Exhibit 10.2

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of September 11,
2018, (the “Execution Date”), is entered into by and between JAGUAR
HEALTH, INC., a Delaware corporation, (the “Company”), and CHARLES CONTE, an
individual resident of the State of New York (the “Buyer”).

 

WHEREAS, the Company and the Buyer are executing and delivering this Agreement
in reliance upon an exemption from securities registration afforded by the
rules and regulations as promulgated by the United States Securities and
Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended
(the “Securities Act”); and

 

WHEREAS, the Buyer desires to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement (i) an 8%
convertible promissory note of the Company, in the form attached hereto as
Exhibit A, in the aggregate principal amount of US$111,250.00 (together with any
note(s) issued in replacement thereof or as a dividend thereon or otherwise with
respect thereto in accordance with the terms thereof, the “Note”), convertible
into shares (the “Conversion Shares”) of common stock, par value $0.0001 share,
of the Company (the “Common Stock”), at $0.85 per share subject to the terms of
the Note, and (ii) a warrant to acquire up to 33,918 shares (the “Warrant
Shares”) of Common Stock at an exercise price as set forth in that certain
Common Stock Purchase Warrant, in the form attached hereto as Exhibit B (the
“Warrant”), upon the terms and subject to the limitations and conditions set
forth in the Warrant.

 

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

 

1.                                      DEFINED TERMS. As used in this
Agreement, the following terms shall have the following meanings specified or
indicated (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):

 

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

 

“Damages” shall mean any loss, claim, damage, liability, cost and expense
(including, without limitation, reasonable attorneys’ fees and disbursements and
costs and expenses of expert witnesses and investigation).

 

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

 

“Hazardous Material” means and includes any hazardous, toxic or dangerous waste,
substance or material, the generation, handling, storage, disposal, treatment or
emission of which is subject to any Environmental Law.

 

“Issuance Shares” means, collectively, the Conversion Shares and the Warrant
Shares.

 

“Knowledge” including the phrase “to the Company’s Knowledge” shall mean the
actual knowledge after reasonable investigation of the Company’s officers and
directors.

 

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

 

“Material Adverse Effect” shall mean any effect on the business, operations,
properties, or financial condition of the Company and/or the Subsidiaries that
is material and adverse to the Company and/or the Subsidiaries and/or any
condition, circumstance, or situation that prohibits or otherwise materially
interfere with the ability of the Company and/or the Subsidiaries to enter into
and/or perform its obligations under any Transaction Document.

 

“Person” shall mean an individual, a corporation, a partnership, an association,
a trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.

 

“Registration Rights Agreement” means that certain registration rights agreement
in the form attached hereto as Exhibit C.

 

“Securities” means, collectively, the Note, the Warrant, the Conversion Shares
and the Warrant Shares.

 

“Subsidiary” or “Subsidiaries” means any Person the Company wholly-owns or
controls, or in which the Company, directly or indirectly, owns a majority of
the voting stock or similar voting interest, in each case that would be
disclosable pursuant to Item 601(b)(21) of Regulation S-K promulgated under the
Securities Act.

 

“Transaction Documents” shall mean this Agreement, the Note, the Warrant, the
Registration Rights Agreement, the Transfer Agent Instruction Letter and all
schedules and exhibits hereto and thereto.

 

“Transfer Agent” shall mean Computershare Trust Company, N.A., the current
transfer agent of the Company, and any successor transfer agent of the Company.

 

“Transfer Agent Instruction Letter” means the letter from the Company to the
Transfer Agent which instructs the Transfer Agent to issue the Issuance Shares
pursuant to the Transaction Documents, in the form of Exhibit D attached hereto.

 

2.                                      PURCHASE AND SALE OF SECURITIES.

 

(a)                                 Purchase of Securities. On the Closing Date
(as defined below), the Company shall sell and issue to the Buyer and the Buyer
shall purchase from the Company, the Note and the Warrant, subject to their
express terms.

 

(b)                                 Form of Payment. On the Closing Date, the
Buyer shall pay the purchase price of $100,000.00 (the “Purchase Price”) by wire
transfer of immediately available funds, in accordance with the Company’s
written wiring instructions against delivery.

 

(c)                                  Closing Date. Subject to the satisfaction
(or written waiver) of the conditions set forth in Section 7 and Section 8
below, the date and time of the issuance and sale of the Securities pursuant to
this Agreement (the “Closing Date”) shall be 5:00 P.M., Eastern Standard Time on
or about September 11, 2018, or such other mutually agreed upon time. The
closing of the transactions contemplated by this Agreement (the “Closing”) shall
occur on the Closing Date at such location as may be agreed to by the parties.

 

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3.                                      REPRESENTATIONS AND WARRANTIES OF THE
BUYER. The Buyer represents and warrants to the Company that:

 

(a)                                 Investment Purpose. As of the Execution
Date, the Buyer is purchasing the Securities for its own account for investment
only and not with a view towards the public sale or distribution thereof, except
pursuant to sales registered or exempted from registration under the Securities
Act; provided, however, that by making the representations herein, the Buyer
does not agree 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 under
the Securities Act.

 

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

 

(c)                                  Information. The Buyer and its advisors, if
any, have been furnished with all materials relating to the business, finances
and operations of the Company and materials relating to the offer and sale of
the Securities which have been requested by the Buyer or its advisors. The Buyer
and its advisors, if any, have been afforded the opportunity to ask questions of
the Company. Notwithstanding the foregoing, the Company has not disclosed to the
Buyer any material nonpublic information and will not disclose such information
unless such information is disclosed to the public prior to or promptly
following such disclosure to the Buyer. Neither such inquiries nor any other due
diligence investigation conducted by Buyer or any of its advisors or
representatives shall modify, amend or affect Buyer’s right to rely on the
Company’s representations and warranties contained in Section 4 below. The Buyer
understands that its investment in the Securities involves a significant degree
of risk, including the risk of loss of the Buyer’s entire investment. The Buyer
is not aware of any facts that may constitute a breach of any of the Company’s
representations and warranties made herein.

