ex10-1





 











Exhibit 10.1



 



PURCHASE AGREEMENT


 


THIS PURCHASE AGREEMENT (this
“Agreement”), dated as of
May 17, 2021, by and between IMAGEWARE SYSTEMS, INC., a Delaware
corporation (the “Company”), and
LINCOLN PARK CAPITAL FUND,
LLC, an Illinois limited liability company (the
“Investor”).


 



WHEREAS:

 


Subject
to the terms and conditions set forth in this Agreement, the
Company wishes to sell to the Investor, and the Investor wishes to
buy from the Company, up to Fifteen Million One Hundred Thousand
Dollars ($15,100,000) of the Company's common stock, $0.01 par
value per share (the "Common Stock"). The shares of
Common Stock to be purchased hereunder (including the Initial
Purchase Shares) are referred to herein as the “Purchase
Shares.”

 


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

 


1.           CERTAIN
DEFINITIONS.


 


For
purposes of this Agreement, the following terms shall have the
following meanings:


 


(a)           “Accelerated
Purchase Date” means, with respect to any Accelerated
Purchase made pursuant to Section 2(c) hereof, the
Business Day immediately following the applicable Purchase Date
with respect to the corresponding Regular Purchase referred to in
clause (i) of the second sentence of Section 2(c)
hereof.


 


(b)           “Accelerated
Purchase Minimum Price Threshold” means, with respect
to any Accelerated Purchase made pursuant to Section 2(c) hereof, any
minimum per share price threshold set forth in the applicable
Accelerated Purchase Notice.


 


(c)           “Accelerated
Purchase Notice” means, with respect to any
Accelerated Purchase made pursuant to Section 2(c) hereof, an
irrevocable written notice from the Company to the Investor
directing the Investor to buy a specified Accelerated Purchase
Share Amount on the applicable Accelerated Purchase Date pursuant
to Section 2(c)
hereof at the applicable Accelerated Purchase Price on the
Accelerated Purchase Date for such Accelerated Purchase in
accordance with this Agreement, and specifying any Accelerated
Purchase Minimum Price Threshold determined by the
Company.


 


(d)           “Accelerated
Purchase Price” means, with respect to any particular
Accelerated Purchase made pursuant to Section 2(c) hereof,
ninety-five percent (95%) of the lower of (i) the VWAP for the
period beginning at 9:30:01 a.m., Eastern time, on the applicable
Accelerated Purchase Date, or such other time publicly announced by
the Principal Market as the official open (or commencement) of
trading on the Principal Market on such applicable Accelerated
Purchase Date (the “Accelerated Purchase Commencement
Time”), and ending at the earliest of (A) 4:00:00
p.m., Eastern time, on such applicable Accelerated Purchase Date,
or such other time publicly announced by the Principal Market as
the official close of trading on the Principal Market on such
applicable Accelerated Purchase Date, (B) such time, from and after
the Accelerated Purchase Commencement Time for such Accelerated
Purchase, that the total number (or volume) of shares of Common
Stock traded on the Principal Market has exceeded the applicable
Accelerated Purchase Share Volume Maximum, and (C) such time, from
and after the Accelerated Purchase Commencement Time for such
Accelerated Purchase, that the Sale Price has fallen below the
applicable Accelerated Purchase Minimum Price Threshold (such
earliest of (i)(A), (i)(B) and (i)(C) above, the
“Accelerated
Purchase Termination Time”), and (ii) the Closing Sale
Price of the Common Stock on such applicable Accelerated Purchase
Date (each to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split, reverse stock
split or other similar transaction).


 




 


 

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(e)           
“Accelerated
Purchase Share Amount” means, with respect to an
Accelerated Purchase made pursuant to Section 2(c) hereof, the number
of Purchase Shares directed by the Company to be purchased by the
Investor in an Accelerated Purchase Notice, which number of
Purchase Shares shall not exceed the lesser of (i) 300% of the
number of Purchase Shares directed by the Company to be purchased
by the Investor pursuant to the corresponding Regular Purchase
Notice for the corresponding Regular Purchase referred to in clause
(i) of the second sentence of Section 2(c) hereof (subject to
the Purchase Share limitations contained in Section 2(b) hereof) and (ii)
an amount equal to (A) the Accelerated Purchase Share Percentage
multiplied by (B) the total number (or volume) of shares of Common
Stock traded on the Principal Market during the period on the
applicable Accelerated Purchase Date beginning at the Accelerated
Purchase Commencement Time for such Accelerated Purchase and ending
at the Accelerated Purchase Termination Time for such Accelerated
Purchase; provided,
that the parties may mutually agree to increase the Accelerated
Purchase Share Amount for any Accelerated Purchase.


