Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of March 8,
2019, is entered into by and between INNOVATE BIOPHARMACEUTICALS, INC., a
Delaware corporation (“Company”), and ATLAS SCIENCES, LLC, a Utah limited
liability company, its successors and/or assigns (“Investor”).
A.    Company and Investor are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
Securities Act of 1933, as amended (the “1933 Act”), and the rules and
regulations promulgated thereunder by the United States Securities and Exchange
Commission (the “SEC”).
B.    Investor desires to purchase and Company desires to issue and sell, upon
the terms and conditions set forth in this Agreement a Convertible Promissory
Note, in the form attached hereto as Exhibit A, in the original principal amount
of $5,500,000.00 (the “Note”), convertible into shares of common stock, $0.0001
par value per share, of Company (the “Common Stock”), upon the terms and subject
to the limitations and conditions set forth in such Note.
C.    This Agreement, the Note, and all other agreements delivered to any party
under or in connection with this Agreement, as the same may be amended from time
to time, are collectively referred to herein as the “Transaction Documents”.
D.    For purposes of this Agreement: “Conversion Shares” means all shares of
Common Stock issuable upon conversion of all or any portion of the Note; and
“Securities” means the Note and the Conversion Shares.
NOW, THEREFORE, in consideration of the above recitals and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Company and Investor hereby agree as follows:
1.Purchase and Sale of Securities.
1.1.    Purchase of Securities. Company shall issue and sell to Investor and
Investor shall purchase from Company the Note. In consideration thereof,
Investor shall pay the Purchase Price (as defined below) to Company.
1.2.    Form of Payment. On the Closing Date (as defined below), Investor shall
pay the Purchase Price to Company via wire transfer of immediately available
funds to the account set forth in Exhibit B against delivery of the Note.
1.3.    Closing Date. Subject to the satisfaction (or written waiver) of the
conditions set forth in Section 5 and Section 6 below, the date of the issuance
and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be
March 8, 2019, or another mutually agreed upon date. The closing of the
transactions contemplated by this Agreement (the “Closing”) shall occur on the
Closing Date by means of the exchange by email of signed .pdf documents, but
shall be deemed for all purposes to have occurred at the offices of Hansen Black
Anderson Ashcraft PLLC in Lehi, Utah.
1.4.    Collateral for the Note. The Note shall be unsecured.

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1.5.    Original Issue Discount; Transaction Expense Amount. The Note carries an
original issue discount of $500,000.00 (the “OID”). In addition, Company agrees
to pay $20,000.00 to Investor to cover Investor’s legal fees, accounting costs,
due diligence, monitoring and other transaction costs incurred in connection
with the purchase and sale of the Securities (the “Transaction Expense Amount”),
which Transaction Expense Amount shall be paid by the Company at Closing (or the
Investor may elect to withhold the Transaction Expense Amount from the Purchase
Price wired to the Company). The “Purchase Price”, therefore, shall be
$5,000,000.00, computed as follows: $5,500,000.00 initial principal balance,
less the OID.
2.    Investor’s Representations, Warranties and Covenants.
2.1.    Investor represents and warrants to Company that as of the Closing Date:
(a)    Investor is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with the
requisite power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder.
(b)    Investor is acquiring the Note, and upon conversion of the Note, will be
acquiring the Conversion Shares, for its own account and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof in violation of applicable securities laws, except pursuant to sales
registered or exempted under the 1933 Act; provided, however, by making the
representations herein, Investor does not agree, or make any representation or
warranty, to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption from registration
under the 1933 Act. Investor does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities in violation of applicable securities laws. For purposes of this
Agreement, “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and any governmental entity or any department or
agency thereof.
(c)    Investor is an “accredited investor” as that term is defined in Rule
501(a) of Regulation D of the 1933 Act.
(d)    Investor understands that the Note is 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 Company is relying in part
upon the truth and accuracy of, and such Investor’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Investor set forth herein in order to determine the availability of such
exemptions and the eligibility of Investor to acquire the Note.
(e)    Investor and its advisors, if any, have been furnished with all materials
relating to the business, finances and operations of Company and materials
relating to the offer and sale of the Note that have been requested by Investor.
Investor and its advisors, if any, have been afforded the opportunity to ask
questions of Company. Neither such inquiries nor any other due diligence
investigations conducted by Investor or its advisors, if any, or its
representatives shall modify, amend or affect such Investor’s right to rely on
Company’s representations and warranties contained herein. Investor understands
that its investment in the Securities involves a high degree of risk. Investor
has sought such accounting, legal and tax advice as it has considered necessary
to make an informed investment decision with respect to its acquisition of the
Note.

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(f)    Investor understands that no United States federal or state agency or any
other government or governmental agency has passed on or made any recommendation
or endorsement of the Securities or the fairness or suitability of the
investment in the Securities nor have such authorities passed upon or endorsed
the merits of the offering of the Note.
(g)    Investor understands that, except as may be contemplated in connection
with the registration of the Common Stock: (i) the Securities have not been and
are not being registered under the 1933 Act or any state securities laws, and
may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) Investor shall have delivered to Company
(if requested by Company) an opinion of counsel, in a form reasonably acceptable
to Company, to the effect that the Securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration, or (C) Investor provides Company with reasonable assurance
that the Securities can be sold, assigned or transferred pursuant to Rule 144 or
Rule 144A promulgated under the 1933 Act (or a successor rule thereto)
(collectively, “Rule 144”); (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144, and further,
if Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the Person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC promulgated thereunder; and (iii) neither Company nor any
other Person is under any obligation to register the Securities under the 1933
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder. Notwithstanding the foregoing, the Securities may be
pledged in connection with a bona fide margin account or other loan or financing
arrangement secured by the Securities and such pledge of the Securities shall
not be deemed to be a transfer, sale or assignment of the Securities hereunder,
and Investor effecting a pledge of the Securities shall not be required to
provide Company with any notice thereof or otherwise make any delivery to
Company pursuant to this Agreement or any other Transaction Document, including,
without limitation, this Section 2.1(g).
(h)    This Agreement, the Note, and the other Transaction Documents have been
duly executed and delivered by Investor and constitute the valid and binding
obligations of Investor enforceable in accordance with their terms, except as
such enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies.
(i)    The execution, delivery and performance by Investor of this Agreement and
the other Transaction Documents and the consummation by Investor of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the organizational documents of Investor, or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which Investor is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws) applicable to Investor, except in the case of clauses (ii) and
(iii) above, for such conflicts, defaults, rights or violations which could not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of Investor to perform its obligations hereunder.
2.2.    Investor covenants and agrees that if Investor is a “Covered Person”
with respect to Company as determined in good faith by Company with the advice
of its counsel and, any of the “bad actor” disqualifying events described in
Rule 506(d)(1)(i)-(viii) promulgated under the 1933 Act (each, a
“Disqualification Event”), is applicable to Investor such that Company is
prohibited from offering or selling its securities pursuant to Rule 506 of
Regulation D promulgated under the 1933 Act, Investor shall use its best efforts
to

