Execution Copy

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of November
15, 2019, by and among H-Cyte, Inc., a Nevada corporation (the “Company”) and
the purchasers identified on the signature pages hereto (including any
successors and assigns, the “Purchaser(s)”).

 

Recitals

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated
thereunder, the Company desires to issue and sell to each Purchaser, and the
Purchasers, severally and not jointly, desire to purchase from the Company, (i)
up to 238,871 shares (the “Shares”) of the Company’s Series D Convertible
Preferred Stock, par value $0.001 per share (the “Series D Preferred Stock”) at
a price equal to $40.817 per share (the “Price”) and (ii) a ten-year warrant to
purchase such number of shares of Common Stock equal to one hundred percent
(100%) of the number of shares of Common Stock issuable upon conversion of the
Shares issued as part of this Agreement into Common Stock (as measured at the
Closing in which such Shares are issued), at an exercise price of $0.75 per
share (subject to adjustment as more particularly set forth in the Warrant), as
more fully described in this Agreement. The Form of Warrant is attached as
Exhibit A hereto. The Shares and the Warrants are collectively referred to as
the “Securities”.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:

 

ARTICLE 1

DEFINITIONS

 

1.1. Definitions. In addition to the terms defined elsewhere in this Agreement:
(a) capitalized terms that are not otherwise defined herein have the meanings
given to such terms in the Warrant, and (b) the following terms have the
meanings set forth in this Section 1.1:

 

“Acquiring Person” shall have the meaning ascribed to such term in Section 4.6.

 

“Action” shall have the meaning ascribed to such term in Section 3.1(j).

 

“Advisors” shall have the meaning ascribed to such term in Section 3.2(g).

 

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act.

 

“Agreement” means this Securities Purchase Agreement.

 

“Board of Directors” means the board of directors of the Company.

 

   

 

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

 

“Certificates of Designation” means, collectively, the Series B Certificate of
Designation and the Series D Certificate of Designation.

 

“Closing” means the closing of the purchase and sale of the Shares and Warrants
pursuant to Section 2.1. The Company shall have the right to hold multiple
Closings prior to the Termination Date.

 

“Closing Date” means the Trading Day on which all of the Transaction Documents
have been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to pay the Subscription
Amount, and (ii) the Company’s obligations to deliver the Shares and Warrants,
in each case, have been satisfied or waived.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the Company’s common stock, par value $0.001 per share.

 

“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, the Shares, the Warrants, any debt,
preferred stock, rights, options, warrants or other instrument that is at any
time convertible into or exercisable or exchangeable for, or otherwise entitles
the holder thereof to receive Common Stock.

 

“Company” means H-Cyte, Inc., a Nevada corporation, f/k/a Medovex Corp.

 

“Company Counsel” means Sichenzia Ross Ference LLP, with offices located at 1185
Avenue of the Americas, 37th Floor, New York, NY 10036.

 

“Confidential Information Agreements” shall have the meaning ascribed to such
term in Section 3.1(ii)(v).

 

“Conversion Shares” means the shares of Common Stock issued and issuable upon
conversion of the Shares in accordance with the Transaction Documents.

 

“Disclosure Schedules” means the Disclosure Schedules of the Company delivered
concurrently herewith.

 

“Disqualifying Event” shall have the meaning ascribed to such term in Section
3.1(dd).

 

“Environmental Laws” shall have the meaning ascribed to such term in Section
3.1(nn).

 

“Evaluation Date” shall have the meaning ascribed to such term in Section
3.1(p).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

 2 

 

 

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

 

“FDA” shall have the meaning ascribed to such term in Section 3.1(u).

 

“FDA Application Integrity Policy” shall have the meaning ascribed to such term
in Section 3.1(u).

 

“Final Closing” shall have the meaning ascribed to such term in Section 2.1(c).

 

“FINRA” shall have the meaning ascribed to such term in Section 3.2(o).

 

“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Hazardous Substances” shall have the meaning ascribed to such term in Section
3.1(nn).

 

“Initial Closing” shall have the meaning ascribed to such term in Section
2.1(c).

 

“Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(o).

 

“Investors’ Rights Agreement” means the Investors’ Rights Agreement, dated as of
the date of the Initial Closing.

 

“Lead Investor” shall have the meaning ascribed to such term in Section 5.2.

 

“Legend Removal Date” shall have the meaning ascribed to such term in Section
4.1(c).

 

“Lien” means a lien, charge, pledge, security interest, hypothecation, mortgage,
encumbrance, right of first refusal, preemptive right or other restriction.

 

“Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(b).

 

“Material Permits” shall have the meaning ascribed to such term in Section
3.1(m).

 

“Maximum Offering” shall have the meaning ascribed to such term in Section
2.1(a).

 

“Minimum Offering” shall have the meaning ascribed to such term in Section
2.1(a).

 

“Money Laundering Laws” shall have the meaning ascribed to such term in Section
3.1(mm).

 

“OFAC” shall have the meaning ascribed to such term in Section 3.1(ll).

 

“Offering” shall have the meaning ascribed to such term in Section 2.1(b).

 

“Organizational Change” shall have the meaning ascribed to such term in Section
4.15.

 

“PCBs” shall have the meaning ascribed to such term in Section 3.1(nn).

 

 3 

 

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Pharmaceutical Product” means each product subject to the jurisdiction of the
FDA under the Federal Food, Drug and Cosmetic Act, as amended, or similar
regulatory authorities outside the United States and the regulations thereunder
that is manufactured, packaged, labeled, tested, distributed, sold, and/or
marketed by the Company or any of its Subsidiaries.

 

“Plan” shall have the meaning ascribed to such term in Section 3.2(m).

 

“Price” has the meaning given to such term in the Recitals.

 

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.

 

“Purchaser” has the meaning given to such term in the first paragraph of this
Agreement.

 

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.9.

 

“Required Filings and Approvals” shall have the meaning ascribed to such term in
Section 3.1(e).

 

“Required Minimum” means, as of any date (updated on a monthly basis), the
maximum aggregate number of shares of Common Stock then issuable pursuant to the
Transaction Documents, including any Warrant Shares (issuable upon exercise of
the Warrants), ignoring any conversion or exercise limits set forth therein,
multiplied by 1.0.

 

“Right of First Refusal and Co-Sale Agreement” means the Right of First Refusal
and Co-Sale Agreement, dated as of the date of the Initial Closing.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.

 

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Securities” means the Shares, the Warrants, the Conversion Shares and the
Warrant Shares.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

 4 

 

 

“Series B Certificate of Designation” means the Amended and Restated Certificate
of Designation of Preferences, Rights and Limitations of 5% Series B Preferred
Stock of H-Cyte, Inc. in the form attached hereto as Exhibit C.

 

“Series D Certificate of Designation” means the Certificate of Designation of
Preferences, Rights and Limitations of Series D Preferred Stock of H-Cyte, Inc.
in the form attached hereto as Exhibit D.

 

“Series D Preferred Stock” has the meaning given to such term in the Recitals.

 

“Share” or “Shares” has the meaning given to such term in the Recitals.

 

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock).

 

“Standard Settlement Period” shall have the meaning ascribed to such term in
Section 4.1(c).

 

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be
paid for Shares and Warrants purchased hereunder as specified below such
Purchaser’s name on the signature page of this Agreement and next to the heading
“Subscription Amount,” in United States dollars and in immediately available
funds.

 

“Subsidiary” any direct or indirect corporation, limited or general partnership,
limited liability company, trust, estate, association, joint venture or other
business entity of which (a) more than 30% of (i) the outstanding capital stock
having (in the absence of contingencies) ordinary voting power to elect a
majority of the board of directors or other managing body of such entity, (ii)
in the case of a partnership or limited liability company, the interest in the
capital or profits of such partnership or limited liability company or (iii) in
the case of a trust, estate, association, joint venture or other entity, the
beneficial interest in such trust, estate, association or other entity business
is, at the time of determination, owned or controlled directly or indirectly
through one or more intermediaries, by such entity, or (b) is under the actual
control of the Company.

 

“Termination Date” shall have the meaning ascribed to such term in Section
2.1(b).

 

“Trading Day” means a day on which the principal Trading Market is open for
trading.

 

“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the NYSE American
LLC, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange, the OTC Bulletin Board, the OTCQX or
OTCQB as maintained by OTC Markets, Inc.

 

“Transaction Documents” means this Agreement, the Warrants, the Certificates of
Designation, the Investors’ Rights Agreement, the Right of First Refusal and
Co-Sale Agreement, the Voting Agreement, all exhibits and schedules thereto and
hereto and any other documents or agreements executed in connection with the
transactions contemplated hereunder.

 

 5 

 

 

“Transfer Agent” means Issuer Direct Corporation, LLC and any successor transfer
agent of the Company.

 

“Voting Agreement” means the Voting Agreement, dated as of the date of the
Initial Closing.

 

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted
average price of the Common Stock for such date (or the nearest preceding date)
on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or
quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then
reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported, or (d) in all
other cases, the fair market value of a share of Common Stock as determined by
an independent appraiser selected in good faith by the Purchasers of a majority
in interest of the Securities then outstanding and reasonably acceptable to the
Company, the fees and expenses of which shall be paid by the Company.

 

“Warrant Shares” means the shares of Common Stock issued and issuable upon
exercise of the Warrants in accordance with the terms of the Transaction
Documents.

 

“Warrants” means, collectively, the Common Stock purchase warrants delivered to
the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which
Warrants shall be exercisable at a price of $0.75 per share (subject to
adjustments for stock dividends, splits, combinations and similar events as more
particularly set forth in such Warrants) and have a term of exercise equal to
ten years, in the form of Exhibit A attached hereto.

 

ARTICLE 2

PURCHASE AND SALE

 

2.1. Closing.

 

(a) On the Closing Date, upon the terms and subject to the conditions set forth
herein, substantially concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and the Purchasers,
severally and not jointly, agree to purchase, a minimum of $5,500,000 of Shares
(the “Minimum Offering”) and up to an aggregate of $9,750,000 of Shares (the
“Maximum Offering”). Each Purchaser shall deliver to the Company, via wire
transfer, immediately available funds equal to such Purchaser’s Subscription
Amount as set forth on the signature page hereto executed by such Purchaser, and
the Company shall deliver to each Purchaser its respective Securities, as
determined pursuant to Section 2.2(a), and the Company and each Purchaser shall
deliver the other items set forth in Section 2.2 deliverable at the Closing.
Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and
2.3, the Closing shall occur at the offices of Company Counsel or such other
location as the parties shall mutually agree.

 

 6 

 

 

(b) The Shares and Warrants will be offered for sale by the Company (the
“Offering”) until the earlier of (i) the closing of the Maximum Offering or (ii)
February 15, 2020 (the “Termination Date”). The Company may terminate the
Offering at any time even if Shares having an aggregate purchase price equal to
the Maximum Offering have not been sold.

 

(c) The Company may hold an initial closing (“Initial Closing”) at any time
after the receipt of accepted subscriptions for the Minimum Offering. After the
Initial Closing, subsequent closings with respect to additional Shares and
Warrants may take place at any time prior to the Termination Date as determined
by the Company, with respect to subscriptions accepted prior to the Termination
Date (each such closing, together with the Initial Closing, being referred to as
a “Closing”). The last Closing of the Offering, occurring on or prior to the
Termination Date, shall be referred to as the “Final Closing”. Any subscription
documents or funds received after the Final Closing will be returned, without
interest or deduction. In the event that no Closing occurs prior to the
Termination Date, all amounts paid by any Purchaser shall be returned to such
Purchaser, without interest or deduction.

 

(d) The Company shall adopt and file each Certificate of Designation with the
Secretary of State of the State of Nevada before the Initial Closing.

 

2.2. Deliveries.

 

(a) At or promptly after each Closing Date, the Company shall deliver or cause
to be delivered to each applicable Purchaser the following:

 

(i) this Agreement, duly executed by the Company (if not previously delivered to
such Purchaser at a prior Closing);

 

(ii) a Warrant for the number of Warrant Shares issuable to such Purchaser upon
exercise thereof, duly executed by the Company;

 

(iii) a stock certificate representing the number of Shares of Series D
Preferred Stock purchased by such Purchaser on such Closing Date hereunder,

 

(iv) a responsible officer’s certificate, duly executed by the Chief Executive
Officer of the Company, dated as of the relevant Closing Date, confirming
satisfaction of the conditions set forth in Section 2.3(b)(i) and (ii) below;

 

(v) a legal opinion of Company Counsel, in a form acceptable to the Lead
Investor; and

 

(vi) each other Transaction Document to which the Company is a party, duly
executed by the Company (if not previously delivered to such Purchaser at a
prior Closing).