 


(f)           “Accelerated
Purchase Share Percentage” means, with respect to any
Accelerated Purchase made pursuant to Section 2(c) hereof, thirty
percent (30%).


 


(g)           “Accelerated
Purchase Share Volume Maximum” means, with respect to
an Accelerated Purchase made pursuant to Section 2(c) hereof, a number
of shares of Common Stock equal to (i) the applicable Accelerated
Purchase Share Amount to be purchased by the Investor pursuant to
the applicable Accelerated Purchase Notice for such Accelerated
Purchase, divided by (ii) the Accelerated Purchase Share Percentage
(to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split, reverse stock
split or other similar transaction).


 


(h)           “Additional
Accelerated Purchase Date” means, with respect to an
Additional Accelerated Purchase made pursuant to Section 2(d) hereof, the
Business Day (i) that is the Accelerated Purchase Date with respect
to the corresponding Accelerated Purchase referred to in
Section 2(d) hereof
and (ii) on which the Investor receives, prior to 1:00 p.m.,
Eastern time, on such Business Day, a valid Additional Accelerated
Purchase Notice for such Additional Accelerated Purchase in
accordance with this Agreement.


 


(i)           “Additional
Accelerated Purchase Minimum Price Threshold” means,
with respect to an Additional Accelerated Purchase made pursuant to
Section 2(d)
hereof, any minimum per share price threshold set forth in the
applicable Additional Accelerated Purchase Notice.


 


(j)           “Additional
Accelerated Purchase Notice” means, with respect to an
Additional Accelerated Purchase made pursuant to Section 2(d) hereof, an
irrevocable written notice from the Company to the Investor
directing the Investor to purchase the applicable Additional
Accelerated Purchase Share Amount at the Additional Accelerated
Purchase Price for such Additional Accelerated Purchase in
accordance with this Agreement, and specifying any Additional
Accelerated Purchase Minimum Price Threshold determined by the
Company.


 


(k)           “Additional
Accelerated Purchase Price” means, with respect to an
Additional Accelerated Purchase made pursuant to Section 2(d) hereof,
ninety-five percent (95%) of the lower of (i) the VWAP for the
period on the applicable Additional Accelerated Purchase Date,
beginning at the latest of (A) the applicable Accelerated Purchase
Termination Time with respect to the corresponding Accelerated
Purchase referred to in Section 2(d) hereof on such
Additional Accelerated Purchase Date, (B) the applicable Additional
Accelerated Purchase Termination Time with respect to the most
recently completed prior Additional Accelerated Purchase on such
Additional Accelerated Purchase Date, as applicable, and (C) the
time at which all Purchase Shares subject to all prior Accelerated
Purchases and Additional Accelerated Purchases (as applicable),
including, without limitation, those that have been effected on the
same Business Day as the applicable Additional Accelerated Purchase
Date with respect to which the applicable Additional Accelerated
Purchase relates, have theretofore been received by the Investor as
DWAC Shares in accordance with this Agreement (such latest of
(i)(A), (i)(B) and (i)(C) above, the “Additional Accelerated Purchase
Commencement Time”), and ending at the earliest of (X)
4:00 p.m., Eastern time, on such Additional Accelerated Purchase
Date, or such other time publicly announced by the Principal Market
as the official close of trading on the Principal Market on such
Additional Accelerated Purchase Date, (Y) such time, from and after
the Additional Accelerated Purchase Commencement Time for such
Additional Accelerated Purchase, that the total number (or volume)
of shares of Common Stock traded on the Principal Market has
exceeded the applicable Additional Accelerated Purchase Share
Volume Maximum, and (Z) such time, from and after the Additional
Accelerated Purchase Commencement Time for such Additional
Accelerated Purchase, that the Sale Price has fallen below the
applicable Additional Accelerated Purchase Minimum Price Threshold
(if any) (such earliest of (i)(X), (i)(Y) and (i)(Z) above, the
“Additional
Accelerated Purchase Termination Time”), and (ii) the
Closing Sale Price of the Common Stock on such Additional
Accelerated Purchase Date (each to be appropriately adjusted for
any reorganization, recapitalization, non-cash dividend, stock
split, reverse stock split or other similar
transaction).