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transfer all or a portion of the Securities to a Person that, to Company’s
knowledge, a Disqualification Event is not applicable, such that Company is no
longer prohibited from offering or selling its securities under Rule 506 as a
result of the Disqualification Event applicable to Investor.
3.    Company’s Representations and Warranties. Company represents and warrants
to Investor that as of the Closing Date: (%4) Company is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has the requisite corporate power to own its properties and to
carry on its business as now being conducted; (%4) Company is duly qualified as
a foreign corporation to do business and is in good standing in each
jurisdiction where the nature of the business conducted or property owned by it
makes such qualification necessary and in which the failure to so qualify would
have a material adverse effect on the business, assets (including intangible
assets), liabilities, financial condition, property, or results of operations of
Company (a “Material Adverse Effect”); (%4) Company has registered its Common
Stock under Section 12(g) of the Securities Exchange Act of 1934, as amended
(the “1934 Act”), and is obligated to file reports pursuant to Section 13 or
Section 15(d) of the 1934 Act; (%4) each of the Transaction Documents and the
transactions contemplated hereby and thereby, have been duly and validly
authorized by Company and all necessary corporate actions have been taken; (%4)
this Agreement, the Note, and the other Transaction Documents have been duly
executed and delivered by Company and constitute the valid and binding
obligations of Company enforceable in accordance with their 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) the execution, delivery and performance by
Company of the Transaction Documents and the consummation by Company of the
transactions contemplated hereby and thereby will not (x) result in a violation
of the organizational documents of Company, or (y) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
Company is a party, or (z) result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws)
applicable to Company, except in the case of clauses (y) and (z) above, for such
conflicts, defaults, rights or violations which could not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
ability of Company to perform its obligations hereunder; (%4) no further
authorization, approval or consent of any court, governmental body, regulatory
agency, self-regulatory organization, or stock exchange or market or the
stockholders or any lender of Company is required to be obtained by Company for
the issuance of the Securities to Investor or the entering into of the
Transaction Documents; (%4) since January 29, 2018, when Company completed its
reverse merger transaction with Innovate Biopharmaceutical Inc., none of
Company’s filings with the SEC contained, at the time they were filed, any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading; (%4)
since January 29, 2018, Company has filed all reports, schedules, forms,
statements and other documents required to be filed by Company with the SEC
under the 1934 Act on a timely basis or has received a waiver of such
requirement or a valid extension of such time of filing and has filed any such
report, schedule, form, statement or other document prior to the expiration of
any such extension; (%4) except as disclosed in Company’s periodic and current
reports with the SEC, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of Company, threatened against or affecting Company before or by any
governmental authority or non-governmental department, commission, board,
bureau, agency or instrumentality or any other person, that would reasonably be
likely to have a Material Adverse Effect on Company or which would be reasonably
likely to adversely affect the validity or enforceability of, or the authority
or ability of Company to perform its obligations under, any of the Transaction
Documents; (%4) since January 28, 2018, Company has not consummated any
financing transaction that has not been disclosed in a periodic filing or
current report with the SEC under the 1934

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Act; (%4) Company is not, nor has it been at any time in the previous twelve
(12) months, a “Shell Company,” as such type of “issuer” is described in Rule
144(i)(1) under the 1933 Act; (%4) when issued, the Conversion Shares will be
duly authorized, validly issued, fully paid for and non-assessable, free and
clear of all liens, claims, charges and encumbrances; (%4) in making its
decision to enter into the transactions contemplated by the Transaction
Documents, Company is not relying on any representation, warranty, covenant or
promise of Investor or its officers, directors, members, managers, employees,
agents or representatives other than as set forth in the Transaction Documents;
and (%4) Company acknowledges that the State of Utah has a reasonable
relationship and sufficient contacts to the transactions contemplated by the
Transaction Documents and any dispute that may arise related thereto such that
the laws and venue of the State of Utah, as set forth more specifically in
Section 10.2 below, shall be applicable to the Transaction Documents and the
transactions contemplated therein.
4.    Company Covenants. Until all of Company’s obligations under all of the
Transaction Documents are paid and performed in full, or within the timeframes
otherwise specifically set forth below, Company will at all times comply with
the following covenants: (%4) so long as Investor beneficially owns any of the
Securities and for at least twenty (20) Trading Days (as defined in the Note)
thereafter, Company will timely file on the applicable deadline all reports
required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934
Act, and will take all reasonable action under its control to ensure that
adequate current public information with respect to Company, as required in
accordance with Rule 144 of the 1933 Act, is publicly available, and will not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination; (%4) when issued, the Conversion Shares will be duly authorized,
validly issued, fully paid for and non-assessable, free and clear of all liens,
claims, charges and encumbrances; (%4) the Common Stock shall be listed or
quoted for trading on any of (a) NYSE, (b) Nasdaq, (c) OTCQX, or (d) OTCQB; (%4)
trading in Company’s Common Stock will not be suspended, halted, chilled,
frozen, reach zero bid or otherwise cease trading on Company’s principal trading
market for a period of five (5) consecutive Trading Days (as defined in the
Note) or more; and (%4) so long as there are any outstanding obligations under
the Note, Company will not make any Restricted Issuances (as defined below)
where Borrower receives net proceeds in an amount less than $5,000,000.00 after
the Closing Date without Investor’s prior written consent, which consent may be
granted or withheld in Investor’s sole and absolute discretion. For purposes
hereof, the term “Restricted Issuance” means any issuance of (1) any debt
instrument or incurrence of any debt other than trade payables in the ordinary
course of business and other than the Convertible Promissory Note in the
original principal amount of $5,106,666.67 held by Gustavia Capital Partners LLC
or its registered assigns (the “Gustavia Note”); (2) any securities or
agreements to sell Common Stock with anti-dilution or price reset/reduction
features other than the Gustavia Note; or (3) except as noted below, any
securities that are or may be become convertible or exercisable into Common
Stock (including Convertible Debt (as defined below), warrants or convertible
preferred stock) other than the Gustavia Note, with a price that varies with the
market price of the Common Stock, even if such security only becomes convertible
or exercisable following an event of default, the passage of time, or another
trigger event or condition, excluding securities which contain cashless or net
exercise provisions, where the exercise price or conversion price does not vary
with the market price of the Common Stock. For the avoidance of doubt, (i) the
issuance of Common Stock, including any contemporaneous warrant issuances sold
to the same purchasers and including any issuance of Common Stock in an
at-the-market offering, in each case, in exchange for cash consideration, will
not be deemed a Restricted Issuance hereunder and (ii) the issuance of shares of
Common Stock under, pursuant to, in exchange for or in connection with any other
contract or instrument, whether convertible or not, other than the Gustavia
Note, is deemed a Restricted Issuance for purposes hereof if the number of
shares of Common Stock to be issued is based upon or related in any way to the
then market price of the Common Stock, including, but not limited to, Common
Stock issued in connection with a Section 3(a)(9) exchange, a Section 3(a)(10)
settlement, or any other similar settlement or exchange, but excluding the
issuance of Common Stock upon conversion

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or exercise of warrants, options or other convertible or exercisable securities
pursuant to cashless or net exercise provisions, where the exercise price or
conversion price is not otherwise based upon or related to the then market price
of the Common Stock.
5.    Conditions to Company’s Obligation to Sell. The obligation of Company
hereunder to issue and sell the Securities to Investor at the Closing is subject
to the satisfaction, on or before the Closing Date, of each of the following
conditions:
5.1.    Investor shall have executed this Agreement and the Note and delivered
the same to Company.
5.2.    Investor shall have delivered the Purchase Price to Company in
accordance with Section 1.2 above.
6.    Conditions to Investor’s Obligation to Purchase. The obligation of
Investor hereunder to purchase the Securities at the Closing is subject to the
satisfaction, on or before the Closing Date, of each of the following
conditions, provided that these conditions are for Investor’s sole benefit and
may be waived by Investor at any time in its sole discretion:
6.1.    Company shall have executed this Agreement and the Note and delivered
the same to Investor.
6.2.    Company shall have delivered to Investor a fully executed Irrevocable
Letter of Instructions to Transfer Agent (the “TA Letter”) substantially in the
form attached hereto as Exhibit C acknowledged and agreed to in writing by
Company’s transfer agent (the “Transfer Agent”).
6.3.    Company shall have delivered to Investor a fully executed Secretary’s
Certificate substantially in the form attached hereto as Exhibit D evidencing
Company’s approval of the Transaction Documents.
6.4.    Company shall have delivered to Investor a fully executed Share Issuance
Resolution substantially in the form attached hereto as Exhibit E to be
delivered to the Transfer Agent.
6.5.     Company shall have delivered to Investor fully executed copies of all
other Transaction Documents required to be executed by Company herein or
therein.
7.    Reservation of Shares. On the date hereof, Company will reserve 8,000,000
shares of Common Stock from its authorized and unissued Common Stock to provide
for all issuances of Common Stock under the Note (the “Share Reserve”). Company
further agrees to add additional shares of Common Stock to the Share Reserve in
increments of 500,000 shares as and when requested by Investor if as of the date
of any such request the number of shares being held in the Share Reserve is less
than two (2) times the number of shares of Common Stock obtained by dividing the
Outstanding Balance (as defined in the Note) as of the date of the request by
the Redemption Conversion Price (as defined in the Note). Until such time as
there are no outstanding obligations under the Note, Company shall require the
Transfer Agent to hold the shares of Common Stock reserved pursuant to the Share
Reserve exclusively for the benefit of Investor and to issue such shares to
Investor promptly upon Investor’s delivery of a conversion notice under the
Note.
8.    No Finder’s or Brokers Fees. Each party represents that it neither is nor
will be obligated for any finder’s fee or commission in connection with the
transactions contemplated by the Transaction Documents. Investor agrees to
indemnify and to hold harmless Company from any liability for any

