Form of Subscription Agreement

This Subscription Agreement (this “Agreement”) is being delivered to the purchaser identified on the signature page to this Agreement (the “Subscriber”) in connection with its investment in Royale Energy Inc., a California corporation (the “Company”). The Company is conducting a private placement (the “Offering”) of “Units”, each Unit comprised of one share of the Company’s common stock (the “Common Stock”) and a 2 year warrant to purchase one fifth of a share of the Company’s Common Stock at an exercise price of $0.80 per share, at a purchase price (the “Purchase Price”) of $0.40 per Unit.

No offering literature or advertisement in any form may be relied upon in the offering of the units except for this Agreement and any supplements hereto, and no person has been authorized to make any representations except those contained herein.

This Agreement is confidential and the contents hereof may not be reproduced, distributed or divulged by or to any persons other than the recipient or its representative, accountant or legal counsel, without the prior written consent of the Company.  Each person who accepts delivery of this Agreement acknowledges and agrees to the foregoing restrictions.

This Agreement does not purport to be all-inclusive or to contain all of the information that you may desire in evaluating the Company, or an investment in the offering. This Agreement does not contain all of the information that would normally appear in a prospectus for an offering registered under the Securities Act.  You must conduct and rely on your own evaluation of the Company and the terms of the offering, including the merits and risks involved, in deciding whether to invest in the offering.

This Agreement does not constitute an offer or solicitation of an offer to any person or in any jurisdiction where such offer or solicitation is unlawful or not authorized.  Each person who accepts delivery of this Agreement agrees to return it and all related documents if such person does not purchase any of the units described herein.

Neither the delivery of this Agreement at any time nor any sale of units hereunder shall imply that information contained herein is correct as of any time subsequent to its date.  The Company will extend to each prospective investor (and to its representative, accountant or legal counsel, if any) the opportunity, prior to its purchase of units, to ask questions of and receive answers from the Company concerning the offering and to obtain additional information, to the extent the Company possesses the same or can acquire it without unreasonable effort or expense, in order to verify the accuracy of the information set forth herein.  All such additional information shall only be provided in writing and identified as such by the Company through its duly authorized officers and/or directors alone; no oral information or information provided by any broker or third party may be relied upon.

No representations, warranties or assurances of any kind are made or should be inferred with respect to the economic return, if any, that may accrue to an investor in the Company.

This Agreement contains forward-looking statements regarding the Company’s performance, strategy, plans, objectives, expectations, beliefs and intentions.  The outcome of the events described in these forward-looking statements is subject to substantial risks, and actual results could differ materially.  The sections entitled “executive summary,” “risk factors,” and “description of business,” in any sec filing or report contain discussions of some of the factors that could contribute to these differences.

This Agreement and the Securities and Exchange Commission (“SEC”) filings and reports include data obtained from industry publications and reports, which the Company believes to be reliable sources; however, neither the accuracy nor completeness of this data is guaranteed. We have neither independently verified this data nor sought the consent of such sources to refer to their reports in this Agreement.

The offering price of the units has been determined arbitrarily.  The price of the units does not necessarily bear any relationship to the assets, earnings or book value of the Company, or to potential assets, earnings, or

book value of the Company.  There is no active trading market in the Company’s Common Stock and there can be no assurance that an active trading market in any of the Company’s securities will develop or be maintained.  The price of units of Common Stock quoted on the OTC markets or traded on any exchange may be impacted by a lack of liquidity or availability of such units for public sale and also will not necessarily bear any relationship to the assets, earnings, book value or potential prospects of the Company or applicable quoted or trading prices that may exist following the lapse of restrictions on the units sold pursuant to the offering or other restrictions. Such prices should not be considered accurate indicators of future quoted or trading prices that may subsequently exist following this offering.

The Company reserves the right, in its sole discretion, to reject any subscription in whole or in part for any reason or for no reason. The Company is not obligated to notify recipients of this Agreement whether all of the units offered hereby have been sold.

