforts to have such Demand Registration Statement declared effective by the SEC as soon as practicable thereafter but in no event later than the Effectiveness Deadline therefor and to keep such Demand Registration Statement continuously effective until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller(s) thereof set forth in such Demand Registration Statement, provided that with respect to any Demand Registration Statement, such period need not extend beyond the applicable Registration Period (as defined below).

(2)         A Request may be withdrawn prior to the filing of the Demand Registration Statement by the Initiating Holder (a “Withdrawn Request”) and a Demand Registration Statement may be withdrawn prior to the effectiveness thereof by all the Holders who have elected to include Registrable Securities in such Demand Registration Statement (a “Withdrawn Demand Registration”). Each Holder requesting inclusion of Registrable Securities in a Demand Registration may, at any time prior to the Effective Date of such Demand Registration Statement (and for any reason), revoke such request by delivering written notice to the Company revoking such requested inclusion.

(3)         The registration rights granted pursuant to the provisions of this Section 4.1(a) shall be in addition to the registration rights granted pursuant to the other provisions of this Article IV.

(ii)         Priority in Demand Registrations. If a Demand Registration involves an Underwritten Offering, and the sole or lead managing Underwriter (as the case may be) of such Underwritten Offering shall advise the Company in writing (with a copy to each Holder requesting registration) on or before the date five (5) days prior to the date then scheduled for such offering that, in its opinion, the amount of Registrable Securities, if any, requested to be included in such Demand Registration exceeds the number which can be sold in such offering (such writing to state the basis of such opinion and the approximate number of Registrable Securities which may be included in such offering), the Company shall include in such Demand Registration, to the extent of the number which the Company is so advised may be included in such offering without such effect, the Registrable Securities requested to be included in the Demand Registration by the Holders allocated, pro rata among the Holders based on the number of Registrable Securities initially requested to be included therein by each Holder. In the event the Company shall not, by virtue of this Section 4.1(a)(ii), include in any Demand Registration all of the Registrable Securities of any Holder requesting to be included in such Demand Registration, such Holder may, upon written notice to the Company given within five (5) days of the time such Holder first is notified of such matter, reduce the amount of Registrable Securities it desires to have included in such Demand Registration, whereupon only the Registrable Securities, if any, it desires to have included will be so included and the Holders not so reducing shall be entitled to a corresponding increase in the amount of Registrable Securities to be included in such Demand Registration.

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(iii)        Demand Registration Minimum. In no event shall the Company be required to effect a Demand Registration unless the reasonably anticipated aggregate offering price to the public of all Registrable Securities for which registration has been requested by all Holders will be at least $500,000 or, if the foregoing is not satisfied, all of the Registrable Securities held by the Initiating Holder are included in the Demand Registration.

(iv)        Underwriting. Notwithstanding anything to the contrary contained in Section 4.1(a)(i), if the Initiating Holder elects, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of a firm commitment Underwritten Offering and such Initiating Holder may require that all Persons (including other Holders) participating in such registration sell their Registrable Securities to the Underwriters at the same price and on the same terms of underwriting applicable to such Initiating Holder. If any Demand Registration involves an Underwritten Offering, the sole or managing Underwriters and any additional investment bankers and managers to be used in connection with such registration shall be selected by the Initiating Holder, subject to the approval of the Company (such approval not to be unreasonably withheld or delayed).

(v)         Other Registrations. During the period (i) beginning on the date of a Request and (ii) ending on the date that is ninety (90) days after the date that a Demand Registration Statement filed pursuant to such Request has been declared effective by the SEC or, if the Initiating Holder withdraws a Request or all the Holders who have elected to include Registrable Securities in such Demand Registration Statement withdraw such Demand Registration Statement, on the date of such Withdrawn Request or such Withdrawn Registration Statement, the Company shall not, without the consent of the Initiating Holder who withdrew such request or all the Holders who have elected to so withdraw such Demand Registration Statement (as applicable), file a registration statement pertaining to any other securities of the Company (other than a registration relating solely to the sale of securities to participants in a Company employee stock or similar plan on Form S-8).

(vi)        Registration Statement Form. Registrations under this Section 4.1(a) shall be on such appropriate registration form of the SEC (i) as shall be selected by the Initiating Holder and (ii) which shall be available for the sale of Registrable Securities in accordance with the intended method or methods of disposition specified in the requests for registration. The Company agrees to include in any such Registration Statement all information which any selling Holder, upon advice of counsel, shall reasonably request.

(b)          Registration of Other Securities. Whenever the Company shall effect a Demand Registration, no securities other than Registrable Securities shall be covered by such registration unless (a) the Initiating Holder shall have consented in writing to the inclusion of such other securities and (b) no Holder is unable to include any of its Registrable Securities requested for inclusion in such registration by reason of Section 4.1(a)(ii).

(c)          Underwritten Offerings.

(i)          Demand Underwritten Offerings. If requested by the sole or lead managing Underwriter for any Underwritten Offering effected pursuant to a Demand Registration, the Company shall enter into a customary underwriting agreement with the Underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to the Initiating Holder and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of that type, including, without limitation, indemnification and contribution to the effect and to the extent provided in Section 4.6 below.

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(ii)         Holders Holding Registrable Securities to be Parties to Underwriting Agreement. The Holders holding Registrable Securities to be distributed by the Underwriters in an Underwritten Offering contemplated by Section 4.1(c) shall be parties to the underwriting agreement between the Company and such Underwriters and may, at such Holders’ option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such Underwriters shall also be made to and for the benefit of such Holders and that any or all of the conditions precedent to the obligations of such Underwriters under such underwriting agreement be conditions precedent to the obligations of such Holders; provided, however, the Company shall not be required to make any representations or warranties with respect to written information specifically provided by a selling Holder for inclusion in the Registration Statement. No Holder shall be required to make any representations or warranties to, or agreements with, the Company or the Underwriters other than representations, warranties or agreements regarding such Holder, such Holder’s Registrable Securities and such Holder’s intended method of disposition.

(iii)        Participation in Underwritten Registration. Notwithstanding anything herein to the contrary in this Section 4.1(c), no Person may participate in any Underwritten Offering hereunder unless such Person (i) agrees to sell its securities on the same terms and conditions provided in any underwritten arrangements approved by the Persons entitled hereunder to approve such arrangement and (ii) accurately completes and executes in a timely manner all questionnaires, powers of attorney, indemnities, custody agreements, underwriting agreements and other documents customary for such an offering and reasonably required under the terms of such underwriting arrangements.

Section 4.2           Piggyback Registration.

(a)          Participation. If the Company at any time proposes to register any of its securities under the Securities Act, whether for its own account or for the account of any other Person (other than (i) a Demand Registration under Section 4.1(a) or (ii) a registration on Form S-4 or S-8 or any successor form to such Forms), (a “Company Public Sale”), then, as soon as practicable after the Company’s determination to undertake such registration, the Company shall give written notice of such proposed filing to each Holder and each Holder shall have the right to include in such registration such number (subject to Section 4.3(b)) of such Holder’s Registrable Securities as such Holder may request in writing (a “Piggyback Registration”). Subject to Section 4.3(b), the Company shall include in such Piggyback Registration all Registrable Securities which are requested to be included therein within 15 days after the receipt by the applicable Holder holding Registrable Securities of any such notice; provided, however, if at any time after giving written notice of the Company’s intention to register any securities and prior to the Effective Date of the applicable Registration Statement, the Company shall determine for any reason not to register or to delay registration of such securities, the Company shall give written notice of such determination to each Holder holding Registrable Securities who requested Registrable Securities to be included on such Registration Statement and, thereupon, (i) in the case of a determination not to register, the Company shall be relieved of its obligation to register any of such Holders’ Registrable Securities in connection with such Company Public Sale (but not from its obligation to pay the Registration Expenses (as defined below) in connection therewith), without prejudice, however, to the rights of each Holder to cause such registration to be effected as a registration under Section 4.1(a), and (ii) in the case of a determination to delay such registration, the Company shall be permitted to delay the registration of such Registrable Securities for the same period as the delay in registering such other securities. If the offering pursuant to such Piggyback Registration is to be Underwritten, then the Holders requesting inclusion therein must, and the Company shall make such arrangements with the sole or lead managing Underwriter so that such Holders may, participate in such Underwritten Offering. If the offering pursuant to such Piggyback Registration is to be on any other basis, then the Holders requesting inclusion therein, and the Company shall make such arrangements so that such Holders may, participate in such offering on such basis. If any Piggyback Registration involves an Underwritten Offering, the sole or managing Underwriter(s) and any additional investment bankers and managers to be used in connection with such registration shall be subject to the approval of the Holders requesting Registrable Securities to be included in such Piggyback Registration (such approval not to be unreasonably withheld). Each Holder requesting inclusion of Registrable Securities in a Piggyback Registration may, at any time prior to the Effective Date of the applicable Registration Statement (and for any reason), revoke such request by delivering written notice to the Company revoking such requested inclusion.

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(b)          Priority of Piggyback Registration. If a Piggyback Registration involves an Underwritten Offering (on a firm commitment basis), and the sole or the lead managing Underwriter (as the case may be) of such Underwritten Offering shall advise the Company in writing (with a copy to each Holder requesting registration) on or before the date five (5) days prior to the date then scheduled for such offering that, in its opinion, the amount of securities (including Registrable Securities) requested to be included in such registration exceeds the amount which can be sold in such offering without materially interfering with the successful marketing of the securities being offered (such writing to state the basis of such opinion and the approximate number of such securities which may be included in such offering without such effect), the Company shall include in such registration, to the extent of the number which the Company is so advised may be included in such offering without such effect, (i) in the case of a registration initiated by the Company, (A) first, the securities that the Company proposes to register for its own account, (B) second, the Mark Global Shares sought to be included (determined on a pro rata basis based upon the aggregate number of Mark Global Shares held by the holders thereof having Mark Global Shares included), (C) third, the Zoi Shares sought to be included (determined on a pro rata basis based upon the aggregate number of Zoi Shares held by the holders thereof having Zoi Shares included), and (D) fourth, only if all the securities referred to in clauses (A), (B) and (C) have been included in such Piggyback Registration, any other securities requested to be included in such registration and (ii) in the case of a registration initiated by a Person other than the Company, (X) first, the Mark Global Shares sought to be included (determined on a pro rata basis based upon the aggregate number of Mark Global Shares held by the holders thereof having Mark Global Shares included), (Y) second, the Zoi Shares sought to be included (determined on a pro rata basis based upon the aggregate number of Zoi Shares held by the holders thereof having Zoi Shares included), and (Z) third, only if all the securities referred to in clauses (X) and (Y) have been included in such Piggyback Registration, the securities proposed to be registered by any Persons initiating such registration, allocated pro rata in proportion to the number of securities requested to be included in such registration by each of them.

Section 4.3          Registration Obligations. Whenever the Company is required to effect the registration of Registrable Securities under the Securities Act pursuant to this Article IV, the Company shall use its best efforts to effect the registration of the applicable Registrable Securities in accordance with the intended method of disposition thereof, and pursuant thereto, and the Company shall have the following obligations:

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(a)          Promptly prepare and file with the SEC a Registration Statement with respect to all the Registrable Securities required to be covered by such Registration Statement (but in no event later than the applicable Filing Deadline) and use its reasonable best efforts to cause such Registration Statement to become effective as soon as practicable after such filing (but in no event later than the Effectiveness Deadline). Subject only to Allowable Suspension Periods with respect to a Shelf Registration Statement, the Company shall use it reasonable best efforts to keep each Registration Statement effective (and the prospectus contained therein available for use) (and if such offering is under a Shelf Registration Statement, such effectiveness shall be pursuant to Rule 415 for resales by the Holders) at all times until, as applicable, (i) if such Registration Statement is not a Shelf Registration Statement, one (1) year after the Effective Date of such Registration Statement or (ii) if such Registration Statement is a Shelf Registration Statement, the date on which the Holders shall have sold all of the Registrable Securities covered by such Shelf Registration Statement (the “Registration Period”). Subject only to Allowable Suspension Periods with respect to a Shelf Registration Statement, the Company shall not be deemed to have used its reasonable best efforts to keep a Registration Statement effective during the Registration Period for such Registration Statement if the Company voluntarily takes any action or omits to take any action that would result in any Holder not being able to offer and sell any of such Holder’s Registrable Securities included in such Shelf Registration Statement during the Registration Period for such Shelf Registration Statement. Notwithstanding anything to the contrary contained in this Agreement, the Company shall ensure that, when filed and at all times while effective, each Registration Statement (including, without limitation, all amendments and supplements thereto) and the prospectus (including, without limitation, all amendments and supplements thereto) used in connection with such Registration Statement (1) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein (in the case of prospectuses, in the light of the circumstances in which they were made) not misleading and (2) will disclose (whether directly or through incorporation by reference to other SEC filings to the extent permitted) all material information regarding the Company and its securities.

(b)          Promptly prepare and file with the SEC such amendments (including, without limitation, post-effective amendments) and supplements to each Registration Statement and the prospectus used in connection with each such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep each such Registration Statement effective at all times during the Registration Period for such Registration Statement, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company required to be covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement; provided, however, by 8:30 a.m. (New York time) on the Business Day immediately following each Effective Date, the Company shall file with the SEC in accordance with Rule 424(b) under the Securities Act the final prospectus to be used in connection with sales pursuant to the applicable Registration Statement (whether or not such a prospectus is technically required by such rule).

(c)          Promptly notify the Holders holding Registrable Securities when the applicable Registration Statement or any amendment thereto has been filed or becomes effective, and when the applicable prospectus or any amendment or supplement to such prospectus has been filed, but, in each case, in no event later than one (1) Business Day thereafter.