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commission or compensation in the nature of a finder’s or broker’s fee arising
out of these transactions (and the costs and expenses of defending against such
liability or asserted liability) for which Investor or any of its officers,
employees or representatives is responsible. Company agrees to indemnify and
hold harmless Investor from any liability for any commission or compensation
in the nature of a finder’s or broker’s fee arising out of these transactions
(and the costs and expenses of defending against such liability or asserted
liability) for which Company or any of its officers, employees or
representatives is responsible.
9.    Terms of Future Financings. So long as the Note is outstanding, upon any
issuance by Company of any promissory note which is convertible into Common
Stock (“Convertible Debt”) after the six (6) month anniversary of the Closing
Date with any term or condition regarding conversion terms or mechanics more
favorable to the holder of such Convertible Debt or with a material term in
favor of the holder of such Convertible Debt that was not similarly provided to
Investor in the Transaction Documents, then Company shall notify Investor of
such additional or more favorable term and such term, at Investor’s option,
shall become a part of the Transaction Documents for the benefit of Investor.
Additionally, if Company fails to notify Investor of any such additional or more
favorable term, but Investor becomes aware that Company has granted such a term
to any third party, Investor may notify Company of such additional or more
favorable term and such term shall become a part of the Transaction Documents
retroactive to the date on which such term was granted to the applicable third
party pursuant to the issuance of Convertible Debt. The types of conversion
terms contained in another Convertible Debt that may be more favorable to the
holder of such security include, but are not limited to, terms addressing
conversion discounts, conversion lookback periods, and conversion prices.
10.    Miscellaneous. The provisions set forth in this Section 10 shall apply to
this Agreement, as well as all other Transaction Documents as if these terms
were fully set forth therein; provided, however, that in the event there is a
conflict between any provision set forth in this Section 10 and any provision in
any other Transaction Document, the provision in such other Transaction Document
shall govern.
10.1.    Arbitration of Claims. The parties shall submit all Claims (as defined
in Exhibit F) arising under this Agreement or any other Transaction Document or
any other agreement between the parties and their affiliates or any Claim
relating to the relationship of the parties to binding arbitration pursuant to
the arbitration provisions set forth in Exhibit F attached hereto (the
“Arbitration Provisions”). For the avoidance of doubt, the parties agree that
the injunction described in Section 10.3 below may be pursued in an arbitration
that is separate and apart from any other arbitration regarding all other Claims
arising under the Transaction Documents. The parties hereby acknowledge and
agree that the Arbitration Provisions are unconditionally binding on the parties
hereto and are severable from all other provisions of this Agreement. By
executing this Agreement, Company represents, warrants and covenants that
Company has reviewed the Arbitration Provisions carefully, consulted with legal
counsel about such provisions (or waived its right to do so), understands that
the Arbitration Provisions are intended to allow for the expeditious and
efficient resolution of any dispute hereunder, agrees to the terms and
limitations set forth in the Arbitration Provisions, and that Company will not
take a position contrary to the foregoing representations. Company acknowledges
and agrees that Investor may rely upon the foregoing representations and
covenants of Company regarding the Arbitration Provisions.
10.2.    Governing Law; Venue. This Agreement shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the
internal laws of the State of Utah, without giving effect to any choice of law
or conflict of law provision or rule (whether of the State of Utah or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Utah. Each party consents to and expressly agrees that
the exclusive venue for arbitration of any dispute arising out of or relating to
any Transaction

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Document or the relationship of the parties or their affiliates shall be in Salt
Lake County, Utah. Without modifying the parties’ obligations to resolve
disputes hereunder pursuant to the Arbitration Provisions, for any litigation
arising in connection with any of the Transaction Documents (and notwithstanding
the terms (specifically including any governing law and venue terms) of any
transfer agent services agreement or other agreement between the Transfer Agent
and Company, such litigation specifically includes, without limitation any
action between or involving Company and the Transfer Agent under the TA Letter
or otherwise related to Investor in any way (specifically including, without
limitation, any action where Company seeks to obtain an injunction, temporary
restraining order, or otherwise prohibit the Transfer Agent from issuing shares
of Common Stock to Investor for any reason)), each party hereto hereby (i)
consents to and expressly submits to the exclusive personal jurisdiction of any
state or federal court sitting in Salt Lake County, Utah, (ii) expressly submits
to the exclusive venue of any such court for the purposes hereof, (iii) agrees
to not bring any such action (specifically including, without limitation, any
action where Company seeks to obtain an injunction, temporary restraining order,
or otherwise prohibit the Transfer Agent from issuing shares of Common Stock to
Investor for any reason) outside of any state or federal court sitting in Salt
Lake County, Utah, and (iv) waives any claim of improper venue and any claim or
objection that such courts are an inconvenient forum or any other claim, defense
or objection to the bringing of any such proceeding in such jurisdiction or to
any claim that such venue of the suit, action or proceeding is improper.
Finally, Company covenants and agrees to name Investor as a party in interest
in, and provide written notice to Investor in accordance with Section 10.9 below
prior to bringing or filing, any action (including without limitation any filing
or action against any person or entity that is not a party to this Agreement,
including without limitation the Transfer Agent) that is related in any way to
the Transaction Documents or any transaction contemplated herein or therein,
including without limitation any action brought by Company to enjoin or prevent
the issuance of any shares of Common Stock to Investor by the Transfer Agent,
and further agrees to timely name Investor as a party to any such action.
Company acknowledges that the governing law and venue provisions set forth in
this Section 10.2 are material terms to induce Investor to enter into the
Transaction Documents and that but for Company’s agreements set forth in this
Section 10.2 Investor would not have entered into the Transaction Documents.
10.3.    Specific Performance. Company acknowledges and agrees that Investor may
suffer irreparable harm in the event that Company fails to perform any material
provision of this Agreement or any of the other Transaction Documents in
accordance with its specific terms. It is accordingly agreed that Investor shall
be entitled to one or more injunctions to prevent or cure breaches of the
provisions of this Agreement or such other Transaction Document and to enforce
specifically the terms and provisions hereof or thereof, this being in addition
to any other remedy to which Investor may be entitled under the Transaction
Documents, at law or in equity. Company specifically agrees that following an
Event of Default (as defined in the Note) pursuant to which Lender fails to
deliver any Lender Conversion Shares or Redemption Conversion Shares in
accordance with the terms of the Note, Investor shall have the right to seek and
receive injunctive relief from a court or an arbitrator prohibiting Company from
issuing any of its common or preferred stock to any party unless the Note is
being paid in full simultaneously with such issuance. Company specifically
agrees that following an Event of Default (as defined in the Note) under the
Note pursuant to which the obligations under the Note are accelerated, if the
Company issues any of its common or preferred stock to any party, the Company
shall use the proceeds from such issuance to repay its obligations under the
Note as follows: (i) if the issuance results in net proceeds to the Company of
less than $5 million, 20% of the net proceeds (or, if the outstanding
obligations of the Company under the Note are less than 20% of such net
proceeds, the proceeds necessary to repay the Note in whole) shall be applied to
the repayment of the Company’s obligations under the Note, (ii) if the issuance
results in net proceeds to the Company of at least $5 million but less than $10
million, 33% of the net proceeds (or, if the outstanding obligations of the
Company under the Note are less than 33% of such net proceeds, the proceeds
necessary to repay the Note in whole) shall be applied to the repayment of the
Company’s obligations under the Note, (iii) if the issuance results in net
proceeds to

