Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of October 11,
2019, among Creative Medical Technology Holdings, Inc., a Nevada corporation
(the “Company”), and each purchaser identified on the signature pages hereto
(each, including its successors and assigns, a “Purchaser” and collectively, the
“Purchasers”).

 

WHEREAS, the parties hereto desire that the Purchasers make advances to the
Company to purchase the securities to be sold under this Agreement; and

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and/or Rule 506 promulgated thereunder, the Company desires
to issue and sell to each Purchaser, and each Purchaser, severally and not
jointly, desires to purchase from the Company securities as more fully described
in this Agreement.

 

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

 

ARTICLE I.

DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.

 

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“Closing Statement” means the Closing Statement in the form on Annex A attached
hereto.

 

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

 

“Disclosure Schedules” shall have the meaning ascribed to such term in Section
3.1.

 

“Equity Incentive Plan” means the Company’s existing equity incentive plan, as
amended.

 

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

 

“Exempt Issuance” means the issuance of (a) shares of Common Stock and options
to officers, directors, employees, or consultants of the Company prior to and
after the Closing Date, (b) securities upon the exercise or exchange of or
conversion of Securities issued hereunder (subject to adjustment for forward and
reverse stock splits and the like that occur after the date hereof), (c) shares
of Common Stock issued or issuable upon the exercise or exchange of or
conversion of securities outstanding on the date of this Agreement set forth on
Schedule 3.1(g) and provided that such securities and any term thereof have not
been amended since the date of this Agreement to increase the number of such
securities or to decrease the issue price, exercise price, exchange price or
conversion price of such securities, (d) securities in connection with strategic
transactions involving the Company and other entities, including, without
limitation, joint ventures, manufacturing, marketing or distribution
arrangements or technology transfer or development arrangements; (e) shares of
Common Stock or other securities issued or issuable upon exercise or conversion
of any securities held by any of the Purchasers; and (f) securities issued or
issuable pursuant to this Agreement, the Notes, the other Transaction Documents,
or upon exercise or conversion of any such securities.

 

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

 

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

 

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

 

“Indebtedness” means (x) any liabilities for borrowed money or amounts owed in
excess of $150,000 (other than trade accounts payable or for services provided
incurred in the ordinary course of business); (y) all guaranties, endorsements
and other contingent obligations in respect of indebtedness of others, whether
or not: the same are or should be reflected in the Company’s consolidated
balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (z) the present value of any lease payments in
excess of $150,000 due under leases required to be capitalized in accordance
with GAAP.

 

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

 

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

 

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

 

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

 

“Maximum Rate” shall have the meaning ascribed to such term in Section 5.17.

 

“Note(s)” means the 8% Original Issue Discount Senior Convertible Promissory
Notes due, subject to the terms therein, twelve (12) months from its date of
issuance, issued by the Company to each Purchaser hereunder, in the form of
Exhibit A attached hereto,

 

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

 

“Principal Amount” means, as to each Purchaser, the amounts set forth below such
Purchaser’s signature block on the signature pages hereto next to the heading
“Principal Amount,” in United States Dollars, which shall equal 108% of such
Purchaser’s Subscription Amount.

 

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

 

“Public Information Failure” shall have the meaning ascribed to such term in
Section 4.3(b).

 

“Public Information Failure Payments” shall have the meaning ascribed to such
term in Section 4.3(b).

 

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

 

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

 

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

 

“Securities” means the Notes.

 

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

 

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act.

 

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

 

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“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a)
and shall, where applicable, also include any direct or indirect subsidiary of
the Company formed or acquired after the date hereof.

 

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

 

“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange, the NYSE American, the OTC Bulletin Board, or the OTC
Markets Group Inc.’s OTCQX, OTCQB, or OTC Pink marketplaces (or any successors
to any of the foregoing).

 

“Transaction Documents” means this Agreement, the Notes, the Warrants, all
exhibits and schedules thereto and hereto and any other documents or agreements
executed in connection with the transactions contemplated hereunder.

 

ARTICLE II.

PURCHASE AND SALE

 

2.1          Purchase. The Purchasers shall purchase an aggregate of $297,000 in
Subscription Amount of Notes in one tranche at the closing (the “Closing”). The
Closing is contingent upon, among other things, all matters being satisfactory
to the Purchasers in their sole discretion, and that the Company is in full
compliance with its obligations and not in default under this Agreement, any
Note, the other Transaction Documents, or any agreement with or for the benefit
of the Purchasers on the Closing Date.

 

2.2          Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, the Company agrees to sell, and each Purchaser,
severally and not jointly, agrees to purchase, such Purchaser’s Closing
Subscription Amount as set forth on the signature page hereto executed by such
Purchaser. At the Closing, unless otherwise agreed, each Purchaser shall have
delivered funds to the Company via wire transfer or a certified or bank check,
immediately available funds equal to such Purchaser’s Subscription Amount as set
forth on the signature page hereto executed by such Purchaser and the Company
shall deliver to each Purchaser its respective Note, as determined pursuant to
Section 2.3(a), and the Company each Purchaser shall deliver the other items set
forth in Section 2.3 deliverable at the Closing. Upon satisfaction of the
covenants and conditions set forth in Sections 2.3 and 2.4 for the Closing, the
Closing shall occur at the offices of Purchasers’ Counsel or such other location
as the parties shall mutually agree.