Subscribers may be deemed to be in possession of material non-public information within the meaning of the United States securities laws and regulations regarding a public Company. This Agreement contains confidential information concerning the Company, and has been prepared solely for use in connection with the offering described herein. Any use of this information for any purpose other than in connection with the consideration of an investment in the units through the offering described herein may subject the user to civil and/or criminal liability. The recipient, by accepting this Agreement, agrees not to: (i) distribute or reproduce this Agreement, in whole or in part, at any time, without the prior written consent of the Company; (ii) to keep confidential the existence of this document and the information contained herein or made available in connection with any further investigation of the Company; and (iii) refrain from trading in the publicly-traded securities of the Company or any other relevant company for so long as such recipient is in possession of the material non-public information contained herein. Subscribers are advised that they should seek their own legal counsel prior to effectuating any transactions in the publicly traded Company’s securities.

The Company will timely file a current report on Form 8-k (“Current Report”) by 8:30 am eastern time on the trading day after the effective date describing the material terms and conditions of this Agreement, a copy of which has been provided to investor prior to the effective date. ALL INFORMATION THAT COMPANY HAS PROVIDED TO INVESTOR THAT CONSTITUTES OR MIGHT CONSTITUTE MATERIAL, NON-PUBLIC INFORMATION WILL BE INCLUDED IN THE CURRENT REPORT. NOTWITHSTANDING ANY OTHER PROVISION, EXCEPT FOR INFORMATION THAT WILL BE INCLUDED IN THE CURRENT REPORT, (A) NEITHER COMPANY NOR ANY OTHER PERSON ACTING ON ITS BEHALF HAS PROVIDED INVESTOR OR ITS REPRESENTATIVES, AGENTS OR ATTORNEYS WITH ANY INFORMATION THAT CONSTITUTES OR MIGHT CONSTITUTE MATERIAL, NON-PUBLIC INFORMATION, INCLUDING WITHOUT LIMITATION THIS AGREEMENT AND THE EXHIBITS AND DISCLOSURE SCHEDULES HERETO, (B) NO INFORMATION CONTAINED IN THE DISCLOSURE SCHEDULES CONSTITUTES MATERIAL NON-PUBLIC INFORMATION AND (C) THERE IS NO ADVERSE MATERIAL INFORMATION REGARDING COMPANY THAT HAS NOT BEEN PUBLICLY DISCLOSED PRIOR TO THE EFFECTIVE DATE. COMPANY UNDERSTANDS AND CONFIRMS THAT INVESTOR WILL RELY ON THE FOREGOING REPRESENTATIONS AND COVENANTS IN EFFECTING TRANSACTIONS IN SECURITIES OF COMPANY. All disclosure provided to investor regarding Company, its business and the transactions contemplated hereby, including without limitation the disclosure schedules, furnished by or on behalf of Company with respect to the representations and warranties made herein are true and correct in all material respects and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading

This offering is being made solely to “accredited investors,” as such term is defined in rule 501 of regulation d under the Securities Act of 1933, as amended (the “Securities Act”).  The units have not been registered under the Securities Act or the securities laws of any state and will be offered and sold in reliance upon the exemption from registration afforded by section 4(2) thereunder and regulation D (Rule 506(b)) of the Securities Act and corresponding provisions of state securities laws.

The units offered hereby are subject to restriction on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and applicable state laws, pursuant to registration or

exemption therefrom.  Investors should be aware that they will be required to bear the financial risks of this investment for an indefinite period of time.

The units offered hereby have not been approved or disapproved by the SEC, any state securities commission or any other regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of this offering or the accuracy or adequacy of this Agreement.  Any representation to the contrary is unlawful.

Prospective investors should not construe the contents of this Agreement as investment, legal, business, or tax advice.  Each investor should contact his, her or its own advisors regarding the appropriateness of this investment and the tax consequences thereof, which may differ depending on an investor’s particular financial situation.  In no event should this Agreement be deemed or considered to be tax advice provided by the Company.

(a)          Subscription.  Subject to the conditions set forth in Section 2 hereof, the Subscriber hereby subscribes for and agrees to purchase the number of Units indicated on page 11 hereof on the terms and conditions described herein.