 




 


 

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(l)           
“Additional
Accelerated Purchase Share Amount” means, with respect
to an Additional Accelerated Purchase made pursuant to Section 2(d) hereof, the number
of Purchase Shares directed by the Company to be purchased by the
Investor on an Additional Accelerated Purchase Notice, which number
of Purchase Shares shall not exceed the lesser of (i) 300% of the
number of Purchase Shares directed by the Company to be purchased
by the Investor pursuant to the corresponding Regular Purchase
Notice for the corresponding Regular Purchase referred to in clause
(i) of the second sentence of Section 2(d) hereof (subject to
the Purchase Share limitations contained in Section 2(b) hereof) and (ii)
an amount equal to (A) the Additional Accelerated Purchase Share
Percentage multiplied by (B) the total number (or volume) of shares
of Common Stock traded on the Principal Market during the period on
the applicable Additional Accelerated Purchase Date beginning at
the Additional Accelerated Purchase Commencement Time for such
Additional Accelerated Purchase and ending at the Additional
Accelerated Purchase Termination Time for such Additional
Accelerated Purchase; provided, that the parties may
mutually agree to increase the Additional Accelerated Purchase
Share Amount for any Additional Accelerated Purchase.

 


(m)           “Additional
Accelerated Purchase Share Percentage” means, with
respect to an Additional Accelerated Purchase made pursuant to
Section 2(d)
hereof, thirty percent (30%).


 


(n)           “Additional
Accelerated Purchase Share Volume Maximum” means, with
respect to an Additional Accelerated Purchase made pursuant to
Section 2(d)
hereof, a number of shares of Common Stock equal to (i) the
applicable Additional Accelerated Purchase Share Amount to be
purchased by the Investor pursuant to the applicable Additional
Accelerated Purchase Notice for such Additional Accelerated
Purchase, divided by (ii) the Additional Accelerated Purchase Share
Percentage (to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split, or other similar
transaction).


 


(o)           “Alternate
Adjusted Regular Purchase Share Limit” means, with
respect to a Regular Purchase made pursuant to Section 2(b) hereof, the
maximum number of Purchase Shares which, taking into account the
applicable per share Purchase Price therefor calculated in
accordance with this Agreement, would enable the Company to deliver
to the Investor, on the applicable Purchase Date for such Regular
Purchase, a Regular Purchase Notice for a Purchase Amount equal to,
or as closely approximating without exceeding, One Hundred Thousand
Dollars ($100,000).


 

(p)           
“Available
Amount” means, initially, Fifteen Million One Hundred
Thousand Dollars ($15,100,000) in the aggregate, which amount shall
be reduced by the Purchase Amount each time the Investor purchases
shares of Common Stock (including the Initial Purchase Shares)
pursuant to Section
2 hereof.


 

(q)           
Reserved.


 


(r)           “Bankruptcy
Law” means Title 11, U.S. Code, or any similar federal
or state law for the relief of debtors.


 


(t)           “Business
Day” means any day on which the Principal Market is
open for trading, including any day on which the Principal Market
is open for trading for a period of time less than the customary
time.


 


(u)           “Closing
Sale Price” means, for any security as of any date,
the last closing sale price for such security on the Principal
Market as reported by the Principal Market.