 

2.3          Deliveries.

 

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

 

(i)                 this Agreement duly executed by the Company;

 

(ii)                a Note with a principal amount equal to 108% of such
Purchaser’s Subscription Amount, registered in the name of such Purchaser; and

 

(iii)               such other documents, certificates, instruments, and other
writings as Purchasers’ counsel may reasonably request.

 

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

 

(i)                 this Agreement duly executed by such Purchaser;

 

(ii)                such Purchaser’s Subscription Amount as to the Closing by
wire transfer to the escrow account specified in writing by the Company and such
Purchaser; and

 

(iii)               such other documents, certificates, instruments, and other
writings as the Company’s counsel may reasonably request.

 

2.4           Closing Conditions.

 

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

 

(i)                 the accuracy in all material respects on the Closing Date of
the representations and warranties of the Purchasers contained herein (unless as
of a specific date therein in which case they shall be accurate as of such
date);

 

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

 

(iii)               the delivery by each Purchaser of the items set forth in
Section 2.3(b) of this Agreement.

 

(b)                The respective obligations of each Purchaser hereunder in
connection with the Closing are subject to the following conditions being met:

 

(i)                 the accuracy in all material respects when made and on the
Closing Date of the representations and warranties of the Company contained
herein (unless as of a specific date therein);

 

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

 

(iii)               the delivery by the Company of the items set forth in
Section 2.3(a) of this Agreement;

 

(iv)               there is no existing Event of Default (as defined in the
Notes, the other Transaction Documents, or any agreement with or for the benefit
of the Purchasers) and no existing event that, with the passage of time or the
giving of notice, would constitute an Event of Default;

 

(v)                there shall have been no Material Adverse Effect with respect
to the Company since the date hereof; and

 

(vi)               from the date hereof to the Closing Date, trading in the
Common Stock shall not have been suspended by the Commission or the Company’s
principal Trading Market and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg L.P. shall not have been suspended
or limited, or minimum prices shall not have been established on securities
whose trades are reported by such service, or on any Trading Market, nor shall a
banking moratorium have been declared either by the United States or New York
State authorities nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any financial
market which, in each case, in the reasonable judgment of such Purchaser, and
without regard to any factors unique to such Purchaser, makes it impracticable
or inadvisable to purchase the Securities at the Closing.

 

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2.5           Post-closing Undertakings. Subsequent to the Closing, the Company
shall:

 

(a)                 promptly pay to the Company’s transfer agent any and all of
its costs and fees associated with any activity of such transfer agent with
respect to the performance of its duties in respect of the transactions
contemplated by this Agreement;

 

(b)                 during the period from the date of this Agreement through
the date on which all of the Purchasers shall have disposed of all of the
Conversion Shares, neither the Company nor its Subsidiaries shall enter into any
additional, or modify any existing, agreements with any existing or future
investors in the Company or any of its Subsidiaries that have the effect of
establishing rights or otherwise benefiting such investor in a manner more
favorable in any material respect, to such investor than the. rights and
benefits established in favor of the Purchasers by this Agreement, unless, in
any such case, the Purchasers have been provided with such rights and benefits;
and

 

(c)                 not enter into any transaction that utilizes or requires,
could utilize or requires, or could be deemed to require the use of the
exemption from the registration requirements of the Securities Act provided by
Section 3 (a) (10) thereof.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1           Representations and Warranties of the Company. Except as set forth
in the “Disclosure Schedules,” which Disclosure Schedules shall be deemed a part
hereof and shall qualify any representation or otherwise made herein to the
extent of the disclosure contained in the corresponding section of the
Disclosure Schedules, the Company hereby makes the following representations and
warranties to each Purchaser as of the date hereof.

 

(a)                Subsidiaries. All of the direct and indirect subsidiaries of
the Company are set forth on Schedule 3.1(a). The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any liens, and all of the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, nonassessable and free of preemptive and similar rights to subscribe for
or purchase securities. If the Company has no subsidiaries, all other references
to the Subsidiaries or any of them in the Transaction Documents shall be
disregarded.

 

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

 

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

 

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

 

(e)                Filings; Consents; and Approvals. The Company is not required
to obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal (except for any
federal consents, etc., concerning cannabis), state, local or other governmental
authority or other Person in connection with the execution, delivery and
performance by the Company of the Transaction Documents, other than: the filing
of Form D with the Commission, to the extent the Company is required to file
with the Commission, and such filings as are required to be made under
applicable state securities laws (collectively, the “Required Approvals”).

 

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(f)                 Issuance of the Securities. The Securities are duly
authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents.