 

(b) On each Closing Date, each applicable Purchaser shall deliver or cause to be
delivered to the Company the following:

 

(i) this Agreement duly executed by such Purchaser (if not previously delivered
by such Purchaser at a prior Closing);

 

 7 

 

 

(ii) payment of an amount equal to the aggregate dollar amount of the Shares
being purchased by such Purchaser, by wire transfer directly to the Company; and

 

(iii) each other Transaction Document to which such Purchaser is a party, duly
executed by such Purchaser (if not previously delivered by such Purchaser at a
prior Closing).

 

2.3. Closing Conditions.

 

(a) The obligations of the Company hereunder in connection with the Closing are
subject to the following conditions being met:

 

(i) the accuracy in all material respects (or, to the extent representations or
warranties are qualified by materiality or Material Adverse Effect, in all
respects) when made and on the date of the Closing of the representations and
warranties of each Purchaser contained herein (unless as of a specific date
therein in which case they shall be accurate as of such date);

 

(ii) all obligations, covenants and agreements of each Purchaser required to be
performed at or prior to a Closing Date shall have been performed; and

 

(iii) the delivery by each Purchaser of the applicable items set forth in
Section 2.2(b) of this Agreement.

 

(b) The obligation of the Purchasers hereunder to purchase the Shares is subject
to the following conditions being met:

 

(i) the accuracy in all material respects (or, to the extent representations or
warranties are qualified by materiality or Material Adverse Effect, in all
respects) when made and on the date of the applicable Closing of the
representations and warranties of the Company contained herein (unless as of a
specific date therein in which case they shall be accurate as of such date);

 

(ii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;

 

(iii) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof and the Company shall not be in breach of any
Transaction Document;

 

(iv) from the date hereof to the Closing Date, trading in the Common Stock shall
not have been suspended by the Commission or the Company’s principal Trading
Market, and, at any time from the date hereto to the Closing Date, trading in
securities generally as reported by Bloomberg L.P. shall not have been suspended
or limited, or minimum prices shall not have been established on securities
whose trades are reported by such service, or on any Trading Market, nor shall a
banking moratorium have been declared either by the United States or New York
State authorities nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any financial
market which, in each case, makes it impracticable or inadvisable to purchase
the Securities on the Closing Date;

 

 8 

 

 

(v) the Company shall have obtained all governmental, regulatory and third party
consents and approvals, if any, necessary for the entry into the Transaction
Documents and the sale of the Securities;

 

(vi) the Company shall have duly filed each Certificate of Designation prior to
the Initial Closing; and

 

(vii) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement.

 

ARTICLE 3
REPRESENTATIONS AND WARRANTIES

 

3.1. Representations and Warranties of the Company. Except as set forth in the
Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof
and shall qualify only the representations and warranties made in a particular
numbered or lettered section and/or subsection of this Section 3.1 or otherwise
made herein to the extent of the disclosure contained in the corresponding
numbered or lettered section or subsection of the Disclosure Schedules, the
Company hereby makes the following representations and warranties to each
Purchaser as of the date hereof:

 

(a) Subsidiaries. The Company owns, directly or indirectly, all of the capital
stock or other equity interests of each of its Subsidiaries, free and clear of
any Liens, and all of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase securities. If the
Company has no Subsidiaries, all other references to the Subsidiaries in the
Transaction Documents shall be disregarded.

 

(b) Organization and Qualification. The Company and each of the Subsidiaries is
an entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation nor default of any of the
provisions of its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in: (i) a
material adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material Adverse Effect”) and no Proceeding has been instituted, or to the
Company’s knowledge threatened or contemplated, in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.

 

 9 

 

 

(c) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
this Agreement and each of the other Transaction Documents and otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and each of the other Transaction Documents by the Company and
the consummation by it of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action on the part of the Company and no
further action is required by the Company, the Board of Directors or the
Company’s stockholders in connection herewith or therewith other than in
connection with the Required Filings and Approvals. This Agreement and each
other Transaction Document to which it is a party has been (or upon delivery
will have been) duly executed by the Company and, when delivered in accordance
with the terms hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.

 

(d) No Conflicts. The execution, delivery and performance by the Company of this
Agreement and each of the other Transaction Documents and the consummation by it
to which it is a party, the issuance and sale of the Securities and the
consummation by it of the transactions contemplated hereby and thereby do not
and will not: (i) conflict with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, result in the creation of any Lien upon any of the properties or assets
of the Company or any Subsidiary, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other understanding to
which the Company or any Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound or affected, or (iii) subject to the
Required Filings and Approvals, conflict with or result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), such as could not have or
reasonably be expected to result in a Material Adverse Effect.

 

(e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) the filings required pursuant to Section 4.5, (ii) the notice and/or
application(s) to each applicable Trading Market for the issuance and sale of
the Securities and the listing of the Warrant Shares for trading thereon in the
time and manner required thereby and (iii) the filing of a Form D with the
Commission and such filings as are required to be made under applicable state
securities laws (collectively, the “Required Filings and Approvals”).

 

 10 

 

 

(f) Issuance of the Securities; Certificates of Designation.

 

(i) The issuance of the Warrants and the Shares being issued pursuant to this
Agreement have been duly authorized and, when issued and paid for in accordance
with the applicable Transaction Documents, will be fully paid and nonassessable,
free and clear of all liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents. The Warrant Shares have been
duly reserved for issuance and, when issued in accordance with the terms of the
Transaction Documents, will be validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents. The Conversion Shares have
been duly reserved for issuance and, when issued in accordance with the terms of
the Transaction Documents, will be validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents.

 

(ii) Upon the filing by the Company of the Series D Certificate of Designation,
the holders of Series D Preferred Stock shall have all of the rights,
preferences and privileges set forth in such Series D Certificate of
Designation. Upon the filing by the Company of the Series B Certificate of
Designation, the holders of the Company’s 5% Series B Convertible Preferred
Stock will be bound by the rights, preferences, privileges and limitations set
forth in such Series B Certificate of Designation.

 

(g) Capitalization. The capitalization of the Company is as set forth on
Schedule 3.1(g), which Schedule 3.1(g) shall also include the number of shares
of Common Stock owned beneficially, and of record, by Affiliates of the Company
as of the date hereof. The Company has not issued any capital stock since its
most recently filed periodic report under the Exchange Act, other than pursuant
to the exercise of employee stock options under the Company’s stock option
plans, the issuance of shares of Common Stock to employees pursuant to the
Company’s employee stock purchase plans and pursuant to the conversion and/or
exercise of Common Stock Equivalents outstanding as of the date of the most
recently filed periodic report under the Exchange Act. None of the Company’s
stock purchase agreements or stock option documents contains a provision for
acceleration of vesting (or lapse of a repurchase right) or other changes in the
vesting provisions or other terms of such agreement or understanding upon the
occurrence of any event or combination of events. The Company has never adjusted
or amended the exercise price of any stock options previously awarded, whether
through amendment, cancellation, replacement grant, repricing, or any other
means. Except as set forth in the Series D Certificate of Designation, the
Company has no obligation (contingent or otherwise) to purchase or redeem any of
its capital stock. No Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities and as disclosed on Schedule 3.1(g), there are no
outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire any shares of Common Stock or the
capital stock of any Subsidiary, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock or Common Stock Equivalents or capital
stock of any Subsidiary. The issuance and sale of the Securities will not
obligate the Company or any Subsidiary to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. There are no outstanding
securities or instruments of the Company or any Subsidiary that contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to redeem a security of the Company or such Subsidiary. The Company
does not have any stock appreciation rights or “phantom stock” plans or any
similar plan or agreement. All of the outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and nonassessable, have
been issued in compliance with all federal and state securities laws, and none
of such outstanding shares was issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities. No further approval or
authorization of any stockholder, the Board of Directors or others is required
for the issuance and sale of the Securities. Except for the agreements
contemplated by this Agreement, which would include the Transaction Documents,
there are no stockholders agreements, voting agreements, investors’ rights
agreements, rights of first refusal agreements, co-sale agreements, registration
rights agreements or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders.

 

 11 

 

 

(h) SEC Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents, required to be filed by the
Company under Section 13 or 15(d) of the Exchange Act for the two years
preceding the date hereof (the foregoing materials, in addition to all
schedules, forms, statements and other documents filed with the Commission for
the two years preceding the date hereof, including any amendments thereto, the
exhibits thereto and documents incorporated by reference therein, being
collectively referred to herein as the “SEC Reports”) on a timely basis or has
received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act, as applicable, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted 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. The Company has never been an issuer
subject to Rule 144(i) under the Securities Act. The financial statements of the
Company included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company and its consolidated
Subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments.

 

 12 

 

 

(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the
date of the latest audited financial statements included within the SEC Reports
and except as has been disclosed in the SEC Reports and as set forth on Schedule
3.1(i), (i) there has been no event, occurrence or development that has had or
that could reasonably be expected to result in a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or disclosed in
filings made with the Commission, (iii) the Company has not altered its method
of accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans,
(vi) the Company has not waived or compromised any valuable right or of a
material debt owed to it, (vii) the Company has not received notice that there
has been a loss of, or material order cancellation by, any major customer,
supplier, licensor or distributor of the Company, (viii) there has been no
material change to a material contract or agreement by which the Company or any
of its assets is bound or subject, (ix) there has been no material change in any
compensation arrangement or agreement with any employee, officer, director or
stockholder, and (x) there have been no loans or guarantees made by the Company
to or for the benefit of its employees, officers or directors, or any members of
their immediate families, other than travel advances and other advances made in
the ordinary course of its business. The Company does not have pending before
the Commission any request for confidential treatment of information. Except for
the issuance of the Securities contemplated by this Agreement or as set forth
on, no event, liability, fact, circumstance, occurrence or development has
occurred or exists or is reasonably expected to occur or exist with respect to
the Company or its Subsidiaries or their respective businesses, prospects,
properties, operations, assets or financial condition that would be required to
be disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at
least 1 Trading Day prior to the date that this representation is made.

 

(j) Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary, any of their
respective properties or any of their respective directors, officers or
employees before or by any court, arbitrator, governmental or administrative
agency or regulatory authority (federal, state, county, local or foreign)
(collectively, an “Action”) which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any Subsidiary, nor any director or officer thereof, is or has been
the subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty. There
has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company or any
current or former director or officer of the Company. The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.

 

(k) Transactions With Affiliates and Employees. None of the officers or
directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $120,000
other than for: (i) payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company, and (iii)
other employee benefits, including stock option agreements under any stock
option plan of the Company.

 

 13 

 

 

(l) Compliance. Neither the Company nor any Subsidiary: (i) is in default under
or in violation of (and no event has occurred that has not been waived that,
with notice or lapse of time or both, would result in a default by the Company
or any Subsidiary under), nor has the Company or any Subsidiary received notice
of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived) except for certain promissory
notes for which the maturity date has been extended, (ii) is in violation of any
judgment, decree, or order of any court, arbitrator or other governmental
authority or (iii) is or has been in violation of any statute, rule, ordinance
or regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not have or
reasonably be expected to result in a Material Adverse Effect.

 

(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such permits could
not reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.
The Company and the Subsidiaries are not in default in any material respect
under any of such Material Permits.

 

(n) Title to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them and good and marketable
title in all personal property owned by them that is material to the business of
the Company and the Subsidiaries, in each case free and clear of all Liens
except for (i) Liens as do not materially affect the value of such property and
do not materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and (ii) Liens for the payment of
federal, state or other taxes, for which appropriate reserves have been made
therefor in accordance with GAAP and the payment of which is neither delinquent
nor subject to penalties. Any real property and facilities held under lease by
the Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases with which the Company and the Subsidiaries are in
compliance.