 




 


 

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(v)           “Confidential
Information” means any information disclosed by either
party to the other party, either directly or indirectly, in
writing, orally or by inspection of tangible objects (including,
without limitation, documents, prototypes, samples, plant and
equipment), which is designated as "Confidential," "Proprietary" or
some similar designation. Information communicated orally shall be
considered Confidential Information if such information is
confirmed in writing as being Confidential Information within ten
(10) Business Days after the initial disclosure. Confidential
Information may also include information disclosed to a disclosing
party by third parties. Confidential Information shall not,
however, include any information which (i) was publicly known and
made generally available in the public domain prior to the time of
disclosure by the disclosing party; (ii) becomes publicly known and
made generally available after disclosure by the disclosing party
to the receiving party through no action or inaction of the
receiving party; (iii) is already in the possession of the
receiving party without confidential restriction at the time of
disclosure by the disclosing party as shown by the receiving
party’s files and records immediately prior to the time of
disclosure; (iv) is obtained by the receiving party from a third
party without a breach of such third party’s obligations of
confidentiality; (v) is independently developed by the receiving
party without use of or reference to the disclosing party’s
Confidential Information, as shown by documents and other competent
evidence in the receiving party’s possession; or (vi) is
required by law to be disclosed by the receiving party,
provided, that the
receiving party gives the disclosing party prompt written notice of
such requirement prior to such disclosure and assistance in
obtaining an order protecting the information from public
disclosure.


 


(w)           “Custodian”
means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.


 


(x)           “DTC”
means The Depository Trust Company, or any successor performing
substantially the same function for the Company.

 


(y)           “DWAC
Shares” means shares of Common Stock that are (i)
issued in electronic form, (ii) freely tradable and transferable
and without restriction on resale and (iii) timely credited by the
Company to the Investor’s or its designee’s specified
Deposit/Withdrawal at Custodian (DWAC) account with DTC under its
Fast Automated Securities Transfer (FAST) Program, or any similar
program hereafter adopted by DTC performing substantially the same
function.

 


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


 


(aa)           “Fully
Adjusted Regular Purchase Share Limit” means,
following any reorganization, recapitalization, non-cash dividend,
stock split or other similar transaction from and after the date of
this Agreement, the Regular Purchase Share Limit (as defined in
Section 2(b)
hereof) in effect on the applicable date of determination, after
giving effect to the full proportionate adjustment with respect to
such reorganization, recapitalization, non-cash dividend, stock
split or other similar transaction.


 


(bb)           “Initial
Purchase Price” means ten cents ($0.10).


 


(cc)           “Material
Adverse Effect” means any material adverse effect on
(i) the enforceability of any Transaction Document,
(ii) the results of operations, assets, business or financial
condition of the Company and its Subsidiaries, taken as a whole,
other than any material adverse effect that resulted exclusively
from (A) any change in the United States or foreign economies
or securities or financial markets in general that does not have a
disproportionate effect on the Company and its Subsidiaries, taken
as a whole, (B) any change that generally affects the industry
in which the Company and its Subsidiaries operate that does not
have a disproportionate effect on the Company and its Subsidiaries,
taken as a whole, (C) any change arising in connection with
earthquakes, other acts of God, hostilities, acts of war, sabotage
or terrorism or military actions or any escalation or material
worsening of any such hostilities, acts of war, sabotage or
terrorism or military actions existing as of the date hereof,
(D) any action taken by the Investor, its affiliates or its or
their successors and assigns with respect to the transactions
contemplated by this Agreement, (E) the effect of any change
in Applicable Laws or accounting rules that does not have a
disproportionate effect on the Company and its Subsidiaries, taken
as a whole, or (F) any change resulting from compliance with
terms of this Agreement or the consummation of the transactions
contemplated by this Agreement, or (iii) the Company’s
ability to perform in any material respect on a timely basis its
obligations under any Transaction Document to be performed as of
the date of determination.


 




 


 

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(dd)           “Maturity
Date” means the first day of the month immediately
following the twenty-four (24) month anniversary of the
Commencement Date.


 


(ee)           
“PEA
Period” means the period commencing at 9:30 a.m.,
Eastern time, on the twentieth (20th) Business Day
immediately prior to the filing of any post-effective amendment to
the Registration Statement (as defined herein) or New Registration
Statement (as such term is defined in the Registration Rights
Agreement), and ending at 9:30 a.m., Eastern time, on the Business
Day immediately following, the effective date of any post-effective
amendment to the Registration Statement (as defined herein) or New
Registration Statement (as such term is defined in the Registration
Rights Agreement).


 


(ff)           “Person”
means an individual or entity including but not limited to any
limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.