 

(d)                                 Governmental Review. The Buyer understands
that no United States federal or state agency or any other government or
governmental agency has passed upon 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 Securities.

 

(e)                                  Transfer or Re-sale. The Buyer understands
that (i) the sale or re-sale of the Securities has not been and is not being
registered under the Securities Act or any applicable state securities laws, and
the Securities may not be transferred unless (a) the Securities are sold
pursuant to an effective registration statement under the Securities Act,
(b) the Buyer shall have delivered to the Company, at the cost of the Company,
an opinion of counsel that shall be in form, substance and scope customary for
opinions of counsel in comparable transactions to the effect that the Securities
to be sold or transferred may be sold or transferred pursuant to an exemption
from such registration, (c) the Securities are sold or transferred to an
“affiliate” (as defined in Rule 144 promulgated under the Securities Act (or a
successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise
transfer the Securities only in accordance with this Section 3(e) and who is an
Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or
(e) the Securities are sold pursuant to Regulation S under the Securities Act
(or a successor rule) (“Regulation S”), and the Buyer shall have delivered to
the Company, at the cost of the Company, an opinion of counsel that shall be in
form, substance and scope customary for opinions of counsel in corporate
transactions; (ii) any sale of such Securities made in reliance on Rule 144 may
be made only in accordance with the terms of said rule and further, if said
rule is not applicable, any re-sale of such 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 Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder (in each case). Notwithstanding the foregoing or
anything else contained herein to the contrary, the Securities may be pledged as
collateral in connection with a bona fide margin account or other lending
arrangement.

 

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(f)                                   Legends. The Buyer understands that the
Note and Warrant and, until such time as the Issuance Shares have been
registered under the Securities Act may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities as of a
particular date that can then be immediately sold, the Issuance Shares may bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. 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.”

 

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws,
(a) such Security is registered for sale under an effective registration
statement filed under the Securities Act or otherwise may be sold pursuant to
Rule 144 or Regulation S without any restriction as to the number of securities
as of a particular date that can then be immediately sold, or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, to the effect that
a public sale or transfer of such Security may be made without registration
under the Securities Act. The Buyer agrees to sell all Securities, including
those represented by a certificate(s) from which the legend has been removed, in
compliance with applicable prospectus delivery requirements, if any.

 

(g)                                  Execution; Enforcement. This Agreement has
been duly executed and delivered on behalf of the Buyer, and this Agreement
constitutes a valid and binding agreement of the Buyer enforceable in accordance
with its terms.

 

(h)                                 Accredited Investor Status. The Buyer is
(i) an “accredited investor” as that term is defined in Rule 501 of the General
Rules and Regulations under the Securities Act by reason of Rule 501(a)(3) (an
“Accredited Investor”), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Securities.  Neither the Buyer nor any person or entity with whom Buyer
shares beneficial ownership of any Securities, is subject to any of the “Bad
Actor” disqualifications described in Rule 506(d)(1)(i) of Regulation D of the
Securities Act.

 

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(i)                                     Residency. The Buyer is an individual
resident of the state of New York.

 

4.                                      REPRESENTATIONS AND WARRANTIES OF THE
COMPANY. The Company represents and warrants to the Buyer that:

 

(a)                                 Organization and Qualification. The Company
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, with the requisite power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. Each of the Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Each of the Company and the Subsidiaries is not in
violation or default of any of the provisions of its respective certificate or
articles of incorporation, bylaws or other organizational or charter documents.
Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not have or reasonably
be expected to result in a Material Adverse Effect and no proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing or seeking
to revoke, limit or curtail such power and authority or qualification.

 

(b)                                 Authorization; Enforcement. The Company has
the requisite corporate power and authority to enter into and perform its
obligations under this Agreement and the other Transaction Documents. The
execution and delivery of this Agreement and the other Transaction Documents by
the Company and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors or
stockholders is required, except to the extent required to remove the Exchange
Cap (as defined in the Note). Each of this Agreement and the other Transaction
Documents has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors’ rights and remedies or by other
equitable principles of general application.

 

(c)                                  Capitalization. As of the Execution Date,
the authorized capital stock of the Company is as set forth in the SEC Documents
(as defined below). Except as set forth on Schedule 4(c), the Company has not
issued any capital stock since its most recently filed periodic report under the
Exchange Act, other than pursuant to the exercise of employee stock options
under the Company’s stock option plans, the issuance of shares of Common Stock
to employees pursuant to the Company’s employee stock purchase plans and
pursuant to the conversion and/or exercise of Common Stock Equivalents
outstanding as of the date of the most recently filed periodic report under the
Exchange Act. Except as disclosed in the SEC Documents, no shares are reserved
for issuance pursuant to the Company’s stock option plans, no shares are
reserved for issuance pursuant to the terms of any Common Stock Equivalents
(other than the Note and the Warrant) exercisable for, or convertible into or
exchangeable for shares of Common Stock and sufficient shares are reserved for
issuance upon conversion of the Note and the exercise of the Warrant (as
required by the Note, Warrant and Transfer Agent Instruction Letter). All of
such outstanding shares of capital stock are, or upon issuance will be, duly
authorized, validly issued, fully paid and non-assessable. Except as disclosed
in the SEC Documents, no shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the shareholders of the Company
or any liens or encumbrances imposed through the actions or failure to act of
the Company. Except as disclosed in the SEC Documents, as of the Execution Date,
(i) there are no outstanding options, warrants, scrip, rights to subscribe for,
puts, calls, rights of first refusal, agreements, understandings, claims or
other commitments or rights of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for any shares of capital
stock of the Company or any of its Subsidiaries, or arrangements by which the
Company or any of its Subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its Subsidiaries, (ii) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of its or their securities
under the Securities Act and (iii) there are no anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) that will be triggered by the
issuance of the Securities. The Company has filed in its SEC Documents true and
correct copies of the Company’s Certificate of Incorporation as in effect on the
Execution Date (“Certificate of Incorporation”), the Company’s By-laws, as in
effect on the Execution Date (the “By-laws”), and the terms of all securities
convertible into or exercisable for Common Stock of the Company and the material
rights of the holders thereof in respect thereto. The Company shall provide the
Buyer a certification of this representation signed by the Company’s Chief
Executive Officer on behalf of the Company as of the Closing Date.

