Exhibit 10.1
 
FORM OF SECURITIES PURCHASE AGREEMENT
 
This SECURITIES PURCHASE AGREEMENT (the “Agreement”) is dated as of and
effective as of [                                      ] (the “Effective Date”),
by and between KNOW LABS, INC., a corporation incorporated under the laws of the
State of Nevada (the “Company”), and the undersigned purchaser (“Purchaser”).
 
WHEREAS, the Company and Purchaser are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Section
4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and
Rule 506(c) of Regulation D (“Regulation D”) as promulgated by the United States
Securities and Exchange Commission (the “SEC”) under the Securities Act.
 
WHEREAS, Purchaser desires to purchase from Company, and the Company desires to
sell and issue to Purchaser, upon the terms and subject to the conditions
contained herein, a subordinated convertible note (the “Convertible Note”), in
the form attached hereto as Exhibit A, and warrants to purchase shares of Common
Stock (the “Warrants”), in the form attached hereto as Exhibit B.
 
NOW, THEREFORE, in consideration of the premises and the mutual covenants of the
parties hereinafter expressed and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
each intending to be legally bound, agree as follows:
 
ARTICLE I
DEFINITIONS
 
For purposes of this Agreement, except as otherwise expressly provided or
otherwise defined elsewhere in this Agreement, or unless the context otherwise
requires, the capitalized terms in this Agreement shall have the meanings
assigned to them in the Convertible Note or this Article as follows:
 
1.1 “Action” as to any Person, means any action, suit, inquiry, notice of
violation, proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting such Person,
any of such Person’s subsidiaries or any of such Person’s or such subsidiaries’
respective properties, before or by any governmental authority, arbitrator,
regulatory authority (federal, state, county, local or foreign), stock market,
stock exchange or trading facility.
 
1.2 “Business Day” shall mean any day other than a Saturday, Sunday, or a legal
holiday on which federal banks are authorized or required to be closed for the
conduct of commercial banking business.
 
1.3 “Common Stock” means the common stock of the Company, par value $0.001 per
share.
 
1.4 “Convertible Note(s)” shall have the meaning given to it in the preamble
above.
 
 
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1.5 “Effective Date” means the date so defined in the introductory paragraph of
this Agreement.
 
1.6 “Material Adverse Effect” means any of (i) a material and adverse effect on
the legality, validity or enforceability of any Transaction Document, (ii) a
material and adverse effect on the results of operations, assets, properties,
business or condition (financial or otherwise) of the Company and the
subsidiaries, taken as a whole, or (iii) a material and adverse impairment to
the Company’s ability to perform on a timely basis its obligations under any
Transaction Document, provided, however, that any effect(s) arising from or
relating to any of the following shall not be deemed, either alone or in
combination, to constitute, and shall not be taken into account in determining
whether there has been or will be, a Material Adverse Effect: (A) conditions
affecting the industries in which the business operates (which effect(s), in
each case, do not disproportionately affect the Business relative to other
companies conducting businesses similar to the business); (B) general economic,
financial market or geopolitical conditions (which effect(s), in each case, do
not disproportionately affect the business relative to other companies
conducting businesses similar to the business); (C) any failure to meet any
projections or forecasts for the business for any period ending (or for which
revenues or earnings are released) on or after the date hereof (provided that
the underlying causes of any such failure (subject to the other provisions of
this definition) shall not be excluded); (D) any change in accounting rules
(including generally accepted accounting principles in the United States), or
the enforcement, implementation or interpretation thereof, after the date
hereof; or (E) any effect caused by, relating to or resulting from the
announcement or pendency of the transactions contemplated by this Agreement.
 
1.7 “Person” means any individual, sole proprietorship, joint venture,
partnership, limited liability company, corporation, association, cooperation,
trust, estate, governmental authority, or any other entity of any nature
whatsoever.
 
1.8 “Securities” means, collectively, the Convertible Notes, the Warrants, and
any additional shares of Common Stock issuable (i) in connection with a
conversion of the Convertible Notes,
(ii) upon exercise of the Warrants or (iii) in accordance with any of the terms
or provisions of this Agreement or any other Transaction Documents.
 