 


(gg)           “Principal
Market” means the OTCQB operated by the OTC Markets
Group, Inc. (or any nationally recognized successor thereto);
provided, however, that in the event the Company’s Common
Stock is ever listed or traded on The Nasdaq Capital Market, The
Nasdaq Global Market, The Nasdaq Global Select Market, the New York
Stock Exchange, the NYSE American, the NYSE Arca, the OTC Bulletin
Board or the OTCQX operated by the OTC Markets Group, Inc. (or any
nationally recognized successor to any of the foregoing), then the
“Principal Market” shall mean such other market or
exchange on which the Company’s Common Stock is then listed
or traded.


 


(hh)           “Purchase
Amount” means, with respect to the Initial Purchase,
any Regular Purchase, any Accelerated Purchase and any Additional
Accelerated Purchase made hereunder, as applicable, the portion of
the Available Amount to be purchased by the Investor pursuant to
Section 2
hereof.


 


(ii)           “Purchase
Date” means, with respect to a Regular Purchase made
pursuant to Section
2(b) hereof, the Business Day on which the Investor
receives, after 4:00 p.m., Eastern time, but prior to 5:00 p.m.,
Eastern time, on such Business Day, a valid Regular Purchase Notice
for such Regular Purchase in accordance with this
Agreement.


 


(jj)           “Purchase
Notice” means a Regular Purchase Notice, an
Accelerated Purchase Notice or an Additional Accelerated Purchase
Notice with respect to any Regular Purchase, Accelerated Purchase
or Additional Accelerated Purchase, respectively.


 


(kk)           “Purchase
Price” means, with respect to any Regular Purchase
made pursuant to Section
2(b) hereof, the lower of: (i) the lowest Sale Price on the
applicable Purchase Date and (ii) the arithmetic average of the
three (3) lowest Closing Sale Prices for the Common Stock during
the fifteen (15) consecutive Business Days ending on the Business
Day immediately preceding such Purchase Date (in each case, to be
appropriately adjusted for any reorganization, recapitalization,
non-cash dividend, stock split or other similar transaction that
occurs on or after the date of this Agreement).


 


(ll)           
“Registration Rights
Agreement” means that certain Registration Rights
Agreement, of even date herewith between the Company and the
Investor.


 


(mm)                      
“Regular Purchase
Notice” means, with respect to any Regular Purchase
pursuant to Section
2(b) hereof, an irrevocable written notice from the Company
to the Investor directing the Investor to buy such applicable
amount of Purchase Shares at the applicable Purchase Price as
specified by the Company therein on the applicable Purchase Date
for such Regular Purchase.


 


(nn)           
“Sale
Price” means any trade price for the shares of Common
Stock on the Principal Market as reported by the Principal
Market.


 




 


 

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(oo)           “SEC”
means the U.S. Securities and Exchange Commission.


 


(pp)           “Securities”
means, collectively, the Purchase Shares (including the Initial
Purchase Shares) and the Commitment Shares.


 


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


 


 


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


 


(ss)           “Transaction
Documents” means, collectively, this Agreement and the
schedules and exhibits hereto, the Registration Rights Agreement
and the schedules and exhibits thereto, and each of the other
agreements, documents, certificates and instruments entered into or
furnished by the parties hereto or thereto in connection with the
transactions contemplated hereby and thereby.


 


(tt)
“Transfer
Agent” means Computershare Trust Company, Inc., or
such other Person who is then serving as the transfer agent for the
Company with respect to the Common Stock.


 


(uu)           “VWAP”
means with respect to an Accelerated Purchase Date or an Additional
Accelerated Purchase Date, as applicable, the volume weighted
average price of the Common Stock on the Principal Market, as
reported on the Principal Market or by another reputable source
such as Bloomberg, L.P.

 


2.
PURCHASE OF COMMON STOCK.

 


Subject
to the terms and conditions set forth in this Agreement, the
Company has the right to sell to the Investor, and the Investor has
the obligation to purchase from the Company, Purchase Shares as
follows:

 

(a)           
Initial Purchases.
On the date hereof, the Investor shall purchase from the Company
One Million (1,000,000) Purchase Shares at the Initial Purchase
Price (such purchase the “Initial Purchase” and
such Purchase Shares, the “Initial Purchase
Shares”).