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the Company of at least $10 million but less than $15 million, 66% of the net
proceeds (or, if the outstanding obligations of the Company under the Note are
less than 66% of such net proceeds, the proceeds necessary to repay the Note in
whole) shall be applied to the repayment of the Company’s obligations under the
Note, and (iv) if the issuance results in net proceeds to the Company of $15
million or more, the Company shall repay its obligations under the Note in full.
For the avoidance of doubt, in the event Investor seeks to obtain an injunction
from a court or an arbitrator against Company or specific performance of any
provision of any Transaction Document, such action shall not be a waiver of any
right of Investor under any Transaction Document, at law, or in equity,
including without limitation its rights to arbitrate any Claim pursuant to the
terms of the Transaction Documents, nor shall Investor’s pursuit of an
injunction prevent Investor, under the doctrines of claim preclusion, issues
preclusion, res judicata or other similar legal doctrines, from pursuing other
Claims in the future in a separate arbitration.
10.4.    Counterparts. Each Transaction Document may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument. The parties hereto confirm that any
electronic copy of another party’s executed counterpart of a Transaction
Document (or such party’s signature page thereof) will be deemed to be an
executed original thereof.
10.5.    Headings. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.
10.6.    Severability. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform to such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
10.7.    Entire Agreement. This Agreement, together with the other Transaction
Documents, contains the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither Company nor Investor makes any representation, warranty,
covenant or undertaking with respect to such matters. For the avoidance of
doubt, all prior term sheets or other documents between Company and Investor, or
any affiliate thereof, related to the transactions contemplated by the
Transaction Documents (collectively, “Prior Agreements”), that may have been
entered into between Company and Investor, or any affiliate thereof, are hereby
null and void and deemed to be replaced in their entirety by the Transaction
Documents. To the extent there is a conflict between any term set forth in any
Prior Agreement and the term(s) of the Transaction Documents, the Transaction
Documents shall govern.
10.8.    Amendments. No provision of this Agreement may be waived or amended
other than by an instrument in writing signed by both parties hereto.
10.9.    Notices. Any notice required or permitted hereunder or under the Note
shall be given in writing (unless otherwise specified herein) and shall be
deemed effectively given on the earliest of: (i) the date delivered, if
delivered by personal delivery as against written receipt therefor, (ii) the
date delivered, if delivered during normal business hours by email to an
executive officer named below or such officer’s successor, or by facsimile (with
successful transmission confirmation which is kept by sending party), or the
next succeeding business day if delivered by email or facsimile transmission
outside of normal business hours, (iii) the earlier of the date delivered (or
the next business day thereafter if not delivered on a business day) or the
third Trading Day after deposit, postage prepaid, in the United States Postal
Service by certified mail, or (iv) the earlier of the date delivered (or the
next business day thereafter if not delivered on a business

9

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day) or the third Trading Day after mailing by express courier, with delivery
costs and fees prepaid, in each case, addressed to each of the other parties
thereunto entitled at the following addresses (or at such other addresses as
such party may designate by five (5) calendar days’ advance written notice
similarly given to each of the other parties hereto):
If to Company:

Innovate Biopharmaceuticals, Inc.
Attn: Kendyle Woodard, EVP-Corporate Affairs
8480 Honeycutt Road, Suite 120
Raleigh, North Carolina 27615

With a copy to (which copy shall not constitute notice):

Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P.
Attn.: Christopher B. Capel, Esq.
150 Fayetteville Street, Suite 2300
Raleigh, North Carolina 27601

If to Investor:

Atlas Sciences, LLC
Attn: Alex Sullivan
3051 West Maple Loop Drive, Suite 325
Lehi, Utah 84043

With a copy to (which copy shall not constitute notice):

Hansen Black Anderson Ashcraft PLLC
Attn: Jonathan Hansen
3051 West Maple Loop Drive, Suite 325
Lehi, Utah 84043

10.10.    Successors and Assigns. This Agreement or any of the severable rights
and obligations inuring to the benefit of or to be performed by Investor
hereunder may be assigned by Investor to a third party, including its
affiliates, in whole or in part, without the need to obtain Company’s consent
thereto. Company may not assign its rights or obligations under this Agreement
or delegate its duties hereunder without the prior written consent of Investor.
10.11.    Survival. The representations and warranties of parties hereto and the
agreements and covenants set forth in this Agreement shall survive the Closing
hereunder notwithstanding any due diligence investigation conducted by or on
behalf of any of the parties hereto.
10.12.    Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

10

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10.13.    Investor’s Rights and Remedies Cumulative. All rights, remedies, and
powers conferred in this Agreement and the Transaction Documents are cumulative
and not exclusive of any other rights or remedies, and shall be in addition to
every other right, power, and remedy that Investor may have, whether
specifically granted in this Agreement or any other Transaction Document, or
existing at law, in equity, or by statute, and any and all such rights and
remedies may be exercised from time to time and as often and in such order as
Investor may deem expedient.
10.14.    Attorneys’ Fees and Cost of Collection. In the event of any
arbitration or action at law or in equity to enforce or interpret the terms of
this Agreement or any of the other Transaction Documents, the parties agree that
the party who is awarded the most money (which, for the avoidance of doubt,
shall be determined without regard to any statutory fines, penalties, fees, or
other charges awarded to any party) shall be deemed the prevailing party for all
purposes and shall therefore be entitled to an additional award of the full
amount of the attorneys’ fees, deposition costs, and expenses paid by such
prevailing party in connection with arbitration or litigation without reduction
or apportionment based upon the individual claims or defenses giving rise to the
fees and expenses. Nothing herein shall restrict or impair an arbitrator’s or a
court’s power to award fees and expenses for frivolous or bad faith pleading. If
(i) the Note is placed in the hands of an attorney for collection or enforcement
prior to commencing arbitration or legal proceedings, or is collected or
enforced through any arbitration or legal proceeding, or Investor otherwise
takes action to collect amounts due under the Note or to enforce the provisions
of the Note, or (ii) there occurs any bankruptcy, reorganization, receivership
of Company or other proceedings affecting Company’s creditors’ rights and
involving a claim under the Note; then Company shall pay the costs incurred by
Investor for such collection, enforcement or action or in connection with such
bankruptcy, reorganization, receivership or other proceeding, including, without
limitation, attorneys’ fees, expenses, deposition costs, and disbursements.
10.15.    Waiver. No waiver of any provision of this Agreement shall be
effective unless it is in the form of a writing signed by the party granting the
waiver. No waiver of any provision or consent to any prohibited action shall
constitute a waiver of any other provision or consent to any other prohibited
action, whether or not similar. No waiver or consent shall constitute a
continuing waiver or consent or commit a party to provide a waiver or consent in
the future except to the extent specifically set forth in writing.
10.16.    Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES
ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER
TRANSACTION DOCUMENT, OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY
JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY
ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION.
FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND
VOLUNTARILY WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.
10.17.    Time is of the Essence. Time is expressly made of the essence with
respect to each and every provision of this Agreement and the other Transaction
Documents.
10.18.    Voluntary Agreement. Company has carefully read this Agreement and
each of the other Transaction Documents and has asked any questions needed for
Company to understand the terms, consequences and binding effect of this
Agreement and each of the other Transaction Documents and fully understand them.
Company has had the opportunity to seek the advice of an attorney of Company’s
choosing, or has waived the right to do so, and is executing this Agreement and
each of the other Transaction Documents voluntarily and without any duress or
undue influence by Investor or anyone else.

11

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IN WITNESS WHEREOF, the undersigned Investor and Company have caused this
Agreement to be duly executed as of the date first above written.