1.9 “Subordination Agreement” means the Subordination Agreement dated the date
hereof by and between Purchaser and Clayton Struve, the form of which is
attached hereto as Exhibit C.
 
1.10 “Subscription Agreement” means the Subscription Agreement, Suitability
Questionnaire, and Accredited Investor Status Certification executed by
Purchaser, the form of which is attached hereto as Exhibit D.
 
1.11 “Transaction Documents” means this Agreement any and all documents or
instruments executed or to be executed by the Company in connection with this
Agreement, including the Subscription Agreement(s), the Convertible Note(s), the
Warrant(s), and the Subordination Agreement(s), together with all modifications,
amendments, extensions, future advances, renewals, and substitutions thereof.
 
 
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1.12 “Warrant(s)” shall have the meaning given to it in the preamble above.
 
ARTICLE II
PURCHASE AND SALE OF CONVERTIBLE NOTES AND WARRANTS
 
2.1 Purchase and Sale. Subject to the satisfaction (or waiver) of the terms and
conditions of this Agreement, Purchaser agrees to purchase, and Company agrees
to sell and issue to Purchaser, the Convertible Notes and the Warrants in the
amount of the Purchase Price, all as set forth on Schedule 1 attached hereto.
The Purchase Price for each Convertible Note purchased shall be equal to its
face value. The aggregate principal amount of Convertible Notes which may be
purchased under this Agreement from time to time shall not exceed $5,000,000;
provided, that the Company may increase such aggregate principal amount of
Convertible Notes in its sole discretion. The Company shall notify Purchaser of
any such increase, but Purchaser shall have no right of first offer, preemptive
right, or any similar right with respect to such additional Convertible Notes.
 
2.2 Closing Date. The purchase and sale of the Convertible Notes and Warrants to
Purchaser shall take place on the Effective Date, or such later date as the
Company and Purchaser may agree in writing, subject to satisfaction of the
conditions set forth in this Agreement (the “Closing Date”). Additional closings
with other purchasers of the Convertible Notes and Warrants may be held from
time to time in the sole discretion of the Company.
 
2.3 Form of Payment. Subject to the satisfaction of the terms and conditions of
this Agreement, on the Closing Date: (i) Purchaser shall deliver to the Company,
to the account designated in the Subscription Agreement, the Purchase Price for
the Convertible Note and Warrants and (ii) the Company shall deliver to
Purchaser the Convertible Note(s) and Warrant(s) which Purchaser is purchasing
hereunder, duly executed on behalf of the Company, together with any other
documents required to be delivered pursuant to this Agreement.
 
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
 
Purchaser represents and warrants to the Company as follows:
 
3.1 Certifications in Subscription Agreement. The certifications of Purchaser
contained in the Subscription Agreement are true and correct as of the Effective
Date, and Purchaser hereby reaffirms the representations, warranties,
agreements, acknowledgments, and understandings of Purchaser contained in the
Subscription Agreement as of the Effective Date.
 
3.2 Additional Information. The Purchaser understands and agrees that the
Purchaser may be asked or required to provide documentation (“Documentation”) to
verify the Purchaser’s accredited investor status. Notwithstanding anything else
contained herein or in other materials provided to Purchaser, this Documentation
may be retained and reviewed by the Company and copies of the Documentation may
be provided to affiliates of the Company and Boustead Securities, LLC, a member
of FINRA and SIPC, who is acting as the Company’s exclusive placement agent in
connection with this offering (the “Placement Agent”), and its affiliates.
Purchaser understands that the Company may not accept Purchaser’s subscription
if Purchaser is not able to provide Documentation acceptable to Company and the
Placement Agent, or for any other reason.
 
 
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3.3 Reliance on Exemptions. Purchaser understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and Purchaser’s
compliance with, the representations, warranties, agreements, acknowledgments,
and understandings of Purchaser set forth herein and in the Subscription
Agreement to determine the availability of such exemptions and the eligibility
of Purchaser to acquire the Securities.
 
3.4 Authorization, Enforcement. This Agreement has been duly and validly
authorized, executed and delivered by, or on behalf of, Purchaser and is a valid
and binding agreement of Purchaser, enforceable in accordance with its terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.
 