 

 14 

 

 

(o) Intellectual Property. The Company and the Subsidiaries have, or have rights
to use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, trade secrets, inventions, copyrights, licenses and
other intellectual property rights and similar rights as necessary or required
for use in connection with their respective businesses as described in the SEC
Reports and which the failure to so have could have a Material Adverse Effect
(collectively, the “Intellectual Property Rights”) without any known conflict
with, or infringement of, the rights of others, including prior employees or
consultants, or academic or medical institutions with which any of them may be
affiliated now or may have been affiliated in the past. None of, and neither the
Company nor any Subsidiary has received a notice (written or otherwise) that any
of, the Intellectual Property Rights has expired, terminated or been abandoned,
or is expected to expire or terminate or be abandoned, within two (2) years from
the date of this Agreement. No product or service marketed or sold (or proposed
to be marketed or sold) by the Company violates or will violate any license or
infringes or will infringe any intellectual property rights of any other party.
The Company has not received any communications alleging that the Company has
violated, or by conducting its business, would violate any of the patents,
trademarks, service marks, tradenames, copyrights, trade secrets, mask works or
other proprietary rights or processes of any other Person. The Company has
obtained and possesses valid licenses to use all of the software programs
present on the computers and other software-enabled electronic devices that it
owns or leases or that it has otherwise provided to its employees for their use
in connection with the Company’s business. It will not be necessary to use any
inventions of any of its employees or consultants (or Persons it currently
intends to hire) made prior to their employment by the Company, including prior
employees or consultants, or academic or medical institutions with which any of
them may be affiliated now or may have been affiliated in the past. Each
employee and consultant has assigned to the Company all intellectual property
rights he or she owns that are related to the Company’s business as now
conducted and as presently proposed to be conducted and all intellectual
property rights that he, she or it solely or jointly conceived, reduced to
practice, developed or made during the period of his, her or its employment or
consulting relationship with the Company that (i) relate, at the time of
conception, reduction to practice, development, or making of such intellectual
property right, to the Company’s business as then conducted or as then proposed
to be conducted, (ii) were developed on any amount of the Company’s time or with
the use of any of the Company’s equipment, supplies, facilities or information
or (iii) resulted from the performance of services for the Company. No
government funding, facilities of a university, college, other educational
institution or research center, or funding from third parties was used in the
development of any Intellectual Property Rights. No Person who was involved in,
or who contributed to, the creation or development of any of the Company’s
intellectual property, has performed services for any government, university,
college, or other educational institution or research center in a manner that
would affect Company’s rights in the Intellectual Property Rights. The Company
and its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their intellectual properties,
except where failure to do so could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

(p) Sarbanes-Oxley; Internal Accounting Controls. The Company and the
Subsidiaries are in compliance with any and all applicable requirements of the
Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and
all applicable rules and regulations promulgated by the Commission thereunder
that are effective as of the date hereof and as of the Closing Date. The Company
and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company and the Subsidiaries have
established disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such
disclosure controls and procedures to ensure that information required to be
disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the Commission’s rules and forms. The Company’s certifying officers
have evaluated the effectiveness of the disclosure controls and procedures of
the Company and the Subsidiaries as of the end of the period covered by the most
recently filed periodic report under the Exchange Act (such date, the
“Evaluation Date”). The Company presented in its most recently filed periodic
report under the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no changes in the internal control over financial reporting (as such term
is defined in the Exchange Act) of the Company and its Subsidiaries that have
materially affected, or are reasonably likely to materially affect, the internal
control over financial reporting of the Company or its Subsidiaries.

 

 15 

 

 

(q) Certain Fees. No brokerage or finder’s fees or commissions are or will be
payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by the Transaction Documents. The Purchaser shall have
no obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section
3.1(q) that may be due in connection with the transactions contemplated by the
Transaction Documents.

 

(r) Private Placement. Assuming the accuracy of the Purchaser’s representations
and warranties set forth in Section 3.2, no registration under the Securities
Act is required for the offer and sale of the Securities by the Company to the
Purchasers as contemplated hereby. The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the Trading Market.

 

(s) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, 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 of 1940,
as amended.

 

(t) Listing and Maintenance Requirements. Except as disclosed in the SEC
Reports, the Company has not, in the 12 months preceding the date hereof,
received notice from any Trading Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading Market. The Company is
required to and has made current filings under Section 15(d) of the Exchange
Act. The Common Stock is currently eligible for electronic transfer through the
Depository Trust Company or another established clearing corporation and the
Company is current in payment of the fees to the Depository Trust Company (or
such other established clearing corporation) in connection with such electronic
transfer.

 

 16 

 

 

(u) FDA. The Company is not in violation of the Federal Food, Drug and Cosmetic
Act, as amended, and the rules and regulations thereunder, except where the
violation thereof would not have a Material Adverse Effect. There is no pending,
completed or, to the Company’s knowledge, threatened, action (including any
lawsuit, arbitration, or legal or administrative or regulatory proceeding,
charge, complaint, or investigation) against the Company or any of its
Subsidiaries, and none of the Company or any of its Subsidiaries has received
any notice, warning letter or other communication from the U.S. Food and Drug
Administration (“FDA”) or any other governmental entity, which (i) contests the
premarket clearance, licensure, registration, or approval of, the uses of, the
distribution of, the manufacturing or packaging of, the testing of, the sale of,
or the labeling and promotion of any Pharmaceutical Product, (ii) withdraws its
approval of, requests the recall, suspension, or seizure of, or withdraws or
orders the withdrawal of advertising or sales promotional materials relating to,
any Pharmaceutical Product, (iii) imposes a clinical hold on any clinical
investigation by the Company or any of its Subsidiaries, (iv) enjoins production
at any facility of the Company or any of its Subsidiaries, (v) enters or
proposes to enter into a consent decree of permanent injunction with the Company
or any of its Subsidiaries, or (vi) otherwise alleges any violation of any laws,
rules or regulations by the Company or any of its Subsidiaries, and which,
either individually or in the aggregate, would have a Material Adverse Effect.
The Company has not been informed by the FDA that the FDA will prohibit the
marketing, sale, license or use in the United States of any product proposed to
be developed, produced or marketed by the Company nor has the FDA expressed to
the Company or any of its Subsidiaries any concern as to approving or clearing
for marketing any product being developed or proposed to be developed by the
Company. Neither the Company nor, to the Company’s knowledge, any officer,
employee or agent of the Company has been convicted of any crime or engaged in
any conduct that has previously caused or would reasonably be expected to result
in (A) disqualification or debarment by the FDA under 21 U.S.C. Sections 335(a)
or (b), or any similar law, rule or regulation of any other governmental
entities, (B) debarment, suspension, or exclusion under any Federal Healthcare
Programs or by the General Services Administration, or (C) exclusion under 42
U.S.C. Section 1320a-7 or any similar law, rule or regulation of any
governmental entities. Neither the Company nor any of its officers, employees,
or to the Company’s knowledge, any of its contractors or agents is the subject
of any pending or threatened investigation by FDA pursuant to its “Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal Gratuities” policy as stated
at 56 Fed. Reg. 46191 (September 10, 1991) (the “FDA Application Integrity
Policy”) and any amendments thereto, or by any other similar governmental entity
pursuant to any similar policy. Neither the Company nor any of its officers,
employees, contractors, and agents has committed any act, made any statement or
failed to make any statement that would reasonably be expected to provide a
basis for FDA to invoke the FDA Application Integrity Policy or for any similar
governmental entity to invoke a similar policy. Neither the Company nor any of
its officers, employees, or to the Company’s knowledge, any of its contractors
or agents has made any materially false statements on, or material omissions
from, any notifications, applications, approvals, reports and other submissions
to FDA or any similar governmental entity. Notwithstanding the above, each
Purchaser acknowledges that the Company has not obtained FDA approval of any of
its products.

 

(v) Preclinical Development and Clinical Trials. The studies, tests, preclinical
development and clinical trials, if any, conducted by or on behalf of the
Company are being conducted in all material respects in accordance with
experimental protocols, procedures and controls pursuant to accepted
professional and scientific standards for products or product candidates
comparable to those being developed by the Company and all applicable laws and
regulations, including the Federal Food, Drug, and Cosmetic Act and 21 C.F.R.
parts 50, 54, 56, 58, 312, and 812. The descriptions of, protocols for, and data
and other results of, the studies, tests, development and trials conducted by or
on behalf of the Company that have been furnished or made available to the
Purchasers are accurate and complete. The Company is not aware of any studies,
tests, development or trials the results of which reasonably call into question
the results of the studies, tests, development and trials conducted by or on
behalf of the Company, and the Company has not received any notices or
correspondence from the FDA or any other governmental entity or any
institutional review board or comparable authority requiring the termination,
suspension or material modification of any studies, tests, preclinical
development or clinical trials conducted by or on behalf of the Company.

 

 17 

 

 

(w) Disclosure. Except with respect to (i) the material terms and conditions of
the transactions contemplated by the Transaction Documents and (ii) information
given to the Purchasers, if any, which the Company hereby confirms will not
constitute material non-public information six months from the date hereof, the
Company confirms that neither it nor any other Person acting on its behalf has
provided the Purchasers or their agents or counsel with any information that it
believes constitutes or might constitute material, nonpublic information. No
representation or warranty of the Company contained in this Agreement and no
certificate furnished or to be furnished to Purchasers at the Closing contains
any untrue statement of a material fact or, omits to state a material fact
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made. All
disclosure furnished in writing by or on behalf of the Company to the Purchasers
regarding the Company, its business and the transactions contemplated hereby, is
true and correct and does not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The press releases disseminated by the Company during the twelve
months preceding the date of this Agreement taken as a whole do not contain any
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 light
of the circumstances under which they were made and when made, not misleading.

 

(x) No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the Company,
nor, to the Company’s knowledge, any of its Affiliates, nor any Person acting on
its or their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of the Securities Act which would require
the registration of any such securities under the Securities Act.

 

(y) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and its Subsidiaries each (i) has made or filed all United
States federal, state and local income and all foreign income and franchise tax
returns, reports and declarations required by any jurisdiction to which it is
subject, (ii) has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations, and (iii) has set aside on its books provision
reasonably adequate for the payment of all material taxes for periods subsequent
to the periods to which such returns, reports or declarations apply. There are
no unpaid taxes in any material amount claimed to be due by the taxing authority
of any jurisdiction, and the officers of the Company or of any Subsidiary know
of no basis for any such claim.

 

(z) No General Solicitation. Neither the Company nor, to the Company’s
knowledge, any person acting on behalf of the Company has offered or sold any of
the Securities by any form of general solicitation or general advertising. The
Company has offered the Securities for sale only to the Purchaser and certain
other “accredited investors” within the meaning of Rule 501 under the Securities
Act.

 

 18 

 

 

(aa) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, to the
knowledge of the Company or any Subsidiary, any agent or other person acting on
behalf of the Company or any Subsidiary, has: (i) directly or indirectly, used
any funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to
any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company or any
Subsidiary (or made by any person acting on its behalf of which the Company is
aware) which is in violation of law or (iv) violated in any material respect any
provision of FCPA. The Company further represents that it has maintained, and
has caused each of its Subsidiaries and affiliates to maintain, systems of
internal controls (including, but not limited to, accounting systems, purchasing
systems and billing systems) and written policies to ensure compliance with the
FCPA or any other applicable anti-bribery or anti-corruption law, and to ensure
that all books and records of the Company and its Subsidiaries accurately and
fairly reflect, in reasonable detail, all transactions and dispositions of funds
and assets. Neither the Company nor any of its officers, directors or employees
are the subject of any allegation, voluntary disclosure, investigation,
prosecution or other enforcement action related to the FCPA or any other
anti-corruption law.

 

(bb) No Disagreements with Accountants and Lawyers; Outstanding SEC Comments.
There are no disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the accountants and
lawyers formerly or presently employed by the Company and the Company is or
immediately after the Closing Date will be current with respect to any fees owed
to its accountants which could affect the Company’s ability to perform any of
its obligations under any of the Transaction Documents. There are no unresolved
comments or inquiries received by the Company or its Affiliates from the
Commission which remain unresolved as of the date hereof.

 

(cc) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents
and the transactions contemplated thereby. The Company further acknowledges that
no Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any Purchaser or any
of their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Purchasers’ purchase of the Securities. The Company further represents to each
Purchaser that the Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.