 

(g)                Capitalization. The capitalization of the Company is as set
forth on Schedule 3.1(g), which Schedule 3.1(g) shall also include the number of
shares of Common Stock owned beneficially, and of record, by Affiliates of the
Company as of the date hereof. The Company has not issued any capital stock
since its most recently filed periodic report under the Exchange Act, other than
as set forth in the SEC Reports or pursuant to the exercise of employee stock
options under any applicable Equity Incentive Plan, 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. No Person has any right of first refusal, preemptive right, right
of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities and securities issued to employees, officers or
directors, or former employees, officers or directors and other service
providers or former service providers of the Company pursuant to such Equity
Incentive Plan or otherwise, there are no outstanding options, warrants, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for or acquire any
shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock or Common Stock Equivalents. The
issuance and sale of the Securities will not obligate any Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any bolder of that Company’s
securities to adjust the exercise, conversion, exchange or reset price under any
of such securities. All of the outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and nonassessable, have
been issued in compliance with all federal and state securities laws, and none
of such outstanding shares was issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities. No further approval or
authorization of any stockholder or other equity holder, as applicable, the
Board of Directors or others is requited for the issuance and sale of the
Securities. Other than as set forth on Schedule 3.1(g), there are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.

 

(h)                SEC Reports; Financial Statements. Except as set forth in
Schedule 3.1(h), the Company has provided all reports, schedules, forms,
statements, and other documents required to be filed by the Company with the
Commission for the two years preceding the date hereof (the foregoing materials,
including the exhibits thereto and documents incorporated by reference therein,
being collectively referred to herein as the “SEC Reports”). As of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Commission and none of the SEC Reports, when filed,
contained any untrue statement of a material fact, or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Except as set forth in Schedule 3.1(h), the financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company and its consolidated
Subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments.

 

 

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(i)                 Material Changes; Undisclosed Events; Liabilities or
Developments. Except as provided on Schedule 3.1(i), since filing the Company’s
most recent Quarterly Report with the Commission for the period ended June 30,
2019: (i) there has been no event, occurrence or development that has had or
that could reasonably be expected to result in a Material Adverse Effect; (ii)
the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities nor required to be
reflected in the Company’s financial statements pursuant to GAAP or disclosed in
filings made with the Commission; (iii) the Company has not altered its method
of accounting; (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock; and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to the Equity Incentive Plan or as set
forth in the SEC Reports. Except for the issuance of the Securities contemplated
by this Agreement, no event, liability, fact, circumstance, occurrence, or
development has occurred or exists or is reasonably expected to occur or exist
with respect to the Company or its Subsidiaries or their respective businesses,
properties, operations, assets, or financial condition, that would be required
to be disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at
least one (1) Trading Day prior to the date that this representation is made.

 

(j)                 Litigation. Except as set forth in the SEC Reports, or, if
applicable, Schedule 3.1(j), there is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulator)' authority (federal, state, county’, local,
or foreign) (collectively, an “Action”), which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse Effect,
and neither the Company not any Subsidiary, nor any director or officer thereof,
is or has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. Other than as set forth in the SEC Reports, there has not been,
and to the knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company that is likely to lead to action that can
reasonably be expected to result in a Material Adverse Effect. Other than as set
forth in the SEC Reports, there has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer of
the Company.

 

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

 

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(l)                 Compliance. Except as set forth in Schedule 3.1(1), neither
the Company nor any Subsidiary: (i) is in default under or in violation of (and
no event has occurred that has not been warned that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any judgment, decree or
order of any court, arbitrator or other governmental authority, or (iii) is or
has been in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as could not have or reasonably be expected to result in a Material
Adverse Effect.

 

(m)               Regulatory Permits. The Company and its Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate federal
(except for any federal certificates, etc., concerning cannabis), state, local
or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Reports, as applicable or on Schedule
3.11(m), except where the failure to possess such permits could not reasonably
be expected to result in a Material Adverse Effect (the “Material Permits”), and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.

 

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

 

(o)                Intellectual Property. The Company and its Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights as described
in the SEC Reports as necessary or required for use in connection with their
respective businesses as presently conducted and which the failure to so have
could have a Material Adverse Effect (collectively, the “Intellectual Property
Rights”). Neither the Company nor any Subsidiary has received a notice (written
or otherwise) that any of, the Intellectual Property Rights has expired,
terminated or been abandoned, or is expected to expire or terminate or be
abandoned, within two (2) years from the date of tints Agreement. No Company nor
any Subsidiary has received, since the date of the latest audited financial
statements included within the SEC Reports, a written notice of a claim or
otherwise has any knowledge that, the Intellectual Property Rights violate or
infringe upon the rights of any Person, except as could not have or reasonably
be expected to not have a Material Adverse Effect. To the knowledge of the
Company, all such Intellectual Property Rights are enforceable and there is no
existing infringement by another Person of any of the Intellectual Property
Rights. The Company and its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality, and value of all of their intellectual
properties, except where failure to do so could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

 

10

 

 

(p)                Transactions with Affiliates and Employees. Except as set
forth in Schedule 3.1(p) or the SEC Reports, none of the officers or directors
of the Company or any Subsidiary and, to the knowledge of the Company, none of
the employees of the Company or any Subsidiary is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from providing for the borrowing of
money from or lending of money to, or otherwise requiring payments to or from
any officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member, or partner,
in each case in excess of $120,000 other than for: (i) payment of salary’ or
consulting fees for services tendered; (ii) reimbursement for expenses incurred
on behalf of the Company; and (iii) other employee benefits, including stock
option or stock award agreements under the Equity Incentive Plan.