3.5 Foreign Investors. If Purchaser is not a United States person (as defined by
Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), Purchaser
hereby represents that it has satisfied itself as to the full observance of the
laws of its jurisdiction in connection with any invitation to subscribe for the
Securities or any use of this Subscription Agreement, including (i) the legal
requirements within its jurisdiction for the purchase of the Securities, (ii)
any foreign exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained, and (iv) the income
tax and other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale, or transfer of the Securities. Purchaser’s
subscription and payment for and continued beneficial ownership of the
Securities will not violate any applicable securities or other laws of the
Purchaser’s jurisdiction.
 
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
 
The Company represents and warrants to Purchaser as follows:
 
4.1 Organization. The Company is a corporation, duly incorporated, validly
existing and in good standing under the laws of the State of Nevada. The Company
has the full corporate power and authority to: (i) enter into and execute this
Agreement and the other Transaction Documents and to perform all of its
obligations hereunder and thereunder; and (ii) own and to conduct and carry on
its business as currently conducted. The Company is duly qualified to transact
business and is in good standing as a foreign corporation in each jurisdiction
where the character of its business or the ownership or use and operation of its
assets or properties requires such qualification.
 
 
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4.2 Authority and Approval of Agreement; Binding Effect. The execution and
delivery by Company of this Agreement and the other Transaction Documents, and
the performance by Company of all of its obligations hereunder and thereunder,
including the issuance of the Securities, have been duly and validly authorized
and approved by the Company and its board of directors pursuant to all
applicable laws and no other action or consent on the part of Company, its board
directors or any other Person is necessary or required by the Company to execute
this Agreement and the other Transaction Documents, consummate the transactions
contemplated herein and therein, perform all of Company’s obligations hereunder
and thereunder, or to issue the Securities. This Agreement and each of the other
Transaction Documents have been duly and validly executed by Company (and the
officer executing this Agreement and all such other Transaction Documents is
duly authorized to act and execute same on behalf of Company) and constitute the
valid and legally binding agreements of Company, enforceable against Company in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.
 
4.3 SEC Reports. Other than as disclosed in the SEC Reports (with respect to a
potential late filing of a Form 8-K on June 27, 2017, about which the Company is
engaged in discussions with the SEC), the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it
under the Securities Exchange Act of 1934 (the “Exchange Act”), including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date
hereof (or such shorter period as the Company was required by law or regulation
to file such material) (the foregoing materials, including 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 filing dates, or to the
extent corrected by a subsequent restatement, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the SEC promulgated thereunder, and none of
the SEC Reports, as amended from time to time, 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 light of the
circumstances under which they were made, not misleading. All material
agreements to which the Company or any subsidiary is a party or to which the
property or assets of the Company or any of its subsidiaries are subject are
included as part of or specifically identified in the SEC Reports. The private
placement memorandum (the “PPM”) prepared in connection with the offering
contemplated by this Agreement and delivered to the Purchaser does 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, not
misleading. The financial statements of the Company included in the SEC Reports
complies in all material respects with applicable accounting requirements and
the rules and regulations of the SEC with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
U.S. generally accepted accounting principles, 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.
 
 
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4.4 Capitalization. The authorized capital stock of the Company is as set forth
in the Company’s latest Annual Report on Form 10-K or Quarterly Report on Form
10-Q (as applicable) as filed with the SEC. As of the Effective Date, and except
as disclosed in the SEC Reports, (i) no shares of the Company’s capital stock
are subject to preemptive rights or any other similar rights or any claims or
encumbrances suffered or permitted by the Company; (ii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company, or contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
issue additional shares of capital stock of the Company, or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company; (iii) there are no outstanding debt securities, notes,
credit agreements, credit facilities or other contracts or instruments
evidencing indebtedness of the Company or any of its, or by which the Company is
or may become bound; (iv) there are no outstanding registration statements with
respect to the Company or any of its securities; (v) there are no agreements or
arrangements under which the Company is obligated to register the sale of any of
their securities under the Securities Act (except pursuant to this Agreement);
(vi) there are no financing statements securing obligations filed in connection
with the Company or any of its assets; (vii) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by this Agreement or any related agreement or the consummation of the
transactions described herein or therein; and (viii) there are no outstanding
securities or instruments of the Company which contain any redemption or similar
provisions, and there are no contracts by which the Company is or may become
bound to redeem a security of the Company. No further approval or authorization
of any stockholder, the Board of Directors or others is required for the
issuance and sale of the Securities.
 