(b)          Purchase of Units.  The Subscriber understands and acknowledges that the Purchase Price to be remitted to the Company in exchange for the Units shall be set at the (above referenced) Purchase Price, for an aggregate purchase price as set forth on page 11 hereof (the “Aggregate Purchase Price”). The Subscriber’s delivery of this Agreement to the Company shall be accompanied by payment for the Units subscribed for hereunder, payable in United States Dollars, by wire transfer of immediately available funds delivered contemporaneously with the Subscriber’s delivery of this Agreement to the Company in accordance with the wire instructions provided on Exhibit A.  The Subscriber understands and agrees that, subject to Section 2 and applicable laws, by executing this Agreement, it is entering into a binding agreement.

(a)          Acceptance or Rejection. Subject to full, faithful and punctual performance and discharge by the Company of all of its duties, obligations and responsibilities as set forth in this Agreement and any other agreement entered into between the Subscriber and the Company relating to this subscription (collectively, the “Transaction Documents”), the Subscriber shall be legally bound to purchase the Units pursuant to the terms and conditions set forth in this Agreement.  For the avoidance of doubt, upon the occurrence of the failure by the Company to fully, faithfully and punctually perform and discharge any of its duties, obligations and responsibilities as set forth in any of the Transaction Documents, which shall have been performed or otherwise discharged prior to the Closing, the Subscriber may, on or prior to the Closing (as defined below), at its sole and absolute discretion, elect not to purchase the Units and provide instructions to the Company to receive the full and immediate refund of the Aggregate Purchase Price. The Subscriber understands and agrees that the Company reserves the right to reject this subscription for Units in whole or part in any order at any time prior to the Closing for any reason or for no reason, notwithstanding the Subscriber’s prior receipt of notice of acceptance of the Subscriber’s subscription.  In the event the Closing does not take place because of (i) the rejection of subscription for Units by the Company; or (ii) the election not to purchase the Units by the Subscriber, this Agreement and any other Transaction Documents shall thereafter be terminated and have no force or effect, and the parties shall take all steps, to ensure that the Aggregate Purchase Price shall promptly be returned or caused to be returned to the Subscriber without interest thereon or deduction therefrom.

(b)          Closing.  The closing of the purchase and sale of the Units hereunder (the “Closing”) shall take place at the offices of Royale Energy Inc., or such other place as determined by the Company and may take place in one of more closings.  Closings shall take place on a Business Day on or promptly following the satisfaction of the conditions set forth in Section 6 below, as determined by the Company (the “Closing Date”). “Business Day” shall mean from the hours of 9:00 a.m. (Pacific Time) through 5:00 p.m. (Pacific Time) of a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required to be closed. The Units purchased by the Subscriber will be delivered by the Company promptly following the Final Closing Date (as defined below) of the Offering.  The initial closing of the Offering shall be referred to as the “Initial Closing”

and such date of the Initial Closing shall be referred to as the “Initial Closing Date.”  The last Closing of the Offering shall be referred to as the “Final Closing” and such date of the Final Closing, shall be referred to as the “Final Closing Date.”

(c)          Following Acceptance or Rejection.  The Subscriber acknowledges and agrees that this Agreement and any other documents delivered in connection herewith will be held by the Company. In the event that this Agreement is not accepted by the Company for whatever reason, which the Company expressly reserves the right to do, this Agreement, the Aggregate Purchase Price received (without interest thereon) and any other documents delivered in connection herewith will be returned to the Subscriber at the address of the Subscriber as set forth in this Agreement. If this Agreement is accepted by the Company, the Company is entitled to treat the Aggregate Purchase Price received as an interest free loan to the Company until such time as the Subscription is accepted.

(d)          Acknowledgments.    The Subscriber understands that the Units are offered by the Company without any anti-dilution protection, including “Most Favored Nation” provisions, and further understands and agrees that its signature hereto will constitute a surrender of all previous anti-dilution protection that may have been granted to it by the Company, which protective provisions will cease and be null and void upon its execution and the Company’s acceptance of this Agreement.