SUBSCRIPTION AMOUNT:

Principal Amount of Note:    $5,500,000.00

Purchase Price:    $5,000,000.00

INVESTOR:

ATLAS SCIENCES, LLC

By: /s/ Alex Sullivan         
Alex Sullivan, CEO

COMPANY:

INNOVATE BIOPHARMACEUTICALS, INC.

By:    /s/ Sandeep Laumas    
Printed Name: Sandeep Laumas    
Title: Chief Executive Officer    

[Signature Page to Securities Purchase Agreement]

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ATTACHED EXHIBITS:

Exhibit A
Note

Exhibit B
Wire Transfer Instructions

Exhibit C
Irrevocable Transfer Agent Instructions

Exhibit D
Secretary’s Certificate

Exhibit E
Share Issuance Resolution

Exhibit F
Arbitration Provisions

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Exhibit 10.1

EXHIBIT F

ARBITRATION PROVISIONS

1.    Dispute Resolution. For purposes of this Exhibit F, the term “Claims”
means any disputes, claims, demands, causes of action, requests for injunctive
relief, requests for specific performance, liabilities, damages, losses, or
controversies whatsoever arising from, related to, or connected with the
transactions contemplated in the Transaction Documents and any communications
between the parties related thereto, including without limitation any claims of
mutual mistake, mistake, fraud, misrepresentation, failure of formation, failure
of consideration, promissory estoppel, unconscionability, failure of condition
precedent, rescission, and any statutory claims, tort claims, contract claims,
or claims to void, invalidate or terminate the Agreement (or these Arbitration
Provisions (defined below)) or any of the other Transaction Documents. For the
avoidance of doubt, a party’s pursuit of an injunction or other Claim pursuant
to these Arbitration Provisions or with a court will not later prevent that
party under the doctrines of claim preclusion, issue preclusion, res judicata or
other similar legal doctrines from pursuing other Claims in a separate
arbitration in the future. The parties to this Agreement (the “parties”) hereby
agree that the Claims may be arbitrated in one or more Arbitrations pursuant to
these Arbitration Provisions (one for an injunction or injunctions and a
separate one for all other Claims). The term “Claims” specifically excludes a
dispute over Calculations. The parties to the Agreement hereby agree that the
arbitration provisions set forth in this Exhibit F (“Arbitration Provisions”)
are binding on each of them. As a result, any attempt to rescind the Agreement
(or these Arbitration Provisions) or declare the Agreement (or these Arbitration
Provisions) or any other Transaction Document invalid or unenforceable for any
reason is subject to these Arbitration Provisions. These Arbitration Provisions
shall also survive any termination or expiration of the Agreement. Any
capitalized term not defined in these Arbitration Provisions shall have the
meaning set forth in the Agreement.
2.    Arbitration. Except as otherwise provided herein, all Claims must be
submitted to arbitration (“Arbitration”) to be conducted exclusively in Salt
Lake County, Utah and pursuant to the terms set forth in these Arbitration
Provisions. Subject to the arbitration appeal right provided for in Paragraph 5
below (the “Appeal Right”), the parties agree that the award of the arbitrator
rendered pursuant to Paragraph 4 below (the “Arbitration Award”) shall be (a)
final and binding upon the parties, (b) the sole and exclusive remedy between
them regarding any Claims, counterclaims, issues, or accountings presented or
pleaded to the arbitrator, and (c) promptly payable in United States dollars
free of any tax, deduction or offset (with respect to monetary awards). Subject
to the Appeal Right, any costs or fees, including without limitation attorneys’
fees, reasonably and necessarily incurred in connection with or incident to
enforcing the Arbitration Award shall, to the maximum extent permitted by law,
be charged against the party resisting such enforcement. The Arbitration Award
shall include default interest (as defined or otherwise provided for in the
Note, “Default Interest”) (with respect to monetary awards) at the rate
specified in the Note for Default Interest both before and after the Arbitration
Award. Judgment upon the Arbitration Award will be entered and enforced by any
state or federal court sitting in Salt Lake County, Utah.
3.    The Arbitration Act. The parties hereby incorporate herein the provisions
and procedures set forth in the Utah Uniform Arbitration Act, U.C.A. §
78B-11-101 et seq. (as amended or superseded from time to time, the “Arbitration
Act”). Notwithstanding the foregoing, pursuant to, and to the maximum extent
permitted by, Section 105 of the Arbitration Act, in the event of conflict or
variation between the terms of these Arbitration Provisions and the provisions
of the Arbitration Act, the terms of these Arbitration Provisions shall control
and the parties hereby waive or otherwise agree to vary the effect of all
requirements of the Arbitration Act that may conflict with or vary from these
Arbitration Provisions.
4.    Arbitration Proceedings. Arbitration between the parties will be subject
to the following:
4.1    Initiation of Arbitration. Pursuant to Section 110 of the Arbitration
Act, the parties agree that a party may initiate Arbitration by giving written
notice to the other party (“Arbitration Notice”) in the same manner that notice
is permitted under Section 10.9 of the Agreement; provided, however, that the
Arbitration Notice may not be given by email or fax. Arbitration will be deemed
initiated as of the date that the Arbitration Notice is deemed delivered to such
other party under Section 10.9 of the Agreement (the “Service Date”). After the
Service Date, information may be delivered, and notices may be given, by email
or fax pursuant to Section 10.9 of the Agreement or any other method permitted
thereunder. The Arbitration Notice must describe the nature of the controversy,
the remedies sought, and the election to commence Arbitration proceedings. All
Claims in the Arbitration Notice must be pleaded consistent with the Utah Rules
of Civil Procedure.

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Exhibit 10.1

4.2    Selection and Payment of Arbitrator.
(a) Within ten (10) calendar days after the Service Date, Investor shall select
and submit to Company the names of three (3) arbitrators that are designated as
“neutrals” or qualified arbitrators by Utah ADR Services
(http://www.utahadrservices.com) (such three (3) designated persons hereunder
are referred to herein as the “Proposed Arbitrators”). For the avoidance of
doubt, each Proposed Arbitrator must be qualified as a “neutral” with Utah ADR
Services. Within five (5) calendar days after Investor has submitted to Company
the names of the Proposed Arbitrators, Company must select, by written notice to
Investor, one (1) of the Proposed Arbitrators to act as the arbitrator for the
parties under these Arbitration Provisions. If Company fails to select one of
the Proposed Arbitrators in writing within such 5-day period, then Investor may
select the arbitrator from the Proposed Arbitrators by providing written notice
of such selection to Company.
(b) If Investor fails to submit to Company the Proposed Arbitrators within ten
(10) calendar days after the Service Date pursuant to subparagraph (a) above,
then Company may at any time prior to Investor so designating the Proposed
Arbitrators, identify the names of three (3) arbitrators that are designated as
“neutrals” or qualified arbitrators by Utah ADR Service by written notice to
Investor. Investor may then, within five (5) calendar days after Company has
submitted notice of its Proposed Arbitrators to Investor, select, by written
notice to Company, one (1) of the Proposed Arbitrators to act as the arbitrator
for the parties under these Arbitration Provisions. If Investor fails to select
in writing and within such 5-day period one (1) of the three (3) Proposed
Arbitrators selected by Company, then Company may select the arbitrator from its
three (3) previously selected Proposed Arbitrators by providing written notice
of such selection to Investor.
(c) If a Proposed Arbitrator chosen to serve as arbitrator declines or is
otherwise unable to serve as arbitrator, then the party that selected such
Proposed Arbitrator may select one (1) of the other three (3) Proposed
Arbitrators within three (3) calendar days of the date the chosen Proposed
Arbitrator declines or notifies the parties he or she is unable to serve as
arbitrator. If all three (3) Proposed Arbitrators decline or are otherwise
unable to serve as arbitrator, then the arbitrator selection process shall begin
again in accordance with this Paragraph 4.2.
(d) The date that the Proposed Arbitrator selected pursuant to this Paragraph
4.2 agrees in writing (including via email) delivered to both parties to serve
as the arbitrator hereunder is referred to herein as the “Arbitration
Commencement Date”. If an arbitrator resigns or is unable to act during the
Arbitration, a replacement arbitrator shall be chosen in accordance with this
Paragraph 4.2 to continue the Arbitration. If Utah ADR Services ceases to exist
or to provide a list of neutrals and there is no successor thereto, then the
arbitrator shall be selected under the then prevailing rules of the American
Arbitration Association.
(e) Subject to Paragraph 4.10 below, the cost of the arbitrator must be paid
equally by both parties. Subject to Paragraph 4.10 below, if one party refuses
or fails to pay its portion of the arbitrator fee, then the other party can
advance such unpaid amount (subject to the accrual of Default Interest
thereupon), with such amount being added to or subtracted from, as applicable,
the Arbitration Award.
4.3    Applicability of Certain Utah Rules. The parties agree that the
Arbitration shall be conducted generally in accordance with the Utah Rules of
Civil Procedure and the Utah Rules of Evidence. More specifically, the Utah
Rules of Civil Procedure shall apply, without limitation, to the filing of any
pleadings, motions or memoranda, the conducting of discovery, and the taking of
any depositions. The Utah Rules of Evidence shall apply to any hearings, whether
telephonic or in person, held by the arbitrator. Notwithstanding the foregoing,
it is the parties’ intent that the incorporation of such rules will in no event
supersede these Arbitration Provisions. In the event of any conflict between the
Utah Rules of Civil Procedure or the Utah Rules of Evidence and these
Arbitration Provisions, these Arbitration Provisions shall control.
4.4    Answer and Default. An answer and any counterclaims to the Arbitration
Notice shall be required to be delivered to the party initiating the Arbitration
within twenty (20) calendar days after the Arbitration Commencement Date. If an
answer is not delivered by the required deadline, the arbitrator must provide
written notice to the defaulting party stating that the arbitrator will enter a
default award against such party if such party does not file an answer within
five (5) calendar days of receipt of such notice. If an answer is not filed
within the five (5) day extension period, the arbitrator must render a default
award, consistent with the relief requested in the Arbitration Notice, against a
party that fails to submit an answer within such time period.
4.5    Related Litigation. The party that delivers the Arbitration Notice to the
other party shall have the option to also commence concurrent legal proceedings
with any state or federal court sitting in Salt Lake County, Utah (“Litigation
Proceedings”), subject to the following: (a) the complaint in the Litigation
Proceedings is to be substantially similar