 

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(d)                                 Issuance of Shares. The Conversion Shares
and Warrant Shares are duly authorized and fully reserved for issuance and, upon
conversion of the Note and the exercise of the Warrant in accordance with their
respective terms, will be validly issued, fully paid and non-assessable, and
free from all taxes, liens, claims and encumbrances with respect to the issue
thereof, with the holders being entitled to all rights accorded to a holder of
Common Stock. The Issuance Shares shall not be subject to preemptive rights or
other similar rights of shareholders of the Company (except to the extent
already waived) and will not impose personal liability upon the holder thereof,
other than restrictions on transfer provided for in the Transaction Documents
and under the Securities Act.

 

(e)                                  Acknowledgment of Dilution. The Company
understands and acknowledges the potentially dilutive effect to the Common Stock
upon the issuance of the Conversion Shares upon conversion of the Note. The
Company further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Note in accordance with this Agreement, the Note is absolute
and unconditional regardless of the dilutive effect that such issuance may have
on the ownership interests of other shareholders of the Company.

 

(f)                                   No Conflicts. The execution, delivery and
performance of this Agreement and the other Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance and reservation for
issuance of the Issuance Shares) will not (a) result in a violation of the
Company’s or any Subsidiary’s certificate or articles of incorporation, by-laws
or other organizational or charter documents, (b) conflict with, or constitute a
material default (or an event that with notice or lapse of time or both would
become a material default) under, result in the creation of any Lien upon any of
the properties or assets of the Company or any Subsidiary, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, instrument or any “lock-up” or similar provision of any
underwriting or similar agreement to which the Company or any Subsidiary is a
party, or (c) result in a violation of any federal, state or local law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or any Subsidiary or by which
any property or asset of the Company or any Subsidiary is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect), nor is the Company otherwise in violation of,
conflict with or in default under any of the foregoing. The business of the
Company is not being conducted in violation of any law, ordinance or regulation
of any governmental entity, except for possible violations that either singly or
in the aggregate do not and will not have a Material Adverse Effect. The Company
is not required under federal, state or local law, rule or regulation to obtain
any consent, authorization or order of, or make any filing or registration with,
any court or governmental agency in order for it to issue the Issuance Shares or
to execute, deliver or perform any of its obligations under this Agreement or
the other Transaction Documents (other than any SEC, FINRA or state securities
filings that may be required to be made by the Company subsequent to Closing or
any registration statement that may be filed pursuant hereto and Nasdaq to the
extent that the total number of Issuance Shares issued to the Buyer exceeds the
Exchange Cap); provided that, for purposes of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Buyer herein. The Company is not in
violation of the listing requirements of the Nasdaq Capital Market (“Nasdaq”),
and does not reasonably anticipate that the Common Stock will be delisted by
Nasdaq in the foreseeable future. Except as set forth on Schedule 4(f), the
Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.

 

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(g)                                  SEC Documents; Financial Statements. Except
as set forth on Schedule 4(g), the Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the one (1) year preceding the Execution Date (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 Documents”) on a timely basis or has received a valid extension of such
time of filing and has filed any such SEC Documents prior to the expiration of
any such extension. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and other federal laws, rules and regulations
applicable to such SEC Documents, and none of the SEC Documents when filed
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents (the “Financial Statements”) comply as to form and substance in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (a) as may be otherwise indicated in such Financial
Statements or the notes thereto or (b) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of 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). The Company
maintains a system of internal accounting controls appropriate for its size.
There is no transaction, arrangement, or other relationship between the Company
and an unconsolidated or other off balance sheet entity that is not disclosed by
the Company in its Financial Statements or otherwise that would be reasonably
likely to have a Material Adverse Effect. Except with respect to the material
terms and conditions of the transactions contemplated by the Transaction
Documents, the Company confirms that neither it nor any other Person acting on
its behalf has provided the Buyer or its agents or counsel with any information
that it believes constitutes or might constitute material, non-public
information. The Company understands and confirms that the Buyer will rely on
the foregoing representation in effecting transactions in securities of the
Company.

 

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(h)                                 Absence of Certain Changes. No event has
occurred that would have a Material Adverse Effect on the Company or any
Subsidiary that has not been disclosed in subsequent SEC filings. For purposes
of this Agreement, neither a decrease in cash or cash equivalents or in the
market price of the Common Stock nor losses incurred in the ordinary course of
the Company’s business shall be deemed or considered as having a Material
Adverse Effect. The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy law nor
does the Company or any of its Subsidiaries have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy or
insolvency proceedings. The Company is financially solvent and is generally able
to pay its debts as they become due.