(d)          Promptly notify the Holders holding Registrable Securities of, and provide copies of, (i) any written comments by the SEC or any request by the SEC or any other federal or state governmental authority for amendments or supplements to such Registration Statement or such prospectus or for additional information, (ii) any stop order suspending the effectiveness of such Registration Statement or any order by the SEC or any other regulatory authority preventing or suspending the use of any preliminary or final prospectus or the initiation or threatening of any proceedings for such purposes, and (iii) the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for offering or sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose.

(e)          Promptly notify the Holders holding Registrable Securities when the Company becomes aware of the happening of any event as a result of which the applicable Registration Statement or the prospectus included in such Registration Statement (as then in effect) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein (in the case of such prospectus and any preliminary prospectus, in light of the circumstances under which they were made) not misleading or, if for any other reason it shall be necessary during such time period to amend or supplement such Registration Statement or prospectus in order to comply with the Securities Act and, in either case as promptly as reasonably practicable thereafter, prepare and file with the SEC an amendment or supplement to such Registration Statement and prospectus which shall correct such misstatement or omission or effect such compliance.

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(f)          (i) Use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of each Registration Statement or the use of any prospectus contained therein, or the suspension of the qualification, or the loss of an exemption from qualification, of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and (ii) promptly notify each Holder holding Registrable Securities included therein of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.

(g)          Promptly incorporate in a prospectus supplement or post-effective amendment such information as the sole or lead managing Underwriter, if any, or any of the Holders of Registrable Securities included in such Underwritten Offering determine should be included therein relating to the plan of distribution with respect to the applicable Registrable Securities.

(h)          Promptly deliver to the Holders holding Registrable Securities and each Underwriter, if any, without charge, as many copies of the applicable prospectus (including each preliminary prospectus) and any amendment or supplement thereto as a Holder holding Registrable Securities or Underwriter may reasonably request (it being understood that the Company consents to the use of such prospectus or any amendment or supplement thereto by such Holders and the Underwriter, if any, in connection with the offering and sale of the Registrable Securities covered by such prospectus or any amendment or supplement thereto) and such other documents as a Holder including Registrable Securities therein may reasonably request in order to facilitate the disposition of such Holder’s Registrable Securities.

(i)          On or prior to the date on which the applicable Registration Statement is declared effective, use its reasonable best efforts to cause such Registrable Securities (i) to be registered, approved or qualified for offer and sale under the securities or “Blue Sky” laws of each state and other jurisdiction of the United States as either a Holder including Registrable Securities therein or the sole or lead managing Underwriter may reasonably request and (ii) to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the Underwriter(s), if any, to consummate the disposition of the Registrable Securities, and in each case to do any and all other acts or things reasonably necessary or advisable to keep such registration or qualification in effect for such period as may be reasonably required, provided that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to taxation or general service of process in any such jurisdiction where it is not then so subject.

(j)          Enter into such customary agreements (including underwriting and indemnification agreements) and take all such other actions as a Holder holding Registrable Securities or the sole or lead managing Underwriter, if any, reasonably requests in order to expedite or facilitate the registration and disposition of the Registrable Securities.

(k)          Obtain for delivery to the Holders holding Registrable Securities and to the Underwriter(s), if any, an opinion or opinions from counsel for the Company dated the Effective Date of the applicable Registration Statement or, in the event of an Underwritten Offering, the date of the closing under the underwriting agreement, in customary form, scope and substance, which opinions shall be reasonably satisfactory to the Holders including Registrable Securities therein or Underwriter(s), as the case may be.

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(l)          Upon the written request of a Holder holding Registrable Securities, the Company shall make available for inspection by (i) such Holder, (ii) legal counsel for such Holder and (iii) one (1) firm of accountants or other agents retained by such Holder (collectively, the “Inspectors”), all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the “Records”), as shall be reasonably deemed necessary by each Inspector, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request; provided, however, each Inspector shall agree in writing to hold in strict confidence and not to make any disclosure (except to such Holder) or use of any Record or other information which the Board of Directors determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (1) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required under the Securities Act, (2) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (3) the information in such Records has been made generally available to the public. Such Holder agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, to the extent legally permissible give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. Nothing herein shall be deemed to limit any Holder’s ability to sell Registrable Securities in a manner which is otherwise consistent with applicable laws and regulations.

(m)          In the case of an Underwritten Offering, obtain for delivery to the Company and the sole or lead managing Underwriter, with copies to the Holders including Registrable Securities in such Underwritten Offering, a cold comfort letter from the Company’s independent certified public accountants in customary form and covering such matters of the type customarily covered by cold comfort letters as the managing underwriter may reasonably request, dated the date of execution of the underwriting agreement and brought down to the closing under the underwriting agreement.

(n)          Use its reasonable best efforts to cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.

(o)          Make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the Securities Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following the applicable Effective Date of each Registration Statement.

(p)          Notwithstanding anything to the contrary herein, at any time after the Effective Date of a particular Registration Statement, the Company may delay the disclosure of material, non-public information concerning the Company or any of its subsidiaries the disclosure of which at the time is not, in the good faith opinion of the Board of Directors, in the best interest of the Company and, in the opinion of counsel to the Company, otherwise required (a “Suspension Period”), provided that the Company shall promptly notify the Holders of Registrable Securities included in such Registration Statement in writing of the (i) existence of material, non-public information giving rise to a Suspension Period (provided that in each such notice the Company shall not disclose the content of such material, non-public information to any of such Holders) and the date on which such Suspension Period will begin and (ii) date on which such Suspension Period ends, provided further that no Suspension Period shall exceed fifteen (15) consecutive days and during any three hundred sixty five (365) day period all such Suspension Periods shall not exceed an aggregate of thirty (30) days, (each, an “Allowable Suspension Period”). For purposes of determining the length of a Suspension Period above, such Suspension Period shall begin on and include the date such Holders receive the notice referred to in clause (i) above and shall end on and include the later of the date such Holders receive the notice referred to in clause (ii) above and the date referred to in such notice. The provisions of Section 4.3(f) hereof shall not be applicable during the period of any Allowable Suspension Period. Upon expiration of each Suspension Period, the Company shall again be bound by Section 4.3(e) with respect to the information giving rise thereto unless such material, non-public information is no longer applicable.

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(q)          Take any and all other actions as may be reasonably requested by the Holders including Registrable Securities in the applicable Registration Statement and the sole or lead managing Underwriter, if any, to facility the sale of the Registrable Securities pursuant to such Registration Statement.

Section 4.4           No Inconsistent Agreements; Additional Rights. The Company shall not hereafter enter into, and is not currently a party to, any agreement with respect to its securities which is inconsistent with the rights granted to the Holders by this Agreement. Without the consent of the Holders, the Company shall not (a) grant any registration rights to third parties which adversely affect any of the Holders or which are more favorable than the rights granted to the Holders hereunder, or (b) enter into any agreement, take any action, or permit any change to occur, with respect to its securities that violates or subordinates any of the rights expressly granted to each of the Holders in this Agreement.

Section 4.5           Registration Expenses. All expenses incident to the Company’s performance of or compliance with this Article IV shall be paid by the Company, including (i) all registration and filing fees, and any other fees and expenses associated with filings required to be made with the SEC, FINRA or the OTC Markets, (ii) all fees and expenses in connection with compliance with any securities or “Blue Sky” laws, (iii) all printing, duplicating, word processing, messenger, telephone, facsimile and delivery expenses, (iv) all fees and disbursements of counsel for the Company and of all independent certified public accountants of the Company (including the expenses of any special audit and cold comfort letters required by or incident to such performance), (v) Securities Act liability insurance or similar insurance if the Company so desires or the underwriters so require in accordance with then-customary underwriting practice, (vi) all fees and expenses incurred in connection with the listing of the Registrable Securities on any national securities exchange or national securities association, (viii) all reasonable fees and disbursements of one law firm or counsel for the Initiating Holder), (ix) all fees and expenses of any special experts or other Persons retained by the Company in connection with any Registration, (x) all of the Company’s internal expenses (including all salaries and expenses of its officers and employees performing legal or accounting duties) and (xi) all expenses related to the participation by the executive officers of the Company (reasonably requested by the managing underwriter) in the “road-show” for any underwritten offering, including all requested travel and reasonable meals and lodging. All such expenses are referred to herein as “Registration Expenses.” The Company shall not be required to pay any fees and disbursements to underwriters not customarily paid by the issuers of securities in a secondary offering, including underwriting fees, discounts and commissions and transfer taxes, if any, attributable to the sale of Registrable Securities.

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Section 4.6           Indemnification.

              (a)          Indemnification by the Company. The Company agrees to indemnify and hold harmless, to the full extent permitted by law, each Holder who elects to have Registrable Securities included in a Registration Statement and each of its affiliates, officers, directors, stockholders, employees, advisors, and agents and each Person who controls (within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) such Persons and each of their respective representatives from and against any and all losses, penalties, judgments, suits, costs, claims, damages, liabilities and expenses, joint or several (including reasonable costs of investigation and legal expenses) (each, a “Loss” and collectively “Losses”) arising out of or based upon (i) any untrue or alleged untrue statement of a material fact contained in any Registration Statement under which such Registrable Securities were registered under the Securities Act (including any final, preliminary or summary prospectus contained therein or any amendment thereof or supplement thereto or any documents incorporated by reference therein), or any other disclosure document produced by or on behalf of the Company or any of its subsidiaries including, without limitation, reports and other documents filed under the Exchange Act, (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus or preliminary prospectus, in light of the circumstances under which they were made) not misleading or (iii) any actions or inactions or proceedings in respect of the foregoing whether or not such indemnified party is a party thereto; provided, however, that the Company shall not be liable to any particular indemnified party (x) to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any such Registration Statement in reliance upon and in conformity with written information furnished to the Company by such indemnified party expressly for inclusion in such Registration Statement or (y) to the extent that any such Loss arises out of or is based upon an untrue statement or omission in a preliminary prospectus relating to Registrable Securities, if a prospectus (as then amended or supplemented) that would have cured the defect was furnished to the indemnified party from whom the Person asserting the claim giving rise to such Loss purchased Registrable Securities at least 5 days prior to the written confirmation of the sale of the Registrable Securities to such Person and a copy of such prospectus (as amended and supplemented) was not sent or given by or on behalf of such indemnified party to such Person at or prior to the written confirmation of the sale of the Registrable Securities to such Person. This indemnity shall be in addition to any liability the Company may otherwise have. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the applicable holder of Registrable Securities or any indemnified party and shall survive the transfer of such securities by such holder. The Company shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of the Securities Act and the Exchange Act) to the same extent as provided above with respect to the indemnification of the indemnified parties.

(b)          Indemnification by Holder. Each Holder who elects to have Registrable Securities included in a Registration Statement (and such Registrable Securities are actually included therein) agrees to severally and not jointly indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act or the Exchange Act) from and against any Losses resulting from (i) any untrue statement of a material fact in any Registration Statement in which such Holder elected to include Registrable Securities (including any final, preliminary or summary prospectus contained therein or any amendment thereof or supplement thereto or any documents incorporated by reference therein) or (ii) any omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus or preliminary prospectus, in light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission arises solely in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for inclusion in such Registration Statement and such untrue or omission has not been corrected by such Holder in a subsequent writing delivered to the Company in a reasonable period of time prior to the filing of such Registration Statement or prospectus with the SEC. In no event shall the liability of such Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such selling Holder as a result of the applicable the sale of its Registrable Securities giving rise to such indemnification obligation. The Company shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above with respect to information furnished in writing by such Persons specifically for inclusion in any prospectus or Registration Statement.

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(c)          Conduct of Indemnification Proceedings. Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that any delay or failure to so notify the indemnifying party shall relieve the indemnifying party of its obligations hereunder only to the extent, if at all, that it is actually and materially prejudiced by reason of such delay or failure) and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however, that any Person entitled to indemnification hereunder shall have the right to select and employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (i) the indemnifying party has agreed in writing to pay such fees or expenses, (ii) the indemnifying party shall have failed to assume the defense of such claim within a reasonable time after receipt of notice of such claim from the Person entitled to indemnification hereunder and employ counsel reasonably satisfactory to such Person, (iii) the indemnified party has reasonably concluded (based upon advice of its counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, or (iv) in the reasonable judgment of any such Person (based upon advice of its counsel) a conflict of interest may exist between such Person and the indemnifying party with respect to such claims (in which case, if the Person notifies the indemnifying party in writing that such Person elects to employ separate counsel at the expense (which has to be reasonable) of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such Person). If the indemnifying party assumes the defense, the indemnifying party shall not have the right to settle such action without the consent of the indemnified party. No indemnifying party shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of an unconditional release from all liability in respect to such claim or litigation. If such defense is not assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its prior written consent, but such consent may not be unreasonably withheld. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements or other charges of more than one separate firm admitted to practice in such jurisdiction at any one time unless (x) the employment of more than one counsel has been authorized in writing by the indemnifying party or parties, (y) an indemnified party has reasonably concluded (based on the advice of counsel) that there may be legal defenses available to it that are different from or in addition to those available to the other indemnified parties or (z) a conflict or potential conflict exists or may exist (based upon advice of counsel to an indemnified party) between such indemnified party and the other indemnified parties, in each of which cases the indemnifying party shall be obligated to pay the reasonable fees and expenses of such additional counsel or counsels.