--------------------------------------------------------------------------------

Exhibit 10.1

to the claims set forth in the Arbitration Notice, provided that an additional
cause of action to compel arbitration will also be included therein, (b) so long
as the other party files an answer to the complaint in the Litigation
Proceedings and an answer to the Arbitration Notice, the Litigation Proceedings
will be stayed pending an Arbitration Award (or Appeal Panel Award (defined
below), as applicable) hereunder, (c) if the other party fails to file an answer
in the Litigation Proceedings or an answer in the Arbitration proceedings, then
the party initiating Arbitration shall be entitled to a default judgment
consistent with the relief requested, to be entered in the Litigation
Proceedings, and (d) any legal or procedural issue arising under the Arbitration
Act that requires a decision of a court of competent jurisdiction may be
determined in the Litigation Proceedings. Any award of the arbitrator (or of the
Appeal Panel (defined below)) may be entered in such Litigation Proceedings
pursuant to the Arbitration Act.
4.6    Discovery. Pursuant to Section 118(8) of the Arbitration Act, the parties
agree that discovery shall be conducted as follows:
(a) Written discovery will only be allowed if the likely benefits of the
proposed written discovery outweigh the burden or expense thereof, and the
written discovery sought is likely to reveal information that will satisfy a
specific element of a claim or defense already pleaded in the Arbitration. The
party seeking written discovery shall always have the burden of showing that all
of the standards and limitations set forth in these Arbitration Provisions are
satisfied. The scope of discovery in the Arbitration proceedings shall also be
limited as follows:
(i)    To facts directly connected with the transactions contemplated by the
Agreement.
(ii)    To facts and information that cannot be obtained from another source or
in another manner that is more convenient, less burdensome or less expensive
than in the manner requested.
(b) No party shall be allowed (i) more than fifteen (15) interrogatories
(including discrete subparts), (ii) more than fifteen (15) requests for
admission (including discrete subparts), (iii) more than ten (10) document
requests (including discrete subparts), or (iv) more than three (3) depositions
(excluding expert depositions) for a maximum of seven (7) hours per deposition.
The costs associated with depositions will be borne by the party taking the
deposition. The party defending the deposition will submit a notice to the party
taking the deposition of the estimated attorneys’ fees that such party expects
to incur in connection with defending the deposition. If the party defending the
deposition fails to submit an estimate of attorneys’ fees within five (5)
calendar days of its receipt of a deposition notice, then such party shall be
deemed to have waived its right to the estimated attorneys’ fees. The party
taking the deposition must pay the party defending the deposition the estimated
attorneys’ fees prior to taking the deposition, unless such obligation is deemed
to be waived as set forth in the immediately preceding sentence. If the party
taking the deposition believes that the estimated attorneys’ fees are
unreasonable, such party may submit the issue to the arbitrator for a decision.
All depositions will be taken in the deponent’s state of residence unless
otherwise agreed or ordered by the arbitrator.
(c) All discovery requests (including document production requests included in
deposition notices) must be submitted in writing to the arbitrator and the other
party. The party submitting the written discovery requests must include with
such discovery requests a detailed explanation of how the proposed discovery
requests satisfy the requirements of these Arbitration Provisions and the Utah
Rules of Civil Procedure. The receiving party will then be allowed, within five
(5) calendar days of receiving the proposed discovery requests, to submit to the
arbitrator an estimate of the attorneys’ fees and costs associated with
responding to such written discovery requests and a written challenge to each
applicable discovery request. After receipt of an estimate of attorneys’ fees
and costs and/or challenge(s) to one or more discovery requests, consistent with
subparagraph (c) above, the arbitrator will within three (3) calendar days make
a finding as to the likely attorneys’ fees and costs associated with responding
to the discovery requests and issue an order that (i) requires the requesting
party to prepay the attorneys’ fees and costs associated with responding to the
discovery requests, and (ii) requires the responding party to respond to the
discovery requests as limited by the arbitrator within twenty-five (25) calendar
days of the arbitrator’s finding with respect to such discovery requests. If a
party entitled to submit an estimate of attorneys’ fees and costs and/or a
challenge to discovery requests fails to do so within such 5-day period, the
arbitrator will make a finding that (A) there are no attorneys’ fees or costs
associated with responding to such discovery requests, and (B) the responding
party must respond to such discovery requests (as may be limited by the
arbitrator) within twenty-five (25) calendar days of the arbitrator’s finding
with respect to such discovery requests. Any party submitting any written
discovery requests, including without limitation interrogatories, requests for
production subpoenas to a party or a third party, or requests for admissions,
must prepay the estimated attorneys’ fees and costs, before the responding party
has any obligation to produce or respond to the same, unless such obligation is
deemed waived as set forth above.