 

(i)                                     Absence of Litigation. Except as
disclosed in the SEC Documents or as set forth on Schedule 4(i), there are no
actions, suits, investigations, inquiries or proceedings pending or, to the
Knowledge of the Company, threatened against or affecting the Company, any
Subsidiary or any of their respective properties, nor has the Company received
any written or oral notice of any such action, suit, proceeding, inquiry or
investigation, which would have a Material Adverse Effect or would require
disclosure under the Securities Act or the Exchange Act. No judgment, order,
writ, injunction or decree or award has been issued by or, to the Knowledge of
the Company, requested of any court, arbitrator or governmental agency which
would have a Material Adverse Effect. Except as disclosed in the SEC Documents
or as set forth on Schedule 4(j) here has not been, and to the Knowledge of the
Company, there is not pending or contemplated, any investigation by the SEC
involving the Company, any Subsidiary or any current or former director or
officer of the Company or any Subsidiary.

 

(j)                                    [Reserved].

 

(k)                                 Tax Status. The Company and each of its
Subsidiaries has made or filed all federal and material state and foreign income
and all other material tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim. The Company has not executed a waiver with respect to
the statute of limitations relating to the assessment or collection of any
foreign, federal, state or local tax. None of the Company’s tax returns is
presently being audited by any taxing authority.

 

(l)                                     [Reserved].

 

(m)                             [Reserved].

 

(n)                                 Acknowledgment Regarding Buyer’s Purchase of
Securities. The Company acknowledges and agrees that the Buyer is acting solely
in the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby and that the
Buyer is neither (i) an officer or director of the Company or any of its
Subsidiaries, nor (ii) an “affiliate” (as defined in Rule 144) of the Company or
any of its Subsidiaries.  The Company further acknowledges that the Buyer is not
acting as a financial advisor or fiduciary of the Company or any of its
Subsidiaries (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice
given by a Buyer or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to the Buyer’s purchase of the Securities.  The Company
further represents to the Buyer that the Company’s decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.

 

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(o)                                 No Integrated Offering. Neither the Company,
nor any person acting on its or their behalf, has directly or indirectly made
any offers or sales in any security or solicited any offers to buy any security
under circumstances that would require registration under the Securities Act of
the issuance of the Securities to the Buyer. The issuance of the Securities to
the Buyer will not be integrated with any other issuance of the Company’s
securities (past, current or future) for purposes of any shareholder approval
provisions applicable to the Company or its securities.

 

(p)                                 No Brokers. The Company has taken no action
which would give rise to any claim by any person for brokerage commissions,
transaction fees or similar payments relating to this Agreement or the
transactions contemplated hereby.

 

(q)                                 [Reserved].

 

(r)                                    [Reserved].

 

(s)                                   [Reserved].

 

(t)                                    Internal Accounting Controls. Except as
disclosed in the SEC Documents the Company and each of its Subsidiaries maintain
a system of internal accounting controls sufficient, in the judgment of the
Company’s board of directors, to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company is in compliance with all provisions of
the Sarbanes-Oxley Act of 2002, as amended, which are applicable to it.

 

(u)                                 Foreign Corrupt Practices. Neither the
Company, nor any of its Subsidiaries, nor any director, officer, agent, employee
or other person acting on behalf of the Company or any Subsidiary has, in the
course of his actions for, or on behalf of, the Company, used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.

 

(v)                                 Solvency. The Company (after giving effect
to the transactions contemplated by this Agreement) is solvent (i.e., its assets
have a fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not, after giving effect to the transaction
contemplated by this Agreement, have the ability to, nor does it intend to take
any action that would impair its ability to, pay its debts from time to time
incurred in connection therewith as such debts mature. Except as disclosed on
Schedule 4(v), the Company did not receive a qualified opinion from its auditors
with respect to its most recent fiscal year end and, after giving effect to the
transactions contemplated by this Agreement, does not anticipate or know of any
basis upon which its auditors might issue a qualified opinion in respect of its
current fiscal year. For the avoidance of doubt any disclosure of the Company’s
ability to continue as a “going concern” shall not, by itself, be a violation of
this Section 4(v).

 

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(w)                               Insurance. The Company and each Subsidiary is
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and each Subsidiary
is engaged.  Neither the Company, nor any Subsidiary has been refused any
insurance coverage sought or applied for, and the Company has no reason to
believe that it or any Subsidiary will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at a
cost that would not materially and adversely affect the condition, financial or
otherwise, or the earnings, business or operations of the Company, taken as a
whole.

 

(x)                                 [Reserved].

 

(y)                                 No General Solicitation; Placement Agent. 
Neither the Company, nor any of its Subsidiaries or affiliates, nor any Person
acting on its or their behalf, has engaged in any form of general solicitation
or general advertising (within the meaning of Regulation D) in connection with
the offer or sale of the Securities.  Neither the Company nor any of its
Subsidiaries has engaged any placement agent or other agent in connection with
the sale of the Securities.  In the event that a broker-dealer or other agent or
advisory is engaged by the Company subsequent to the initial Closing, the
Company shall be responsible for the payment of any placement agent’s fees,
financial advisory fees, or brokers’ commissions (other than for persons engaged
by any Buyer or its investment advisor) relating to or arising out of the
transactions contemplated hereby in connection with the sale of the Securities.
The Company shall pay, and hold the Buyer harmless against, any liability, loss
or expense (including, without limitation, attorney’s fees and out-of-pocket
expenses) arising in connection with any such claim.

 

(z)                                  [Reserved].

 

(aa)                          [Reserved].

 

(bb)                          [Reserved].

 

(cc)                            [Reserved].

 

(dd)                          Investment Company Status.  The Company is not,
and upon consummation of the sale of the Securities will not be, an “investment
company,” a company controlled by an “investment company” or an “affiliated
person” of, or “promoter” or “principal underwriter” for, an “investment
company” as such terms are defined in the Investment Company Act of 1940, as
amended.