The Subscriber hereby acknowledges, agrees with and represents, warrants and covenants to the Company, as follows:

(a)          The Subscriber has full power and authority to enter into this Agreement, the execution and delivery of which has been duly authorized, if applicable, and this Agreement constitutes a valid and legally binding obligation of the Subscriber, except as may be limited by bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement of rights of creditors, and except as enforceability of the obligations hereunder are subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or law).

(b)          The Subscriber acknowledges its understanding that the Offering and sale of the Units is intended to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), by virtue of Section 4(2) of the Securities Act and the provisions of Regulation D promulgated thereunder (“Regulation D”).  In furtherance thereof, the Subscriber represents and warrants to the Company and its affiliates as follows:

(i)          The Subscriber realizes that the basis for the exemption from registration may not be available if, notwithstanding the Subscriber’s representations contained herein, the Subscriber is merely acquiring the Units for a fixed or determinable period in the future, or for a market rise, or for sale if the market does not rise. The Subscriber does not have any such intention.

(ii)          The Subscriber realizes that the basis for exemption would not be available if the Offering is part of a plan or scheme to evade registration provisions of the Securities Act or any applicable state or federal securities laws.

(iii)          The Subscriber is acquiring the Units solely for the Subscriber’s own beneficial account, for investment purposes, and not with a view towards, or resale in connection with, any distribution of the Units.

(iv)          The Subscriber has the financial ability to bear the economic risk of the Subscriber’s investment, has adequate means for providing for its current needs and contingencies, and has no need for liquidity with respect to an investment in the Company.

(v)          The Subscriber and the Subscriber’s attorney, accountant, purchaser representative and/or tax advisor, if any (collectively, the “Advisors”) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of a prospective investment in the Units. If other than an individual, the Subscriber also represents it has not been organized solely for the purpose of acquiring the Units.

(vi)          The Subscriber (together with its Advisors, if any) has received all documents requested by the Subscriber, if any, has carefully reviewed them and understands the information contained therein, prior to the execution of this Agreement.

(c)          The Subscriber is not relying on the Company or any of its employees, agents, sub-agents or advisors with respect to the legal, tax, economic and related considerations involved in this investment. The Subscriber has relied on the advice of, or has consulted with, only its Advisors. Each Advisor, if any, has disclosed to the Subscriber in writing (a copy of which is annexed to this Agreement) the specific details of any and all past, present or future relationships, actual or contemplated, between the Advisor and the Company or any affiliate or sub-agent thereof.

(d)          The Subscriber has carefully considered the potential risks relating to the Company and a purchase of the Units, and fully understands that the Units are a speculative investment that involves a high degree of risk of loss of the Subscriber’s entire investment. Among other things, the Subscriber has carefully considered each of the risks described under the heading “Risk Factors” in the Company’s SEC Filings, which risk factors are incorporated herein by reference, and any additional disclosures in the nature of Risk Factors described herein.

 (e)          The Subscriber will not sell or otherwise transfer any Units without registration under the Securities Act or an exemption therefrom, and fully understands and agrees that the Subscriber must bear the economic risk of its purchase because, among other reasons, the Units have not been registered under the Securities Act or under the securities laws of any state and, therefore, cannot be resold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Securities Act and under the applicable securities laws of such states, or an exemption from such registration is available.  In particular, the Subscriber is aware that the Units are “restricted securities,” as such term is defined in Rule 144 promulgated under the Securities Act (“Rule 144”), and they may not be sold pursuant to Rule 144 unless all of the conditions of Rule 144 are met. The Subscriber understands that any sales or transfers of the Units are further restricted by state securities laws and the provisions of this Agreement.

(f)          No oral or written representations or warranties have been made, or information furnished, to the Subscriber or its Advisors, if any, by the Company or any of its officers, employees, agents, sub-agents, affiliates, advisors or subsidiaries in connection with the Offering, other than any representations of the Company contained herein, and in subscribing for the Units, the Subscriber is not relying upon any representations other than those contained herein.

(g)          The Subscriber’s overall commitment to investments that are not readily marketable is not disproportionate to the Subscriber’s net worth, and an investment in the Units will not cause such overall commitment to become excessive.