 

(dd) Disqualification. No executive officer, member of the Board of Directors of
the Company or shareholder of the Company beneficially owning more than 10% of
the Company’s securities is currently subject to a Disqualifying Event. For
purposes of this Agreement, “Disqualifying Event” means any conviction, order,
judgment, decree, suspension, expulsion, event or other matter set out in Rule
506(d)(1)(i) through 506(d)(1)(viii) of Regulation D that is currently in effect
or which occurred within the periods set out in Rule 506(d)(1)(i) through
(viii).

 

 19 

 

 

(ee) Acknowledgment Regarding Purchaser’s Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding, it is understood
and acknowledged by the Company that: (i) none of the Purchasers has been asked
by the Company to agree, nor has any Purchaser agreed, to desist from purchasing
or selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Securities
for any specified term, (ii) past or future open market or other transactions by
any Purchaser, specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this or future private
placement transactions, may negatively impact the market price of the Company’s
publicly-traded securities, (iii) any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser is a party, directly or
indirectly, presently may have a “short” position in the Common Stock and (iv)
each Purchaser shall not be deemed to have any affiliation with or control over
any arm’s length counter-party in any “derivative” transaction. The Company
further understands and acknowledges that (y) one or more Purchasers may engage
in hedging activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value of
the Conversion Shares and Warrant Shares deliverable with respect to Securities
are being determined, and (z) such hedging activities (if any) could reduce the
value of the existing stockholders’ equity interests in the Company at and after
the time that the hedging activities are being conducted. The Company
acknowledges that such aforementioned hedging activities do not constitute a
breach of any of the Transaction Documents.

 

(ff) Regulation M Compliance. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company’s placement agent, if any, in connection with
the placement of the Securities.

 

(gg) Stock Option Plans. Each stock option granted by the Company under the
Company’s stock option plan was granted (i) in accordance with the terms of the
Company’s stock option plan and (ii) with an exercise price at least equal to
the fair market value of the Common Stock on the date such stock option would be
considered granted under GAAP and applicable law. No stock option granted under
the Company’s stock option plan has been backdated. The Company has not
knowingly granted, and there is no and has been no Company policy or practice to
knowingly grant, stock options prior to, or otherwise knowingly coordinate the
grant of stock options with, the release or other public announcement of
material information regarding the Company or its Subsidiaries or their
financial results or prospects.

 

(hh) Labor Relations. No labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the Company, which
could reasonably be expected to result in a Material Adverse Effect. None of the
Company’s or its Subsidiaries’ employees is a member of a union that relates to
such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relationships
with their employees are good. To the knowledge of the Company, no executive
officer of the Company or any Subsidiary is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition agreement, or
any other contract or agreement or any restrictive covenant in favor of any
third party, and the continued employment of each such executive officer does
not subject the Company or any of its Subsidiaries to any liability with respect
to any of the foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and regulations
relating to employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to be in compliance
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

 

 20 

 

 

(ii) Employee Matters.

 

(i) None of the Company’s employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would materially interfere with such employee’s ability to promote the interest
of the Company or that would conflict with the Company’s business. Neither the
execution or delivery of the Transaction Documents, nor the carrying on of the
Company’s business by the employees of the Company, nor the conduct of the
Company’s business as now conducted and as presently proposed to be conducted,
will conflict with or result in a breach of the terms, conditions, or provisions
of, or constitute a default under, any contract, covenant or instrument under
which any such employee is now obligated.

 

(ii) The Company is not delinquent in payments to any of its employees,
consultants, or independent contractors for any wages, salaries, commissions,
bonuses, or other direct compensation for any service performed for it to the
date hereof or amounts required to be reimbursed to such employees, consultants
or independent contractors. The Company has complied in all material respects
with all applicable state and federal equal employment opportunity laws and with
other laws related to employment, including those related to wages, hours,
worker classification and collective bargaining. The Company has withheld and
paid to the appropriate governmental entity or is holding for payment not yet
due to such governmental entity all amounts required to be withheld from
employees of the Company and is not liable for any arrears of wages, taxes,
penalties or other sums for failure to comply with any of the foregoing.

 

(iii) To the Company’s knowledge, no executive officer intends to terminate
employment with the Company or is otherwise likely to become unavailable to
continue as an executive officer. The Company does not have a present intention
to terminate the employment of any of the foregoing. The employment of each
employee of the Company is terminable at the will of the Company. Upon
termination of the employment of any such employees, no severance or other
payments will become due. Except as set forth on Schedule 3.1(ii)(iii), the
Company has no policy, practice, plan or program of paying severance pay or any
form of severance compensation in connection with the termination of employment
services.

 

(iv) The Company has not made any representations regarding equity incentives to
any officer, employee, director or consultant that are inconsistent with the
share amounts and terms set forth in the minutes of meetings of the Company’s
board of directors.

 

(v) Each current and former employee, consultant and officer of the Company has
executed an agreement with the Company regarding confidentiality and proprietary
information substantially in the form or forms delivered to the counsel for the
Purchasers (the “Confidential Information Agreements”). No current or former
executive officer has excluded works or inventions from his or her assignment of
inventions pursuant to such executive officer’s Confidential Information
Agreement. Each current and former executive officer has executed a
non-competition and non-solicitation agreement substantially in the form or
forms delivered to counsel for the Purchasers. The Company is not aware that any
of its executive officers is in violation of any agreement covered by this
subsection.

 

 21 

 

 

(jj) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged, including, but not limited to, directors and
officers insurance coverage at least equal to the aggregate Subscription Amount.
Neither the Company nor any Subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business without a significant increase in cost.

 

(kk) Registration Rights. Except as set forth on Schedule 3.1(kk), no Person has
any right to cause the Company or any Subsidiary to effect the registration
under the Securities Act of any securities of the Company or any Subsidiary.

 

(ll) Office of Foreign Assets Control. Neither the Company nor any Subsidiary
nor, to the Company’s knowledge, any director, officer, agent, employee or
affiliate of the Company or any Subsidiary is currently subject to any U.S.
sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“OFAC”).

 

(mm) Money Laundering. The operations of the Company and its Subsidiaries are
and have been conducted at all times in compliance with applicable financial
record-keeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, applicable money laundering
statutes and applicable rules and regulations thereunder (collectively, the
“Money Laundering Laws”), and no Action or Proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or any Subsidiary with respect to the Money Laundering Laws is pending or, to
the knowledge of the Company or any Subsidiary, threatened.

 

(nn) Environmental and Safety Laws. Except as could not reasonably be expected
to have a Material Adverse Effect, (i) the Company is and has been in compliance
with all Environmental Laws; (i) there has been no release or threatened release
of any pollutant, contaminant or toxic or hazardous material, substance or waste
or petroleum or any fraction thereof (each a “Hazardous Substance”), on, upon,
into or from any site currently or heretofore owned, leased or otherwise used by
the Company; (iii) there have been no Hazardous Substances generated by the
Company that have been disposed of or come to rest at any site that has been
included in any published U.S. federal, state or local “superfund” site list or
any other similar list of hazardous or toxic waste sites published by any
governmental authority in the United States; and (iv) there are no underground
storage tanks located on, no polychlorinated biphenyls (“PCBs”) or
PCB-containing equipment used or stored on, and no hazardous waste as defined by
the Resource Conservation and Recovery Act, as amended, stored on, any site
owned or operated by the Company, except for the storage of hazardous waste in
compliance with Environmental Laws. The Company has made available to the
Purchasers true and complete copies of all material environmental records,
reports, notifications, certificates of need, permits, pending permit
applications, correspondence, engineering studies and environmental studies or
assessments. For purposes of this Section 3.1(nn), “Environmental Laws” means
any law, regulation, or other applicable requirement relating to (a) releases or
threatened release of a Hazardous Substance; (b) pollution or protection of
employee health or safety, public health or the environment; or (c) the
manufacture, handling, transport, use, treatment, storage, or disposal of a
Hazardous Substances.

 

 22 

 

 

(oo) Takeover Protections. The Company and the Board of Directors have taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
articles of incorporation (or similar charter documents), any certificates of
designation adopted by the Company pursuant to its articles of incorporation or
the laws of its state of incorporation that is or could become applicable to the
Purchasers as a result of the Purchasers and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation as a result of the Company’s issuance of the
Securities and the Purchasers’ ownership of the Securities.

 

3.2. Representations and Warranties of each Purchaser. Each Purchaser, for
itself and for no other Purchaser, hereby represents and warrants as of the date
hereof to the Company as follows:

 

(a) Such Purchaser is either an individual or an entity duly incorporated or
formed, validly existing and in good standing under the laws of the jurisdiction
of its incorporation or formation with full right, corporate, partnership,
limited liability company or similar power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of the Transaction Documents and performance by such Purchaser of
the transactions contemplated by the Transaction Documents have been duly
authorized by all necessary corporate, partnership, limited liability company or
similar action, as applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such Purchaser, and
when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except: (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

 

(b) Such Purchaser understands that the Securities are “restricted securities”
and have not been registered under the Securities Act or any applicable state
securities law and is acquiring the Securities as principal for its own account
and not with a view to or for distributing or reselling such Securities or any
part thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of such Securities
in violation of the Securities Act or any applicable state securities law and
has no direct or indirect arrangement or understandings with any other persons
to distribute or regarding the distribution of such Securities in violation of
the Securities Act or any applicable state securities law (this representation
and warranty not limiting such Purchaser’s right to sell the Securities in
compliance with applicable federal and state securities laws). Such Purchaser is
acquiring the Securities hereunder in the ordinary course of its business.

 

(c) At the time the Purchaser was offered the Shares and Warrants, it was, and
as of the date hereof it is, and on each date on which it exercises a Warrant it
will be either: (i) an “accredited investor” as defined in Rule 501(a) under the
Securities Act or (ii) a “qualified institutional buyer” as defined in Rule
144A(a) under the Securities Act and has truthfully and accurately completed the
Investor Questionnaire attached as Exhibit B to this Agreement and will submit
to the Company such further assurances of such status as may be reasonably
requested by the Company.

 

 23 

 

 

(d) Such Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of such
investment.

 

(e) Such Purchaser is not, to such Purchaser’s knowledge, purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or, to the knowledge of such Purchaser, any other general solicitation or
general advertisement.

 

(f) Such Purchaser acknowledges that it has had the opportunity to review the
Transaction Documents (including all exhibits and schedules thereto) and the SEC
Reports and has been afforded (i) the opportunity to ask such questions as it
has deemed necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the Securities
and the merits and risks of investing in the Securities; (ii) access to
information about the Company and its financial condition, results of
operations, business, properties, management and prospects sufficient to enable
it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment.

 

(g) Such Purchaser and his, her or its Purchaser’s attorney, accountant,
purchaser representative and/or tax advisor, if any (collectively, “Advisors”),
have received and have carefully reviewed this Agreement, and each of the
Transaction Documents and all other documents requested by the Purchaser or its
Advisors, if any, and understand the information contained therein, prior to the
execution of this Agreement.

 

(h) In evaluating the suitability of an investment in the Company, such
Purchaser has not relied upon any representation of the Company or other
information (oral or written) provided by the Company other than as stated in
this Agreement, any other Transaction Document or any other document or
instrument executed and/or delivered in connection with this Agreement or the
consummation of the transactions contemplated hereby.

 

(i) Other than with respect to the representations and warranties of the Company
as set forth in this Agreement, any other Transaction Document or any other
document or instrument executed and/or delivered in connection with this
Agreement or the consummation of the transactions contemplated hereby, such
Purchaser is not relying on the Company or any of its employees or agents with
respect to the legal, tax, economic and related considerations of an investment
in any of the Securities and such Purchaser has relied on the advice of, or has
consulted with, only his, her or its own Advisors.

 

 24 

 

 

(j) Such Purchaser understands and agrees that purchase of the Securities
involves a high degree of risk, and is able to afford an investment in a
speculative venture having the risks and objectives of the Company. Such
Purchaser must bear the substantial economic risks of the investment in the
Securities indefinitely because none of the Securities may be sold, hypothecated
or otherwise disposed of unless subsequently registered under the Securities Act
and applicable state securities laws or an exemption from such registration is
available. Prior to any such registration, legends will be placed on the
certificates representing Securities (including the Conversion Shares and
Warrant Shares) to the effect that such securities have not been registered
under the Securities Act or applicable state securities laws and appropriate
notations thereof will be made in the Company’s books.