 

(q)                Sarbanes-Oxley: Internal Accounting Controls. Except as set
forth in Schedule 3.1(g), the Company and the Subsidiaries are in compliance
with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that
are effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the Commission thereunder that are effective as of
the date hereof and as of the Closing Date. Other than as disclosed in the SEC
Reports, the Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that: (i)
transactions are executed in accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability; (iii) access to assets is permitted, only in accordance
with management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company and the Subsidiaries have established disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
the Subsidiaries and designed such disclosure controls and procedures to ensure
that information required to be disclosed by the Company in the reports it files
or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Commission’s rules and forms.
The Company’s certifying officers have evaluated the effectiveness of the
disclosure controls and procedures of the Company and the Subsidiaries as of the
end of the period covered by the most recently filed periodic report under the
Exchange Act (such date, the “Evaluation Date”). The Company presented in its
most recently filed periodic report with the Commission the conclusions of the
certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been, no changes in the internal control over
financial reporting (as such term is defined in the Exchange Act) that have
materially affected, or is reasonably likely to materially affect, the internal
control over financial repotting of the Company and its Subsidiaries.

 

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

 

11

 

 

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

 

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

 

(u)                Registration Rights. No Person has any right to cause any
Company to effect the registration under the Securities Act of any securities of
the Company or any Subsidiaries.

 

(v)                Listing and Maintenance Requirements. The Company has not, in
the twelve (12) months preceding the date hereof, received notice from any
Trading Market on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.

 

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

 

(x)                Disclosure. 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 any of the Purchasers or their agents or counsel with any information
that it believes constitutes or might constitute material, non-public
information. The Company understands and confirms that the Purchasers will rely
on the foregoing representation in effecting transactions in securities of the
Company. All of the disclosure furnished by or on behalf of the Company to the
Purchasers regarding the Company and its Subsidiaries, their respective
businesses and the transactions contemplated hereby, including the Disclosure
Schedules to this Agreement, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. The Company acknowledges and agrees that
no Purchaser makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically set forth hi
Section 3.2 hereof.

 

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

 

12

 

 

(z)                No General Solicitation. No Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form of
general solicitation or general advertising. The Company has offered the
Securities for sale only to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.

 

(aa)              Foreign Corrupt Practices. Neither the Company nor any
Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent or
other person acting on behalf of the Company or any Subsidiary, has: (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity; (ii) made any unlawful payment to foreign or domestic
government officials or employees of to any foreign or domestic political
parties or campaigns from corporate funds; (iii) failed to disclose fully any
contribution made by the Company or any Subsidiary (or made by any person acting
on its behalf of which the Company is aware) which is in violation of law; or
(iv) violated in any material respect any provision of FCPA.

 

(bb)             Accountants. The Company’s accounting firm is set forth on
Schedule 3.1(bb) of the Disclosure Schedules. To the knowledge and belief of the
Company, such accounting firm is a registered public accounting firm as required
by the Exchange Act.

 

(cc)             No Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise, between the Company and the accountants and lawyers formerly
or presently employed by the Company.

 

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

 

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

 

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

 

13

 

 

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

 

(hh)             U.S. Real Property Holding Corporation. The Company is not and
has never been a U.S. real property holding corporation within the meaning of
Section 897 of the Internal Revenue Code of 1986, as amended, and the Company
shall so certify upon a Purchaser’s request.

 

(ii)               Bank Holding Company Act. Neither the Company nor any of its
Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956,
as amended (the “BHCA”) and to regulation by the Board of Governors of the
Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of
its Subsidiaries or Affiliates owns or controls, directly or indirectly, five
percent (5%) or more of the outstanding shares of any class of voting securities
or twenty-five percent (25%) or more of the total equity of a bank or any entity
that is subject to the BHCA and to regulation by the Federal Reserve. Neither
the Company nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.

 

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

 

(kk)              Seniority. As of the Closing Date, no Indebtedness or other
claim against the Company is senior to the Notes in right of payment, whether
with respect to interest or upon liquidation or dissolution, or otherwise, other
than indebtedness secured by purchase money security interests (which is senior
only as to underlying assets covered thereby) and capital lease obligations
(which is senior only as to the property covered thereby).