(d)          Contribution. If for any reason the indemnification provided for in paragraphs (a) and (b) of this Section is unavailable to an indemnified party or insufficient in respect of any Losses referred to therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such Loss (i) in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party or parties on the other hand in connection with the acts, statements or omissions that resulted in such losses, as well as any other relevant equitable considerations. In connection with any Registration Statement filed with the SEC by the Company, the relative fault of the indemnifying party on the one hand and the indemnified party on the other hand shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just or equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The amount paid or payable by an indemnified party as a result of the Losses referred to in Sections 4.6(a) and 4.6(b) shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), in connection with any Registration Statement filed by the Company, a selling holder of Registrable Securities shall not be required to contribute any amount in excess of the dollar amount of the net proceeds received by such holder under the sale of Registrable Securities giving rise to such contribution obligation.

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Section 4.7           Rule 144 Compliance. The Company covenants that it will use its reasonable best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if the Company is not required to file such reports, it will, upon the request of any holder of Registrable Securities, make publicly available such necessary information for so long as necessary to permit sales pursuant to Rules 144 under the Securities Act), and take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities in compliance with (i) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon the request of a Holder, the Company will deliver a written statement as to whether it has complied with such requirements and, if not, the specifics thereof.

Section 4.8           Rule 415. Notwithstanding anything to the contrary contained in this Article IV, in the event the staff of the SEC (the “Staff”) or the SEC seeks to characterize any offering pursuant to a Shelf Registration Statement filed pursuant to this Agreement as constituting an offering of securities by, or on behalf of, the Company, or in any other manner, such that the Staff or the SEC do not permit such Shelf Registration Statement to become effective and used for resales in a manner that does not constitute such an offering and that permits the continuous resale at the market by the holders of Registrable Securities participating therein (or as otherwise may be acceptable to each Investor) without being named therein as an “underwriter,” then the Company shall reduce the number of shares to be included in such Shelf Registration Statement by all holders of Registrable Securities participating therein until such time as the Staff and the SEC shall so permit such Shelf Registration Statement to become effective as aforesaid. In making such reduction, the Company shall reduce the number of shares to be included by all holders of Registrable Securities participating therein on a pro rata basis (based upon the number of Registrable Securities otherwise required to be included for each such holder) unless the inclusion of shares by a particular holder or a particular set of holders are resulting in the Staff or the SEC’s “by or on behalf of the Company” offering position, in which event the shares held by such holder or set of holders shall be the only shares subject to reduction (and if by a set of holders on a pro rata basis by such holders or on such other basis as would result in the exclusion of the least number of shares by all such holders).  In addition, in the event that the Staff or the SEC requires any holder of Registrable Securities seeking to sell securities under a Shelf Registration Statement filed pursuant to this Agreement to be specifically identified as an “underwriter” in order to permit such Shelf Registration Statement to become effective, and such holder does not consent to being so named as an underwriter in such Shelf Registration Statement, then, in each such case, the Company shall reduce the total number of Registrable Securities to be registered on behalf of such holder, until such time as the Staff or the SEC does not require such identification or until such holder accepts such identification and the manner thereof. Any reduction pursuant to this paragraph will first reduce all securities that are not Registrable Securities, if any such securities are permitted by the holders to be included. In the event of any reduction in Registrable Securities pursuant to this Section 4.8, an affected holder thereof shall have the right to require, upon delivery of a written request to the Company signed by such holder, the Company to file a registration statement within thirty (30) days of such request (subject to any restrictions imposed by Rule 415 or required by the Staff or the SEC) for resale by such holder in a manner acceptable to such holder, and the Company shall following such request cause to be and keep effective such registration statement in the same manner as otherwise contemplated in this Agreement for registration statements hereunder, in each case until such time as: (i) all Registrable Securities held by such holder have been registered and sold pursuant to an effective Registration Statement in a manner acceptable to such holder or (ii) such holder agrees to be named as an underwriter in any such Registration Statement in a manner acceptable to such holder as to all Registrable Securities held by such holder and that have not theretofore been included in a Registration Statement under this Agreement (it being understood that the special demand right under this sentence may be exercised by a holder multiple times and with respect to limited amounts of Registrable Securities in order to permit the resale thereof by such holder as contemplated above).

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Section 4.9           Deemed Holdings. For purposes of determining whether a holder holds or owns Registrable Securities under this Article IV, it is expressly understood and agreed that (i) Mark Global shall be deemed to own and hold all Registrable Securities held by Mark Global, Rakishev and any other Person controlled by Rakishev (expressly excluding the Company if Rakishev Controls the Company) and such Registrable Securities shall be deemed to be Mark Global’s Registrable Securities and (ii) Zoi shall be deemed to own and hold all Registrable Securities held by TGR, Zoi and any other Person controlled by Zoi (expressly excluding the Company if Zoi Controls the Company) and such Registrable Securities shall be deemed to be Zoi’s Registrable Securities.

Article V

TRANSFER RESTRICTIONS

Section 5.1           Tag Along Rights.

(a)          In the case of a proposed Transfer by TGR, Zoi or any of their Permitted Transferees (a “Transferring Shareholder”) of any or all of its shares of Company Common Stock, other than (i) to the Company, (ii) to a Permitted Transferee, (iii) a De Minimis Transfer, (iv) any Transfer to the public pursuant to Rule 144 under the Securities Act or (v) any Transfer to the public pursuant to any Registration Statement, provided that, if the transaction was an Underwritten Offering, Mark Global and Rakishev had the opportunity of participating in the Underwritten Offering pari passu with TGR, Mark Global, Rakishev or any of their Permitted Transferees (a “Tagging Shareholder”) shall, to the fullest extent permitted by applicable law, have the right to participate in such sale by selling to the proposed Transferee (a “Proposed Transferee”) up to a number of its shares of Company Common Stock equal to the product of (A) the total number of shares of Company Common Stock proposed to be Transferred by the Transferring Shareholder multiplied by (B) a fraction, the numerator of which is the aggregate number of shares of Company Common Stock owned by such Tagging Shareholder and the denominator of which is the aggregate number of shares of Company Common Stock owned by TGR, Zoi, Mark Global, Rakishev and each of their Permitted Transferees collectively. Transferring Shareholder shall take such lawful actions as may be reasonably requested by Tagging Shareholder to facilitate the closing of the applicable transaction and to effectuate the provisions of this Section 5.1.

(b)          In connection with any transaction to which Section 5.1(a) hereof shall be applicable, the Transferring Shareholder shall give notice to Mark Global, Rakishev and each of their Permitted Transferees of a proposed Transfer not later than twenty (20) Business Days prior to the closing of the proposed Transfer, setting forth the number of shares of Company Common Stock proposed to be so Transferred, the name and address of the Proposed Transferee, the proposed amount and form of consideration (and, if such consideration consists in part or in whole of property other than cash, the Transferring Shareholder shall provide such information, to the extent reasonably available to the Transferring Shareholder, relating to such non-cash consideration as Mark Global and Rakishev may reasonably request in order to evaluate such non-cash consideration), and other terms and conditions of payment offered by the Proposed Transferee. The Transferring Shareholder shall deliver or cause to be delivered to each Tagging Shareholder copies of all transaction documents relating to the Proposed Transfer as the same become available. The tag-along rights provided by this Section 5.1 must be exercised by the Tagging Shareholder within ten (10) Business Days following receipt of the notice required by the first sentence of this Section 5.1(b), by delivery of a written notice to the Transferring Shareholder indicating its desire to exercise its rights and specifying the number of shares of Company Common Stock it desires to Transfer.

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(c)          Any Transfer of shares of Company Common Stock by a Tagging Shareholder to a Proposed Transferee pursuant to this Section 5.1 shall be on the same terms and conditions (including, without limitation, price, time of payment and form of consideration) as to be paid to the Transferring Shareholder; provided that in order to be entitled to exercise its tag along right pursuant to this Section 5.1, each Tagging Shareholder must agree to make to the Proposed Transferee representations, warranties, covenants, indemnities and agreements the same mutatis mutandis as those made by the Transferring Shareholder in connection with the Proposed Transfer (other than any non-competition or similar agreements or covenants that would bind the Tagging Shareholder or its Affiliates), and agree to the same conditions to the Proposed Transfer as the Transferring Shareholder agrees, it being understood that all such representations, warranties, covenants, indemnities and agreements shall be made by the Transferring Shareholder and each Tagging Shareholder severally and not jointly and that, except with respect to individual representations, warranties, covenants, indemnities and other agreements of the Tagging Shareholder as to the unencumbered title to its shares of Company Common Stock and the power, authority and legal right to Transfer such shares of Company Common Stock, the aggregate amount of the liability of the Tagging Shareholder shall not exceed either (i) such Tagging Shareholder’s pro rata portion of any such liability to be determined in accordance with such Tagging Shareholder’s portion of the total number of shares of Company Common Stock included in such Transfer or (ii) the proceeds to such Tagging Shareholder in connection with such Transfer. Each Tagging Shareholder shall be responsible for its proportionate share of the costs of the Proposed Transfer to the extent not paid or reimbursed by the Proposed Transferee or the Company.

Section 5.2           Rights and Obligations of Transferees. Any transfer of shares of Company Common Stock to a Permitted Transferee shall be permitted hereunder only if the transferee of such shares of Company Common Stock agrees in writing that it shall, upon such Transfer, assume with respect to such shares of Company Common Stock the transferor’s obligations under this Agreement and become a party to this Agreement for such purpose, and any other agreement or instrument executed and delivered by such transferor in respect of the shares of Company Common Stock.

Section 5.3           Termination of Transfer Restrictions. The provisions of this Article V shall terminate and be of no further force and effect upon the earlier of (i) the date on which TGR or its Permitted Transferees cease to hold collectively 15% of the outstanding Company Common Stock or (ii) the date on which Mark Global, Rakishev or their Permitted Transferees ceases to hold collectively 5% of the outstanding Company Common Stock.

Section 5.4           Legend. The Company shall cause its Transfer Agent, and the Holders shall use their best efforts to cooperate with the Company and the Transfer Agent, to place a legend on the Registrable Securities indicating that such Registrable Securities are bound by and subject to the terms of this Agreement.

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Article VI

GENERAL PROVISIONS

Section 6.1           Assignment; Benefit.

             (a)            The rights and obligations hereunder shall not be assignable without the prior written consent of the other parties hereto except that each of Mark Global or Rakishev, on the one hand, and TGR or Zoi, on the other hand, may transfer shares of Company Common Stock owned by it or him to any other entity controlled by Rakishev or Zoi, as the case may be, and upon execution of a joinder to this Agreement by the new entity, such new entity shall have the rights and obligations of the transferee. Any assignment of rights or obligations in violation of this Section 6.1 shall, to the fullest extent permitted by law, be null and void.

(b)          This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, and their respective successors and permitted assigns, and there shall be no third-party beneficiaries to this Agreement other than the indemnitees under Section 4.6.

Section 6.2           Termination. This Agreement shall terminate after each of Mark Global and its Affiliates, on the one hand, and TGR and its Affiliates, on the other hand, shall have transferred all shares of Company Common Stock owned by them to an unrelated third party. In addition, upon the written request of Mark Global at any time and from time to time, the terms of Article III and/or Article V of this Agreement may be terminated, and in such cases all other provisions of this Agreement shall survive notwithstanding such partial termination.

Section 6.3           Severability. In the event that any provision of this Agreement shall be invalid, illegal or unenforceable such provision shall be construed by limiting it so as to be valid, legal and enforceable to the maximum extent provided by law and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 6.4           Entire Agreement; Amendment.

(a)          This Agreement sets forth the entire understanding and agreement between the parties with respect to the subject matter hereof and supersedes and replaces any prior understanding, agreement or statement of intent, in each case written or oral, of any kind and every nature with respect hereto. No provision of this Agreement may be amended, modified or waived in whole or in part at any time without an agreement in writing executed by each of the parties hereto.

(b)          No waiver of any breach of any of the terms of this Agreement shall be effective unless such waiver is expressly made in writing and executed and delivered by the party against whom such waiver is claimed. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. Except as otherwise expressly provided herein, no failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder, or otherwise available in respect hereof at law or in equity, shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

Section 6.5           Counterparts. This Agreement may be executed in any number of separate counterparts each of which when so executed shall be deemed to be an original and all of which together shall constitute one and the same agreement. This Agreement may be executed and delivered by facsimile or PDF and, upon such delivery, the facsimile or PDF signature will be deemed to have the same effect as if the original signature had been delivered to the other parties hereto.

Section 6.6           Notices. Unless otherwise specified herein, all notices, consents, approvals, reports, designations, requests, waivers, elections and other communications authorized or required to be given pursuant to this Agreement shall be in writing and shall be given, made or delivered (and shall be deemed to have been duly given, made or delivered upon receipt) by personal hand-delivery, by facsimile transmission, by electronic mail, by mailing the same in a sealed envelope, registered first-class mail, postage prepaid, return receipt requested, or by air courier guaranteeing overnight delivery, addressed to the Shareholder at the addresses set forth on the signature page to this Agreement (or at such other address for a Shareholder as shall be specified by like notice).

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Section 6.7           Independent Auditors; Books and Records; Inspection.

(a)          The books of account and records of the Company shall be audited as of the end of each fiscal year by a firm of independent public accountants selected by the Board of Directors or the Audit Committee of the Board of Directors.

(b)          The books and records of the Company shall be available for inspection by each of TGR and Mark Global at the principal office and place of business of the Company.

Section 6.8           Governing Law. THIS AGREEMENT AND ANY RELATED DISPUTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.

Section 6.9           Jurisdiction.