 

(k) Such Purchaser has adequate means of providing for such Purchaser’s current
financial needs and foreseeable contingencies and has no need for liquidity from
its investment in the Securities for an indefinite period of time.

 

(l) Within five (5) days after receipt of a request from the Company, such
Purchaser will provide such information and deliver such documents as may
reasonably be necessary to comply with any and all laws and ordinances to which
the Company is subject.

 

(m) (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. Such Purchaser or Plan
fiduciary (a) is responsible for the decision to invest in the Company; (b) is
independent of the Company and any of its affiliates; (c) is qualified to make
such investment decision; and (d) in making such decision, such Purchaser or
Plan fiduciary has not relied on any advice or recommendation of the Company or
any of its affiliates.

 

(n) Such Purchaser represents that (i) he, she or it was contacted regarding the
sale of the Securities by the Company or a placement agent of the Company (or
another person whom the Purchaser believed to be an authorized agent or
representative thereof) with whom such Purchaser had a prior substantial
pre-existing relationship and (ii) he, she or it did not learn of the offering
of the Securities by means of any form of general solicitation or general
advertising, and in connection therewith, such Purchaser 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.

 

(o) Such Purchaser acknowledges that if he or she is a Registered Representative
of a Financial Industry Regulatory Authority (“FINRA”) member firm, he or she
must give such firm the notice required by the FINRA’s Rules of Fair Practice,
receipt of which must be acknowledged by such firm prior to an investment in the
Securities.

 

(p) Such Purchaser agrees not to issue any public statement with respect to the
Transaction Documents, such Purchaser’s investment or proposed investment in the
Company or the terms of any agreement or covenant between them and the Company
without the Company’s prior written consent, except such disclosures as may be
required under applicable law.

 

 25 

 

 

(q) Such Purchaser understands, acknowledges and agrees with the Company that
this subscription may be rejected, in whole or in part, by the Company, in the
sole and absolute discretion of the Company, at any time before any Closing
notwithstanding prior receipt by such Purchaser of notice of acceptance of such
Purchaser’s subscription.

 

(r) Such Purchaser acknowledges that the information contained in the
Transaction Documents or otherwise made available to the Purchaser is
confidential and non-public and agrees that all such information shall be kept
in confidence by the Purchaser and neither used by such Purchaser for the
Purchaser’s personal benefit (other than in connection with this subscription)
nor disclosed to any third party for any reason, notwithstanding that a
Purchaser’s subscription may not be accepted by the Company; provided, however,
that (i) such Purchaser may disclose such information to its affiliates and
advisors who may have a need for such information in connection with providing
advice to the Purchaser with respect to its investment in the Company so long as
such affiliates and advisors have an obligation of confidentiality, and (ii)
this obligation shall not apply to any such information that (A) is part of the
public knowledge or literature and readily accessible at the date hereof, (B)
becomes part of the public knowledge or literature and readily accessible by
publication (except as a result of a breach of this provision) or (C) is
received from third parties without an obligation of confidentiality (except
third parties who disclose such information in violation of any confidentiality
agreements or obligations, including, without limitation, any subscription or
other similar agreement entered into with the Company).

 

The Company acknowledges and agrees that the representations contained in this
Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on
the Company’s representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transactions contemplated hereby.
Notwithstanding the foregoing, for the avoidance of doubt, nothing contained
herein shall constitute a representation or warranty, or preclude any actions,
with respect to locating or borrowing shares in order to effect Short Sales or
similar transactions in the future.

 

ARTICLE 4
OTHER AGREEMENTS OF THE PARTIES

 

4.1. Transfer Restrictions.

 

(a) The Purchasers acknowledge they understand that they may only dispose of the
Securities in compliance with state and federal securities laws. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or Rule 144, to the Company or in connection with a pledge as
contemplated in Section 4.1(b), the Company may require the transferor thereof
to provide to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement, including the
representations and warranties made by each Purchaser herein, and shall have the
rights of a Purchaser under this Agreement.

 

 26 

 

 

(b) The Purchasers agree to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Securities in the following form:

 

THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN
WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

The Company acknowledges and agrees that a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and, if required under the terms of such arrangement, such
Purchaser may transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval of the
Company and no legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no notice shall be
required of such pledge. At the appropriate Purchaser’s expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities.

 

(c) Certificates evidencing the Conversion Shares or the Warrant Shares shall
not contain any legend (including the legend set forth in Section 4.1(b)
hereof), (i) while a registration statement covering the resale of such security
is effective under the Securities Act, (ii) following any sale of such
Conversion Shares or Warrant Shares, as applicable, pursuant to Rule 144 (with
respect to the Warrant Shares, assuming cashless exercise of the Warrants),
(iii) if such Conversion Shares or Warrant Shares, as applicable, are eligible
for sale under Rule 144 (with respect to the Warrant Shares, assuming cashless
exercise of the Warrants), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company shall cause its counsel to issue a legal opinion to the Transfer Agent
or the Purchaser promptly if required by the Transfer Agent to effect the
removal of the legend hereunder, or if requested by a Purchaser, respectively.
If all or any Shares are converted or if all or any portion of a Warrant is
exercised at a time when there is an effective registration statement to cover
the resale of the Conversion Shares or Warrant Shares, as applicable, or if such
Conversion Shares or such Warrant Shares may be sold under Rule 144 or if such
legend is not otherwise required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued by the staff
of the Commission) then such Conversion Shares or such Warrant Shares, as
applicable, shall be issued free of all legends. The Company agrees that
following such time as such legend is no longer required under this Section
4.1(c), it will, no later than the earlier of (i) three (3) Trading Days and
(ii) the number of Trading Days comprising the Standard Settlement Period (as
defined below) following the delivery by a Purchaser to the Company or the
Transfer Agent of Warrant Shares issued with a restrictive legend (such third
Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to
such Purchaser a certificate representing such shares that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to the Transfer Agent that enlarge the restrictions
on transfer set forth in this Section 4.1. Certificates for Securities subject
to legend removal hereunder shall be transmitted by the Transfer Agent to the
Purchaser by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System as directed by such Purchaser. As used herein,
“Standard Settlement Period” means the standard settlement period, expressed in
a number of Trading Days, on the Company’s primary Trading Market with respect
to the Common Stock as in effect on the date of delivery of a certificate
representing Conversion Shares or Warrants Shares, as the case may be, issued
with a restrictive legend. All costs associated with the removal of the legend
in accordance with this Section 4.1 shall be borne by the Company.

 

 27 

 

 

(d) Each Purchaser, severally and not jointly with the other Purchasers, agrees
with the Company that such Purchaser will sell any Securities pursuant to either
the registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom, and that if
Securities are sold pursuant to an effective registration statement, they will
be sold in compliance with the plan of distribution set forth therein, and
acknowledges that the removal of the restrictive legend from certificates
representing Securities as set forth in this Section 4.1 is predicated upon the
Company’s reliance upon this understanding.

 

4.2. Acknowledgment of Dilution. The Company acknowledges that the issuance of
the Securities may result in dilution of the outstanding shares of Common Stock,
which dilution may be substantial under certain market conditions. The Company
further acknowledges that its obligations under the Transaction Documents,
including, without limitation, its obligation to issue the Conversion Shares and
the Warrant Shares pursuant to the Transaction Documents, are, except as
otherwise set forth in the Transaction Documents, unconditional and absolute and
not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have
against the Purchaser and regardless of the dilutive effect that such issuance
may have on the ownership of the other stockholders of the Company.

 

4.3. Furnishing of Information. The Company represents and warrants to the
Purchaser that the Company files reports with the Commission pursuant to Section
15(d) of the Exchange Act. The Company agrees to cause the Common Stock to be
registered under Section 12(g) or 12(b) of the Exchange Act on or before the
60th calendar day following the date hereof. Until such time that no Purchaser
owns Securities, the Company covenants to maintain the registration of the
Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file
(or obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act even if the Company is not then subject to the
reporting requirements of the Exchange Act.

 

4.4. Integration. The Company shall not sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of the
Securities to the Purchaser in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchaser.

 

 28 

 

 

4.5. Securities Laws Disclosure; Publicity. The Company shall (a) by 9:00 a.m.
(New York City time) on the Trading Day immediately following the date hereof,
issue a press release disclosing the material terms of the transactions
contemplated hereby, and (b) file a Current Report on Form 8-K, including the
Transaction Documents as exhibits thereto, with the Commission within the time
required by the Exchange Act. From and after the issuance of such press release,
the Company represents to the Purchasers that it shall have publicly disclosed
all material, non-public information delivered to any of the Purchasers by the
Company or any of its Subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions contemplated
by the Transaction Documents. In addition, effective upon the issuance of such
press release, the Company acknowledges and agrees that any and all
confidentiality or similar obligations under any agreement, whether written or
oral, between the Company, any of its Subsidiaries or any of their respective
officers, directors, agents, employees or Affiliates on the one hand, and any of
the Purchasers or any of their Affiliates on the other hand, shall terminate.
The Company and each Purchaser shall consult with each other in issuing any
other press releases with respect to the transactions contemplated hereby, and
neither the Company nor any Purchaser shall issue any such press release nor
otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of any Purchaser, or without the
prior consent of each Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld or delayed, except if
such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except: (i) as required by federal
securities law in connection with the filing of final Transaction Documents with
the Commission and (ii) to the extent such disclosure is required by law or
Trading Market regulations, provided, however, that in each such case the,
Company shall provide the Purchasers with prior notice of such disclosure.

 

4.6. Shareholder Rights Plan. The Company will not make or enforce any claim or,
provide its consent to, any claim by any other Person, that any Purchaser or
group of Purchasers is an “Acquiring Person” under any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or similar anti-takeover plan or arrangement in effect, or
that any Purchaser or group of Purchasers could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving Securities
under the Transaction Documents or any other agreement between the Company and
the Purchasers.

 

4.7. Non-Public Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, which
shall be disclosed pursuant to Section 4.5, the Company covenants and agrees
that neither it, nor any other Person acting on its behalf will provide any
Purchaser or its agents or counsel with any information that constitutes, or the
Company reasonably believes constitutes, material non-public information, unless
prior thereto such Purchaser shall have consented to the receipt of such
information and agreed with the Company to keep such information confidential.
The Company understands and confirms that each Purchaser shall be relying on the
foregoing covenant in effecting transactions in securities of the Company. To
the extent that the Company delivers any material, non-public information to a
Purchaser without such Purchaser’s consent, the Company hereby covenants and
agrees that such Purchaser shall not have any duty of confidentiality to the
Company, any of its Subsidiaries, or any of their respective officers,
directors, agents, employees or Affiliates, or a duty to the Company, any of its
Subsidiaries or any of their respective officers, directors, agents, employees
or Affiliates not to trade on the basis of, such material, non-public
information, provided that the Purchaser shall remain subject to applicable law.
To the extent that any notice provided pursuant to any Transaction Document
constitutes, or contains, material, non-public information regarding the Company
or any Subsidiaries, the Company shall simultaneously file such notice with the
Commission pursuant to a Current Report on Form 8-K. The Company understands and
confirms that each Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the Company.

 

 29 

 

 

4.8. Use of Proceeds. The Company shall use the net proceeds from the sale of
the Securities hereunder solely for working capital purposes, payment of fees
and expenses relating to the transactions contemplated by this Agreement and the
Transaction Documents and general corporate purposes and shall not use such
proceeds: (a) for the satisfaction of any portion of the Company’s debt (other
than payment of trade payables in the ordinary course of the Company’s business
and prior practices), (b) for the redemption of any Common Stock or Common Stock
Equivalents, (c) for the settlement of any outstanding litigation, or (d) in
violation of FCPA or OFAC regulations, provided that the Company with the prior
consent of the Lead Investor may use proceeds towards repayment in full of (i)
the 12% Senior Secured Convertible Note due in September 2019 in an amount not
to exceed $920,000, (ii) the redemption of outstanding warrants held by the
holders of the Company’s 5% Series B Convertible Preferred Stock and or (iii)
the redemption of that certain holder of the Company’s 5% Series B Convertible
Preferred Stock owed $50,000 plus accrued interest.