 


 




 


 

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(b)           
Commencement of Regular
Sales of Common Stock. Upon the satisfaction of the
conditions set forth in Sections 7 and 8 hereof (the
“Commencement” and the
date of satisfaction of such conditions the “Commencement Date”), the
Company shall have the right, but not the obligation, to direct the
Investor, by its delivery to the Investor of a Regular Purchase
Notice from time to time, to purchase up to Two Hundred Fifty
Thousand (250,000) Purchase Shares, subject to adjustment as set
forth below in this Section 2(b) (such maximum
number of Purchase Shares, as may be adjusted from time to time,
the “Regular
Purchase Share Limit”), at the Purchase Price on the
Purchase Date (each such purchase a “Regular Purchase”);
provided,
however, that (i)
the Regular Purchase Share Limit shall be increased to Three
Hundred Thousand (300,000) Purchase Shares, if the Closing Sale
Price of the Common Stock on the applicable Purchase Date is not
below $0.10, (ii) the Regular Purchase Share Limit shall be
increased to Three Hundred Fifty Thousand (350,000) Purchase
Shares, if the Closing Sale Price of the Common Stock on the
applicable Purchase Date is not below $0.25, and (iii) the Regular
Purchase Share Limit shall be increased to Five Hundred Thousand
(500,000) Purchase Shares, if the Closing Sale Price of the Common
Stock on the applicable Purchase Date is not below $0.50;
provided,
further,
however, that if,
the Fully Adjusted Regular Purchase Share Limit then in effect
would preclude the Company from delivering to the Investor a
Regular Purchase Notice hereunder for a Purchase Amount equal to or
greater than the Alternate Adjusted Regular Purchase Share Limit,
the Alternate Adjusted Regular Purchase Share Limit shall apply in
lieu of the Fully Adjusted Regular Purchase Share Limit; and
provided,
further,
however, that the
Investor’s committed obligation under any single Regular
Purchase, other than any Regular Purchase with respect to which an
Alternate Adjusted Regular Purchase Share Limit shall apply, shall
not exceed Five Hundred Thousand ($500,000) Dollars; provided, further, however, that the parties may
mutually agree to increase the Regular Purchase Share Limit for any
Regular Purchase to up to Two Million (2,000,000) Purchase Shares.
The Company may deliver multiple Regular Purchase Notices to the
Investor in a day as often as every Business Day, so long as
Purchase Shares for all prior Regular Purchases, Accelerated
Purchases and Additional Accelerated Purchases, including, without
limitation, those that have been effected on the same Business Day
as the applicable Purchase Date, have theretofore been received by
the Investor as DWAC Shares in accordance with this Agreement.
Notwithstanding the foregoing, the Company shall not deliver a
Regular Purchase Notice to the Investor during the PEA
Period.


 

(c)           
Accelerated
Purchases. Subject to the terms and conditions of this
Agreement, beginning on the Commencement Date, in addition to
purchases of Purchase Shares as described in Section 2(b) above, the Company
shall also have the right, but not the obligation, to direct the
Investor, by its delivery to the Investor of an Accelerated
Purchase Notice from time to time in accordance with this
Agreement, to purchase the applicable Accelerated Purchase Share
Amount at the Accelerated Purchase Price on the Accelerated
Purchase Date therefor in accordance with this Agreement (each such
purchase, an “Accelerated Purchase”).
The Company may deliver an Accelerated Purchase Notice to the
Investor only on a Purchase Date on which (i) the Company also
properly submitted a Regular Purchase Notice providing for a
Regular Purchase of a number of Purchase Shares not less than the
Regular Purchase Share Limit then in effect on such Purchase Date
in accordance with this Agreement, (ii) if all Purchase Shares
subject to all prior Regular Purchases, Accelerated Purchases and
Additional Accelerated Purchases, including, without limitation,
those that have been effected on the same Business Day as the
applicable Accelerated Purchase Date with respect to which the
applicable Accelerated Purchase relates, have theretofore been
received by the Investor as DWAC Shares in accordance with this
Agreement and (iii) the Closing Sale Price of the Common Stock is
not less than the Accelerated Purchase Floor Price. Within one (1)
Business Day after completion of each Accelerated Purchase Date for
an Accelerated Purchase, the Investor will provide to the Company a
written confirmation of such Accelerated Purchase setting forth the
applicable Accelerated Purchase Share Amount and Accelerated
Purchase Price for such Accelerated Purchase (each, an
“Accelerated
Purchase Confirmation”). Notwithstanding the
foregoing, the Company shall not deliver any Accelerated Purchase
Notices during the PEA Period.