 

(ll)                Shell Company. The Company is not now a “shell company” as
that term is defined in Section 12b-2 of the Exchange Act.

 

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

 

14

 

 

(nn)              Related Party Transactions. All related party transactions
have been consummated in accordance with all applicable laws and governing
agreements, including, without limitation, those laws applicable to the
diversion of a corporate opportunity of the Company or any of Affiliate of the
Company or any Affiliate of any principal of that Company. In each instance, the
particular related party transaction has been approved by a majority of the
disinterested directors of the applicable Company, after fall disclosure has
been made to each board member of the pertinent facts of the proposed
transaction. Each such related party transaction has been consummated on terms
and conditions that are equal or more favorable to the applicable Company than a
transaction with an unaffiliated third party knowing all the facts and under no
compulsion to consummate such transaction.

 

Each Purchaser acknowledges and agrees that the representations contained in
Section 3.1 shall not modify, amend or affect the Company’s and each
Subsidiary’s rights to indemnification or to rely on such Purchaser’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transactions contemplated hereby.

 

3.2           Representations and Warranties of the Purchasers. Each Purchaser,
for itself and for no other Purchaser, hereby represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows (unless as of a
specific date therein):

 

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

 

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

 

(c)                Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and as of the date hereof it is an “accredited investor” as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) under the
Securities Act.

 

15

 

 

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

 

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

 

(f)                 Certain Transactions and Confidentiality. Other than
consummating the transactions contemplated hereunder, such Purchaser has not
directly or indirectly, nor has any Person acting on behalf of or pursuant to
any understanding with such Purchaser, executed any purchases or sales,
including Short Sales, of the securities of the Company during the period
commencing as of the time that such Purchaser first received a term sheet
(written or oral) from the Company or any other Person representing the Company
setting forth the material terms of the transactions contemplated hereunder and
ending immediately prior to the execution hereof. Notwithstanding the foregoing,
in the case of a Purchaser that is a multi- managed investment vehicle whereby
separate portfolio managers manage separate portions of such Purchaser’s assets
and the portfolio managers have no direct knowledge of the investment decisions
made by the portfolio managers managing other portions of such Purchaser’s
assets, the representation set forth above shall only apply with respect to the
portion of assets managed by the portfolio manager that made the investment
decision to purchase the Securities covered by this Agreement. Other than to
other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein
shall constitute a representation or warranty, or preclude any actions, with
respect to the identification of the availability of, or securing of, available
shares to borrow in order to effect Short Sales or similar transactions in the
future.

 

The Company acknowledges and agrees that the representations contained in
Section 3.2 shall not modify, amend, or affect such Purchaser’s rights to
indemnification or to rely on the Company’s representations and warranties
contained in this Agreement or any representations and warranties contained in
any other Transaction Document or any other document or instrument executed
and/or delivered in connection with this Agreement or the consummation of the
transactions contemplated hereby.

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1           Transfer Restrictions.

 

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

 

16

 

 

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

 

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

 

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

 

(c)                In addition to such Purchaser’s other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated damages and not
as a penalty, $1,000 per Trading Day for each Trading Day after the third
Trading Date after such Purchaser has duly requested the removal of the above
legend (the “Legend Removal Date”) until such certificate is delivered without a
legend. Nothing herein shall limit such Purchaser’s right to pursue actual
damages for the Company’s failure to deliver certificates representing any
Securities as required by the Transaction Documents, and such Purchaser shall
have the tight to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.

 

4.2           [Reserved].

 

17

 

 

4.3           Furnishing of Information: Public Information.

 

(a)                Until the earliest time that no Purchaser owns Securities,
the Company covenants to file timely (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required or permitted
to be filed by the Company after the date hereof pursuant to the Exchange Act
even if the Company is not then subject to the reporting requirements of the
Exchange Act.

 

(b)                At any time during the period commencing from the one-year
anniversary of the date hereof and ending at such time that all of the
Securities may be sold without the requirement for the Company to be in
compliance with Rule 144(c)(1) and otherwise without restriction or limitation
pursuant to Rule 144, if the Company shall fail for any reason to satisfy the
current public information requirement under Rule 144(c) (a “Public Information
Failure”), then, in addition to such Purchaser’s other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated damages and not
as a penalty, by reason of any such delay in or reduction of its ability to sell
the Securities, an amount in cash equal to two percent (2.0%) of the aggregate
Subscription Amount of such Purchaser’s Securities on the day of a Public
Information Failure and on even thirtieth (30th) day (pro-rated for periods
totaling less than thirty (30) days) thereafter until the earlier of (a) the
date such Public Information Failure is cured and (b) such time that such public
information is no longer required for a seller to transfer shares of Common
Stock pursuant to Rule 144. The payments to which a Purchaser shall be entitled
pursuant to this Section 4.3(b) are referred to herein as “Public Information
Failure Payments.” Public Information Failure Payments shall be paid on the
earlier of (i) the last day of the calendar month during which such Public
Information Failure Payments are incurred and (ii) the third (3rd) Business Day
after the event or failure giving rise to the Public Information Failure
Payments is cured. In the event the Company fails to make Public Information
Failure Payments in a timely manner, such Public Information Failure Payments
shall hear interest at the rate of 1.5% per month (prorated for partial months)
until paid in full. Nothing herein shall limit such Purchaser’s right to pursue
actual damages for the Public Information Failure, and such Purchaser shall have
the right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief.