 

(ee)                            Illegal or Unauthorized Payments; Political
Contributions.  Neither the Company or any of its Subsidiaries nor, to the
Knowledge of the Company, any of the officers, directors, employees, agents or
other representatives of the Company or any of its Subsidiaries or any other
business entity or enterprise with which the Company or any Subsidiary is or has
been affiliated or associated, has, directly or indirectly, made or authorized
any payment, contribution or gift of money, property, or services, whether or
not in contravention of applicable law, (a) as a kickback or bribe to any Person
or (b) to any political organization, or the holder of or any aspirant to any
elective or appointive public office except for personal political contributions
not involving the direct or indirect use of funds of the Company or any of its
Subsidiaries.

 

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

 

(gg)                            Books and Records.  To the Company’s Knowledge,
the books of account, ledgers, order books, records and documents of the Company
and its Subsidiaries accurately and completely reflect all information relating
to the respective businesses of the Company and its Subsidiaries, the nature,
acquisition, maintenance, location and collection of each of their respective
assets, and the nature of all transactions giving rise to material obligations
or accounts receivable of the Company or its Subsidiaries, as the case may be,
except where the failure to so reflect such information would not have a
Material Adverse Effect.  To the Company’s Knowledge, the minute books of the
Company and its Subsidiaries contain accurate records in all material respects
of all meetings and accurately reflect all other actions taken by the
stockholders, boards of directors and all committees of the boards of directors,
and other governing Persons of the Company and its Subsidiaries, respectively.

 

(hh)                          Money Laundering.  The Company and its
Subsidiaries are in compliance with, and have not previously violated, the USA
PATRIOT ACT of 2001  and all other applicable U.S. and non-U.S. anti-money
laundering laws and regulations, including, but not limited to, the laws,
regulations and Executive Orders and sanctions programs administered by the U.S.
Office of Foreign Assets Control, including, but not limited, to (i) Executive
Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism”
(66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR,
Subtitle B, Chapter V.

 

(ii)                                  Acknowledgement Regarding Buyer’s Trading
Activity.  It is understood and acknowledged by the Company (a) (i) that the
Buyer has not been asked by the Company or its Subsidiaries to agree, nor has
the Buyer agreed with the Company or its Subsidiaries, to desist from purchasing
or selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Securities
for any specified term; and (ii) that the Buyer shall not be deemed to have any
affiliation with or control over any arm’s length counter party in any
“derivative” transaction.  The Company further understands and acknowledges that
the Buyer may engage in hedging and/or trading activities at various times
during the period that the Securities are outstanding and (b) such hedging
and/or trading activities, if any, can reduce the value of the existing
stockholders’ equity interest in the Company both at and after the time the
hedging and/or trading activities are being conducted.  The Company acknowledges
that such aforementioned hedging and/or trading activities do not constitute a
breach of any of the Transaction Documents.

 

(jj)                                Shell Company Status. The Company is not
currently and issuer identified in Rule 144(i)(1)(i) under the Securities Act,
is subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, has filed all reports and other materials required to be filed by
Section 13 or 15(d) of the Exchange Act, as applicable during the preceding 12
months, and, as of a date at least one year prior to the Execution Date, has
filed current “Form 10 information” with the SEC (as defined in
Rule 144(i)(3) of the Securities Act) reflecting its status as an entity that is
no longer an issuer described in Rule 144(i)(1)(i) of the Securities Act.

 

(kk)                          No Disqualification Events.  With respect to
Securities to be offered and sold hereunder in reliance on Rule 506 under the
Securities Act (“Regulation D Securities”), none of the Company, any of its
predecessors, any affiliated issuer, any director, executive officer, other
officer of the Company participating in the offering hereunder, any beneficial
owner of 20% or more of the Company’s outstanding voting equity securities,
calculated on the basis of voting power, nor any promoter (as that term is
defined in Rule 405 under the Securities Act) connected with the Company in any
capacity at the time of sale (each, an “Issuer Covered Person” and, together,
“Issuer Covered Persons”) is subject to any of the “bad actor” disqualifying
events described in Rule 506(d)(1)(i)-(viii) under the Securities Act (each, a
“Disqualification Event”), except for a Disqualification Event covered by
Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine
whether any Issuer Covered Person is subject to a Disqualification Event.  The
Company has complied, to the extent applicable, with its disclosure obligations
under Rule 506(e), and has furnished to the Buyers a copy of any disclosures
provided thereunder.

 

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(ll)                                  Other Covered Persons. The Company is not
aware of any Person (other than any Issuer Covered Person) that has been or will
be paid (directly or indirectly) remuneration for solicitation of buyers or
potential purchasers in connection with the sale of any Regulation D Securities.

 

(mm)                  Absence of Schedules. In the event that at Closing, the
Company does not deliver any disclosure schedule contemplated by this Agreement,
the Company hereby acknowledges and agrees that each such undelivered disclosure
schedule shall be deemed to read as follows: “Nothing to Disclose”.

 

5.                                      COVENANTS.

 

(a)                                 Best Efforts. The parties shall use their
commercially reasonable best efforts to satisfy timely each of the conditions
described in Section 6 and 7 of this Agreement.

 

(b)                                 Use of Proceeds. The Company shall use the
proceeds from the sale of the Note for working capital and other general
corporate purposes and shall not, directly or indirectly, use such proceeds for
any loan to or investment in any other corporation, partnership, enterprise or
other person (except in connection with its currently existing direct or
indirect Subsidiaries).