4.5 No Conflicts; Consents and Approvals. The execution, delivery, and
performance of this Agreement and the Transaction Documents, and the
consummation of the transactions contemplated hereby and thereby, including the
issuance of any of the Securities, will not: (i) constitute a violation of or
conflict with the Articles of Incorporation or Bylaws of the Company (the
“Organizational Documents”); (ii) constitute a violation of, or a default or
breach under (either immediately, upon notice, upon lapse of time, or both), or
conflicts with, or gives to any other Person any rights of termination,
amendment, acceleration or cancellation of, any provision of any material
contract to which Company is a party or by which any of its assets or properties
may be bound; or (iii) constitute a violation of, or conflict with, any law
(including United States federal and state securities laws). The Company is not
in violation of its Organizational Documents and the Company is not in default
or breach (and no event has occurred which with notice or lapse of time or both
could put the Company in default or breach) under, and the Company has not taken
any action or failed to take any action that would give to any other Person any
rights of termination, amendment, acceleration, or cancellation of, any material
contract to which the Company is a party or by which any property or assets of
the Company are bound or affected.
 
 
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4.6 Issuance of Securities. The Securities are duly authorized and, upon
issuance in accordance with the terms hereof, shall be duly issued, fully paid
and non-assessable, and free from all encumbrances with respect to the issue
thereof, and will be issued in compliance with all applicable United States
federal and state securities laws.
 
4.7 Brokerage Fees. There is no Person acting on behalf of the Company who is
entitled to or has any claim for any brokerage or finder’s fee or commission in
connection with the execution of this Agreement or the consummation of the
transactions contemplated hereby, except for Boustead Securities, LLC, which is
acting as placement agent (the “Placement Agent”) for the sale of the
Securities.
 
4.8 No Material Adverse Changes. Since the date of the latest audited financial
statements included within the SEC Reports and except as otherwise disclosed in
the PPM, there has not been any adverse change in the business, financial
condition, operations, results of operations, or future prospects of the
Company.
 
4.9 Litigation. There is no Action which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the
Securities or (ii) except as disclosed in the SEC Reports or the PPM, could, if
there were an unfavorable decision, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any subsidiary, nor to the knowledge of the Company or any
subsidiary, any director or officer thereof (in his or her capacity as such), 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, except as disclosed in the SEC Reports or the PPM. There has not
been, and to the knowledge of the Company, there is not pending or contemplated
any investigation by the SEC involving the Company or any current or former
director or officer of the Company (in his or her capacity as such). The SEC has
not issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company under the Exchange Act or the
Securities Act.
 
4.10 No Undisclosed Material Liabilities. There are no liabilities of the
Company or any subsidiary of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability, other than: (a) liabilities provided for in the
audited consolidated balance sheet of the Company and the subsidiaries as of
September 30, 2018 or disclosed in the notes thereto; and (b) other undisclosed
liabilities which, individually or in the aggregate, have not resulted in or
could reasonably be expected to result in a Material Adverse Effect.
 
4.11 Intellectual Property. The Company and its subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights (collectively, the “Intellectual Property Rights”) that are necessary or
material for use in connection with the business of the Company as described in
the SEC Reports and which the failure to so have could, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any subsidiary has received a written notice
that the Intellectual Property Rights used by the Company or any subsidiary
violates or infringes upon the rights of any Person. Except as set forth in the
SEC Reports or the PPM, to the Company’s knowledge, all such Intellectual
Property Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights. The Company and its
subsidiaries have taken reasonable steps to protect the Company’s and its
subsidiaries’ rights in their Intellectual Property Rights and confidential
information (the “Confidential Information”). Each employee, consultant and
contractor who has had access to Confidential Information which is necessary for
the conduct of the business of the Company and its subsidiaries as currently
conducted or as currently proposed to be conducted has executed an agreement to
maintain the confidentiality of such Confidential Information and has executed
appropriate agreements that are substantially consistent with the Company’s
standard forms thereof. Except under confidentiality obligations, there has been
no material disclosure of any of the Company’s or its subsidiaries’ Confidential
Information to any third party.
 