(h)          The Subscriber understands and agrees that the certificates for the Units shall bear substantially the following legend until (i) such Units shall have been registered under the Securities Act and effectively disposed of in accordance with a registration statement that has been declared effective or (ii) in the opinion of counsel acceptable to the Subscriber, such Units may be sold without registration under the Securities Act, as well as any applicable “blue sky” or state securities laws:

THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS.  SUCH UNITS HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED BY THE ISSUER WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION COVERING SUCH UNITS UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

(i)          Neither the SEC nor any state securities commission has approved the Units or passed upon or endorsed the merits of the Offering. There is no government or other insurance covering any of the Units.

(j)          The Subscriber and its Advisors, if any, have had a reasonable opportunity to ask questions of and receive answers from a person or persons acting on behalf of the Company concerning the Offering and the business, financial condition, results of operations and prospects of the Company, and all such questions have been answered to the full satisfaction of the Subscriber and its Advisors, if any.

(k)          (i)          In making the decision to invest in the Units the Subscriber has relied solely upon the information provided by the Company in the Transaction Documents.  To the extent necessary, the Subscriber has retained, at its own expense, and relied upon appropriate professional advice regarding the investment, tax and legal merits and consequences of this Agreement and the purchase of the Units hereunder.  The Subscriber disclaims reliance on any statements made or information provided by any person or entity in the course of Subscriber’s consideration of an investment in the Units other than the Transaction Documents.

(ii)          The Subscriber represents and warrants that: (i) the Subscriber was contacted regarding the sale of the Units by the Company (or an authorized agent or representative thereof) with whom the Subscriber had a prior substantial pre-existing relationship  and (ii) no Units were offered or sold to it by means of any form of general solicitation or general advertising, and in connection therewith, the Subscriber did not (A) receive or review any advertisement, article, notice or other communication published in a newspaper or magazine or similar media or broadcast over television or radio, whether closed circuit, or generally available; or (B) attend any seminar meeting or industry investor conference whose attendees were invited by any general solicitation or general advertising; or (C) observe any website or filing of the Company with the SEC in which any offering of securities by the Company was described and as a result learned of any offering of securities by the Company.

(l)          The Subscriber has taken no action that would give rise to any claim by any person for brokerage commissions, finders’ fees or the like relating to this Agreement or the transactions contemplated hereby.

(m)          The Subscriber is not relying on the Company or any of its employees, agents, or advisors with respect to the legal, tax, economic and related considerations of an investment in the Units, and the Subscriber has relied on the advice of, or has consulted with, only its own Advisors.

(n)          The Subscriber acknowledges that any estimates or forward-looking statements or projections furnished by the Company to the Subscriber were prepared by the management of the Company in good faith, but that the attainment of any such projections, estimates or forward-looking statements cannot be guaranteed by the Company or its management and should not be relied upon.  In order to comply with Regulation F-D promulgated by the Securities and Exchange Commission, to the extent (if any) that the Subscriber has received material nonpublic information prior to applying to purchase the Units, Subscriber agrees not to: (i) distribute or reproduce such information, in whole or in part, at any time, without the prior written consent of the Company; (ii) to keep confidential the information contained herein or made available in connection with any further investigation of the Company; and (iii) refrain from trading in the publicly-traded securities of the Company or any other relevant company for so long as such recipient is in possession of the material non-public information.

(o)          No oral or written representations have been made, or oral or written information furnished, to the Subscriber or its Advisors, if any, in connection with the Offering that are in any way inconsistent with the information contained herein.

(p)          (For ERISA plans only) The fiduciary of the ERISA plan (the “Plan”) represents that such fiduciary has been informed of and understands the Company’s investment objectives, policies and strategies, and that the decision to invest “plan assets” (as such term is defined in ERISA) in the Company is consistent with the provisions of ERISA that require diversification of plan assets and impose other fiduciary responsibilities. The Subscriber or Plan fiduciary (i) is responsible for the decision to invest in the Company; (ii) is independent of the Company and any of its affiliates; (iii) is qualified to make such investment decision; and (iv) in making such decision, the Subscriber or Plan fiduciary has not relied primarily on any advice or recommendation of the Company or any of its affiliates.