 

(c)                                  Financial Information. The Company agrees
to send or make available the following reports to the Buyer until the Buyer
transfers, assigns, or sells all of the Securities: (i) within ten (10) days
after the filing with the SEC, a copy of its Annual Report on Form 10-K its
Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; and
(ii) within one (1) day after release, copies of all press releases issued by
the Company or any of its Subsidiaries. For the avoidance of doubt, filing the
documents required in (i) above via EDGAR or releasing any documents set forth
in (ii) above via a recognized wire service shall satisfy the delivery
requirements of this Section 5(c).

 

(d)                                 Listing. The Company shall work in good
faith to secure the listing of the Issuance Shares upon each national securities
exchange or automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and, so long as
the Buyer owns any of the Securities, shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all Conversion Shares
and Warrant Shares from time to time issuable upon conversion of the Note and
exercise of the Warrant. The Company will obtain and, so long as the Buyer owns
any of the Securities, maintain the listing and trading of its Common Stock on
Nasdaq, any equivalent replacement exchange, the New York Stock Exchange
(“NYSE”), the NYSE American or the OTCQB or OTCQX market places of the OTC
Markets and will comply in all respects with the Company’s reporting, filing and
other obligations under the bylaws or rules of the Financial Industry Regulatory
Authority (“FINRA”) and such exchanges, as applicable.

 

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(e)                                  Corporate Existence. So long as the Buyer
beneficially owns the Note, the Company shall maintain its corporate existence
and shall not sell all or substantially all of the Company’s assets, except in
the event of a merger or consolidation or sale of all or substantially all of
the Company’s assets, where the surviving or successor entity in such
transaction assumes the Company’s obligations hereunder and under the agreements
and instruments entered into in connection herewith.

 

(f)                                   No Integration. The Company shall not make
any offers or sales of any security (other than the Securities) under
circumstances that would require registration of the Securities being offered or
sold hereunder under the Securities Act or cause the offering of the Securities
to be integrated with any other offering of securities by the Company for the
purpose of any stockholder approval provision applicable to the Company or its
securities.

 

(g)                                  Failure to Comply with the Exchange Act. So
long as the Buyer beneficially owns the Note and/or the Warrant, the Company
shall comply with the reporting requirements of the Exchange Act; and the
Company shall continue to be subject to the reporting requirements of the
Exchange Act.

 

(h)                                 Breach of Covenants. If the Company
materially breaches any of the covenants set forth in this Section 5, such
breach continues uncured for a period of at least five (5) Business Days and
such breach would reasonably be expected to have a Material Adverse Effect, then
in addition to any other remedies available to the Buyer pursuant to this
Agreement, it will be considered an event of default under Section 3.3 of the
Note.

 

(i)                                     Reservation of Shares. The Company
covenants that while the Note and Warrant remain outstanding, the Company will
reserve from its authorized and unissued Common Stock a sufficient number of
shares, free from preemptive rights, to provide for the issuance of the
Conversion Shares and Warrant Shares, and, in the event that the Company has not
repaid the Note within sixty (60) days following the Closing Date, the Company
must authorize and reserve the number of shares that is actually issuable upon
full conversion of the Note and the Warrant, which such reserved amount shall be
increased by the Company from time to time in accordance with its obligations
under such Securities.

 

(j)                                    Indemnification. Each party hereto (an
“Indemnifying Party”) agrees to indemnify and hold harmless the other party
along with its officers, directors, employees, and authorized agents, and each
Person or entity, if any, who controls such party within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act or the
rules and regulations thereunder (an “Indemnified Party”) from and against any
Damages, joint or several, and any action in respect thereof to which the
Indemnified Party becomes subject to, resulting from, arising out of or relating
to any misrepresentation, breach of warranty or nonfulfillment of or failure to
perform any covenant or agreement on the part of the Indemnifying Party
contained in this Agreement.

 

6.                                      Transfer Agent Instructions. Prior to
registration of the Issuance Shares under the Securities Act or the date on
which the Issuance Shares may be sold pursuant to Rule 144 without any
restriction as to the number of Securities as of a particular date that can then
be immediately sold, all such certificates shall bear the restrictive legend
specified in Section 3(f) of this Agreement. The Company warrants that: (i) no
stop transfer instructions will be given by the Company to its Transfer Agent
and that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Note and Warrant; (ii) it will not direct its Transfer Agent not to transfer or
delay, impair, and/or hinder its Transfer Agent in transferring (or issuing)
(electronically or in certificated form) any certificate for Conversion Shares
or Warrant Shares to be issued to the Buyer upon conversion or exercise of or
otherwise pursuant to the Note or Warrant as and when required by the Note,
Warrant and this Agreement; and (iii) it will not fail to remove (or direct its
Transfer Agent not to remove or impairs, delays, and/or hinders its Transfer
Agent from removing) any restrictive legend (or to withdraw any stop transfer
instructions in respect thereof) on any certificate for any Issuance Shares as
contemplated by the terms of this Agreement, the Note and the Warrant. Nothing
in this Section shall affect in any way the Buyer’s obligations and agreement to
comply with all applicable prospectus delivery requirements, if any, upon
re-sale of the Securities. If the Buyer provides the Company, at the cost of the
Buyer, with (i) an opinion of counsel in form, substance and scope customary for
opinions in comparable transactions, to the effect that a public sale or
transfer of such Securities may be made without registration under the
Securities Act and such sale or transfer is effected or (ii) the Buyer provides
reasonable assurances that the Securities can be sold pursuant to Rule 144, the
Company shall permit the transfer, and, in the case of the Issuance Shares,
promptly instruct its Transfer Agent to issue one or more certificates, free
from restrictive legend, in such name and in such denominations as specified by
the Buyer. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer, by vitiating the intent and
purpose of the transactions contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section may be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section, that the Buyer shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate transfer, without the necessity
of showing economic loss and without any bond or other security being required.