 

4.9. Indemnification of Purchasers. Subject to the provisions of this Section
4.9, the Company will indemnify and hold each Purchaser and such Purchaser’s
directors, officers, shareholders, members, managers, managing members,
partners, employees and agents (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a lack of such
title or any other title), each Person who controls such Purchaser (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, shareholders, agents, members, managers, managing
members, partners or employees (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a lack of such
title or any other title) of such controlling persons (each, a “Purchaser
Party”) harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents, (b) any action instituted against the Purchaser Parties
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser Party, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser Party’s
representations, warranties or covenants under the Transaction Documents or any
agreements or understandings such Purchaser Party may have with any such
stockholder or any violations by such Purchaser Party of state or federal
securities laws or any conduct by such Purchaser Party which constitutes fraud,
gross negligence, willful misconduct or malfeasance) or (c) any untrue statement
or alleged untrue statement of a material fact contained in any registration
statement registering the resale of the Conversion Shares or Warrant Shares, or
related prospectus or prospectus supplement, or any information incorporated by
reference therein, or arising out of or based upon any omission or alleged
omission to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. If any action shall be brought against any Purchaser Party in
respect of which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and the Company
shall have the right to assume, pursue and maintain the defense thereof with
counsel of its own choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to engage separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Purchaser Party except to the extent
that (i) the engagement of such separate counsel thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume, pursue and maintain such defense and to
engage counsel or (iii) in such action there is, in the reasonable opinion of
counsel, a material conflict on any material issue between the position of the
Company and the position of such Purchaser Party, in which case the Company
shall be responsible for the reasonable fees and expenses of no more than one
such separate counsel for such Purchaser Party. The Company will not be liable
to any Purchaser Party under this Agreement (y) for any settlement by a
Purchaser Party effected without the Company’s prior written consent, which
shall not be unreasonably withheld, conditioned or delayed; or (z) to the
extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the representations,
warranties, covenants or agreements made by such Purchaser Party in this
Agreement or in the other Transaction Documents. The indemnification required by
this Section 4.9 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
are incurred. The indemnity agreements contained herein shall be in addition to
any cause of action or similar right of any Purchaser Party against the Company
or others and any liabilities the Company may be subject to pursuant to law.

 

 30 

 

 

4.10. Reservation and Listing of Securities.

 

(a) From and after the Initial Closing, the Company shall maintain a reserve
from its duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may then be required to fulfill its
obligations in full under the Transaction Documents.

 

(b) If, on any date after the Initial Closing, the number of authorized but
unissued (and otherwise unreserved) shares of Common Stock is less than the
Required Minimum on such date, then the Board of Directors shall use
commercially reasonable efforts to amend the Company’s certificate or articles
of incorporation to increase the number of authorized but unissued shares of
Common Stock to at least the Required Minimum at such time, as soon as possible
and in any event not later than the 90th calendar day after such date.

 

(c) The Company shall, if applicable but only after the Initial Closing: (i) in
the time and manner required by the principal Trading Market, prepare and file
with such Trading Market an additional shares listing application covering a
number of shares of Common Stock at least equal to the Required Minimum on the
date of such application, (ii) take all steps necessary to cause such shares of
Common Stock to be approved for listing on such Trading Market as soon as
possible thereafter, (iii) provide to each Purchaser evidence of such listing,
and (iv) maintain the listing of such Common Stock on any date at least equal to
the Required Minimum on such date on such Trading Market or another Trading
Market.

 

4.11. Form D; Blue Sky Filings. The Company shall timely file a Form D with
respect to the Securities and shall provide a copy thereof, promptly upon
request of any Purchaser. The Company shall take such action as the Company
shall reasonably determine is necessary in order to obtain an exemption for, or
to qualify the Securities for, sale to each applicable Purchaser at each Closing
under applicable securities or “Blue Sky” laws of the states of the United
States, and shall provide evidence of such actions promptly upon request of the
Purchaser.

 

 31 

 

 

4.12. Promotional Stock Activities. Neither the Company, nor any of its
officers, directors, affiliates or agents, have engaged in any stock promotional
activity that could give rise to a complaint or inquiry by the Commission
alleging (a) a violation of the anti-fraud provisions of the U.S. federal
securities laws, (b) violations of the anti-touting provisions of the U.S.
federal securities laws, (c) improper “gun-jumping” under applicable law, or (d)
improper promotion of the Company or its securities without adequate disclosure
of compensation information.

 

4.13. Transfer Agent. The Company covenants and agrees that it will at all times
while the Securities remain outstanding maintain a duly qualified independent
transfer agent.

 

4.14. No Short Selling. Each Purchaser shall not, either directly or indirectly
through related parties, affiliates or otherwise, (a) sell “short” or “short
against the box” (as those terms are generally understood) any equity security
of the Company or (b) otherwise engage in any transaction that involves hedging
of the Purchaser’s position in any equity security of the Company, until the
Purchaser no longer owns any Securities.

 

4.15. Corporate Existence. So long as the Securities remain outstanding, the
Company shall not directly or indirectly consummate any merger, reorganization,
restructuring, consolidation, sale of all or substantially all of the Company’s
assets or any similar transaction or related transactions, (each such
transaction, an “Organizational Change”) unless the Company provides the
Purchasers with three (3) Trading Days written notice of such Organizational
Change

 

4.16. Equal Treatment of Purchasers. No consideration (including any
modification of any Transaction Document) shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration is also offered to all of
the parties to the Transaction Documents. For clarification purposes, this
provision constitutes a separate right granted to each Purchaser by the Company
and negotiated separately by each Purchaser, and is intended for the Company to
treat the Purchasers as a class and shall not in any way be construed as the
Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.

 

4.17. Conversion and Exercise Procedures. Each of the form of Notice of Exercise
in the Warrants and the form of Notice of Conversion for the Series D Preferred
Stock set forth the totality of the procedures required of the Purchasers in
order to exercise the Warrants or convert the Shares. Without limiting the
preceding sentences, no ink-original Notice of Exercise or Notice of Conversion
shall be required, nor shall any medallion guarantee (or other type of guarantee
or notarization) of any Notice of Exercise or Notice of Conversion form be
required in order to exercise the Warrants or convert the Shares. No additional
legal opinion, other information or instructions shall be required of the
Purchasers to convert their Shares or exercise their Warrants. The Company shall
honor conversions of the Shares and exercises of the Warrants and shall deliver
underlying shares of Common Stock in accordance with the terms, conditions and
time periods set forth in the Transaction Documents.

 

 32 

 

 

ARTICLE 5
MISCELLANEOUS

 

5.1. Termination. This Agreement may be terminated by the Purchasers, as to the
Purchasers’ obligations hereunder only and without any effect whatsoever on the
obligations between the Company and the Purchaser, by written notice to the
other parties, if the Closing has not been consummated on or before the
Termination Date. The Company’s and the Purchasers’ representations and
warranties shall survive the termination of this Agreement.

 

5.2. Fees and Expenses. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement, provided that Company shall pay all
reasonable out of pocket legal, due diligence and administrative fees and
expenses, not to exceed Thirty Thousand Dollars ($30,000), of FWHC Holdings, LLC
(the “Lead Investor”) in connection with the transactions contemplated by this
Agreement and the Transaction Documents. The Company shall pay all Transfer
Agent fees (including, without limitation, any fees required for same-day
processing of any instruction letter delivered by the Company and any exercise
notice delivered by a Purchaser), stamp taxes and other taxes and duties levied
in connection with the delivery of any Securities to the Purchasers. Each
Purchaser acknowledges that Hill Ward Henderson, P.A. acted as counsel only to
the Lead Investor in connection with the transactions contemplated by this
Agreement and the other Transaction Documents, and that the other Purchasers had
the opportunity to engage their own counsel for those transactions.

 

5.3. Entire Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and thereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

 

5.4. Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of: (a) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number or
email attachment at the email address as set forth on the signature pages
attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day,
(b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number or email
attachment at the email address as set forth on the signature pages attached
hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City
time) on any Trading Day, (c) the second (2nd) Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set forth on the
signature pages attached hereto. To the extent that any notice provided pursuant
to any Transaction Document constitutes, or contains material, non-public
information regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report
on Form 8-K.

 

5.5. Headings. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof.

 

 33 

 

 

5.6. Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser (other than by merger). The
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom the Purchaser assigns or transfers any Securities, provided that such
transfer complies with all applicable federal and state securities laws and that
such transferee agrees in writing with the Company to be bound, with respect to
the transferred Securities, by the provisions of the Transaction Documents that
apply to the Purchaser.

 

5.7. No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.9 and this Section 5.7.

 

5.8. Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
Florida, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal Proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, partners, members,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of Tampa. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City
of Tampa, County of Hillsborough for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Action or Proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such Action or Proceeding is improper or is
an inconvenient venue for such Proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
Action or Proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address
in effect for 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 other manner permitted by law. If any party shall commence an
Action or Proceeding to enforce any provisions of the Transaction Documents,
then, in addition to the obligations of the Company under Section 4.9, the
prevailing party in such Action or Proceeding shall be reimbursed by the
non-prevailing party for its reasonable attorneys’ fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
Action or Proceeding.

 

5.9. Survival. The representations and warranties contained herein shall survive
the Closing and the delivery of the Securities.

 

5.10. Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together 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, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature 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 facsimile or “.pdf” signature page were an original thereof.

 

 34 

 

 

5.11. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

 

5.12. Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) any of the other
Transaction Documents, whenever any Purchaser 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 such
Purchaser 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; provided,
however, that in the case of a rescission of an exercise of a Warrant, the
applicable Purchaser shall be required to return any shares of Common Stock
subject to any such rescinded exercise notice concurrently with the return to
such Purchaser of the aggregate exercise price paid to the Company for such
shares and the restoration of such Purchaser’s right to acquire such shares
pursuant to such Purchaser’s Warrant (including, issuance of a replacement
warrant evidencing such restored right).

 

5.13. Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction. The applicant
for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs (including customary indemnity) associated with the
issuance of such replacement Securities.

 

5.14. Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
contained in the Transaction Documents and hereby agrees to waive and not to
assert in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.

 

5.15. Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or such Purchaser
enforces or exercises its rights 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, 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.

 

 35 

 

 

5.16. Liquidated Damages. The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.

 

5.17. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall not be a Business Day, then such action may be taken or such right may be
exercised on the next succeeding Business Day.

 

5.18. Construction. The parties agree that each of them and/or their respective
counsel have reviewed and had an opportunity to revise the Transaction Documents
and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments thereto.

 

5.19. 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.

 

5.20. Independent Nature of Purchasers’ Obligations and Rights. The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant hereto
or thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights including, without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in its review and negotiation of the Transaction
Documents. The Company has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by any of the Purchasers. It is expressly
understood and agreed that each provision contained in this Agreement and in
each other Transaction Document is between the Company and a Purchaser, solely,
and not between the company and the Purchasers collectively and not between and
among the Purchasers.

 

5.21. No Commitment for Additional Financing. The Company acknowledges and
agrees that no Purchaser has made any representation, undertaking, commitment or
agreement to provide or assist the Company in obtaining any financing,
investment or other assistance, other than the purchase of the Securities as set
forth herein and subject to the conditions set forth herein. In addition, the
Company acknowledges and agrees that (a) no statements, whether written or oral,
made by any Purchaser or its representatives on or after the date of this
Agreement shall create an obligation, commitment or agreement to provide or
assist the Company in obtaining any financing or investment, (b) the Company
shall not rely on any such statement by any Purchaser or its representatives
and, (c) an obligation, commitment or agreement to provide or assist the Company
in obtaining any financing or investment may only be created by a written
agreement, signed by such Purchaser and the Company, setting forth the terms and
conditions of such financing or investment and stating that the parties intend
for such writing to be a binding obligation or agreement. Each Purchaser shall
have the right, in his, her or its own sole and absolute discretion, to refuse
or decline to participate in any other financing of or investment in the
Company, and shall have no obligation to assist or cooperate with the Company in
obtaining any financing, investment or other assistance.