 

4.4           Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security' (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities or that would be integrated with
the offer or sale of the Securities for purposes of the rules and regulations of
any Trading Market such that it would require stockholder approval prior to the
closing of such other transaction unless stockholder approval is obtained before
the closing of such subsequent transaction.

 

4.5           [Reserved].

 

4.6           Stockholder Rights Plan. No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that any
Purchaser is an “Acquiring Person” under any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement),
or similar anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchasers.

 

4.7           Non-Public Information. Except with respect to the material terms
and conditions of the transactions contemplated by the Transaction Documents,
the Company covenants and agrees that neither it, nor any other Person acting on
its behalf, will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have entered into a
written agreement with the Company regarding the confidentiality and use of such
information. The Company understands and confirms that the Purchaser shall be
relying on the foregoing covenant in effecting transactions in securities of the
Company.

 

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4.8           Use of Proceeds. The Company shall use the net proceeds hereunder
as set forth on Schedule 4.8 attached hereto.

 

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

 

4.10         Reverse Split. Within 30 days following the Closing, the Company
will file a preliminary information statement on Schedule 14C with the
Commission to effect a reverse split of its Common Stock at a ratio of between
one-for-25 and one-for-75 (the “Reverse Split”), and will cause the Reverse
Split to become effective no later than December 30, 2019.

 

19

 

 

4.11         Equal Treatment of Purchasers. No consideration (including any
modification of any Transaction Document) shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of this
Agreement unless the same consideration is also offered to all of the parties to
this Agreement. Further, no Company shall make any payment of principal or
interest on the Notes in amounts which are disproportionate to the respective
principal amounts outstanding on the Notes at any applicable time. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended for the Company to treat the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in conceit or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.

 

4.12         Issuance Restrictions. The Company shall not issue any securities
convertible or exercisable into shares of Common Stock within sixty days after
the Closing.

 

4.13         ROFR. If the Company proposes to offer or sell any securities,
except for an equity line of at least $1,000,000, (all such securities “New
Securities”) within one year after the Closing Date, the Company shall first
offer such New Securities to the Purchasers. A Purchaser shall be entitled to
apportion the right of first offer hereby granted to it among itself and its
Affiliates in such proportions as it deems appropriate. The Company shall give
notice (the “Offer Notice”) to each Purchaser, stating (i) its bona fide
intention to offer such New Securities, (ii) the number of such New Securities
to be offered, and (iii) the price and terms, if any, upon which it proposes to
offer such New Securities. By notification to the Company within five (5) days
after the Offer Notice is given, each Purchaser may elect to purchase or
otherwise acquire, at the price and on the terms specified in the Offer Notice,
up to that portion of the New Securities which equals the proportion that the
Common Stock issued and held, or issuable (directly or indirectly) upon
conversion of the Notes then held by such Purchaser relative to the other
Purchasers. At the expiration of such five (5) day period, the Company shall
promptly notify each Purchaser that elects to purchase or acquire all the shares
available to it (each, a “Fully Exercising Investor”) of any other Purchaser’s
failure to do likewise. During the five (5) day period commencing after the
Company has given such notice, each Fully Exercising Investor may, by giving
notice to the Company, elect to purchase or acquire, in addition to the number
of shares specified above, up to that portion of the New Securities for which
Purchasers were entitled to subscribe but that were not subscribed for by the
Purchasers which is equal to the proportion that the Common Stock issued and
held, or issuable (directly or indirectly) upon conversion of the Notes, by such
Fully Exercising Investor bears to the Common Stock issued and held, or issuable
(directly or indirectly) upon conversion of the Notes then held by all Fully
Exercising Investors who wish to purchase such unsubscribed shares. The closing
of any sale pursuant to this Section shall occur within the later of twenty (20)
days of the date that the Offer Notice is given and the date of initial sale of
New Securities pursuant to this section. If all New Securities referred to in
the Offer Notice are not elected to be purchased or acquired as provided in this
Section, the Company may, during the twenty (20) day period following the
expiration of the periods provided in this Section, offer and sell the remaining
unsubscribed portion of such New Securities to any Person or Persons at a price
not less than, and upon terms no more favorable to the offeree than, those
specified in the Offer Notice. If the Company does not enter into an agreement
for the sale of such New Securities within such period, or if such agreement is
not consummated within twenty (20) days of the execution thereof, the right
provided hereunder shall be deemed to be revived and such New Securities shall
not be offered unless first reoffered to the Purchasers in accordance with this
Section. Upon execution of this Agreement, the Purchasers hereby cancel any and
all rights of first refusal or any similar right they may have arising under any
document or security.