 
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4.12 Solvency. The Company has not (a) made a general assignment for the benefit
of creditors; (b) filed any voluntary petition in bankruptcy or suffered the
filing of any involuntary petition by its creditors; (c) suffered the
appointment of a receiver to take possession of all, or substantially all, of
its assets; (d) suffered the attachment or other judicial seizure of all, or
substantially all, of its assets; (e) admitted in writing its inability to pay
its debts as they come due; or (f) made an offer of settlement, extension or
composition to its creditors generally.
 
4.13 Related Party Transactions. Except as set forth in the SEC Reports or the
PPM: (a) none of the Company or any of its affiliates, officers, directors,
stockholders or employees, or any affiliate of any of such Person, has any
material interest in any property, real or personal, tangible or intangible,
including the Company’s Intellectual Property used in or pertaining to the
business of the Company, except for the normal rights of a stockholder, or, to
the Company’s knowledge, any supplier, distributor or customer of the Company,
(b) there are no agreements, understandings or proposed transactions between the
Company and any of its officers, directors, employees, affiliates, or, to the
Company’s knowledge, any affiliate thereof, (c) to the Company’s knowledge, no
employee, officer or director of the Company or any of its Subsidiaries has any
direct or indirect ownership interest in any firm or corporation with which the
Company is affiliated or with which the Company has a business relationship, or
any firm or corporation that competes with the Company; (d) to the Company’s
knowledge, no member of the immediate family of any officer or director of the
Company is directly or indirectly interested in any material contract of the
Company filed as an exhibit to the Company’s SEC Reports, or (e) there are no
amounts owed (cash and stock) to officers, directors and consultants (salary,
bonuses or other forms of compensation).
 
4.14 Disclosure. Neither the Company nor any Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any information
that constitutes or might constitute material, non-public information, other
than the terms of the transactions contemplated hereby and other information
that will be disclosed promptly following the execution of this Agreement. The
Company understands and confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the Company.
 
 
 
 
 
 
 
 
 
 
 
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ARTICLE V
COVENANTS
 
5.1     Covenants.
 
(a) Corporate Existence. The Company shall at all times preserve and maintain
its: (i) existence and good standing in the jurisdiction of its organization;
and (ii) its qualification to do business and good standing in each jurisdiction
where the nature of its business makes such qualification necessary, and shall
at all times continue as a going concern in the business which the Company is
presently conducting.
 
(b)    Notice of Default. The Company shall, promptly, but not more than five
(5) days after the commencement thereof, give notice to Purchaser in writing of
the occurrence of any “Event of Default” (as such term is defined in any of the
Transaction Documents) or of any event which, with the lapse of time, the giving
of notice or both, would constitute an Event of Default hereunder or under any
other Transaction Document.
 
(c) Reservation of Shares. So long as any Securities are owned beneficially
and/or of record by any Purchaser or any transferee thereof, the Company
covenants and agrees that it will at all times reserve and keep available out of
its authorized and unissued shares of Common Stock a number of shares of Common
Stock sufficient for the sole purpose of issuance upon conversion of the
Convertible Notes, payment of interest on the Convertible Note and exercise of
the Warrants (and/or any transferee thereof), free from preemptive rights or any
other actual contingent purchase rights of persons other than the applicable
Purchaser (and any other holders of any Convertible Note and/or Warrants
transferred from a Purchaser).
 
(d)    Transferability; Certificate.
 
(i) The Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of the Securities other than
pursuant to an effective registration statement, to the Company, to an affiliate
of a Purchaser or in connection with a pledge as contemplated in Section
7.1(d)(ii), the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor, 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.
 
(ii) Certificates evidencing Securities will contain a standard legend referring
to transfer restrictions under the Securities Act.
 