 

(Signature Pages Follow)

 

 36 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

  Company:         H-CYTE, INC.         By: /s/ William E. Horne   Name: William
E. Horne,   Title: Chief Executive Officer         Address for Notice:   201 E.
Kennedy Blvd, Suite 700   Tampa, FL 33602   Attn: William E. Horne   Fax: (844)
633-6839         With a copy to (which shall not constitute notice):        
Sichenzia Ross Ference LLP   1185 Avenue of the Americas, 37th Floor,   New
York, NY 10036   Attn: Arthur S. Marcus, Esq.   Fax:       and       Hallett &
Perrin   1445 Ross Avenue, Suite 2400   Dallas, Texas 75202   Attention: Scot W.
O’Brien, Esq.   Facsimile: (214) 922-4142

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE FOR PURCHASER
FOLLOWS]

 

Signature Page to Securities Purchase Agreement (H-Cyte): Series D Convertible
Preferred Stock

 

   

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

  Purchaser:         FWHC HOLDINGS, LLC   a Delaware limited liability company  
      By: HOA Capital, LLC     A Delaware limited liability company,     its
manager         By: /s/ J. Rex Farrior, III   Name: J. Rex Farrior, III   Title:
Manager         Address for Notices and Delivery of Securities:   1306 W Kennedy
Blvd   Tampa, Florida 33606   Attn: J. Rex Farrior, III         With a copy to
(which shall not constitute notice):   Hill Ward Henderson   3700 Bank of
America Plaza   101 E. Kennedy Blvd, Ste 3700   Tampa, Florida 33602   Attn:
John C. Connery, Jr., Esq. and R. James Robbins, Jr,. Esq.

 

  Subscription Amount: $  

 

  Shares:  

 

  Warrant Shares:  

 

  EIN Number:  

 

Signature Page to Securities Purchase Agreement (H-Cyte): Series D Convertible
Preferred Stock

 

   

 

 

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

Name of Purchaser:  

 

Signature of Authorized Signatory of Purchaser:  

 

Name of Authorized Signatory:  

 

Title of Authorized Signatory:  

 

Email Address of Authorized Signatory:  

 

Facsimile Number of Authorized Signatory:  

 

Address for Notice to Purchaser:

 

Address for Delivery of Securities to Purchaser (if not same as address for
notice):

 

Subscription Amount: $    

 

Shares:    

 

Warrant Shares:    

 

EIN Number:    

 

[SIGNATURE PAGES CONTINUE]

 

Signature Page to Securities Purchase Agreement (H-Cyte): Series D Convertible
Preferred Stock

 

   

 

 

Exhibit A

 

Form of Warrant

 

THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN
WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.

 

H-CYTE, INC.

 

Warrant for the Purchase of Shares of Common Stock, par value $0.001 per Share

 

No. [●]                   [●] Shares

 

THIS CERTIFIES that, for value received, FWHC Holdings, LLC, a Delaware limited
liability company, whose address is 1306 W Kennedy Blvd, Tampa, Florida, 33606
(the “Holder”), is entitled to subscribe for and purchase from H-Cyte, Inc., a
Nevada corporation f/k/a Medovex Corp. (the “Company”), upon the terms and
conditions set forth herein, [●] shares of the Company’s Common Stock, par value
$0.001 per Share (“Common Stock”), at a price of $0.75 per share (the “Exercise
Price”). As used herein the term this “Warrant” shall mean and include this
Warrant and any Common Stock or warrants hereafter issued as a consequence of
the exercise or transfer of this Warrant in whole or in part. This Warrant was
issued to the Holder in connection with the transactions contemplated by that
certain Securities Purchase Agreement (the “Purchase Agreement”), dated November
15, 2019, among the Company and the Purchasers signatory thereto. Capitalized
terms used in this Warrant but not defined herein shall have the meanings
ascribed to such terms in the Purchase Agreement.

 

The number of shares of Common Stock issuable upon exercise of this Warrant (the
“Warrant Shares”) and the Exercise Price may be adjusted from time to time as
hereinafter set forth.

 

 1 

 

 

1. Exercise Period. Subject to the terms and conditions set forth herein, this
Warrant may be exercised at any time or from time to time during the period
commencing at 10:00 a.m. (New York City time) on the day immediately following
the date the Warrant is issued to the Holder, and ending at 5:00 p.m. (New York
City time) on the tenth (10th) anniversary thereof (the “Exercise Period”).

 

2. Procedure for Exercise; Effect of Exercise.

 

(a) Cash Exercise. This Warrant may be exercised, in whole or in part, by the
Holder during normal business hours on any business day during the Exercise
Period by (i) the presentation and surrender of this Warrant to the Company at
its principal office along with a duly executed Notice of Exercise (in the form
attached hereto) specifying the number of Warrant Shares to be purchased, and
(ii) delivery of payment to the Company of the Exercise Price for the number of
Warrant Shares specified in the Notice of Exercise by cash, wire transfer of
immediately available funds to a bank account specified by the Company, or by
certified or bank cashier’s check.

 

(b) Cashless Exercise. If the Warrant has been outstanding for six (6) months
and there is no effective registration statement including the Warrant Shares,
this Warrant may also be exercised by the Holder through a cashless exercise, as
described in this Section 2(b). In such case, this Warrant may be exercised, in
whole or in part, by the Holder during normal business hours on any business day
during the Exercise Period by the presentation and surrender of this Warrant to
the Company at its principal office along with a duly executed Notice of
Exercise specifying the number of Warrant Shares to be applied to such exercise.
The number of shares of Common Stock to be issued upon exercise of this Warrant
pursuant to this Section 2(b) shall equal the value of this Warrant (or the
portion thereof being canceled) computed as of the date of delivery of this
Warrant to the Company using the following formula:

 

X = Y(A-B)   A

 

Where:

 

  X = the number of shares of Common Stock to be issued to Holder under this
Section 2(b);   Y = the number of Warrant Shares identified in the Notice of
Exercise as being applied to the subject exercise;   A = the Current Market
Price on such date; and   B = the Exercise Price on such date.

 

For purposes of this Section 2(b), Current Market Price shall have the
definition provided in Section 6(g).

 

The Company acknowledges and agrees that this Warrant was issued on the date set
forth at the end of this Warrant. Consequently, the Company acknowledges and
agrees that, if the Holder conducts a cashless exercise pursuant to this Section
2(b), the period during which the Holder held this Warrant may, for purposes of
Rule 144 promulgated under the Securities Act of 1933, as amended (the
“Securities Act”), be “tacked” to the period during which the Holder holds the
Warrant Shares received upon such cashless exercise.

 

 2 

 

 

(c) Effect of Exercise. Upon receipt by the Company of this Warrant and a Notice
of Exercise, together with proper payment of the Exercise Price, as provided in
this Section 2, the Company agrees that such Warrant Shares shall be deemed to
be issued to the Holder as the record holder of such Warrant Shares as of the
close of business on the date on which this Warrant has been surrendered and
payment has been made for such Warrant Shares in accordance with this Warrant
and the Holder shall be deemed to be the holder of record of the Warrant Shares,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such Warrant Shares shall not then be
actually delivered to the Holder. A stock certificate or certificates for the
Warrant Shares specified in the Notice of Exercise shall be delivered to the
Holder as promptly as practicable, and in any event within seven (7) business
days, thereafter. The stock certificate(s) so delivered shall be in any such
denominations as may be reasonably specified by the Holder in the Notice of
Exercise. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the right of the Holder to purchase the balance of the
Warrant Shares subject to purchase hereunder.

 

3. Registration of Warrants; Transfer of Warrants. Any Warrants issued upon the
transfer or exercise in part of this Warrant shall be numbered and shall be
registered in a Warrant Register as they are issued. The Company shall be
entitled to treat the registered holder of any Warrant on the Warrant Register
as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrant on the
part of any other person, and shall not be liable for any registration or
transfer of Warrants which are registered or to be registered in the name of a
fiduciary or the nominee of a fiduciary unless made with the actual knowledge
that a fiduciary or nominee is committing a breach of trust in requesting such
registration or transfer, or with the knowledge of such facts that its
participation therein amounts to bad faith. This Warrant shall be transferable
only on the books of the Company upon delivery thereof duly endorsed by the
Holder or by its duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment, or authority to transfer. In all
cases of transfer by an attorney, executor, administrator, guardian, or other
legal representative, duly authenticated evidence of his or its authority shall
be produced. Upon any registration of transfer, the Company shall deliver a new
Warrant or Warrants to the person entitled thereto. This Warrant may be
exchanged, at the option of the Holder thereof, for another Warrant, or other
Warrants of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of Warrant Shares, upon surrender
to the Company or its duly authorized agent.

 

 3 

 

 

4. Restrictions on Transfer.

 

(a) The Holder, as of the date of issuance hereof, represents to the Company
that such Holder is acquiring the Warrants for its own account for investment
purposes and not with a view to the distribution thereof or of the Warrant
Shares. Notwithstanding any provisions contained in this Warrant to the
contrary, this Warrant and the related Warrant Shares shall not be transferable
except pursuant to the proviso contained in the following sentence or upon the
conditions specified in this Section 4, which conditions are intended, among
other things, to insure compliance with the provisions of the Securities Act and
applicable state law in respect of the transfer of this Warrant or such Warrant
Shares. The Holder by acceptance of this Warrant agrees that the Holder will not
transfer this Warrant or the related Warrant Shares prior to delivery to the
Company of an opinion of the Holder’s counsel (as such opinion and such counsel
are described in Section 4(b) hereof) or until registration of such Warrant
Shares under the Securities Act has become effective or after a sale of such
Warrant or Warrant Shares has been consummated pursuant to Rule 144 or Rule 144A
under the Securities Act; provided, however, that the Holder may freely transfer
this Warrant or such Warrant Shares (without delivery to the Company of an
opinion of counsel) (i) to one of its nominees, affiliates or a nominee thereof,
(ii) to a pension or profit-sharing fund established and maintained for its
employees or for the employees of any affiliate, (iii) from a nominee to any of
the aforementioned persons as beneficial owner of this Warrant or such Warrant
Shares, (iv) to a qualified institutional buyer, so long as such transfer is
effected in compliance with Rule 144A under the Securities Act, or (v) to an
accredited investor (as such term is defined in Regulation D under the
Securities Act).

 

(b) The Holder, by its acceptance hereof, agrees that prior to any transfer of
this Warrant or of the related Warrant Shares (other than as permitted by
Section 4(a) hereof or pursuant to a registration under the Securities Act), the
Holder will give written notice to the Company of its intention to effect such
transfer, together with an opinion of such counsel for the Holder as shall be
reasonably acceptable to the Company, to the effect that the proposed transfer
of this Warrant and/or such Warrant Shares may be effected without registration
under the Securities Act. Upon delivery of such notice and opinion to the
Company, the Holder shall be entitled to transfer this Warrant and/or such
Warrant Shares in accordance with the intended method of disposition specified
in the notice to the Company.

 

(c) Each stock certificate representing Warrant Shares issued upon exercise or
exchange of this Warrant shall bear the following legend unless the opinion of
counsel referred to in Section 4(b) states such legend is not required or as
otherwise provided in the Purchase Agreement:

 

“THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN
WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.”

 

 4 

 

 

The Holder understands that the Company may place, and may instruct any transfer
agent or depository for the Warrant Shares to place, a stop transfer notation in
the securities records in respect of the Warrant Shares.

 

5. Reservation of Shares. The Company shall at all times during the Exercise
Period reserve and keep available out of its authorized and unissued Common
Stock, solely for the purpose of providing for the exercise of the rights to
purchase all Warrant Shares granted pursuant to the Warrants, such number of
shares of Common Stock as shall, from time to time, be sufficient therefor. The
Company covenants that all shares of Common Stock issuable upon exercise of this
Warrant, upon receipt by the Company of the full Exercise Price therefor, and
all shares of Common Stock issuable upon conversion of this Warrant, shall be
validly issued, fully paid, non-assessable, and free of preemptive rights, and
free from all taxes, claims, liens, charges and other encumbrances.