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Exhibit 10.1

(d) In order to allow a written discovery request, the arbitrator must find that
the discovery request satisfies the standards set forth in these Arbitration
Provisions and the Utah Rules of Civil Procedure. The arbitrator must strictly
enforce these standards. If a discovery request does not satisfy any of the
standards set forth in these Arbitration Provisions or the Utah Rules of Civil
Procedure, the arbitrator may modify such discovery request to satisfy the
applicable standards, or strike such discovery request in whole or in part.
(e) Each party may submit expert reports (and rebuttals thereto), provided that
such reports must be submitted within sixty (60) days of the Arbitration
Commencement Date. Each party will be allowed a maximum of two (2) experts.
Expert reports must contain the following: (i) a complete statement of all
opinions the expert will offer at trial and the basis and reasons for them; (ii)
the expert’s name and qualifications, including a list of all the expert’s
publications within the preceding ten (10) years, and a list of any other cases
in which the expert has testified at trial or in a deposition or prepared a
report within the preceding ten (10) years; and (iii) the compensation to be
paid for the expert’s report and testimony. The parties are entitled to depose
any other party’s expert witness one (1) time for no more than four (4) hours.
An expert may not testify in a party’s case-in-chief concerning any matter not
fairly disclosed in the expert report.
4.6    Dispositive Motions. Each party shall have the right to submit
dispositive motions pursuant Rule 12 or Rule 56 of the Utah Rules of Civil
Procedure (a “Dispositive Motion”). The party submitting the Dispositive Motion
may, but is not required to, deliver to the arbitrator and to the other party a
memorandum in support (the “Memorandum in Support”) of the Dispositive Motion.
Within seven (7) calendar days of delivery of the Memorandum in Support, the
other party shall deliver to the arbitrator and to the other party a memorandum
in opposition to the Memorandum in Support (the “Memorandum in Opposition”).
Within seven (7) calendar days of delivery of the Memorandum in Opposition, as
applicable, the party that submitted the Memorandum in Support shall deliver to
the arbitrator and to the other party a reply memorandum to the Memorandum in
Opposition (“Reply Memorandum”). If the applicable party shall fail to deliver
the Memorandum in Opposition as required above, or if the other party fails to
deliver the Reply Memorandum as required above, then the applicable party shall
lose its right to so deliver the same, and the Dispositive Motion shall proceed
regardless.
4.7    Confidentiality. All information disclosed by either party (or such
party’s agents) during the Arbitration process (including without limitation
information disclosed during the discovery process or any Appeal (defined
below)) shall be considered confidential in nature. Each party agrees not to
disclose any confidential information received from the other party (or its
agents) during the Arbitration process (including without limitation during the
discovery process or any Appeal) unless (a) prior to or after the time of
disclosure such information becomes public knowledge or part of the public
domain, not as a result of any inaction or action of the receiving party or its
agents, (b) such information is required by a court order, subpoena or similar
legal duress to be disclosed if such receiving party has notified the other
party thereof in writing and given it a reasonable opportunity to obtain a
protective order from a court of competent jurisdiction prior to disclosure, or
(c) such information is disclosed to the receiving party’s agents,
representatives and legal counsel on a need to know basis who each agree in
writing not to disclose such information to any third party. Pursuant to Section
118(5) of the Arbitration Act, the arbitrator is hereby authorized and directed
to issue a protective order to prevent the disclosure of privileged information
and confidential information upon the written request of either party.
4.8    Authorization; Timing; Scheduling Order. Subject to all other portions of
these Arbitration Provisions, the parties hereby authorize and direct the
arbitrator to take such actions and make such rulings as may be necessary to
carry out the parties’ intent for the Arbitration proceedings to be efficient
and expeditious. Pursuant to Section 120 of the Arbitration Act, the parties
hereby agree that an Arbitration Award must be made within one hundred twenty
(120) calendar days after the Arbitration Commencement Date. The arbitrator is
hereby authorized and directed to hold a scheduling conference within ten (10)
calendar days after the Arbitration Commencement Date in order to establish a
scheduling order with various binding deadlines for discovery, expert testimony,
and the submission of documents by the parties to enable the arbitrator to
render a decision prior to the end of such 120-day period.
4.9    Relief. The arbitrator shall have the right to award or include in the
Arbitration Award (or in a preliminary ruling) any relief which the arbitrator
deems proper under the circumstances, including, without limitation, specific
performance and injunctive relief, provided that the arbitrator may not award
exemplary or punitive damages.
4.10    Fees and Costs. As part of the Arbitration Award, the arbitrator is
hereby directed to require the non-prevailing party to (a) pay the full amount
of any unpaid costs and fees of the Arbitration, and (b) reimburse the
prevailing party for all reasonable attorneys’ fees, arbitrator costs and fees,
deposition costs, other discovery costs, and other expenses,

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Exhibit 10.1

costs or fees paid or otherwise incurred by the prevailing party in connection
with the Arbitration. The arbitrator shall determine the prevailing party, if
any, in the arbitrator’s discretion based on all the facts and circumstances of
the case.
5.    Arbitration Appeal.
5.1    Initiation of Appeal. Following the entry of the Arbitration Award,
either party (the “Appellant”) shall have a period of thirty (30) calendar days
in which to notify the other party (the “Appellee”), in writing, that the
Appellant elects to appeal (the “Appeal”) the Arbitration Award (such notice, an
“Appeal Notice”) to a panel of arbitrators as provided in Paragraph 5.2 below.
The date the Appellant delivers an Appeal Notice to the Appellee is referred to
herein as the “Appeal Date”. The Appeal Notice must be delivered to the Appellee
in accordance with the provisions of Paragraph 4.1 above with respect to
delivery of an Arbitration Notice. In addition, together with delivery of the
Appeal Notice to the Appellee, the Appellant must also pay for (and provide
proof of such payment to the Appellee together with delivery of the Appeal
Notice) a bond in the amount of 110% of the sum the Appellant owes to the
Appellee as a result of the Arbitration Award the Appellant is appealing. In the
event an Appellant delivers an Appeal Notice to the Appellee (together with
proof of payment of the applicable bond) in compliance with the provisions of
this Paragraph 5.1, the Appeal will occur as a matter of right and, except as
specifically set forth herein, will not be further conditioned. In the event a
party does not deliver an Appeal Notice (along with proof of payment of the
applicable bond) to the other party within the deadline prescribed in this
Paragraph 5.1, such party shall lose its right to appeal the Arbitration Award.
If no party delivers an Appeal Notice (along with proof of payment of the
applicable bond) to the other party within the deadline described in this
Paragraph 5.1, the Arbitration Award shall be final. The parties acknowledge and
agree that any Appeal shall be deemed part of the parties’ agreement to
arbitrate for purposes of these Arbitration Provisions and the Arbitration Act.
5.2    Selection and Payment of Appeal Panel. In the event an Appellant delivers
an Appeal Notice to the Appellee (together with proof of payment of the
applicable bond) in compliance with the provisions of Paragraph 5.1 above, the
Appeal will be heard by a three (3) person arbitration panel (the “Appeal
Panel”).
(a)     Within ten (10) calendar days after the Appeal Date, the Appellee shall
select and submit to the Appellant the names of five (5) arbitrators that are
designated as “neutrals” or qualified arbitrators by Utah ADR Services
(http://www.utahadrservices.com) (such five (5) designated persons hereunder are
referred to herein as the “Proposed Appeal Arbitrators”). For the avoidance of
doubt, each Proposed Appeal Arbitrator must be qualified as a “neutral” with
Utah ADR Services, and shall not be the arbitrator who rendered the Arbitration
Award being appealed (the “Original Arbitrator”). Within five (5) calendar days
after the Appellee has submitted to the Appellant the names of the Proposed
Appeal Arbitrators, the Appellant must select, by written notice to the
Appellee, three (3) of the Proposed Appeal Arbitrators to act as the members of
the Appeal Panel. If the Appellant fails to select three (3) of the Proposed
Appeal Arbitrators in writing within such 5-day period, then the Appellee may
select such three (3) arbitrators from the Proposed Appeal Arbitrators by
providing written notice of such selection to the Appellant.
(b)     If the Appellee fails to submit to the Appellant the names of the
Proposed Appeal Arbitrators within ten (10) calendar days after the Appeal Date
pursuant to subparagraph (a) above, then the Appellant may at any time prior to
the Appellee so designating the Proposed Appeal Arbitrators, identify the names
of five (5) arbitrators that are designated as “neutrals” or qualified
arbitrators by Utah ADR Service (none of whom may be the Original Arbitrator) by
written notice to the Appellee. The Appellee may then, within five (5) calendar
days after the Appellant has submitted notice of its selected arbitrators to the
Appellee, select, by written notice to the Appellant, three (3) of such selected
arbitrators to serve on the Appeal Panel. If the Appellee fails to select in
writing within such 5-day period three (3) of the arbitrators selected by the
Appellant to serve as the members of the Appeal Panel, then the Appellant may
select the three (3) members of the Appeal Panel from the Appellant’s list of
five (5) arbitrators by providing written notice of such selection to the
Appellee.
(c)     If a selected Proposed Appeal Arbitrator declines or is otherwise unable
to serve, then the party that selected such Proposed Appeal Arbitrator may
select one (1) of the other five (5) designated Proposed Appeal Arbitrators
within three (3) calendar days of the date a chosen Proposed Appeal Arbitrator
declines or notifies the parties he or she is unable to serve as an arbitrator.
If at least three (3) of the five (5) designated Proposed Appeal Arbitrators
decline or are otherwise unable to serve, then the Proposed Appeal Arbitrator
selection process shall begin again in accordance with this Paragraph 5.2;
provided, however, that any Proposed Appeal Arbitrators who have already agreed
to serve shall remain on the Appeal Panel.
(d)    The date that all three (3) Proposed Appeal Arbitrators selected pursuant
to this Paragraph 5.2 agree in writing (including via email) delivered to both
the Appellant and the Appellee to serve as members of the Appeal