 

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7.                                      CONDITIONS PRECEDENT TO THE COMPANY’S
OBLIGATIONS TO SELL. The obligation of the Company hereunder to issue and sell
the Note and the Warrant to the Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date of each of the following conditions
thereto, 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:

 

(a)                                 The Buyer shall have executed this Agreement
and delivered the same to the Company.

 

(b)                                 The Buyer shall have delivered the Purchase
Price in accordance with Section 2(b) above.

 

(c)                                  The representations and warranties of the
Buyer shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and the Buyer
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Buyer at or prior to the Closing Date.

 

(d)                                 No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.

 

8.                                      CONDITIONS PRECEDENT TO THE BUYER’S
OBLIGATION TO PURCHASE. The obligation of the Buyer hereunder to purchase the
Note at the Closing is subject to the satisfaction, at or before the Closing
Date of each of the following conditions, provided that these conditions are for
the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole
discretion:

 

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(a)                                 The Company shall have executed this
Agreement and delivered the same to the Buyer.

 

(b)                                 The Company shall have delivered to the
Buyer the duly executed Note in accordance with Section 2(a) above.

 

(c)                                  The Company shall have delivered to the
Buyer the duly executed Warrant in accordance with Section 2(a) above.

 

(d)                                 [Reserved].

 

(e)                                  The Company shall have delivered to the
Buyer the duly executed Registration Rights Agreement.

 

(f)                                   The Company shall have delivered to the
Buyer the duly executed Transfer Agent Instruction Letter.

 

(g)                                  [Reserved].

 

(h)                                 No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.

 

(i)                                     No event shall have occurred which could
reasonably be expected to have a Material Adverse Effect on the Company
including but not limited to a change in the Exchange Act reporting status of
the Company or the failure of the Company to be timely in its Exchange Act
reporting obligations.

 

(j)                                    The Issuance Shares shall have been
authorized for trading and quotation on Nasdaq and trading in the Common Stock
on Nasdaq shall not have been suspended by the SEC or Nasdaq.

 

(k)                                 The representations and warranties of the
Company shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date, which shall be
true and correct in all material respects as of such 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.

 

Payment by Buyer of the Purchase Price shall evidence satisfaction of the
foregoing conditions of this Section 8.

 

9.                                      GOVERNING LAW; MISCELLANEOUS.

 

(a)                                 Governing Law.  This Agreement shall be
governed by and interpreted in accordance with the laws of the State of New York
without regard to the principles of conflicts of law (whether of the State of
New York or any other jurisdiction).

 

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(b)                                 Arbitration.  Any disputes, claims, or
controversies arising out of or relating to the Transaction Documents, or the
transactions, contemplated thereby, or the breach, termination, enforcement,
interpretation or validity thereof, including the determination of the scope or
applicability of this Agreement to arbitrate, shall be referred to and resolved
solely and exclusively by binding arbitration to be conducted before the
Judicial Arbitration and Mediation Service (“JAMS” ), or its successor pursuant
the expedited procedures set forth in the JAMS Comprehensive Arbitration
Rules and Procedures (the “Rules” ), including Rules 16.1 and 16.2 of those
Rules. The arbitration shall be held in New York, New York, before a tribunal
consisting of three (3) arbitrators each of whom will be selected in accordance
“strike and rank” methodology set forth in Rule 15. Either party to this
Agreement may, without waiving any remedy under this Agreement, seek from any
court having jurisdiction any interim or provisional relief that is necessary to
protect the rights or property of that party, pending the establishment of the
arbitral tribunal. The costs and expenses of such arbitration shall be allocated
as determined by the arbitrators, and the arbitrators are authorized to award
attorneys’ fees to the prevailing party, including pre and post award interest.
The arbitrators’ decision must set forth a reasoned basis for any award of
damages or finding of liability. The arbitrators’ decision and award will be
made and delivered as soon as reasonably possibly and in any case within sixty
(60) days’ following the conclusion of the arbitration hearing and shall be
final and binding on the parties and may be entered by any court having
jurisdiction thereof.

 

(c)                                  JURY TRIAL WAIVER.  THE COMPANY AND THE
BUYER HEREBY WAIVE A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER IN RESPECT OF ANY
MATTER ARISING OUT OF OR IN CONNECTION WITH THE TRANSACTION DOCUMENTS.

 

(d)                                 Counterparts; Signatures by Electronic Mail.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original but all of which shall constitute one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. This Agreement, once executed by a
party, may be delivered to the other party hereto by electronic mail
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.

 

(e)                                  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.

 

(f)                                   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
with 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.

 

(g)                                  Entire Agreement; Amendments. This
Agreement and the instruments referenced herein contain 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 the Company nor the
Buyer makes any representation, warranty, covenant or undertaking with respect
to such matters. No provision of this Agreement may be waived or amended other
than by an instrument in writing signed by the majority in interest of the
Buyer.

 

(h)                                 Notices. All notices, demands, requests,
consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be
(a) personally served, (b) deposited in the mail, registered or certified,
return receipt requested, postage prepaid, (c) delivered by reputable air
courier service with charges prepaid, or (d) transmitted by hand delivery,
telegram, or e-mail as a PDF, addressed as set forth below or to such other
address as such party shall have specified most recently by written notice given
in accordance herewith. Any notice or other communication required or permitted
to be given hereunder shall be deemed effective (i) upon hand delivery or
delivery by e-mail at the address designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (ii) on the second business day following the date of mailing by express
courier service or on the fifth business day after deposited in the mail, in
each case, fully prepaid, addressed to such address, or upon actual receipt of
such mailing, whichever shall first occur.