(a)          To the fullest extent permitted by law, each of the Parties unconditionally and irrevocably agrees to submit to the exclusive jurisdiction of the state and federal courts located in Wilmington, Delaware for any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement and hereby irrevocably waives, to the fullest extent permitted by applicable law, and agrees not to assert any objection, whether as a defense or otherwise, that such Party may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding that is brought in any such court has been brought in an inconvenient forum or that such suit, action or proceeding may not be brought or is not maintainable in such courts or that the venue thereof may not be appropriate, or that this Agreement may not be enforced in or by such courts. To the fullest extent permitted by law, each Party agrees that a final non-appealable judgment in any such suit, action or proceeding shall be conclusive and may be enforced in any other jurisdiction in which a Party may be found or may have assets by suit on the judgment or in any other manner provided by applicable law, and agrees to the fullest extent permitted by law to consent to the enforcement of any such judgment and not to oppose such enforcement or to seek review on the merits of any such judgment in any such jurisdiction.

(b)          To the fullest extent permitted by law, each of the Parties hereby irrevocably consents to the service of process outside the territorial jurisdiction of such courts in any suit, action or proceeding by giving copies thereof by overnight courier to the address of such Party specified in section 6.6 and such service of process shall be deemed effective service of process on such Party; provided, however, that the foregoing shall not limit the right of any Party to effect service of process on the other Party by any other legally available method.

Section 6.10         Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH PARTY HERETO WAIVES, AND COVENANTS THAT SUCH PARTY WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH THE DEALINGS OF ANY PARTY HERETO OR THE COMPANY IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT, TORT OR OTHERWISE.

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Section 6.11         Specific Performance. It is hereby agreed and acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties fail to comply with any of the obligations herein imposed on them by this Agreement and that, in the event of any such failure, an aggrieved party will be irreparably damaged and will not have an adequate remedy at law. Any such party shall, therefore, be entitled (in addition to any other remedy to which such party may be entitled at law or in equity) to injunctive relief, including specific performance, to enforce such obligations, without the posting of any bond, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law.

Section 6.12         Subsequent Acquisition of Shares. Any securities of the Company acquired subsequent to the date hereof by a Shareholder shall be subject to the terms and conditions of this Agreement.

Section 6.13         Effective Time of this Agreement. Notwithstanding anything contained in this agreement to the contrary, this Agreement shall not be effective (other than this Section 6.13) until 12:01 a.m. (New York time) on the first (1^st) Business Day immediately following the date on which Mark Global, together with its Affiliates, has beneficial ownership (as determined under Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder by the SEC) of greater than 10% of the Company Common Stock.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first above written.

NET ELEMENT, INC.
By:	/s/ Mike Zoi
	Name:
	Title:
	Address:	Net Element, Inc.
		1450 S. Miami Ave
		Miami, FL 33130
		Attention: CFO
	Facsimile:	(305) 358-7876

MARK GLOBAL CORPORATION
By:	/s/ Nurlan Abduov
	Name: Nurlan Abduov
	Title:   Director
	Address:	Mark Global Corporation
		c/o Trident Trust Company (B.V.I.) Limited
		Trident Chambers, P.O. Box 146
		Road Town, Tortola
		British Virgin Islands
	Facsimile:

With a copy to:

Greenberg Traurig, LLP

200 Park Avenue

Florham Park, NJ 07932

Attention: Robert I. Wexler, Esquire

Telephone:  (973) 443-3565

Facsimile:  (973) 301-8410

TGR CAPITAL, LLC
By:	ENERFUND, LLC, its sole Member
	By:	/s/ Mike Zoi
		Mike Zoi, Managing Member

Address:	TGR Capital, LLC
	1450 S. Miami Ave
	Miami, FL 33130
	Attention: CFO
Facsimile:	(305) 358-7876

[Signatures continue on next page.]

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ENERFUND, LLC, a Florida limited liability company
	By:	/s/ Mike Zoi
		Mike Zoi, Managing Member
	Address:		TGR Capital, LLC
			1450 S. Miami Ave
			Miami, FL 33130
			Attention: CFO
			Facsimile:  (305) 358-7876

MZ CAPITAL, LLC, a Florida limited liability company
	By:	/s/ Mike Zoi
		Mike Zoi, Managing Member
	Address:		TGR Capital, LLC
			1450 S. Miami Ave
			Miami, FL 33130
			Attention: CFO
			Facsimile:  (305) 358-7876

MZ CAPITAL, LLC, a Delaware limited liability company
	By:	/s/ Mike Zoi
		Mike Zoi, Manager
	Address:		TGR Capital, LLC
			1450 S. Miami Ave
			Miami, FL 33130
			Attention: CFO
			Facsimile:  (305) 358-7876

/s/ Kenges Rakishev

Kenges Rakishev

/s/ Mike Zoi

Mike Zoi

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EX-10.1

EXECUTION COPY

SUBSCRIPTION AGREEMENT

This SUBSCRIPTION AGREEMENT (the “Agreement”), dated as of February 23, 2012, is by and between Net Element, Inc., a Delaware corporation (the “Company”), and Kenges Rakishev (the “Buyer”).

RECITALS

A.          The Company and Buyer are each executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.

B.          Buyer wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, 13,333,334 shares of Common Stock (as defined below) (such 13,333,334 shares of Common Stock are collectively referred to herein as the “Common Shares”).

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 Buyer hereby agree as follows:

1.            PURCHASE AND SALE OF COMMON SHARES.

(a)          Common Shares. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue and sell to Buyer, and Buyer shall purchase from the Company on the Closing Date (as defined below), the Common Shares.

(b)          Closing. The closing (the “Closing”) of the purchase of the Common Shares by the Buyer shall occur at the offices of Greenberg Traurig, LLP, 200 Park Avenue, Florham Park, NJ 07932. The date and time of the Closing (the “Closing Date”) shall be 10:00 a.m., New York time, on the first (1^st) Business Day (as defined below) 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 Buyer). “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 aggregate purchase price for the Common Shares to be purchased by Buyer shall be $2,000,000.10 (the “Purchase Price”).

(d)          Payment of Purchase Price; Deliveries. On the Closing Date, (i) (A) Buyer shall pay the Purchase Price to the Company for the Common Shares to be issued and sold to Buyer at the Closing, by wire transfer of immediately available funds in accordance with the Company’s written wire instructions, and (B) Buyer shall deliver to the Company a duly completed and executed Internal Revenue Service Form W-8BEN or other appropriate Form W-8, and (ii) the Company shall deliver to Buyer one or more stock certificates, free and clear of all restrictive and other legends (except as expressly provided in Section 5(c) hereof), evidencing the Common Shares, duly executed on behalf of the Company and registered in the name of Buyer or its designee.

2.            BUYER’S REPRESENTATIONS AND WARRANTIES.

Buyer represents and warrants to the Company that:

(a)          Authority. Buyer has 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. “Transaction Documents” means, collectively, this Agreement, 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.

(b)          No Public Sale or Distribution. Buyer is acquiring the Common Shares 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, Buyer does not agree, or make any representation or warranty, to hold any of the Common Shares for any minimum or other specific term and reserves the right to dispose of the Common Shares at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act. Buyer does not presently have any agreement or understanding, directly or indirectly, with any Person (as defined below) to distribute any of the Common Shares in violation of applicable securities laws. “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.

(c)          Accredited Investor Status; Residence. Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933 Act. Buyer has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of his investment in the Company through his purchase of the Common Shares. Buyer is able to bear the economic risk of such investment for an indefinite period of time. At the present time, Buyer can afford a complete loss of such investment and has no need for liquidity in such investment. Buyer is a resident of the Republic of Kazakhstan.

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(d)          Reliance on Exemptions. Buyer understands that the Common Shares are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of Buyer to acquire the Common Shares.

(e)          Information. Buyer acknowledges that he has carefully reviewed this Agreement and the Company’s filings with the SEC since January 1, 2011, which are available on the Internet at www.sec.gov, all of which filings Buyer acknowledges have been made available to him. Buyer and his 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 Common Shares which have been requested by Buyer. Buyer and his advisors, if any, have been afforded the opportunity to ask questions of the Company. Buyer has sought such accounting, legal and tax advice as he has considered necessary to make an informed investment decision with respect to his acquisition of the Common Shares. Buyer understands that his investment in the Common Shares involves a high degree of risk in that: (i) the Company is a development stage company and has a limited operating history upon which an evaluation of its prospects can be made; (ii) an investment in the Company is highly speculative and only investors who can afford the loss of their entire investment should consider investing in the Company and securities of the Company; (iii) transferability of the Common Shares is limited; (iv) the Company has experienced recurring losses and it must raise substantial additional capital in order to continue operating its business; (v) subsequent equity financings will dilute the ownership and voting interests of Buyer and his affiliates and equity securities issued by the Company to other persons or entities may have rights, preferences or privileges senior to the rights of Buyer; (vi) any debt financing that may be obtained by the Company must be repaid regardless of whether the Company generates revenues or cash flows from operations and may be secured by substantially all of the Company’s assets; (vii) there is absolutely no assurance that any type of financing on terms acceptable to the Company will be available to the Company or otherwise obtained by the Company; and (viii) if the Company is unable to obtain additional financing or is unable to obtain additional financing on terms acceptable to it, then the Company may be unable to implement its business plans or take advantage of business opportunities, which could have a material adverse effect on the Company’s business prospects, financial condition and results of operations and may ultimately require the Company to suspend or cease operations.

(f)          No Governmental Review. Buyer 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 Common Shares or the fairness or suitability of the investment in the Common Shares nor have such authorities passed upon or endorsed the merits of the offering or sale of the Common Shares.

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(g)          Transfer or Resale. Buyer understands that: (i) the Common Shares 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 or transferred unless (A) subsequently registered thereunder, (B) Buyer shall have delivered to the Company (if requested by the Company) an opinion of counsel to Buyer, in a form reasonably acceptable to the Company, to the effect that the applicable Common Shares to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) Buyer provides the Company with reasonable assurance that the applicable Common Shares can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of Common Shares made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of Common Shares under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) 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 Common Shares 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 by Buyer and constitutes the legal, valid and binding obligations of Buyer enforceable against Buyer 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 Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby will not (i) 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 Buyer is a party, or (ii) result in a violation of any law, rule, regulation, order, judgment or decree (including U.S. federal and state securities laws and any non-U.S. laws) applicable to Buyer, except in the case of clauses (i) and (ii) 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 Buyer to perform its obligations hereunder.

(k)          OFAC. Buyer is not (i) a Person included in the Specially Designated Nationals and Blocked Persons lists, as published from time to time by the U.S. Office of Foreign Assets Control (“OFAC”), (ii) currently subject to any U.S. economic sanctions administered by OFAC, (iii) to Buyer’s knowledge, a Person with whom the Company is prohibited from dealing or otherwise engaging in any transaction by any anti-money laundering laws or anti-terrorism laws, including the USA Patriot Act of 2001 and the 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)), (iv) to Buyer’s knowledge, a Person covered by or subject to (or is resident, organized or otherwise located in any country that is covered by or subject to) sanctions under the International Emergency Economic Powers Act, the Trading with the Enemy Act or any other applicable laws imposing economic sanctions against or prohibiting transacting business with, for or on behalf of any country, region or individual pursuant to United States law or United Nations resolution, or (v) to Buyer’s knowledge, named on any applicable list of known suspected terrorists, terrorist organizations or of other sanctioned Persons issued by any governmental authority of any jurisdiction in which the Company has conducted or is conducting business.

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3.            REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to the Buyer that:

(a)          Organization and Standing. Each of the Company and each of its Subsidiaries (as defined below) is duly organized, validly existing and in good standing under the laws of the jurisdiction of their respective incorporation, organization or formation. Each of the Company and each of its Subsidiaries has full corporate power and authority and all necessary government approvals to own, lease and operate its respective properties and assets and to conduct its respective businesses as presently conducted. Each of the Company and each of its Subsidiaries is duly qualified to do business as a foreign corporation or other entity and is in good standing in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its respective business makes such qualification necessary, except that where any such failure has not had, or could not reasonably be expected to have a material adverse effect on the business, assets, condition (financial or otherwise), results of operations or prospects of the Company and its Subsidiaries, taken as a whole (a “Material Adverse Effect”). Other than the Persons set forth on Schedule 3(a), the Company has no Subsidiaries. “Subsidiaries” means any Person in which the Company, directly or indirectly, (I) owns any of the outstanding capital stock or holds any 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)          Capital Stock of the Company. As of the date hereof, the Company has authorized capital stock consisting of 2,500,000,000 shares of Common Stock, of which 747,674,446 shares are issued and outstanding, and 100,000,000 shares of preferred stock, $.001 par value, of which no shares are issued and outstanding. As of such date, 149,970,000 shares of the Company’s capital stock were reserved for issuance upon the exercise of outstanding stock options. All of the issued and outstanding shares of capital stock of the Company and of each of its Subsidiaries have been duly authorized and validly issued, are fully paid and non-assessable, and are free of preemptive rights. The Company has 6,250,000 treasury shares. Except as set forth on Schedule 3(b)(i) attached hereto, the Company owns all of the outstanding capital stock, membership interests, partnership interests or other equity interests in its Subsidiaries. Except as set forth on Schedule 3(b)(ii) attached hereto, neither the Company nor any Subsidiary has outstanding any subscriptions, options, warrants, or other rights to purchase, or securities or other obligations convertible into or exchangeable for, or contracts, commitments, agreements, arrangements, or understandings, to issue, any shares of its capital stock, membership interests or other securities. Schedule 3(b)(ii) hereto sets forth the number of (i) warrants to purchase shares of the Common Stock and (ii) options to purchase and securities convertible into shares of the Common Stock. “Common Stock” means (i) the Company’s shares of common stock, $.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.