 

20

 

 

4.14         Securities Laws Disclosure; Publicity. The Company shall by 9:30
a.m. (New York City time) on the second (2nd) Trading Day immediately following
the date hereof, issue a press release or Current Report on Form 8-K disclosing
the material terms of the transactions contemplated hereby. The Company
represents to the Purchasers that, as of the issuance of such press release or
Form 8-K, it shall have publicly disclosed all material, non-public information
delivered to any of the Purchasers by the Company or any of its Subsidiaries, or
any of their respective officers, directors, employees, or agents in connection
with the transactions contemplated by the Transaction Documents. The Company and
the Purchasers shall consult with each other in issuing any other press releases
with respect to the transactions contemplated hereby, and neither the Company
nor the Purchasers shall issue any such press release nor otherwise make any
such public statement without the prior consent of the Company, with respect to
any press release of the Purchasers, or without the prior consent of the
Purchaser, with respect to any press release of the Company, which consent shall
not unreasonably be withheld, delayed, denied, or conditioned except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of the Purchasers, or include the name of the Purchasers in
any filing with the Commission or any regulatory agency or Trading Market,
without the prior written consent of such Purchasers, except: (a) as required by
federal securities law in connection with any offering statement contemplated by
this Agreement and (b) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide such
Purchasers with prior notice of such disclosure permitted under this clause (b).

 

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

 

ARTICLE V.

MISCELLANEOUS

 

5.1           Termination. This Agreement may be terminated by any Purchaser, as
to such Purchaser’s obligations hereunder only and without any effect whatsoever
on the obligations between the Company and the other Purchasers, by written
notice to the other parties, if the Closing has not been consummated on or
before October 18, 2019; provided, however, that such termination will not
affect the right of any party to sue for any breach by any other party or
parties.

 

5.2           Fees and Expenses. The Company shall deliver to the Purchaser,
prior to the Closing, a completed and executed copy of the Closing Statement,
attached hereto as Annex A. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants, and other experts, if any, and all other
expenses incurred by such parry incident to the negotiation, preparation,
execution, delivery and performance of this Agreement; provided that, at the
Closing the Company shall pay the Purchasers $3,000 in the aggregate for
Purchasers’ legal fees. the Company shall pay all stamp taxes and other taxes
and duties levied in connection with the delivery of any Securities to the
Purchaser.

 

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

 

5.4           Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of: (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto at or prior to 12:00 noon (New
York City time) on a Trading Day; (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 12:00 noon (New York City time) on any
Trading Day; (iii) the second (2nd) Trading Day following the date of mailing,
if sent by U.S. nationally recognized overnight courier service; or (iv) upon
actual receipt by the party to whom such notice is requited to be given. The
address for such notices and communications shall be as set forth on the
signature pages attached hereto.

 

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5.5           Amendments; Waivers. No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchasers holding at least
two-thirds (2/3) in interest of the Securities then outstanding or, in the case
of a waiver, by the party against whom enforcement of any such waived provision
is sought. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such
right.

 

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

 

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

 

5.8           No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.

 

5.9           Governing Law. All questions concerning the construction,
validity, enforcement, and interpretation of this Note shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Nevada, without regard to the principles of conflict of laws thereof. All
proceedings concerning the interpretations, enforcement, and defense of the
transactions contemplated by this Agreement and the Agreement itself (whether
brought against a party hereto or its respective affiliates, directors,
officers, stockholders, partners, members, employees, or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New
York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such New York Courts,
or such New York Courts are improper or inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any other manner permitted by
applicable law. Each party- hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If any party shall commence an action ox
proceeding to enforce any provisions of this Agreement, then the prevailing
patty in such action or proceeding shall be reimbursed by the other party for
its attorneys’ fees and other costs and expenses incurred in the investigation,
preparation and prosecution of such action or proceeding.

 

22

 

 

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

 

5.11         Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each patty and delivered to each other party, it being understood that the
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission or by e-mail delivery of a “.pdf’ format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or “.pdf’ signature page were an original
thereof.

 

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

 

5.13         Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other Transaction Documents, whenever any Purchaser exercises a right,
election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then
such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in
whole or m part without prejudice to its future actions and rights.

 

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

 

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

 

5.16         Payment Set Aside. To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid, or otherwise restored
to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then, to the extent of any such restoration,
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

 

23

 

 

5.17         Usury. To the extent it may lawfully do so, the Company hereby
agrees not to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or advantage of,
usury laws wherever enacted, now or at any time hereafter in force, in
connection with any claim, action, or proceeding that may be brought by any
Purchaser in order to enforce any right or remedy under any Transaction
Document. Notwithstanding any provision to the contrary contained in any
Transaction Document, it is expressly agreed and provided that the total
liability of the Company under the Transaction Documents for payments in the
nature of interest shall not exceed the maximum lawful rate authorized under
applicable law (the “Maximum Rate”), and, without, limiting the foregoing, in no
event shall any rate of interest or default interest, or both of them, when
aggregated with any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such Maximum Rate. It is
agreed that if the maximum contract rate of interest allowed by law and
applicable to the Transaction Documents is increased or decreased by statute or
any official governmental action subsequent to the date hereof, the new maximum
contract rate of interest allowed by law will be the Maximum Rate applicable to
the Transaction Documents from the effective date thereof forward, unless such
application is precluded by applicable law. If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction Documents,
such excess shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner of handling
such excess to be at such Purchaser’s election.