(q)          This Agreement is not enforceable by the Subscriber unless it has been accepted by the Company, and the Subscriber acknowledges and agrees that the Company reserves the right to reject any subscription for any reason or for no reason.

(r)          The Subscriber will indemnify and hold harmless the Company and, where applicable, its directors, officers, employees, agents, advisors, affiliates and Unitholders, and each other person, if any, who controls any of the foregoing from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) (a “Loss”) arising out of or based upon any representation or warranty of the Subscriber contained herein or in any document furnished by the Subscriber to the Company in connection herewith being untrue in any material respect or any breach or failure by the Subscriber to comply with any covenant or agreement made by the Subscriber herein or therein.

(s)          The Subscriber is, and on each date on which the Subscriber continues to own restricted Units from the Offering will be, an “Accredited Investor” as defined in Rule 501(a) under the Securities Act. In general, an “Accredited Investor” is deemed to be an institution with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 (excluding such person’s principal residence) or annual income exceeding $200,000 or $300,000 jointly with his or her spouse.

(t)          The Subscriber, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the Offering, and has so evaluated the merits and risks of such investment. The Subscriber has not authorized any person or entity to act as its Purchaser Representative (as that term is defined in Regulation D) in connection with the Offering. The Subscriber is able to bear the economic risk of an investment in the Units and, at the present time, is able to afford a complete loss of such investment.

(u)          The Subscriber has reviewed, or had an opportunity to review, all of the SEC Filings (as defined below), and all “Risk Factors” and “Forward Looking Statements” disclaimers contained therein.  In addition, the Subscriber has reviewed and acknowledges it has such knowledge, sophistication, and experience in securities matters.

The Company hereby acknowledges, agrees with and represents, warrants and covenants to the Subscriber, as follows:

(a)          Organization and Qualification.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of California.  The Company is duly qualified to do business, and is in good standing in the states required due to (a) the ownership or lease of real or personal property for use in the operation of the Company's business or (b) the nature of the business conducted by the Company.  The Company has all requisite power, right and authority to own, operate and lease its properties and assets, to carry on its business as now conducted, to execute, deliver and perform its obligations under this Agreement and the other Transaction Documents to which it is a party, and to carry out the transactions contemplated hereby and thereby.  All actions on the part of the Company and its officers and directors necessary for the authorization, execution, delivery and performance of this Agreement and the other Transaction Documents, the consummation of the transactions contemplated hereby and thereby, and the performance of all of the Company's obligations under this Agreement and the other Transaction Documents have been taken or will be taken prior to the Closing.  This Agreement has been, and the other Transaction Documents to which the Company is a party on the Closing will be, duly executed and delivered by the Company, and this Agreement is, and each of the other Transaction Documents to which it is a party on the Closing will be, a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.

(b)          Issuance of Units.  The Units to be issued to the Subscriber pursuant to this Agreement, when issued and delivered in accordance with the terms of this Agreement, will be duly and validly issued and will be fully paid and non-assessable.

(c)          Authorization; Enforcement.  The execution, delivery and performance of this Agreement and the other Transaction Documents by the Company, and the consummation of the transactions contemplated hereby and thereby, will not (a) constitute a violation (with or without the giving of notice or lapse of time, or both) of any provision of any law or any judgment, decree, order, regulation or rule of any court, agency or other governmental

authority applicable to the Company, (b) require any consent, approval or authorization of, or declaration, filing or registration with, any person, (c) result in a default (with or without the giving of notice or lapse of time, or both) under, acceleration or termination of, or the creation in any party of the right to accelerate, terminate, modify or cancel, any agreement, lease, note or other restriction, encumbrance, obligation or liability to which the Company is a party or by which it is bound or to which any assets of the Company are subject, (d) result in the creation of any lien or encumbrance upon the assets of the Company, or upon any Units or other securities of the Company, (e) conflict with or result in a breach of or constitute a default under any provision of those certain articles of incorporation or those certain bylaws of the Company, or (f) invalidate or adversely affect any permit, license, authorization or status used in the conduct of the business of the Company.