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(c)          No Violation. 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 Common Shares) will not violate (with or without the giving of notice or the lapse of time or both), conflict with, or result in any violation of or default under (i) any provision or restriction of the Company’s certificate of incorporation, as amended and as in effect on the date hereof (the “Certificate of Incorporation”) (including, without limitation, any certificates of designation contained therein), the Company’s bylaws, as amended and as in effect on the date hereof (the “Bylaws”) or other organizational documents of the Company or any of its Subsidiaries, (ii) any agreement, indenture or other instrument to which the Company or any Subsidiary is a party or may be bound or (iii) any shareholders’ agreement, voting trust, proxy or other similar agreement to which the Company or any of its Subsidiaries is a party or may be bound. 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 will not (A) violate any judgment, decree, order or award of any court, governmental body or other authority to which the Company is subject or (B) violate any statute, regulation, ordinance or code of any foreign, federal, state or local government or other governmental department or agency.

(d)          Legal Compliance. Each of the Company and its Subsidiaries is in material compliance with, and the respective businesses of the Company and its Subsidiaries are being conducted in compliance with, all applicable laws, orders and permits which are necessary to conduct the businesses now operated by them, and, neither the Company nor any of its Subsidiaries has received written notice of any litigation alleging any failure to so comply, except in each case such as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The material permits under which the Company and its Subsidiaries are operating or bound (i) constitute all material permits used or required in the conduct of the respective businesses of the Company and its Subsidiaries as presently conducted and (ii) are in full force and effect, except in each case as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(e)          Material Contracts. Except as set forth in Schedule 3(e) attached hereto, neither the Company nor any of its Subsidiaries is in default, and no event has occurred which, with due notice or lapse of time or both, would constitute such a default under, any material contract, agreement, instrument, commitment and other arrangement to which the Company or any Subsidiary is a party or otherwise relating to or affecting any of their respective assets, including, without limitation, employment, severance or consulting agreements, loan, credit or security agreements, joint venture agreements and license and distribution agreements, except in each case such as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(f)          Reports and Financial Statements.

(i)          Except as set forth in Schedule 3(f)(i) attached hereto, the Company has filed with the SEC true and complete copies of all reports, schedules, forms, statements and any definitive proxy or information statements required to be filed by the Company pursuant to the Securities Exchange Act of 1934, as amended (the “1934 Act”), since January 1, 2011 (the “SEC Filings”), each of which has complied in all material respects with the 1934 Act and the rules and regulations promulgated thereunder, as in effect on the date so filed, except to the extent updated, amended, restated or corrected by a subsequent SEC Filing filed or furnished to the SEC by the Company and in either case, publicly available prior to the date hereof. None of the SEC Filings (including, any financial statements or schedules included or incorporated by reference therein) contained when filed any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except to the extent updated, amended, restated or corrected by a subsequent SEC Filing.

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(ii)          Except to the extent updated, amended, restated or corrected by a subsequent SEC Filing, all of the financial statements included in the SEC Filings, in each case, including any related notes thereto, as filed with the SEC (those filed with the SEC are collectively referred to as the “Financial Statements”), have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as may be permitted by Form 10-Q of the SEC and subject, in the case of the unaudited statements, to normal, year-end audit adjustments which could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect). (i) The consolidated balance sheets (including the related notes) included in the Financial Statements (if applicable, as updated, amended, restated or corrected in a subsequent SEC Filing) fairly present, in all material respects, the consolidated financial position of the Company and its consolidated Subsidiaries at the respective dates thereof, and (ii) the consolidated statements of operations, stockholders’ equity (in the audited financial statements of the Company) and cash flows (in each case, including the related notes) included in the Financial Statements (if applicable, as updated, amended, restated or corrected in a subsequent SEC Filing) fairly present, in all material respects, the consolidated statements of operations, stockholders’ equity (in the audited financial statements of the Company) and cash flows of the Company and its consolidated Subsidiaries for the periods indicated, subject, in the case of the unaudited statements, to normal, year-end audit adjustments which could not reasonably be expected to be material in the aggregate.

(iii)          The Company has designed and maintains a system of “internal control over financial reporting” (as defined in Rules 13a-15(f) and 15d-15(f) of the 1934 Act). However, as described in Item 9A of the Company’s Transition Report, as amended, on Form 10-KT/A for the period ended December 31, 2010, the Company’s management has identified material weaknesses in the Company’s internal control over financial reporting, which have not been fully remediated as of the date of this Agreement.

(iv)          Subject to the disclosure set forth in the Company’s latest filed Form 10-Q with the SEC regarding the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the 1934 Act), the management of the Company has (i) implemented disclosure controls and procedures that comply in all material respects with the requirements of the 1934 Act, and (ii) has disclosed, based on its most recent evaluation of internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the 1934 Act), to the Company’s outside auditors and the board of directors of the Company (A) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. Neither the Company nor any of its consolidated Subsidiaries has any liabilities or obligations of any kind whatsoever, whether or not accrued and whether or not contingent or absolute, that are material to the Company and its consolidated Subsidiaries, taken as a whole, other than (i) liabilities or obligations disclosed or provided for in the consolidated financial statements of the Company and its consolidated subsidiaries as of June 30, 2011, including the notes thereto, contained in the SEC Filings, (ii) liabilities or obligations incurred in the ordinary course of business consistent with past practice since July 1, 2011, (iii) liabilities or obligations disclosed in SEC Filings since July 1, 2011, and (iv) other liabilities or obligations that were not, or could not reasonably be expected to be, material and adverse to the businesses of the Company and its consolidated Subsidiaries, taken as a whole.

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(g)          Broker’s Fees. Neither the Company nor any of its officers or directors has retained or authorized any investment banker, broker, finder or other intermediary to act on behalf of the Company or incurred any liability for any banker’s, broker’s or finder’s fees or commissions in connection with the transactions contemplated by this Agreement.

(h)          Litigation. Except as set forth on Schedule 3(h) attached hereto, there is no action, suit, proceeding, inquiry or investigation before or by 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 Subsidiaries’ officers or directors in their capacities as such, that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(i)          Bankruptcy. Neither the Company nor any of its Subsidiaries has taken any steps to seek protection pursuant to any bankruptcy law nor does the Company or any of its Subsidiaries have (i) any knowledge or reason to believe that any creditors of the Company or any of its Subsidiaries intend to initiate involuntary bankruptcy proceedings with respect to the Company or any of its Subsidiaries or (ii) any actual knowledge of any fact which would reasonably lead a creditor to initiate involuntary bankruptcy proceedings with respect to the Company or any of its Subsidiaries.

(j)          Actions in the Ordinary Course of Business. Except as disclosed in the SEC Filings and except for an aggregate of $100,785 which has been advanced to the Company by Mike Zoi or one or more entities controlled by him to fund continuing operations of the Company, since January 1, 2011, neither the Company nor any of its Subsidiaries (i) has taken any action or entered into any material transaction, other than contemplated hereby, outside the ordinary and usual course of business; (ii) has borrowed any money or become contingently liable for any obligation or liability of another outside the ordinary and usual course of business; (iii) has failed to pay any of its uncontested debts and obligations as they become due; (iv) has incurred any debt, liability, or obligation of any nature to any party, except for obligations arising from the purchase of goods or the rendition of services in the ordinary and usual course of business; (v) has failed to use its best efforts to preserve its business organization intact, to keep available the services of its employees and independent contractors, or to preserve its relationships with its customers, suppliers, and others with which it deals; (vi) has sold, transferred, leased, or encumbered any of its assets or properties outside the ordinary and usual course of business; (vii) has waived any material right, (viii) has written off any assets or properties; or (ix) has hired any employees or, other than decreasing in 2011 and then increasing later in 2011 the compensation of certain employees of the Company, increased the compensation of any employees outside the ordinary and usual course of business.

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(k)          No Prohibited Payments. Neither the Company nor any of its Subsidiaries nor any officer, director, employee, independent contractor, or agent, acting on behalf of the Company or any of its Subsidiaries, has at any time (i) made any contributions to any candidate for political office in violation of law or failed to disclose fully any contributions to any candidate for political office in accordance with any applicable statute, rule, regulation, or ordinance requiring such disclosure, (ii) made any payment to any local, state, federal, or foreign governmental officer or official, or other Person charged with similar public or quasi-public duties, other than payments required or allowed by applicable law, (iii) made any payment outside the ordinary course of business to any purchasing or selling agent or Person charged with similar duties of any entity to which the Company or any of its Subsidiaries sells products or renders services or from which the Company or any of its Subsidiaries buys products or services for the purpose of influencing such agent or Person to buy products or services from or sell products or services to the Company or any of its Subsidiaries, or (iv) engaged in any transaction, maintained any bank account, or used any corporate funds, except for transactions, bank accounts, and funds that have been and are reflected in the normally maintained books and records of the Company or any of its Subsidiaries.

(l)          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 to issue the Common Shares 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 Common Shares) have been duly authorized by the Company’s board of directors and (other than any filings as may be required by the SEC or any state securities agencies) no further filing, consent or authorization is required by the Company, its board of directors or its stockholders or other governing body. 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.

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(m)          Consents. The Company is not required to obtain any consent from, authorization or order of, or make any filing or registration with (other than any filings as may be required by the SEC or any state securities agencies), 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 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 neither the Company nor any of its Subsidiaries are 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. The Company is not in violation of the requirements of the Principal Market (as defined below) 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. 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 of former director or officer of the Company or any of its Subsidiaries.

(o)          Issuance of Common Shares. The issuance of the Common Shares 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. Subject to the accuracy of the representations and warranties of the Buyer in this Agreement, the offer and issuance by the Company of the Common Shares is exempt from registration under the 1933 Act.

(p)          Acknowledgment Regarding Buyer’s Purchase of Common Shares. The Company acknowledges and agrees that Buyer 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. The Company further acknowledges that Buyer 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 Buyer or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to Buyer’s purchase of the Common Shares. The Company further represents to Buyer that the Company’s decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives.

(q)          No General Solicitation; No Integrated Offering. 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 Common Shares. None of the Company, its Subsidiaries or any of their affiliates, nor 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 Common Shares under the 1933 Act, whether through integration with prior offerings or otherwise, or cause this offering of the Common Shares 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 any Person acting on their behalf will take any action or steps that would require registration of the issuance of any of the Common Shares under the 1933 Act or cause the offering of any of the Common Shares to be integrated with other offerings of securities of the Company.

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(r)          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) or other similar anti-takeover provision under the Certificate of Incorporation, Bylaws or other organizational documents or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to Buyer as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Common Shares and Buyer’s ownership of the Common Shares. 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.

(s)          Investment Company Status. The Company is not, and upon consummation of the sale of the Common Shares 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.

(t)          Manipulation of Price. Neither the Company nor any of its Subsidiaries has, and, to the knowledge of the Company, no Person acting on their behalf has, directly or indirectly, (i) taken any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company or any of its Subsidiaries to facilitate the sale or resale of any of the Common Shares, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Common Shares, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company or any of its Subsidiaries.

(u)          Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other than income or similar taxes), if any, which are required to be paid in connection with the issuance and sale of the Common Shares to Buyer hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes, if any, will be or will have been complied with.

(v)          OFAC. Neither the Company or any of its Subsidiaries, nor, to the Company’s actual knowledge, is any affiliate, principal, director, officer, employee of, or any Person acting on behalf of or controlled by, the Company or any of its Subsidiaries, (i) a Person included in the Specially Designated Nationals and Blocked Persons lists, as published from time to time by OFAC, (ii) currently subject to any U.S. economic sanctions administered by OFAC, (iii) to the Company’s knowledge, a Person with whom the Buyer is prohibited from dealing or otherwise engaging in any transaction by any anti-money laundering laws or anti-terrorism laws, including the USA Patriot Act of 2001 and the 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)), (iv) to the Company’s knowledge, a Person covered by or subject to (or is resident, organized or otherwise located in any country that is covered by or subject to) sanctions under the International Emergency Economic Powers Act, the Trading with the Enemy Act or any other applicable laws imposing economic sanctions against or prohibiting transacting business with, for or on behalf of any country, region or individual pursuant to United States law or United Nations resolution, or (v) to the Company’s knowledge, named on any applicable list of known suspected terrorists, terrorist organizations or of other sanctioned Persons issued by any governmental authority of any jurisdiction in which the Buyer has conducted or is conducting business. 

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The Company acknowledges and agrees that Buyer is not making, and has not made, any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 2.

4.            COVENANTS.

(a)          Best Efforts. Buyer shall use its 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 best efforts to timely satisfy each of the conditions to be satisfied by it as provided in Section 7

of this Agreement.

(b)          Form D and Blue Sky. The Company shall file a Form D with respect to the Common Shares as required under Regulation D and to provide a copy thereof to Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to, qualify the Common Shares for sale to the Buyer at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyer on or prior to the Closing Date. Without limiting any other obligation of the Company under this Agreement, the Company shall timely make all filings and reports relating to the offer and sale of the Common Shares required under all applicable securities laws (including, without limitation, all applicable federal securities laws and all applicable “Blue Sky” laws), and the Company shall comply with all applicable foreign, federal, state and local laws, statutes, rules, regulations and the like relating to the offering and sale of the Common Shares to the Buyer.

(c)          Reporting Status. Until the first date after the Closing Date on which the Buyer no longer holds any of the Common 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 such filings or would otherwise permit such termination.

(d)          Use of Proceeds. The Company shall use the proceeds from the sale of the Common Shares hereunder solely for general working capital purposes.