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Exhibit 10.1

Panel hereunder is referred to herein as the “Appeal Commencement Date”. No
later than five (5) calendar days after the Appeal Commencement Date, the
Appellee shall designate in writing (including via email) to the Appellant and
the Appeal Panel the name of one (1) of the three (3) members of the Appeal
Panel to serve as the lead arbitrator in the Appeal proceedings. Each member of
the Appeal Panel shall be deemed an arbitrator for purposes of these Arbitration
Provisions and the Arbitration Act, provided that, in conducting the Appeal, the
Appeal Panel may only act or make determinations upon the approval or vote of no
less than the majority vote of its members, as announced or communicated by the
lead arbitrator on the Appeal Panel. If an arbitrator on the Appeal Panel ceases
or is unable to act during the Appeal proceedings, a replacement arbitrator
shall be chosen in accordance with Paragraph 5.2 above to continue the Appeal as
a member of the Appeal Panel. If Utah ADR Services ceases to exist or to provide
a list of neutrals, then the arbitrators for the Appeal Panel shall be selected
under the then prevailing rules of the American Arbitration Association.
(d)     Subject to Paragraph 5.7 below, the cost of the Appeal Panel must be
paid entirely by the Appellant.
5.3    Appeal Procedure. The Appeal will be deemed an appeal of the entire
Arbitration Award. In conducting the Appeal, the Appeal Panel shall conduct a de
novo review of all Claims described or otherwise set forth in the Arbitration
Notice. Subject to the foregoing and all other provisions of this Paragraph 5,
the Appeal Panel shall conduct the Appeal in a manner the Appeal Panel considers
appropriate for a fair and expeditious disposition of the Appeal, may hold one
or more hearings and permit oral argument, and may review all previous evidence
and discovery, together with all briefs, pleadings and other documents filed
with the Original Arbitrator (as well as any documents filed with the Appeal
Panel pursuant to Paragraph 5.4(a) below). Notwithstanding the foregoing, in
connection with the Appeal, the Appeal Panel shall not permit the parties to
conduct any additional discovery or raise any new Claims to be arbitrated, shall
not permit new witnesses or affidavits, and shall not base any of its findings
or determinations on the Original Arbitrator’s findings or the Arbitration
Award.
5.4    Timing.
(a)    Within seven (7) calendar days of the Appeal Commencement Date, the
Appellant (i) shall deliver or cause to be delivered to the Appeal Panel copies
of the Appeal Notice, all discovery conducted in connection with the
Arbitration, and all briefs, pleadings and other documents filed with the
Original Arbitrator (which material Appellee shall have the right to review and
supplement if necessary), and (ii) may, but is not required to, deliver to the
Appeal Panel and to the Appellee a Memorandum in Support of the Appellant’s
arguments concerning or position with respect to all Claims, counterclaims,
issues, or accountings presented or pleaded in the Arbitration. Within seven (7)
calendar days of the Appellant’s delivery of the Memorandum in Support, as
applicable, the Appellee shall deliver to the Appeal Panel and to the Appellant
a Memorandum in Opposition to the Memorandum in Support. Within seven (7)
calendar days of the Appellee’s delivery of the Memorandum in Opposition, as
applicable, the Appellant shall deliver to the Appeal Panel and to the Appellee
a Reply Memorandum to the Memorandum in Opposition. If the Appellant shall fail
to substantially comply with the requirements of clause (i) of this subparagraph
(a), the Appellant shall lose its right to appeal the Arbitration Award, and the
Arbitration Award shall be final. If the Appellee shall fail to deliver the
Memorandum in Opposition as required above, or if the Appellant shall fail to
deliver the Reply Memorandum as required above, then the Appellee or the
Appellant, as the case may be, shall lose its right to so deliver the same, and
the Appeal shall proceed regardless.
(b)     Subject to subparagraph (a) above, the parties hereby agree that the
Appeal must be heard by the Appeal Panel within thirty (30) calendar days of the
Appeal Commencement Date, and that the Appeal Panel must render its decision
within thirty (30) calendar days after the Appeal is heard (and in no event
later than sixty (60) calendar days after the Appeal Commencement Date).
5.5    Appeal Panel Award. The Appeal Panel shall issue its decision (the
“Appeal Panel Award”) through the lead arbitrator on the Appeal Panel.
Notwithstanding any other provision contained herein, the Appeal Panel Award
shall (a) supersede in its entirety and make of no further force or effect the
Arbitration Award (provided that any protective orders issued by the Original
Arbitrator shall remain in full force and effect), (b) be final and binding upon
the parties, with no further rights of appeal, (c) be the sole and exclusive
remedy between the parties regarding any Claims, counterclaims, issues, or
accountings presented or pleaded in the Arbitration, and (d) be promptly payable
in United States dollars free of any tax, deduction or offset (with respect to
monetary awards). Any costs or fees, including without limitation attorneys’
fees, reasonably and necessarily incurred in connection with or incident to
enforcing the Appeal Panel Award shall, to the maximum extent permitted by law,
be charged against the party resisting such enforcement. The Appeal Panel Award
shall include Default Interest (with respect to monetary awards) at the rate

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Exhibit 10.1

specified in the Note for Default Interest both before and after the Arbitration
Award. Judgment upon the Appeal Panel Award will be entered and enforced by a
state or federal court sitting in Salt Lake County, Utah.
5.6    Relief. The Appeal Panel shall have the right to award or include in the
Appeal Panel Award any relief which the Appeal Panel deems proper under the
circumstances, including, without limitation, specific performance and
injunctive relief, provided that the Appeal Panel may not award exemplary or
punitive damages.
5.7    Fees and Costs. As part of the Appeal Panel Award, the Appeal Panel is
hereby directed to require the non-prevailing party to (a) pay the full amount
of any unpaid costs and fees of the Arbitration and the Appeal Panel, and (b)
reimburse the prevailing party the reasonable attorneys’ fees, arbitrator and
Appeal Panel costs and fees, deposition costs, other discovery costs, and other
expenses, costs or fees paid or otherwise incurred by the prevailing party in
connection with the Arbitration (including without limitation in connection with
the Appeal). The Appeal Panel shall determine the prevailing party, if any, in
the Appeal Panel’s discretion based on all the facts and circumstances of the
case.
6.     Miscellaneous.
6.1    Severability. If any part of these Arbitration Provisions is found to
violate or be illegal under applicable law, then such provision shall be
modified to the minimum extent necessary to make such provision enforceable
under applicable law, and the remainder of the Arbitration Provisions shall
remain unaffected and in full force and effect.
6.2    Governing Law. These Arbitration Provisions shall be governed by the laws
of the State of Utah without regard to the conflict of laws principles therein.
6.3    Interpretation. The headings of these Arbitration Provisions are for
convenience of reference only and shall not form part of, or affect the
interpretation of, these Arbitration Provisions.
6.4    Waiver. No waiver of any provision of these Arbitration Provisions shall
be effective unless it is in the form of a writing signed by the party granting
the waiver.
6.5    Time is of the Essence. Time is expressly made of the essence with
respect to each and every provision of these Arbitration Provisions.

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