(d)          SEC Filings. The Company is subject to, and in full compliance with, the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company has made available to each Subscriber through the EDGAR system true and complete copies of each of the Company’s Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K, in each case filed since November 16, 2011 (collectively, the “SEC Filings”), and all such SEC Filings are incorporated herein by reference.  The SEC Filings, when they were filed with the SEC (or, if any amendment with respect to any such document was filed, when such amendment was filed), complied in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder and did not, as of such date, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. All reports and statements required to be filed by the Company under the Exchange Act have been filed, together with all exhibits required to be filed therewith. The Company and each of its direct and indirect subsidiaries (collectively, the “Subsidiaries”), are engaged in all material respects only in the business described in the SEC Filings, and the SEC Filings contain a complete and accurate description in all material respects of the business of the Company and the Subsidiaries.

(e)          Capitalization and Additional Issuances.  The authorized and outstanding capital stock of the Company on a fully diluted basis as of the date of this Agreement and the Final Closing Date (not including the Units) are set forth in the SEC Filings.  Except as set forth in the SEC Filings, there are no options, warrants, or rights to subscribe to, securities, rights, understandings or obligations convertible into or exchangeable for or giving any right to subscribe for any Units of capital stock or other equity interest of the Company or any of the Subsidiaries.  The only officer, director, employee and consultant stock option or stock incentive plan or similar plan currently in effect or contemplated by the Company is described in the SEC Filings.  There are no outstanding agreements or preemptive or similar rights affecting the Company's Common Stock.

(f)          Private Placements.  Assuming the accuracy of the Subscriber’s representations and warranties set forth in Section 3, no registration under the Securities Act is required for the offer and sale of the Units by the Company to the Subscribers as contemplated hereby.

(g)          Investment Company.  The Company is not, and is not an affiliate of, and immediately after receipt of payment for the Units will not be or be an affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.  The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act.

5.          OTHER AGREEMENTS OF THE PARTIES

(a)          Securities Laws Disclosure; Publicity.    The Company shall not publicly disclose the name of any Subscriber, or include the name of any Subscriber in any filing with the SEC or any regulatory agency, without the prior written consent of such Subscriber, except to the extent such disclosure is required by law.

(b)          Integration.  The Company shall not, and shall use its best efforts to ensure that no affiliate of the Company shall, after the date hereof, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security that would be integrated with the offer or sale of the Units in a manner that would require the registration under the Securities Act of the sale of the Units to the Subscribers.

(c)          Quotation.  As long as any Subscriber owns Units, the Company shall use its best efforts to maintain eligibility for the Company’s Common Stock on the OTC BB, OTC QB or a national securities exchange.

6.          CONDITIONS TO ACCEPTANCE OF SUBSCRIPTION

The Company’s right to accept the subscription of the Subscriber is conditioned upon satisfaction of the following conditions precedent on or before the date the Company accepts such subscription:

(a)          As of the Closing, no legal action, suit or proceeding shall be pending that seeks to restrain or prohibit the transactions contemplated by this Agreement.

(b)          The representations and warranties of the Company contained in this Agreement shall have been true and correct in all material respects on the date of this Agreement and shall be true and correct as of the Closing as if made on the Closing Date.

(a)          All parties hereto have been represented by counsel, and no inference shall be drawn in favor of or against any party by virtue of the fact that such party’s counsel was or was not the principal draftsman of this Agreement.

(b)          Each of the parties hereto shall be responsible to pay the costs and expenses of its own legal counsel in connection with the preparation and review of this Agreement and related documentation.

(c)          Neither this Agreement, nor any provisions hereof, shall be waived, modified, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, modification, discharge or termination is sought.

(d)          The representations, warranties and agreement of the Subscriber and the Company made in this Agreement shall survive the execution and delivery of this Agreement and the delivery of the Units.

(e)          Any party may send any notice, request, demand, claim or other communication hereunder to the Subscriber at the address set forth on the signature page of this Agreement or to the Company at its primary office (including personal delivery, expedited courier, messenger service, fax, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication will be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other parties written notice in the manner herein set forth.