 


 




 


 

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(d)           
Additional Accelerated
Purchases. Subject to the terms and conditions of this
Agreement, beginning one (1) Business Day following the
Commencement Date and thereafter, in addition to purchases of
Purchase Shares as described in Section 2(b) and Section 2(c) above, the Company
shall also have the right, but not the obligation, to direct the
Investor, by its timely delivery to the Investor of an Additional
Accelerated Purchase Notice on an Additional Accelerated Purchase
Date in accordance with this Agreement, to purchase the applicable
Additional Accelerated Purchase Share Amount at the applicable
Additional Accelerated Purchase Price therefor in accordance with
this Agreement (each such purchase, an “Additional Accelerated
Purchase”). The Company may deliver multiple
Additional Accelerated Purchase Notices to the Investor on an
Additional Accelerated Purchase Date; provided, however, that the Company may
deliver an Additional Accelerated Purchase Notice to the Investor
only (i) on a Business Day that is also the Accelerated Purchase
Date for an Accelerated Purchase with respect to which the Company
properly submitted to the Investor an Accelerated Purchase Notice
in accordance with this Agreement on the applicable Purchase Date
for a Regular Purchase of a number of Purchase Shares not less than
the Regular Purchase Share Limit then in effect in accordance with
this Agreement, and (ii) if all Purchase Shares subject to all
prior Regular Purchases, Accelerated Purchases and Additional
Accelerated Purchases, including, without limitation, those that
have been effected on the same Business Day as the applicable
Additional Accelerated Purchase Date with respect to which the
applicable Additional Accelerated Purchase relates, have
theretofore been received by the Investor as DWAC Shares in
accordance with this Agreement. Within one (1) Business Day after
the completion of each Additional Accelerated Purchase Date, the
Investor will provide to the Company a written confirmation of each
Additional Accelerated Purchase on such Additional Accelerated
Purchase Date setting forth the applicable Additional Accelerated
Purchase Share Amount and Additional Accelerated Purchase Price for
each such Additional Accelerated Purchase on such Additional
Accelerated Purchase Date (each, an “Additional Accelerated Purchase
Confirmation”). Notwithstanding the foregoing, the
Company shall not deliver any Additional Accelerated Purchase
Notices during the PEA Period.

 


 




 


 