(e)          Listing. The Company shall promptly secure the listing or designation for quotation (as the case may be) of all of the Common Shares upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed or designated for quotation (as the case may be) (subject to official notice of issuance) (but in no event later than the Closing Date) and shall maintain such listing or designation for quotation (as the case may be) of all the Common Shares from time to time issuable under the terms of the Transaction Documents on such national securities exchange or automated quotation system. The Company shall maintain the Common Stock’s listing or designation for quotation (as the case may be) on the OTCQB (the “Principal Market”), the OTCQX, the OTC Bulletin Board, The New York Stock Exchange, the NYSE Amex, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital 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(e).

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(f)          Fees. 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 Buyer, which Buyer acknowledges there are no such Persons) relating to or arising out of the transactions contemplated hereby, if any. The Company shall pay, and hold Buyer 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 provided for herein, each party to this Agreement shall bear its own fees, costs and expenses in connection with the transactions contemplated by this Agreement.

(g)          Pledge of Common Shares. Notwithstanding anything to the contrary contained in this Agreement (but subject to any limitations imposed by applicable securities laws), the Company acknowledges and agrees that the Common Shares may be pledged by Buyer in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Common Shares. The pledge of Common Shares shall not be deemed to be a transfer, sale or assignment of the Common Shares hereunder, and if Buyer effects a pledge of Common Shares, Buyer shall not be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document. The Company hereby agrees to execute and deliver such documentation as a pledgee of the Common Shares may reasonably request in connection with a pledge of the Common Shares to such pledgee by Buyer.

(h)          Disclosure of Transactions and Other Material Information. The Company shall, on or before 8:30 a.m., New York time, on the fourth (4th) Business Day after the date of this Agreement, file a Current Report on Form 8-K describing all the material terms of the transactions contemplated by the Transaction Documents in the form required by the 1934 Act and attaching all the material Transaction Documents (including, without limitation, this Agreement (and all schedules to this Agreement)) (including all attachments, the “8-K Filing”). Except for the 8-K Filing, neither the Company, its Subsidiaries nor Buyer shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, the Company shall be entitled, without the prior approval of Buyer, to make any press release or other public disclosure with respect to such transactions in substantial conformity with the 8-K Filing, provided that Buyer shall be consulted by the Company in connection with any such press release or other public statement prior to its release).

(i)          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, either individually or in the aggregate, in a Material Adverse Effect.

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(j)          Variable Rate Transaction. From the date hereof through the first date after the Closing Date on which the Buyer, together with Buyer’s Affiliates, cease to have “beneficial ownership” (as determined under Section 13(d) of the 1934 Act and the rules and regulations thereunder) greater than five percent (5%) of the Common Stock, the Company and each Subsidiary shall be prohibited from effecting or entering into an agreement to effect any Subsequent Placement (as defined below) involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the Company or any Subsidiary (i) issues or sells any Convertible Securities either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of, or quotations for, the shares of Common Stock at any time after the initial issuance of such Convertible Securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such Convertible Securities or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock, other than pursuant to a customary “weighted average” anti-dilution provision or (ii) enters into any agreement (including, without limitation, an “equity line of credit” which has non-customary or disproportionately dilutive provisions 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). Buyer shall be entitled to obtain injunctive relief against the Company and its Subsidiaries to preclude any such issuance, which remedy shall be in addition to any right to collect damages.

(k)          Participation Right. From the date hereof through the first date after the Closing Date on which the Buyer, together with Buyer’s Affiliates, cease to have “beneficial ownership” (as determined under Section 13(d) of the 1934 Act and the rules and regulations thereunder) of greater than five percent (5%) of the Common Stock, neither the Company nor any of its Subsidiaries shall, directly or indirectly, issue, offer, sell, grant any option or right to purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant of any option or right to purchase or other disposition of) any equity 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 (as defined below), any preferred stock or any purchase rights (any such issuance, offer, sale, grant, disposition or announcement is referred to as a “Subsequent Placement”) unless the Company shall have first complied with this Section 4(k). Buyer may elect, in its sole and absolute discretion, to assign its rights under the Section 4(k) to an Affiliate of Buyer, provided that such Affiliate shall be an “accredited investor” as that term is defined in Rule 501(a) of Regulation D and shall execute an instrument in form and substance reasonably acceptable to the Company pursuant to which such Affiliate joins in and agrees to be bound by the provisions of this Section 4(k).

(i)          At least five (5) Business Days prior to each proposed or intended Subsequent Placement, the Company shall deliver to Buyer an irrevocable written notice (the “Offer Notice”) of such proposed or intended issuance or sale or exchange (the “Offer”) of the securities being offered (the “Offered Securities”) in such Subsequent Placement, which Offer Notice shall (w) identify and describe the Offered Securities, (x) describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged, (y) identify the Persons (if known) to which or with which the Offered Securities are to be offered, issued, sold or exchanged and (z) offer to issue and sell to or exchange with Buyer (or Buyer’s Affiliate) in accordance with the terms of the Offer 100% of the Offered Securities.

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(ii)          To accept an Offer, in whole or in part, Buyer must deliver a written notice to the Company prior to the end of the fifth (5^th) Business Day after the Company’s delivery to Buyer of the applicable Offer Notice (the “Offer Period”), setting forth all or any portion of the Offered Securities that Buyer elects to purchase (the “Notice of Acceptance”). Notwithstanding the foregoing, if the Company desires to modify or amend the terms and conditions of the Offer prior to the expiration of the Offer Period, the Company may deliver to Buyer a new Offer Notice and the Offer Period shall expire on the fifth (5^th) Business Day after the Company’s delivery to Buyer of such new Offer Notice.

(iii)          The Company shall have thirty (30) days from the expiration of the Offer Period above (i) to offer, issue, sell or exchange all or any part of such Offered Securities as to which a Notice of Acceptance has not been given by Buyer (the “Refused Securities”) pursuant to a definitive agreement(s) (the “Subsequent Placement Agreement”), but only to the offerees described in the Offer Notice (if so described therein) and only upon terms and conditions (including, without limitation, unit prices and interest rates) that are not more favorable to the acquiring Person or Persons or less favorable to the Company than those set forth in the Offer Notice and (ii) to publicly announce, if required by applicable law, (a) the execution of such Subsequent Placement Agreement, and (b) either (x) the consummation of the transactions contemplated by such Subsequent Placement Agreement or (y) the termination of such Subsequent Placement Agreement, which shall be filed with the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement and any documents contemplated therein filed as exhibits thereto.

(iv)          In the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the terms specified in Section 4(k)(iii) above), then Buyer may, at its sole option and in its sole discretion, reduce the number or amount of the Offered Securities specified in its Notice of Acceptance to an amount that shall be not less than the number or amount of the Offered Securities that Buyer elected to purchase pursuant to Section 4(k)(ii) above multiplied by a fraction, (i) the numerator of which shall be the number or amount of Offered Securities the Company actually proposes to issue, sell or exchange and (ii) the denominator of which shall be the original amount of the Offered Securities. In the event that Buyer so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless and until such securities have again been offered to the Buyer in accordance with Section 4(k)(i) above.

(v)          Upon the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, Buyer shall acquire from the Company, and the Company shall issue to Buyer, the number or amount of Offered Securities specified in its Notice of Acceptance. The purchase by Buyer of any Offered Securities is subject in all cases to the preparation, execution and delivery by the Company and Buyer of a separate purchase agreement relating to such Offered Securities reasonably satisfactory in form and substance to Buyer and its counsel.

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(vi)          Any Offered Securities not acquired by Buyer or other Persons in accordance with this Section 4(k) may not be issued, sold or exchanged until they are again offered to Buyer under the procedures specified in this Agreement.

(vii)         The Company and Buyer agree that if Buyer elects to participate in the Offer, neither the Subsequent Placement Agreement with respect to such Offer nor any other transaction documents related thereto (collectively, the “Subsequent Placement Documents”) shall include any term or provision whereby Buyer shall be required to agree to any restrictions on trading as to any securities of the Company or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under or in connection with, any agreement previously entered into with the Company or any instrument received from the Company.

(viii)        Notwithstanding anything to the contrary in this Section 4(k) and unless otherwise agreed to by Buyer, the Company shall either confirm in writing to Buyer that the transaction with respect to the Subsequent Placement has been abandoned or shall publicly disclose, if required by applicable law, its intention to issue the Offered Securities, in either case in such a manner such that Buyer will not be in possession of any material, non-public information, by the fifth (5^th) Business Day following delivery of the Offer Notice. If by such fifth (5^th) Business Day, no public disclosure regarding a transaction with respect to the Offered Securities has been made, and no notice regarding the abandonment of such transaction has been received by Buyer, such transaction shall be deemed to have been abandoned and Buyer shall not be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries. Should the Company decide to pursue such transaction with respect to the Offered Securities, the Company shall provide Buyer with another Offer Notice in accordance with, and subject to, the terms of this Section 4(k) and Buyer will again have the right of participation set forth in this Section 4(k).

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(ix)          The restrictions contained in this Section 4(k) shall not apply in connection with the issuance of any Excluded Securities (as defined below). “Excluded Securities” means, collectively, (A) shares of Common Stock or options to purchase Common Stock to directors, officers, employees or consultants (provided that, (1) any such consultant may not be an Affiliate of either Mike Zoi or TGR Capital, LLC, may not be an officer, director or employee of the Company, and may not be providing, directly or indirectly, any capital to the Company, and (2) such shares or options must be issued or granted pursuant to a written, arms’ length agreement between the consultant and the Company in connection with bona fide services provided to the Company by such consultant) of the Company in their capacity as such pursuant to an Approved Share Plan (as defined below); and (B) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than options to purchase Common Stock issued pursuant to an Approved Share Plan that are covered by clause (A) above) issued prior to the date of this Agreement, provided that the conversion or exercise (as the case may be) of any such Convertible Security is made solely pursuant to the conversion or exercise (as the case may be) provisions of such Convertible Security that were in effect on the date immediately prior to the date of this Agreement, the conversion or exercise price of any such Convertible Securities (other than options to purchase Common Stock issued pursuant to an Approved Share Plan that are covered by clause (A) above) is not lowered, none of such Convertible Securities are (other than options to purchase Common Stock issued pursuant to an Approved Share Plan that are covered by clause (A) above) (nor is any provision of any such Convertible Securities) amended or waived in any manner (whether by the Company or the holder thereof) to increase the number of shares issuable thereunder and none of the terms or conditions of any such Convertible Securities (other than options to purchase Common Stock issued pursuant to an Approved Share Plan that are covered by clause (A) above) are otherwise materially changed or waived (whether by the Company or the holder thereof) in any manner that adversely affects the Buyer. “Approved Share Plan” means any employee benefit plan which has been approved by the board of directors of the Company prior to or subsequent to the date hereof pursuant to which shares of Common Stock and options to purchase Common Stock may be issued to any employee, officer, director or consultant (provided that, (1) any such consultant may not be an Affiliate of either Mike Zoi or TGR Capital, LLC, may not be an officer, director or employee of the Company, and may not be providing, directly or indirectly, any capital to the Company), and (2) such shares or options must be issued or granted pursuant to a written, arms’ length agreement between the consultant and the Company in connection with bona fide services provided to the Company by such consultant) for services provided to the Company in their capacity as such. “Convertible Securities” means any capital stock or other security of the Company or any of its Subsidiaries that is, or may be, 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.

(l)          Passive Foreign Investment Company. The Company shall conduct its business 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 U.S. Internal Revenue Code of 1986, as amended.

5.           REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

(a)          Register. The Company shall maintain or cause to be maintained at its principal executive offices (or such other office or agency of the Company as it may designate to Buyer), a register for its Common Stock in which the Company or its agent shall record the name and address of the Person in whose name the Common Shares have been issued (including the name and address of each assignee and transferee) and the number of Common Shares held by such Person. The Company shall keep the register open and available at all times during business hours for inspection of Buyer or its legal representatives. 

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(b)          Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent and any subsequent transfer agent (the “Irrevocable Transfer Agent Instructions”) to issue one or more certificates or credit shares to the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of Buyer or its respective nominee(s), for the Common Shares in such amounts as specified from time to time by Buyer to the Company upon delivery of the Common Shares. The Company represents and warrants that no instructions other than the Irrevocable Transfer Agent Instructions referred to in this Section 5(b), instructions to include a standard 1933 Act restrictive securities legend as contemplated by Section 5(c) and stop transfer instructions to give effect to Section 2(h) hereof, will be given by the Company to its transfer agent with respect to the Common Shares, and that the Common Shares 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 Buyer effects a sale, assignment or transfer of the Common Shares in accordance with Section 2(h), subject to Buyer and his broker providing customary certificates and other documentation in connection with such sale, assignment or transfer, the Company shall permit the sale, assignment or transfer (as applicable) 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 Buyer to effect such sale, transfer or assignment (as applicable). In the event that such sale, assignment or transfer involves Common Shares sold, assigned or transferred pursuant to an effective registration statement or in compliance with Rule 144, the transfer agent shall issue such shares to Buyer or such 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 Buyer. 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 Buyer 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. If required by the Company’s transfer agent, the Company shall cause its counsel to issue a legal opinion to the Company’s transfer agent in connection with the sale, assignment or transfer of the Common Shares. 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 such legend shall be borne by the Company.