 

5.18         Independent Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any Purchaser
pursuant hereto or thereto, shall he deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to he joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in its review and negotiation of the Transaction
Documents.

 

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

 

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

 

24

 

 

5.21         Construction. The parties agree that each of them and/or their
respective counsel have reviewed and had an opportunity to revise the
Transaction Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of the Transaction Documents or any
amendments thereto. In addition, each and every reference to share prices and
shares of Common Stock in any Transaction Document shall be subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.

 

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

 

5.23         WAIVER OF CONFLICTS. Each party to this Agreement acknowledges that
Fox Rothschild LLC (“Fox”), outside general counsel to the Company, has in the
past performed legal services for, and may now or in the future represent, one
or more Purchasers or their affiliates in matters unrelated to the transactions
contemplated by this Agreement (the “Financing”), including representation of
such Purchasers or their affiliates in matters of a similar nature to the
Financing. The applicable rules of professional conduct require that Fox inform
the parties hereunder of this representation and obtain their consent. Fox has
served as outside general counsel to the Company and has negotiated the terms of
the Financing solely on behalf of the Company. The Company and each Purchaser
hereby (a) acknowledge that they have had an opportunity to ask for and have
obtained information relevant to such representation, including disclosure of
the reasonably foreseeable adverse consequences of such representation;
(b) acknowledge that with respect to the Financing, Fox has represented solely
the Company, and not any Purchaser or any stockholder, director or employee of
the Company or any Purchaser; and (c) gives its informed consent to Fox’s
representation of the Company in the Financing.

 

(Signature Pages Follow)

 

25

 

 

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

 

CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC.

 

 

By: /s/ Timothy Warbington   Timothy Warbington, Chief Executive Officer        
  Facsimile No. for delivery of Notices: ______________________  

 

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

 

26

 

 

PURCHASER SIGNATURE PAGES TO
SECURITIES PURCHASE AGREEMENT

 

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

 

Name of Purchaser: Armada Investment Fund LLC

 

Signature of Authorized Signatory of Purchaser: /s/ Gabriel Berkowitz

 

Name of Authorized Signatory: Gabriel Berkowitz

 

Title of Authorized Signatory: Manager

 

Email Address of Authorized Signatory: gabriel@armadacp.com

 

Facsimile Number of Authorized Signatory:  

 

Address for Notice to Purchaser:

 

7703 Springfield Lake Drive

Lake Worth, FL 33467

 

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

 

______________________________________________________________________________

 

______________________________________________________________________________

 

______________________________________________________________________________

 

Subscription Amount: $125,000.00

 

Note Principal (Subscription Amount *1.08): $135,000.00

 

27

 

 

PURCHASER SIGNATURE PAGES TO
SECURITIES PURCHASE AGREEMENT

 

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

 

Name of Purchaser: BHP Capital NY, Inc.

 

Signature of Authorized Signatory of Purchaser: /s/ Bryan Pantofel

 

Name of Authorized Signatory: Bryan Pantofel

 

Title of Authorized Signatory: President

 

Email Address of Authorized Signatory: bryan@bhpcap.com

 

Facsimile Number of Authorized Signatory:  

 

Address for Notice to Purchaser:

 

45 SW 9th Street, Suite 1603

Miami, Florida 33130

 

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

 

______________________________________________________________________________

 

______________________________________________________________________________

 

______________________________________________________________________________

 

Subscription Amount: $75,000.00

 

Note Principal (Subscription Amount *1.08): $81,000.00

 

28

 

 

PURCHASER SIGNATURE PAGES TO
SECURITIES PURCHASE AGREEMENT

 

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

 

Name of Purchaser: Fourth Man, LLC

 

Signature of Authorized Signatory of Purchaser: /s/ Edward Deese

 

Name of Authorized Signatory: Edward Deese

 

Title of Authorized Signatory: Manager

 

Email Address of Authorized Signatory: ed@fourth-man.com

 

Facsimile Number of Authorized Signatory:  

 

Address for Notice to Purchaser:

 

21520 Yorba Linda Blvd.

Suite G PMB 335

Yorba Linda, CA 92887

 

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

 

______________________________________________________________________________

 

______________________________________________________________________________

 

______________________________________________________________________________

 

Subscription Amount: $75,000.00

 

Note Principal (Subscription Amount *1.08): $81,000.00

 

29