(f)          Except as otherwise provided herein, this Agreement shall be binding upon, and inure to the benefit of, the parties to this Agreement and their heirs, executors, administrators, successors, legal representatives and assigns.  If the Subscriber is more than one person or entity, the obligation of the Subscriber shall be joint and several and the agreements, representations, warranties and acknowledgments contained herein shall be deemed to be made by, and be binding upon, each such person or entity and its heirs, executors, administrators, successors, legal representatives and assigns. This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them.

(g)          This Agreement is not transferable or assignable by the Subscriber.

(h)          Except as otherwise provided herein, this Agreement shall not be changed, modified or amended except by a writing signed by both (a) the Company and (b) Subscribers in the Offering holding a majority of the Units issued in the Offering then held by the original Subscribers.

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

(j)          The Company and the Subscriber hereby agree that any dispute that may arise between them arising out of or in connection with this Agreement shall be adjudicated before a court located in the City of New York, Borough of Manhattan, and they hereby submit to the exclusive jurisdiction of the federal and state courts of

the State of New York located in the City of New York, Borough of Manhattan with respect to any action or legal proceeding commenced by any party, and irrevocably waive any objection they now or hereafter may have respecting the venue of any such action or proceeding brought in such a court or respecting the fact that such court is an inconvenient forum, relating to or arising out of this Agreement or any acts or omissions relating to the sale of the Units hereunder, and consent to the service of process in any such action or legal proceeding by means of registered or certified mail, return receipt requested, postage prepaid, in care of the address set forth herein or such other address as either party shall furnish in writing to the other.

(k)          WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

(l)          This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Subscriber has executed this Agreement on July _____, 2016.

Instructions:  Check all boxes below which correctly describe you.

☐

You are (i) a bank, as defined in Section 3(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), (ii) a savings and loan association or other institution, as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in an individual or fiduciary capacity, (iii) a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (iv) an insurance company as defined in Section 2(13) of the Securities Act, (v) an investment company registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), (vi) a business development company as defined in Section 2(a)(48) of the Investment Company Act, (vii) a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301 (c) or (d) of the Small Business Investment Act of 1958, as amended, (viii) a plan established and maintained by a state, its political subdivisions, or an agency or instrumentality of a state or its political subdivisions, for the benefit of its employees and you have total assets in excess of $5,000,000, or (ix) an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and (1) the decision that you shall subscribe for and purchase Units of Common Stock (the “Units”), is made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or (2) you have total assets in excess of $5,000,000 and the decision that you shall subscribe for and purchase the Units is made solely by persons or entities that are accredited investors, as defined in Rule 501 of Regulation D) or (3) you are a self-directed plan and the decision that you shall subscribe for and purchase the Units is made solely by persons or entities that are accredited investors.

☐	You are a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended.

☐

You are an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation, Massachusetts or similar business trust or a partnership, in each case not formed for the specific purpose of making an investment in the Units and its underlying securities in excess of $5,000,000.

☐	You are a director or executive officer of the Company.

☐	You are a natural person whose individual net worth, or joint net worth with your spouse, exceeds $1,000,000 (excluding your principal residence) at the time of your subscription for and purchase of the Units.

☐	You are a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with your spouse in excess of $300,000 in each of the two most recent years, and who has a reasonable expectation of reaching the same income level in the current year.

☐	You are a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Units and whose subscription for and purchase of the Units is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D.

☐	You are an entity in which all of the equity owners are persons or entities described in one of the preceding paragraphs.

____   ____

I/We understand that this investment is not guaranteed.

____   ____

I/We are aware that this investment is not liquid.

____   ____

I/We are sophisticated in financial and business affairs and are able to evaluate the risks and merits of an investment in this offering.

____   ____

I/We confirm that this investment is considered “high risk.” (This type of investment is considered high risk due to the inherent risks including lack of liquidity and lack of diversification.  Success or failure of private placements such as this is dependent on the corporate issuer of these securities and is outside the control of the investors. While potential loss is limited to the amount invested, such loss is possible.)

The Subscriber hereby represents and warrants that all of its answers to this Investor Questionnaire are true as of the date of its execution of the Subscription Agreement pursuant to which it purchased the Units.