(c)          Legends. Buyer understands that the Common Shares will be issued pursuant to an exemption from registration or qualification under the 1933 Act and applicable state securities laws, and except as set forth below, the Common Shares 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):

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THE SHARES OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SAID ACT THAT IS THEN APPLICABLE TO THE SHARES, AS TO WHICH A PRIOR OPINION OF COUNSEL MAY BE REQUIRED BY THE ISSUER OR THE TRANSFER AGENT.

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(d)          Removal of Legends. Certificates evidencing Common Shares shall not be required to contain the legend set forth in Section 5(c) above or any other legend (i) if such Common Shares are being sold pursuant to an effective registration statement under the 1933 Act covering the resale of the Common Shares, (ii) following the sale of Common Shares pursuant to Rule 144 (provided that Buyer shall deliver a customary "144 rep letter" to the Company in connection with each sale of Common Shares pursuant to Rule 144), (iii) if the Common Shares are eligible to be sold, assigned or transferred under Rule 144 (provided that such Common Shares are eligible to be sold without any restriction or limitation on the amount of securities to be sold or the manner of sale pursuant to Rule 144 and Buyer provides the Company with reasonable assurances that the Common Shares are so eligible), (iv) in connection with a sale, assignment or other transfer (other than under Rule 144), provided that Buyer provides the Company with an opinion of counsel to Buyer, in a generally acceptable form, to the effect that such sale, assignment or transfer of the Common Shares may be made without registration under the applicable requirements of the 1933 Act or (v) if such legend is not required under applicable requirements of the 1933 Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the SEC and its staff). If a legend is not required pursuant to the foregoing, the Company shall no later than two (2) Business Days following the delivery by Buyer to the Company or the transfer agent (with notice to the Company) of a legended certificate representing the Common Shares (endorsed or with stock powers attached, signatures medallion guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, if applicable), together with any other deliveries from Buyer as may be required pursuant to this Section 5(d), as directed by Buyer, either: (A) provided that the Company’s transfer agent is participating in the DTC Fast Automated Securities Transfer Program, credit the aggregate number of Common Shares to which Buyer shall be entitled to Buyer’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system or (B) if the Company’s transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver (via reputable overnight courier) to Buyer, a certificate representing the Common Shares that is free from all restrictive and other legends, registered in the name of Buyer or its designee.

6.           CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

(a)          The obligation of the Company hereunder to issue and sell the Common Shares to Buyer 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 Buyer with prior written notice thereof:

(i)          Buyer shall have delivered to the Company the Purchase Price for the Common Shares being purchased by Buyer at the Closing by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company.

(ii)         Buyer shall deliver to the Company a duly completed and executed Internal Revenue Service Form W-8BEN or other appropriate Form W-8.

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(iii)        The representations and warranties of Buyer 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 Buyer 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 Buyer at or prior to the Closing Date.

7.           CONDITIONS TO BUYER’S OBLIGATION TO PURCHASE.

(a)          The obligation of Buyer hereunder to purchase the Common Shares 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 Buyer’s sole benefit and may be waived by Buyer at any time in its sole discretion by providing the Company with prior written notice thereof:

(i)          The Company shall have duly executed and delivered to Buyer (A) each of the other Transaction Documents and (B) the Common Shares at the Closing pursuant to this Agreement.

(ii)         Buyer shall have received the opinion of Curtis Wolfe,the Company’s corporate counsel, dated as of the Closing Date, in the form reasonably acceptable to Buyer.

(iii)        The Company shall have delivered to Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form reasonably acceptable to Buyer, which instructions shall have been delivered to the Company’s transfer agent.

(iv)         The Company shall have delivered to Buyer a certificate, in the form acceptable to Buyer, executed by the Secretary of the Company and dated as of the Closing Date, as to (i) the resolutions consistent with Section 3(d) as adopted by the Company’s board of directors in a form reasonably acceptable to Buyer, (ii) the Certificate of Incorporation and (iii) the Bylaws, each as in effect at the Closing.

(v)         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.

(vi)         The Common Stock (I) shall be designated for quotation or listed on the Principal Market and (II) shall not have been suspended, as of the Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall suspension by the SEC or the Principal Market have been threatened, as of the Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by falling below the minimum maintenance requirements (if any)of the Principal Market.

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(vii)         The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Common Shares, including without limitation, those required by the Principal Market.

(viii)        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.

(ix)          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.

(x)          The Company shall have obtained approval of the Principal Market to list or designate for quotation (as the case may be) the Common Shares, if any approval is required to obtain such listing or designation.

(xi)          The Company shall have delivered to Buyer such other documents, instruments or certificates relating to the transactions contemplated by this Agreement as Buyer or its counsel may reasonably request.

8.           TERMINATION.

In the event that the Closing shall not have occurred within ten (10) days after the date hereof, then Buyer shall have the right to terminate this Agreement at any time on or after the close of business on such date without liability of Buyer to the Company; provided, however, the right to terminate this Agreement under this Section 8 shall not be available to Buyer if the failure of the transactions contemplated by this Agreement to have been consummated by such date is the result of Buyer’s breach of this Agreement. 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.

9.           MISCELLANEOUS.

(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 Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Delaware. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of Wilmington, Delaware, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, 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. 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 be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude Buyer from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to Buyer or to enforce a judgment or other court ruling in favor of Buyer. 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 IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

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(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).

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(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 Buyer, the Company, 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. Except as expressly set forth herein or therein, neither the Company nor Buyer makes any representation, warranty, covenant or undertaking, express or implied, with respect to such matters. For clarification purposes, the Recitals are part of this Agreement. Provisions of this Agreement may be amended only with the written consent of the Company and the Buyer. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. The Company confirms that, except as set forth in this Agreement, Buyer 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 Buyer to enter into this Agreement, the Company expressly acknowledges and agrees that (i) no due diligence or other investigation or inquiry conducted by Buyer, any of its advisors or any of its representatives, nor any representation of Buyer contained herein, shall affect Buyer’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 SEC Filings,” nothing contained in any of the SEC Filings shall affect Buyer’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 e-mail addresses for such communications shall be:

If to the Company:

Net Element, Inc.

1450 S. Miami Avenue

Miami, Florida 33130

E-mail addresses: mzoi@enerfund.com and jn@netelement.com

Facsimile: (305) 358-7876

Attention: Chief Executive Officer and Chief Financial Officer

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If to Buyer:

11, Ondasynov street

050051

Almaty

Kazakhstan

E-mail address: KRakhishev@yahoo.co.uk

with a copy (for informational purposes only) to:

Greenberg Traurig, LLP

200 Park Avenue

Florham Park, NJ 07932

E-mail addresses: wexler@gtlaw.com

Facsimile: (312) 456-8435

Attention: Robert I. Wexler, Esq.

or to such other address, facsimile number and/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 permitted assigns, including, as contemplated below, any assignee or transferee of any of the Common Shares. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Buyer. Buyer may assign some or all of its rights hereunder to an Affiliate of Buyer in connection with any assignment or transfer of any of its Common Shares without the consent of the Company, in which event such assignee or transferee (as the case may be) shall be deemed to be a Buyer hereunder with respect to such assigned rights, provided, however, that such Affiliate shall be an “accredited investor” as that term is defined in Rule 501(a) of Regulation D and shall execute an instrument in form and substance reasonably acceptable to the Company pursuant to which such Affiliate joins in and agrees to be bound by the provisions of this Agreement.

(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).

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(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.

(i)          Each of the parties to this Agreement (each, an “Indemnitor”) shall defend, protect, indemnify and hold harmless the other party to this Agreement and, in the case of Buyer, his 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, and (b) any breach of any covenant, agreement or obligation of the Company contained in any of the Transaction Documents. In addition, the Company will defend, protect, indemnify and hold harmless each Buyer Indemnitee for any Indemnified Liabilities incurred by any such Indemnitee as a result of, or arising out of, or relating to 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, relates to 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 Common Shares or (iii) the status of Buyer or holder of the Common Shares 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 an Indemnitor may be unenforceable for any reason, the Indemnitor shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.

25

(ii)         Promptly after receipt by an Indemnitee under this Section 9(k) of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving an Indemnified Liability, such Indemnitee shall, if a claim in respect thereof is to be made against an Indemnitor under this Section 9(k), deliver to the Indemnitor a written notice of the commencement thereof, and the Indemnitor shall have the right to participate in, and, to the extent the Indemnitor so desires, to assume control of the defense thereof with counsel mutually satisfactory to the Indemnitor and the Indemnitee; provided, however, that an Indemnitee shall have the right to retain its own counsel with the fees and expenses of such counsel to be paid by the Indemnitor if: (i) the Indemnitor has agreed in writing to pay such fees and expenses; (ii) the Indemnitor shall have failed promptly to assume the defense of such Indemnified Liability and to employ counsel reasonably satisfactory to such Indemnitee in any such Indemnified Liability; or (iii) the named parties to any such Indemnified Liability (including any impleaded parties) include both such Indemnitee and the Indemnitor, and such Indemnitee shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnitee and the Indemnitor (in which case, if such Indemnitee notifies the Indemnitor in writing that it elects to employ separate counsel at the expense of the Indemnitor, then the Indemnitor shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnitor), provided further, that in the case of clause (iii) above the Indemnitor shall not be responsible for the reasonable fees and expenses of more than one (1) separate legal counsel for such Indemnitee. The Indemnitee shall reasonably cooperate with the Indemnitor in connection with any negotiation or defense of any such action or Indemnified Liability by the Indemnitor and shall furnish to the Indemnitor all information reasonably available to the Indemnitee which relates to such action or Indemnified Liability. The Indemnitor shall keep the Indemnitee reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. The Indemnitor shall not be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the Indemnitor shall not unreasonably withhold, delay or condition its consent. The Indemnitor shall not, without the prior written consent of the Indemnitee, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnitee of a release from all liability in respect to such Indemnified Liability or litigation, and such settlement shall not include any admission as to fault on the part of the Indemnitee. Following indemnification as provided for hereunder, the Indemnitor shall be subrogated to all rights of the Indemnitee with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the Indemnitor within a reasonable time of the commencement of any such action shall not relieve the Indemnitor of any liability to the Indemnitee under this Section 9(k), except to the extent that the Indemnitor is materially and adversely prejudiced in its ability to defend such action.

(iii)        The indemnification required by this Section 9(k) shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Liabilities are incurred. The indemnity agreement contained herein shall be in addition to (A) any cause of action or similar right of an Indemnitee against the Indemnitor or others and (B) any liabilities the Indemnitor may be subject to pursuant to 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 combinations and other similar transactions that occur with respect to the Common Stock after the date of this Agreement.

26

(m)          Remedies. Buyer shall have all rights and remedies set forth in the Transaction Documents and all rights and remedies which Buyer has been granted at any time under any other agreement or contract and all of the rights which Buyer has under applicable 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 applicable law. Furthermore, the Company recognizes that in the event that it fails to perform, observe, or discharge any or all of its obligations under the Transaction Documents, any remedy at law may prove to be inadequate relief to the Buyer. The Company therefore agrees that the Buyer 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.

(n)          Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever Buyer 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 Buyer may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, 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 Buyer hereunder or pursuant to any of the other Transaction Documents or the Buyer 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. 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.

27

IN WITNESS WHEREOF, Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written above.

COMPANY:
NET ELEMENT, INC.
By:	/s/ Mike Zoi
	Name:	Mike Zoi
	Title:	CEO
KENGES RAKISHEV, individually
By:	/s/ Kenges Rakishev
	KENGES RAKISHEV

28

Schedule 3(a)

See the subsidiaries depicted in Schedule 3(b)(i).

In addition, as of February 22, 2012, the Company has advanced an aggregate of $196,557 to Stratuscore, Inc., a State of Washington corporation. As consideration for amounts advanced to Stratuscore, Inc., Stratuscore, Inc. has agreed to issue the Company a convertible promissory note convertible into equity in Stratuscore, Inc.

29

Schedule 3(b)

(i)           Ownership of Subsidiaries.

Except as set forth on the Company’s Organizational Chart as of 10/24/11 on the following page, all subsidiaries of Net Element, Inc. are wholly-owned by Net Element, Inc.

In addition, as of February 22, 2012, the Company has advanced an aggregate of $196,557 to Stratuscore, Inc., a State of Washington corporation. As consideration for amounts advanced to Stratuscore, Inc., Stratuscore, Inc. has agreed to issue the Company a convertible promissory note convertible into equity in Stratuscore, Inc., which would not constitute all of the outstanding equity interests in Stratuscore, Inc.

30

31

Notes to the Chart:

Music1, LLC owns 97% of the membership interests in A&R Music Live, LLC, a Georgia limited liability company. The remaining 3% of the membership interests in A&R Music Live, LLC is owned by Stephen Strother, the founder and president of A&R Music Live, LLC.

Motorsport, LLC purchased the remaining 20% of the outstanding common stock of Motorsport.com, Inc. and now owns 100% of the outstanding common stock of Motorsport.com, Inc.

The Company owns a 70% interest in LegalGuru LLC, a Florida limited liability company, and Curtis Wolfe owns a 30% interest in LegalGuru LLC.

(ii)          Issued and outstanding warrants, options, etc.:

See attached Capitalization Chart.