(iii) The Company acknowledges and agrees that a Purchaser may from time to time
pledge, and/or grant a security interest in some or all of the Securities
pursuant to a bona fide margin agreement in connection with a bona fide margin
account and, if required under the terms of such agreement or account, 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 or consent
of the Company and no legal opinion of legal counsel to the pledgee, secured
party or pledgor shall be required in connection with the pledge, but such legal
opinion may be required in connection with a subsequent transfer following
default by the Purchaser transferee of the pledge. 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
thereof including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of selling
stockholders thereunder. Except as otherwise provided in Section 7.1(d)(iv), any
Securities subject to a pledge or security interest as contemplated by this
Section 7.1(d)(iii) shall continue to bear the legend set forth in this Section
7.1(d)(ii) and be subject to the restrictions on transfer set forth in Section
7.1(d)(i).
 
 
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(iv) Certificates representing Securities shall be eligible for removal of the
restrictive legend (including the legend set forth in Section 7.1(d)(ii)): (i)
following any sale of such Securities pursuant to the plan of distribution in an
effective registration statement (in compliance with any prospectus delivery
requirements) or (ii) following a sale or transfer of such Securities pursuant
to Rule 144 (assuming the transferee is not an affiliate of the Company), or
(iii) while such Securities are eligible for sale by the selling Purchaser
without the requirement for the Company to be in compliance with the current
public information required under Rule 144 as to such Securities and without
volume or manner-of-sale restrictions. The Company agrees that following such
time as legends are no longer required to be set forth on certificates
representing Securities under this Section 7.1(d), it will, no longer than three
trading days following the delivery by a Purchaser to the Company or the
transfer agent of a certificate representing such Securities containing a
restrictive legend, deliver or instruct the transfer agent to deliver to such
Purchaser, Securities which are free of all restrictive and other legends. If
the Company is then eligible, certificates for Securities subject to legend
removal hereunder shall be transmitted by the transfer agent to a Purchaser by
crediting the prime brokerage account of such Purchaser with the Depository
Trust Company System as directed by such Purchaser.
 
(e) Furnishing of Information. As long as any Purchaser or any transferee owns
any Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Purchaser owns Securities, if the Company is not
required to file reports pursuant to such laws, it will prepare and furnish to
the Purchasers and make publicly available in accordance with Rule 144(c) such
information as is required for the Purchasers to sell the Securities under Rule
144. The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell the Securities without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144.
 
(f) Integration. The Company shall not, and shall use its best efforts to ensure
that no affiliate of the Company shall, 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 in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers, or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any trading market on which the Common Stock of the Company then
trades in a manner that would require stockholder approval of the sale of the
Securities to the Purchasers.
 
 
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(g) Securities Laws Disclosure; Publicity. By (i) 9:30 a.m. (New York time) on
the trading day following the Closing Date, the Company shall issue a press
release, disclosing the transactions contemplated by the Transaction Documents
and the Closing and by (ii) 5:30 p.m. (New York time) on the fourth Trading Day
following the Closing Date, the Company will file a Current Report on Form 8-K,
disclosing the material terms of the Transaction Documents (and attach as
exhibits thereto all existing Transaction Documents) and the Closing. The
Company covenants that following such disclosure, the Purchasers shall no longer
be in possession of any material, non-public information with respect to the
Company or any subsidiary. In addition, the Company will make such other filings
and notices in the manner and time required by the SEC and the trading market on
which the Common Stock of the Company is quoted. 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 to the extent such disclosure is required by law or trading market
regulations.
 
(h) Indemnification of Purchasers. The Company will indemnify and hold the
Purchasers and their respective directors, officers, shareholders, partners,
members, affiliates, employees and agents (each, an “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 in respect thereof (collectively, “Losses”) that any such
Purchaser Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by any of the Company in any Transaction Document or
in any certificate or other instrument delivered by or on behalf of the Company.
In addition to the indemnity contained herein, the Company will reimburse each
Purchaser Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred.
 
(i) Non-Public Information. The Company covenants and agrees that, except as
specifically contemplated by the Transaction Documents, neither it nor any other
Person acting on its behalf will provide any Purchaser or its agents or counsel
with any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the Company.
 