 

6. Certain Adjustments.

 

(a)The Exercise Price shall be subject to adjustment from time to time as
follows:

 

(i) In the event that the Company shall (A) pay a dividend or make a
distribution to all its stockholders, in shares of Common Stock, on any class of
capital stock of the Company or any subsidiary which is not directly or
indirectly wholly owned by the Company, (B) split or subdivide its outstanding
Common Stock into a greater number of shares, or (C) combine its outstanding
Common Stock into a smaller number of shares, then in each such case the
Exercise Price in effect immediately prior thereto shall be adjusted so that the
Holder of a Warrant thereafter surrendered for Exercise shall be entitled to
receive the number of shares of Common Stock that such Holder would have owned
or have been entitled to receive after the occurrence of any of the events
described above had such Warrant been exercised immediately prior to the
occurrence of such event. An adjustment made pursuant to this Section 6(a)(i)
shall become effective immediately after the close of business on the record
date in the case of a dividend or distribution (except as provided in Section
6(e) below) and shall become effective immediately after the close of business
on the effective date in the case of such subdivision, split or combination, as
the case may be. Any shares of Common Stock issuable in payment of a dividend
shall be deemed to have been issued immediately prior to the close of business
on the record date for such dividend for purposes of calculating the number of
outstanding shares of Common Stock under clauses (c) and (c) below.

 

(ii) No adjustment in the Exercise Price shall be required unless the adjustment
would require an increase or decrease of at least 1% in the Exercise Price then
in effect; provided, however, that any adjustments that by reason of this
Section 6(a) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 6(a)
shall be made to the nearest cent or nearest 1/100th of a share.

 

 5 

 

 

(iii) The Company from time to time may reduce the Exercise Price by any amount
for any period of time in the discretion of the Board of Directors. A voluntary
reduction of the Exercise Price does not change or adjust the Exercise Price
otherwise in effect for purposes of this Section 6(a).

 

(iv) In the event that, at any time as a result of an adjustment made pursuant
to Sections 6(a)(i) through 6(a)(ii) above, the Holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive any shares of the
Company other than shares of the Common Stock, thereafter the number of such
other shares so receivable upon exercise of any such Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
Sections 6(a)(i) through 6(a)(iv) above, and the other provisions of this
Section 6(a) with respect to the Common Stock shall apply on like terms to any
such other shares.

 

(b) In case of any reclassification of the Common Stock (other than in a
transaction to which Section 6(a)(i) applies), any consolidation of the Company
with, or merger of the Company into, any other entity, any merger of another
entity into the Company (other than a merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock of the Company), any sale or transfer of all or substantially all
of the assets of the Company or any compulsory share exchange, pursuant to which
share exchange the Common Stock is converted into other securities, cash or
other property, then lawful provision shall be made as part of the terms of such
transaction whereby the Holder of a Warrant then outstanding shall have the
right thereafter, during the period such Warrant shall be exercisable, to
exercise such Warrant only for the kind and amount of securities, cash and other
property receivable upon the reclassification, consolidation, merger, sale,
transfer or share exchange by a holder of the number of shares of Common Stock
of the Company into which a Warrant might have been able to exercise for
immediately prior to the reclassification, consolidation, merger, sale, transfer
or share exchange assuming that such holder of Common Stock failed to exercise
rights of election, if any, as to the kind or amount of securities, cash or
other property receivable upon consummation of such transaction subject to
adjustment as provided in Section 6(a) above following the date of consummation
of such transaction. The provisions of this Section 6(b) shall similarly apply
to successive reclassifications, consolidations, mergers, sales, transfers or
share exchanges.

 

 6 

 

 

(c) If (i) the Company shall take any action which would require an adjustment
in the Exercise Price pursuant to Section 6(a); (ii) the Company shall authorize
the granting to the holders of its Common Stock generally of rights, warrants or
options to subscribe for or purchase any shares of any class or any other
rights, warrants or options; (iii) there shall be any reclassification or change
of the Common Stock (other than a subdivision or combination of its outstanding
Common Stock or a change in par value) or any consolidation, merger or statutory
share exchange to which the Company is a party and for which approval of any
stockholders of the Company is required, or the sale or transfer of all or
substantially all of the assets of the Company; or (iv) there shall be a
voluntary or involuntary dissolution, liquidation or winding up of the Company;
then, in each such case, the Company shall cause to be filed with the transfer
agent for the Warrants and shall cause to be mailed to each Holder at such
Holder’s address as shown on the books of the transfer agent for the Warrants,
as promptly as possible, but at least 30 days prior to the applicable date
hereinafter specified, a notice stating (A) the date on which a record is to be
taken for the purpose of such dividend, distribution or granting of rights,
warrants or options, or, if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to such dividend,
distribution or rights, warrants or options are to be determined, or (B) the
date on which such reclassification, change, consolidation, merger, statutory
share exchange, sale, transfer, dissolution, liquidation or winding-up is
expected to become effective or occur, and the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities or other property deliverable upon such
reclassification, change, consolidation, merger, statutory share exchange, sale,
transfer, dissolution, liquidation or winding up. Failure to give such notice or
any defect therein shall not affect the legality or validity of the proceedings
described in this Section 6(c).

 

(d) Whenever the Exercise Price is adjusted as herein provided, the Company
shall promptly file with the transfer agent for the Warrants a certificate of an
officer of the Company setting forth the Exercise Price after the adjustment and
setting forth a brief statement of the facts requiring such adjustment and a
computation thereof. The Company shall promptly cause a notice of the adjusted
Exercise Price to be mailed to each Holder.

 

(e) In any case in which Section 6(a) provides that an adjustment shall become
effective immediately after a record date for an event and the date fixed for
such adjustment pursuant to Section 6(a) occurs after such record date but
before the occurrence of such event, the Company may defer until the actual
occurrence of such event (i) issuing to the Holder of any Warrants exercised
after such record date and before the occurrence of such event the additional
shares of Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon such
exercise before giving effect to such adjustment, and (ii) paying to such holder
any amount in cash in lieu of any fraction pursuant to Section 6(h).

 

(f) In case the Company shall take any action affecting the Common Stock, other
than actions described in this Section 6, which in the opinion of the Board of
Directors would materially adversely affect the exercise right of the Holders,
the Exercise Price may be adjusted, to the extent permitted by law, in such
manner, if any, and at such time, as the Board of Directors may determine to be
equitable in the circumstances; provided, however, that in no event shall the
Board of Directors be required to take any such action.

 

(g) For the purpose of any computation under Section 2(b) or this Section 6, the
“Current Market Price” per share of Common Stock shall mean the VWAP of the
Common Stock on the day in question.

 

(h) The Company shall not be required to issue fractions of shares of Common
Stock or other capital stock of the Company upon the exercise of this Warrant.
If any fraction of a share would be issuable on the exercise of this Warrant (or
specified portions thereof), the Company shall purchase such fraction for an
amount in cash equal to the same fraction of the Current Market Price of such
share of Common Stock on the date of exercise of this Warrant.

 

 7 

 

 

7. Transfer Taxes. The issuance of any shares or other securities upon the
exercise of this Warrant, and the delivery of certificates or other instruments
representing such shares or other securities, shall be made without charge to
the Holder for any tax or other charge in respect of such issuance. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of any certificate in a name
other than that of the Holder and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.

 

8. Loss or Mutilation of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
any Warrant (and upon surrender of any Warrant if mutilated), and upon
reimbursement of the Company’s reasonable incidental expenses, the Company shall
execute and deliver to the Holder thereof a new Warrant of like date, tenor, and
denomination.

 

9. No Rights as a Stockholder. The Holder of any Warrant shall not have, solely
on account of such status, any rights of a stockholder of the Company, either at
law or in equity, or to any notice of meetings of stockholders or of any other
proceedings of the Company, except as provided in this Warrant.

 

10. Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Nevada, without regard to the principles of conflicts of law thereof.

 

* * *

 

 8 

 

 

Issuance date: November __, 2019

 

  H-CYTE, INC.         By:     Name: William E. Horne   Title: Chief Executive
Officer

 

 9 

 

 

FORM OF ASSIGNMENT

 

(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)

 

FOR VALUE RECEIVED,_________________________ hereby sells, assigns, and
transfers unto __________________ a Warrant to purchase __________ shares of
Common Stock, par value $0.001 per share, of H-Cyte, Inc., a Nevada corporation
(the “Company”), together with all right, title, and interest therein, and does
hereby irrevocably constitute and appoint ________________________ attorney to
transfer such Warrant on the books of the Company, with full power of
substitution.

 

  Dated:  

 

  By:     Print Name               Signature

 

The signature on the foregoing Assignment must correspond to the name as written
upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.

 

   

 

 

To: H-Cyte, Inc.   201 E. Kennedy Blvd, Suite 700   Tampa, FL 33602   Attention:
Chief Executive Officer

 

NOTICE OF EXERCISE

 

The undersigned hereby exercises his or its rights to purchase _______ Warrant
Shares covered by the within Warrant and tenders payment herewith in the amount
of $_________ by [tendering cash or delivering a certified check or bank
cashier’s check, payable to the order of the Company] [surrendering ______
shares of Common Stock received upon exercise of the attached Warrant, which
shares have a Current Market Price equal to such payment] in accordance with the
terms thereof, and requests that certificates for such securities be issued in
the name of, and delivered to:

 

_______________________________________

 

_______________________________________

 

_______________________________________

 

(Print Name, Address and Social Security

or Tax Identification Number)

 

and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.

 

  Dated:  

 

  By:     Print Name               Signature

 

Address:

 

_________________________________

_________________________________

_________________________________

 

   

 

 

Exhibit B

 

Form of Investor Questionnaire
H-CYTE

 

For Individual Investors Only

 

(All individual investors must INITIAL where appropriate. Where there are joint
investors both parties must INITIAL):

 

Initial ________   I certify that I have a “net worth” of at least $1 million
either individually or through aggregating my individual holdings and those in
which I have a joint, community property or other similar shared ownership
interest with my spouse. For purposes of calculating net worth under this
paragraph, (i) the primary residence shall not be included as an asset, (ii) to
the extent that the indebtedness that is secured by the primary residence is in
excess of the fair market value of the primary residence, the excess amount
shall be included as a liability, and (iii) if the amount of outstanding
indebtedness that is secured by the primary residence exceeds the amount
outstanding 60 days prior to the execution of this Subscription Agreement, other
than as a result of the acquisition of the primary residence, the amount of such
excess shall be included as a liability. Initial ________   I certify that I
have had an annual gross income for the past two years of at least $200,000 (or
$300,000 jointly with my spouse) and expect my income (or joint income, as
appropriate) to reach the same level in the current year.

 

For Non-Individual Investors

(all Non-Individual Investors must INITIAL where appropriate):

 

Initial ________   The undersigned certifies that it is a partnership,
corporation, limited liability company or business trust that is 100% owned by
persons who meet either of the criteria for Individual Investors, above. Initial
________   The undersigned certifies that it is a partnership, corporation,
limited liability company or business trust that has total assets of at least $5
million and was not formed for the purpose of investing in Company. Initial
________   The undersigned certifies that it is an employee benefit plan whose
investment decision is made by a plan fiduciary (as defined in ERISA §3(21))
that is a bank, savings and loan association, insurance company or registered
investment adviser. Initial ________   The undersigned certifies that it is an
employee benefit plan whose total assets exceed $5,000,000 as of the date of the
Agreement. Initial ________   The undersigned certifies that it is a
self-directed employee benefit plan whose investment decisions are made solely
by persons who meet either of the criteria for Individual Investors, above.
Initial ________   The undersigned certifies that it is a U.S. bank, U.S.
savings and loan association or other similar U.S. institution acting in its
individual or fiduciary capacity. Initial ________   The undersigned certifies
that it is a broker-dealer registered pursuant to §15 of the Securities Exchange
Act of 1934, as amended. Initial ________   The undersigned certifies that it is
an organization described in §501(c)(3) of the Internal Revenue Code with total
assets exceeding $5,000,000 and not formed for the specific purpose of investing
in Company. Initial ________   The undersigned certifies that it is a trust with
total assets of at least $5,000,000, not formed for the specific purpose of
investing in Company, and whose purchase is directed by a person with such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of the prospective investment. Initial ________
  The undersigned certifies that it is a plan established and maintained by a
state or its political subdivisions, or any agency or instrumentality thereof,
for the benefit of its employees, and which has total assets in excess of
$5,000,000. Initial ________   The undersigned certifies that it is an insurance
company as defined in §2(a)(13) of the Securities Act of 1933, as amended, or a
registered investment company.

 

   

 

 

Exhibit C

 

Form of Series B Certificate of Designation

 

(see attached)

 

   

 

 

Exhibit D

 

Form of Series D Certificate of Designation

 

(see attached)