32

Stock Ownership Breakdown February 15, 2012

								Options &
								Convertible					Fully
Name	Basic			Shares		Warrants		Notes		Total			Diluted
Mike Zoi		87.6	%		655,144,503		214,545,455		32,727,273		902,417,230	Mike Zoi		89.3	%
Dmitiry Kozko		3.3	%		24,950,000		-		250,121		25,200,121	Dmitiry Kozko		2.5	%
Richard Lappenbusch		0.8	%		6,100,000		-		434,943		6,534,943	Richard Lappenbusch		0.6	%
Curtis Wolfe		0.1	%		1,000,000		-		3,288,928		4,288,928	Curtis Wolfe		0.4	%
Jonathan New		0.1	%		475,100		-		2,278,084		2,753,184	Jonathan New		0.3	%
Felix Vilus		0.2	%		1,466,667		2,000,000		-		3,466,667	Felix Vilus		0.3	%
Yapik Conversion Option		0.0	%		-		-		1,500,000		1,500,000	Yapik Conversion		0.1	%
All Others		8.0	%		60,004,843		-		4,788,274		64,793,117	All Others		6.4	%
Total		100.0	%		747,674,446		216,545,455		45,267,623		1,010,954,190			100.0	%

	OPTIONS &
Option and Warrant Summary:	CONV NOTE		WARRANTS		TOTAL
2004 Plan Options		5,071,500		-		5,071,500
2011 Plan Options		2,968,850		-		2,968,850
C. Wolfe Option from Guru Investment		3,000,000		-		3,000,000
TGR Warrants from Sub-Agreement		-		100,000,000		100,000,000
Enerfund Warrants Sub Agreement		-		100,000,000		100,000,000
Enerfund Warrants $3.6M Notes		32,727,273				32,727,273
Enerfund Warrants on $1.6M Note (if converted)		-		14,545,455		14,545,455
Felix Warrants				2,000,000		2,000,000
Yapik Conversion Option		1,500,000		-		1,500,000
		45,267,623		216,545,455		261,813,077

Shares owned by TGR Capital, LLC

Acct #	Former Acct Name	Shares	TGR Energy Certificate #	Warrants	%	Strike Price
177	Spinex	62,995,000	1016, 1017, 1018 & 1019
177	Splinex	102,875,000	1014
24	BZINFIN BVI	4,000,000	must buy bond to reissue
27	Clay Real Estate	4,000,000	must buy bond to reissue
45	Ener1 Group	3,162,334	1013
87	Ketevan Kezua	2,000,000	1013
88	Galina Hartchenko	3,000,000	Needs medallion by Galina
111	Alexander Malovik	16,000,000	1028
130	Elena Novak	1,000,000	Needs Medallion by Elena
204	Sabina Zoidze	2,000,000	1013
		201,032,334
177	TGR Capital	1,000,000	1027
78	Itochu Corp	231,415	1013
177	TGR Energy, LLC	5,157,600	1030	2,578,800		$0.05
177	TGR Energy, LLC	66,870,485	1029	33,434,743		$0.05
177	TGR Energy, LLC	10,697,250	1034	5,348,625		$0.05
177	TGR Energy, LLC	4,077,700	1043	2,038,850		$0.05
177	TGR Energy, LLC	5,395,600	1042	2,697,800		$0.05
177	TGR Energy, LLC	6,713,215	1045	3,357,107		$0.05
177	TGR Energy, LLC	10,037,315	1051	5,019,157		$0.05
177	TGR Energy, LLC	2,240,450	1052	1,120,225		$0.05
178	TGR Energy, LLC	88,810,385	1060	44,404,693
		200,000,000
	TOTAL OWNED by TGR Capital	402,263,749	STOCK	100,000,000		WARRANTS
Shares owned by Enerfund, LLC
	Enerfund	111,000,000	1061	100,000,000		$          0.05
		66,875,000
Shares owned by Mike Zoi
	Mike Zoi	5,754	1031	-
Shares owned by MZ Capital, LLC (FL)		29,062,500	1053	-
Shares owned by MZ Capital, LLC (DE)		45,937,500	1067 Cert is missing	-
				200,000,000		Total warrants beneficially owned by Mike Zoi
	TOTAL SHARES BENEFICIALLY OWNED BY MIKE ZOI	655,144,503		855,144,503	90.8%	Total Stock and Warrants Beneficially Owned
	TOTAL NETE OUTSTANDING at 12/31/11	742,341,113	TOTY STOCK	941,444,363		Total TOTY Stock and Warrants Outstanding (does not include employee stock options)
		88.4%	% of Stock Mike owns beneficially (no warrants included)

	number of shares	number of shares
TGR per Reconciliation		402,263,749
Adjustments:
BZINFIN and Clay	8,000,000		Lost cert
Galina and Elena Novak	4,000,000		Wont go to bank
Shares in Mikes name	9,473,300		Mistake to be corrected
Sub-Total		21,473,300
Adjusted Total		380,790,449
Total per Transfer Agent Report		380,790,449
Proof		-

NETE Investment Summary at December 31, 2011

Source of Funds	Amount		Comment
Splinex Equity Contributions	$	2,000,000
Debt converted to Equity		4,091,394	Not including 500k for restructuring (pushed down to TGR Capital)
Splinex Investment	$	6,091,394
				Convertible Feature:
$1.6M Loan from Enerfund		1,600,000	If converted, 14,545,455 warrants are issued		14,545,455	Shares @ $0.11/share
$2M Loan from Enerfund		2,000,000			18,181,818	Shares @ $0.11/share
ZOI Equity		6,000,000	subscription agreements with TGR Capital and Enerfund
Zoi Investment	$	8,000,000
Debt and Equity Investment in Openfilm by Zoi prior to 12/2010	$	2,844,824
Total Investment to Date	$	16,936,218

Net Element, Inc Stock Options to Employees

Option Life in Years			7		10		5		5		5		5		5		5		5
Strike Price		$	0.25	$	0.10	$	0.06	$	0.37	$	0.15	$	0.15	$	0.21	$	0.60	$	0.20
First	Last		08/13/08		03/31/11		07/31/11		08/31/11		09/30/11		10/31/11		11/30/11		12/31/11		02/14/12	TOTAL	TOTAL
Name	Name		# of Options		# of Options		# of Options		# of Options		# of Options		# of Options		# of Options		# of Options		# of Options	# of Options	# of Shares
Jon	New		1,000,000		94,000		58,333		6,306		46,667		46,667		22,222		3,889		1,000,000	2,278,084	475,100
Ivan	Onuchin		-		376,000		50,000		5,405		26,667		26,667		14,286		3,333		250,000	752,358	100
Brenda	Nieborsky		-		376,000		19,375		2,095		19,806		19,806		11,438		3,056			451,576	100
Richard	Lappenbusch		-		-		125,000		13,514		100,000		100,000		71,429		25,000			434,943	6,100,000
Regan	Morgan		-		376,000		-		2,027		5,000		5,000		3,571		-		-	391,598	-
Peter	Burg		-		117,500		29,063		3,142		29,708		29,708		5,536		1,938		300,000	516,595	100
Curtis	Wolfe		100,000		94,000		50,000		5,405		13,333		13,333		9,524		3,333			288,928	1,000,000
Dmitry	Kozko		-		94,000		50,000		5,406		40,000		40,000		19,048		1,667			250,121	24,950,100
Steve	Strother		-		141,000		-		-		-		-		-					141,000	100
Robert	Lyon		-		117,500		8,333		901		2,222		2,222		794				50,000	181,972	100
Philipp	Tur		-		47,000		6,250		676		5,417		5,417		2,530		417			67,707	100
Sergey	Kaplan		-		14,100		18,750		2,027		5,000		5,000		3,571		1,250			49,698	1,045
Christoph	Guenther												33,334		2,222					35,556
Sabina	Zoidze		-		-		7,500		811		6,500		6,500		4,643		1,625		-	27,579	-
			1,100,000		1,847,100		422,604		47,715		300,320		333,654		170,814		45,508		1,600,000	5,867,715	32,526,845
PLAN			2004 Plan		2004 Plan		2011 Plan		2011 Plan		2011 Plan		2011 Plan		2011 Plan		2011 Plan		2011 Plan

Schedule 3(e)

Contracts

Even though listed on this schedule, the Company does not consider any of these items material:

1. David Reitman Consulting, Inc. for Net Element, 3dn.net project - Completed consulting engineering work for 3DN.net project a 3D optimized CDN for the Russian and Eastern European market. Project was tabled pending additional investors. Final invoice of $10,050 was presented to the Company on 7/13. The Company agreed to pay 50% up front and 50% within 2 months. The Company paid the first half on 7/14 and has not paid the remainder.

2. DLA Piper for Net Element, 3dn.net project - Legal services related to commercial contract negotiation with Beijing Blue IT a.k.a. China Cache.  Retainer of $25,000 was provided on 5/20. First billing on 7/18 was over agreed amounts and entire budget and all project work was stopped and the bill was disputed. Negotiations pending DLA proof of documented work by party and what the total is to be paid. Intention is to pay, as soon as accurate billing is provided within original agreed upon budget of $45,000.

3. NueMeta – Music1 LLC - Contracted a consulting company to design and build a system that would allow Music1.com to ingest, offer, and publish music catalogs complying with industry standards specifically DDEX IP licensed patents. Total contract was $150,000 and the Company paid the initial upfront payment of $30,000 on 5/20.  Shortly after starting on 6/1, the Company asked NueMeta to pause their work until further notice and hold all assets as collateral. The Company’s request was denied and NueMeta requested entire contract cost to be paid in full.  This dispute has been settled.

4. Digital Data Exchange LLC – Music1 LLC – Licensed patent pool of IP for $1,000 and pre-paid 1 yr. of membership dues for XML-based music standard patents on 3/31. This IP license was required to implement the NueMeta-based solution #3 above. $1,000 is currently unpaid.

5. Regus – A&R Music Live, LLC - office space rented in Atlanta for ARlive project on 4/11 for $7,300, a deposit of two months rent.  During company-wide expense reductions, the Company decided to terminate the lease and return the office space. Regus refused to prorate and claims the entire lease period of one year.  The Company issued a termination letter and returned its keys, parking and security access cards, June 9, 2011 and moved out on June 8, 2011. The Company’s termination letter provided that the termination is effective, June 10. The Company’s position is that the Company paid a prorated share of the lease in advance.

6. Pensara LLC – Music1 LLC. Pensara was contrated for program management services per contract of 3/31 for Music1 Product Plan documentation. Total contract was for 200 hrs. at $90/hr. Contract completed 6/1. Pensara overbilled by $1,395 without prior approval. Paid $8,730 to date. Pensara filed a lawsuit in Miami claiming that approximately $10,000 is due to Pensara. This dispute has been settled.

7. Compuware d.b.a. Gomez. – Net Element – hired firm to perform Internet test and measurement services on 5/27 for $15,552 for one year of monitoring credits.  Notified them of cancelation 8/30.  Live monitoring of all 15 sites in NETE portfolio.  Unpaid.

8. RightHIRE Staffing Solutions – Net Element – hired professional placement agency for recruiting of CRO.  CRO hired @ 200,000 with 15% placement fee for $30,000.  Paid $5,000 on 6/22.

9. Munger, Tolles & Olson LLP – Openfilm LLC – hired legal representation to resolve employment dispute.  Invoiced $7,150 on 6/15.  Unpaid.

10. The Pancake Movement LLC – Spark Lab LLC – hired web site design, social media strategy, and branding firm on 3/11 to create website design for spark lab project for $25,000 of which they were paid half upfront.  The remaining $12,500 was to be paid on final delivery. Project was partially completed @ 75% when the contract was cancelled.  The Pancake Movement LLC is seeking $7,500 for the incomplete work to deliver artwork as is.  Work delivery and settlement amount of is in dispute.  Unpaid on remainder of contract.

Schedule 3(f)(i)

SEC Filings

1.  The Form 8-K filed by the Company on February 22, 2011 was filed late.  That Form 8-K reported the appointment on February 15, 2011 of Richard Lappenbusch as President and Chief Operating Officer of the Company.

2.  The Form 8-K filed by the Company on January 18, 2012 was filed late.  That Form 8-K reported the increase in compensation of certain executive officers of the Company effective as of November 16, 2011.  As reported in a Form 8-K filed by the Company on August 19, 2011, the compensation of those executive officers was previously reduced on August 15, 2011.

3.  The Company did not file a Form 8-K reporting under Items 1.01 and 3.02 thereof the entry into a subscription agreement on December 31, 2010 pursuant to which it sold 200,000,000 shares of Common Stock and warrants to purchase up to 100,000,000 shares of Common Stock to Enerfund, LLC, a company controlled by Mike Zoi.

4.  The Company did not file a Form 8-K reporting under Item 5.07 thereof the approval by a majority-in-interest of the Company's stockholders by written consent dated February 1, 2011 of an amendment to the Company's Certificate of Incorporation to increase the authorized number of shares of Common Stock to 2,500,000,000.

5.  The Company did not file a Form 8-K reporting under Items 1.01 and 2.03 thereof the entry into a joint venture arrangement on March 29, 2011 with one of the Company's directors, Curtis Wolfe, to develop a website intended to allow legal professionals to market their services using the Company's technologies.

6.  The Company has not yet filed a Form 8-K reporting under Items 1.01 and 2.03 thereof the entry into an amendment dated November 16, 2011 to the lease agreement for its principal executive office.  The Company also has not yet filed that amendment or its original lease agreement dated October 8, 2010 for its principal executive office as exhibits to its periodic reports.

7.  The Company did not file a preliminary information statement in connection with the stockholder approval described in 4 above.  The definitive information statement relating to that action was filed on February 4, 2011.

Schedule 3(h)

Claims

1. See disclosures set forth on Schedule 3.5 which are incorporated by this reference to this Schedule 3.8. Even though listed on this schedule, the Company does not consider any of these items material.

2. The Company was levied approximately $53,488.79 in penalties for late filing of IRS Form 5471 for the tax years of the Company ending March 31, 2007, March 31, 2008 and March 31, 2009. The company has requested an abatement of such late filing fees due to reasonable cause.