 

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If to the Company, to:

 

JAGUAR HEALTH, INC.
201 Mission Street, Suite 2375

San Francisco, California 94105
Attention: Lisa A. Conte, CEO

E-mail: lconte@jaguar.health

Phone:

 

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

 

Reed Smith LLP

1510 Page Mill Road, Suite 110

Palo Alto, CA 94304

E-mail: DReinke@reedsmith.com

Attention: Donald Reinke, Esq.

Phone: 650.352.0532

 

If to the Buyer, to:

 

CHARLES CONTE

 

Either party hereto may from time to time change its address or e-mail for
notices under this Section 9(h) by giving at least ten (10) days’ prior written
notice of such changed address to the other party hereto.

 

(i)                                     Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of the parties and their
successors and assigns. Neither the Company nor the Buyer shall assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, subject to Section 3(e),
the Buyer may assign its rights hereunder to any person that purchases
Securities in a private transaction from the Buyer or to any of its
“affiliates,” as that term is defined under the Exchange Act, without the
consent of the Company.

 

(j)                                    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.

 

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(k)                                 Survival. The representations and warranties
of the Company and the agreements and covenants set forth in this Agreement
shall survive the Closing hereunder. The Company agrees to indemnify and hold
harmless the Buyer and all their officers, directors, employees and agents for
loss or damage arising as a result of or related to any breach by the Company of
any of its representations, warranties and covenants set forth in this Agreement
or any of its covenants and obligations under this Agreement, including
advancement of expenses as they are incurred.

 

(l)                                     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.

 

(m)                             No Strict Construction. The language used in
this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied
against any party.

 

(n)                                 Remedies.  In addition to any other remedy
provided herein or in any document executed in connection herewith, the Company
shall pay the Buyer for all costs, fees and expenses in connection with any
arbitration, litigation, contest, dispute, suit or any other action to enforce
any rights of the Buyer against the Company in connection herewith, including,
but not limited to, costs and expenses and attorneys’ fees, and costs and time
charges of counsel to the Buyer.

 

(o)                                 Publicity. The Company, and the Buyer shall
have the right to review a reasonable period of time before issuance of any
press releases, SEC, Nasdaq (or other applicable trading market), or FINRA
filings, or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of the Buyer, to make any press release or SEC,
Nasdaq (or other applicable trading market) or FINRA filings with respect to
such transactions as is required by applicable law and regulations (although the
Buyer shall be consulted by the Company in connection with any such press
release prior to its release and shall be provided with a copy thereof).

 

** signature page follows **

 

18

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IN WITNESS WHEREOF, the Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the Execution Date.

 

 

COMPANY:

 

 

 

JAGUAR HEALTH, INC.

 

 

 

 

 

By:

/s/ Lisa A. Conte

 

Name: Lisa A. Conte

 

Title: President and CEO

 

 

 

 

 

BUYER:

 

 

 

/s/ Charles Conte

 

Charles Conte

 

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SCHEDULE OF BUYERS

 

(1)

Buyer

 

(2)
Address and E-mail

 

(3)
Aggregate Note
Face Value

 

(4)
Aggregate
Number of
Warrants

 

(5)
Purchase Price

 

 

 

 

 

 

 

 

 

 

 

Charles Conte

 

 

 

$

111,250.00

 

33,918

 

$

100,000.00

 

 

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SCHEDULES

 

Schedule 4(c)

 

Capitalization

 

 

 

 

 

On August 28, 2018, the Company issued to Pacific Capital Management, LLC (the
“LC Facilitator”) a five-year warrant (the “Warrant”) to purchase 670,586 shares
of the Company’s voting common stock, subject to adjustment for reclassification
or change of the common stock, stock splits, dividends, distributions or changes
to the exercise price of the Warrant in accordance with the terms of the
Warrant. The Company issued the warrant in consideration for the LC Facilitator
causing its financial institution to issue a letter of credit in the amount of
$475,000 (the “Letter of Credit”) on behalf of the Company in favor of the
Company’s landlord pursuant to the terms of the Landlord Letter of Credit &
Warrant Issuance Agreement, dated August 28, 2018, by and between the Company
and the LC Facilitator (“LOC Agreement”). The Warrant is exercisable commencing
after the 7-month anniversary date of issuance, and the exercise price of the
Warrant is the lower of (i) $0.85 per share and (ii) the average of the closing
sales price of the Common Stock for the 30 consecutive trading days commencing
on September 4, 2018.

 

 

 

Schedule 4(f)

 

No Conflicts

 

 

 

 

 

The NASDAQ Capital Market imposes, among other requirements, a minimum bid
requirement. The closing bid price for the Common Stock must remain at or above
$1.00 per share to comply with NASDAQ’s minimum bid requirement for continued
listing. If the closing bid price for the Common Stock is less than $1.00 per
share for 30 consecutive business days, NASDAQ may send the Company a notice
stating that the Company will be provided a period of 180 days to regain
compliance with the minimum bid requirement or else NASDAQ may make a
determination to delist the Common Stock.

 

 

 

Schedule 4(g)

 

SEC Documents

 

 

 

 

 

Each of Ari Azhir, Yang Zhi, Folkert Kamphuis and Qiu Jiahao filed a Form 4 on
June 6, 2018 reporting a grant of stock options that should have been filed on
March 16, 2018 pursuant to Section 16(a) of the Exchange Act. Each of Lisa
Conte, Steven King and Karen Wright filed a Form 4 on December 29, 2017
reporting a grant of stock options that should have been filed on December 26,
2017 pursuant to Section 16(a) of the Exchange Act.

 

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EXHIBITS

 

Exhibit A                                             Form of Convertible
Promissory Note

Exhibit B                                             Form of Warrant

Exhibit C                                             Form of Registration
Rights Agreement

Exhibit D                                             Form of Transfer Agent
Instruction Letter

 

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