ARTICLE VI
CONDITIONS PRECEDENT TO THE COMPANY’ S OBLIGATIONS TO SELL
 
The obligation of the Company hereunder to issue and sell the Securities to
Purchaser is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions; provided, that these conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its sole
discretion:
 
 
11

 
 
6.1 Purchaser shall have executed the Transaction Documents and delivered the
Purchase Price to the Company.
 
6.2 The representations and warranties of Purchaser shall be true and correct in
all material respects as of the Closing Date (except for representations and
warranties that speak as of a specific date), and Purchaser shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by Purchaser at or prior to the Closing Date.
 
6.3 The Company shall have received such certificates, confirmations,
resolutions, acknowledgements, or other documentation necessary or advisable
from all applicable governmental authorities, including, but not limited to,
those located in the State of Nevada, as the Company may require in order to
evidence such governmental authorities’ approval of this Agreement, the
Transaction Documents and the purchase of the Securities contemplated hereby.
 
6.4 No statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction that prohibits the consummation
of any of the transactions contemplated by the Transaction Documents.
 
ARTICLE VII
CONDITIONS PRECEDENT TO THE PURCHASER’S OBLIGATIONS TO PURCHASE
 
The obligation of Purchaser hereunder to purchase the Convertible Note is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions (in addition to any other conditions precedent elsewhere in
this Agreement); provided, that these conditions are for Purchaser’s sole
benefit and may be waived by Purchaser at any time in its sole discretion:
 
7.1 The Company shall have executed and delivered the Transaction Documents to
Purchaser.
 
7.2 The representations and warranties of the Company shall be true and correct
in all material respects as of the Closing Date (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied, and complied in all material respects with the covenants,
agreements, and conditions required by this Agreement to be performed,
satisfied, or complied with by the Company at or prior to the Closing Date.
 
7.3 No statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction that prohibits the consummation
of any of the transactions contemplated by the Transaction Documents.
 
 
 
 
12

 
 
7.4 No stop order or suspension of trading shall have been imposed by the SEC or
any other governmental or regulatory body having jurisdiction over the Company
or the market(s) where the Common Stock of the Company is listed or quoted with
respect to public trading in the Common Stock of the Company.
 
7.5 The Company shall have executed such other agreements, certificates,
confirmations or resolutions as Purchaser may require to consummate the
transactions contemplated by this Agreement and the Transaction Documents,
including a closing statement and joint disbursement instructions as may be
required by Purchaser.
 
ARTICLE IX
MISCELLANEOUS
 
8.1 Notices. All notices of request, demand and other communications hereunder
shall be addressed to the parties as follows:
 
If to the Company:
Know Labs, Inc.
 
500 Union Street, Suite 810
 
Seattle, WA, 98101
 
Attn: Ronald P. Erickson, Chairman
 
E-mail: ron@knowlabs.co
 
 
If to Purchaser:
To the address and other contact information specified in the Subscription
Agreement.

  
unless the address is changed by the party by like notice given to the other
party. Notice shall be in writing and shall be deemed delivered: (i) if mailed
by certified mail, return receipt requested, postage prepaid and properly
addressed to the address below, then three (3) Business Days after deposit of
same in a regularly maintained U.S. Mail receptacle; or (ii) if mailed by
Federal Express, UPS, or other nationally recognized overnight courier service,
next day delivery, then one (1) Business Day after deposit of same in a
regularly maintained receptacle of such overnight courier; or (iii) if hand
delivered or sent by email, then upon hand delivery or receipt thereof.
Notwithstanding the foregoing, notice, consents, waivers, or other
communications referred to in this Agreement sent by e-mail shall be deemed to
have been delivered only when the sending party has confirmed (by reply e-mail
or some other form of written confirmation from the receiving party) that the
notice has been received by the other party.
 
8.2 Entire Agreement. This Agreement and the other Transaction Documents: (i)
constitute the entire agreement between the parties and (ii) are the final
expression of the intentions of the Company and Purchaser. No promises, either
expressed or implied, exist between the Company and Purchaser, unless contained
herein or in the Transaction Documents. This Agreement and the Transaction
Documents supersede all negotiations, representations, warranties, commitments,
offers, and contracts (of any kind or nature, whether oral or written) prior to
the execution hereof.
 
 
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8.3 Amendments; Waivers. No amendment, modification, or termination of any
provision of this Agreement or of the Transaction Documents, or waiver or
consent to any departure by either party therefrom, shall in any event be
effective unless the same shall be in writing and signed by the other party, and
any such waiver or consent shall be effective only for the specific purpose for
which given.
 
8.4 Assignability. Purchaser may at any time assign Purchaser’s rights in this
Agreement, the Convertible Notes, any Transaction Document, or any part thereof,
subject to applicable law, including federal and state securities laws. The
Company may not sell or assign this Agreement, any Transaction Document, or any
other agreement with Purchaser, or any portion thereof, either voluntarily or by
operation of law, nor delegate any of its duties of obligations hereunder or
thereunder, without the prior written consent of Purchaser, which consent shall
not be unreasonably withheld. This Agreement shall be binding upon Purchaser and
the Company and their respective legal representatives, successors and permitted
assigns.
 
8.5 Governing Law. This Agreement shall be governed by and be construed in
accordance with the laws of the State of Nevada without regard to the conflicts
of law rules of such state. The parties hereby irrevocably and unconditionally
submit, for themselves and their property, to the jurisdiction of the state or
federal courts situated in Las Vegas, Nevada, in respect of actions brought
against it in any action, suit, or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action, suit or proceeding may be heard and determined in
such courts. Each of the parties hereto agrees that a final judgment in any such
action, suit, or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
 
8.6 Enforceability; Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by,
unenforceable or invalid under any jurisdiction, such provision shall as to such
jurisdiction, be severable and be ineffective to the extent of such prohibition
or invalidity, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
 
8.7 Interpretation. If any provision in this Agreement requires judicial or
similar interpretation, the judicial or other such body interpreting or
construing such provision shall not apply the assumption that the terms hereof
shall be more strictly construed against one party because of the rule that an
instrument must be construed more strictly against the party which itself or
through its agents prepared the same. The parties hereby agree that all parties
and their agents have participated in the preparation hereof equally.
 
8.8 Execution. This Agreement may be executed in one or more counterparts, all
of which taken together shall be deemed and considered one and the same
Agreement, and same shall become effective when counterparts have been signed by
each party and each party has delivered its signed counterpart to the other
party. In the event that any signature is delivered by facsimile transmission or
by e-mail delivery of a “.pdf’ format file or other similar format file, such
signature shall be deemed an original for all purposes and shall create a valid
and binding obligation of the party executing same with the same force and
effect as if such facsimile or “.pdf’ signature page was an original thereof.
 
 
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8.9 Headings. The article and section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of the Agreement.
 
8.10 No Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.
 
8.11 Fees and Expenses. Each party shall be responsible for paying its own fees
and expenses in connection with this Agreement, the other Transaction
Agreements, and the transactions contemplated hereby and thereby.
Notwithstanding the foregoing, the Company shall be directly responsible for the
payment the fees or commissions payable to the Placement Agent.
 
8.12 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery of the Securities
for 18 months following the Closing Date.
 
 
(signature page follows)
 
 
 
 
 
 
 
 
 
15

 
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date and year set forth above.
 
COMPANY:
 
 
 
KNOW LABS, INC.
 
 
 
 
 
By:
 
Name: Ronald P. Erickson
 
Title: Chairman
 
 
 
By:
 
Name: Phillip A. Bosua
 
Title: Chief Executive Officer
 
 
 
 
 
PURCHASER:
 
 
 
 
 
Signature:
 
Name:
 

 

 
 
 
 
 
 
16

 
 
SCHEDULE 1
PURCHASE PRICE; SECURITIES PURCHASED
 
 
Name of Purchaser
Purchase Price and Principal Amount of Convertible Note Being Purchased
Number of Shares issuable upon exercise of Warrant Purchased
 
 
 
$
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
EXHIBIT A
 
FORM OF CONVERTIBLE NOTE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
EXHIBIT B
 
FORM OF WARRANT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
EXHIBIT C
 
FORM OF SUBORDINATION AGREEMENT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
EXHIBIT D
 
FORM OF SUBSCRIPTION AGREEMENT