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(e)           
Payment for Purchase
Shares. The Investor shall pay to the Company the price for
the Initial Purchase Shares pursuant to Section 2(a) via wire transfer of
immediately available funds on the same Business Day that the
Investor receives the Initial Purchase Shares, if such Initial
Purchase Shares are so received by the Investor before 1:00 p.m.,
Eastern time, or if such Initial Purchase Shares are so received by
the Investor after 1:00 p.m. Eastern time, the next Business Day.
For each Regular Purchase, the Investor shall pay to the Company an
amount equal to the Purchase Amount with respect to such Regular
Purchase as full payment for such Purchase Shares via wire transfer
of immediately available funds on the same Business Day that the
Investor receives such Purchase Shares, if such Purchase Shares are
received by the Investor before 1:00 p.m., Eastern time, or, if
such Purchase Shares are received by the Investor after 1:00 p.m.,
Eastern time, the next Business Day. For each Accelerated Purchase
and each Additional Accelerated Purchase, the Investor shall pay to
the Company an amount equal to the Purchase Amount with respect to
such Accelerated Purchase and Additional Accelerated Purchase,
respectively, as full payment for such Purchase Shares via wire
transfer of immediately available funds on the second Business Day
following the date that the Investor receives such Purchase Shares.
If the Company or the Transfer Agent shall fail for any reason or
for no reason to electronically transfer any Purchase Shares as
DWAC Shares submitted by the Investor or its agent with respect to
any Regular Purchase, Accelerated Purchase or Additional
Accelerated Purchase (as applicable) within two (2) Business Days
following the receipt by the Company of the Purchase Price,
Accelerated Purchase Price or Additional Accelerated Purchase
Price, respectively, therefor in compliance with this Section 2(e), and if on or
after such Business Day the Investor purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Investor of such Purchase Shares that
the Investor anticipated receiving from the Company with respect to
such Regular Purchase, Accelerated Purchase or Additional
Accelerated Purchase (as applicable), then the Company shall,
within two (2) Business Days after the Investor’s request,
either (i) pay cash to the Investor in an amount equal to the
Investor’s total purchase price (including customary
brokerage commissions, if any) for the shares of Common Stock so
purchased (the “Cover Price”), at which
point the Company’s obligation to deliver such Purchase
Shares as DWAC Shares shall terminate, or (ii) promptly honor its
obligation to deliver to the Investor such Purchase Shares as DWAC
Shares and pay cash to the Investor in an amount equal to the
excess (if any) of the Cover Price over the total Purchase Amount
paid by the Investor pursuant to this Agreement for all of the
Purchase Shares to be purchased by the Investor in connection with
such purchases. The Company shall not issue any fraction of a share
of Common Stock upon the Initial Purchase or any Regular Purchase,
Accelerated Purchase or Additional Accelerated Purchase. If the
issuance would result in the issuance of a fraction of a share of
Common Stock, the Company shall round such fraction of a share of
Common Stock up or down to the nearest whole share. All payments
made under this Agreement shall be made in lawful money of the
United States of America or wire transfer of immediately available
funds to such account as the Company may from time to time
designate by written notice in accordance with the provisions of
this Agreement. Whenever any amount expressed to be due by the
terms of this Agreement is due on any day that is not a Business
Day, the same shall instead be due on the next succeeding day that
is a Business Day.


 

(f)           
Compliance with Principal
Market Rules. The Company shall not issue any Securities
pursuant to this Agreement if such issuance would reasonably be
expected to result in (A) a violation of the Securities Act or (B)
a breach of the rules and regulations of the Principal Market.
Furthermore, the Company agrees that it shall not issue any
Securities pursuant to this Agreement if, at the time of such
issuance (Y) the effectiveness of the Registration Statement
registering the Securities has lapsed for any reason (including,
without limitation, the issuance of a stop order or similar order)
or (Z) the Registration Statement is unavailable for the sale by
the Company to the Investor (or the resale by the Investor, as the
case may be) of any or all of the Securities to be issued to the
Investor under the Transaction Documents. The provisions of this
Section 2(f) shall
be implemented in a manner otherwise than in strict conformity with
the terms hereof only if necessary to ensure compliance with the
Securities Act and the rules and regulations of the Principal
Market.

 

      



 


 




 


 

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(g)           Beneficial
Ownership Limitation. Notwithstanding anything to the
contrary contained in this Agreement, the Company shall
not issue or sell, and the Investor shall not purchase or
acquire, any Common Stock under this Agreement which, when
aggregated with all other shares of Common Stock then beneficially
owned by the Investor and its affiliates (as calculated pursuant to
Section 13(d) of the Exchange Act and Rule 13d-3 promulgated
thereunder), would result in the beneficial ownership by
the Investor and its affiliates of more than 4.99%
of the then issued and outstanding shares of Common Stock (the
“Beneficial
Ownership Limitation”). Upon the written or oral
request of the Investor, the Company shall promptly (but not later
than twenty-four (24) hours) confirm orally or in writing to the
Investor the amount of Common Stock then outstanding. The Investor
and the Company shall each cooperate in good faith in the
determinations required hereby and the application
hereof.

 


(g) Excess Share Limitation. If the
Company delivers any Purchase Notice for a Purchase Amount in
excess of the limitations contained in this Section 2, such Purchase Notice
shall be void ab initio to
the extent of the amount by which the number of Purchase Shares set
forth in such Purchase Notice exceeds the number of Purchase Shares
which the Company is permitted to include in such Purchase Notice
in accordance herewith, and the Investor shall have no obligation
to purchase such excess Purchase Shares with respect to such
Purchase Notice; provided, however, that the Investor
shall remain obligated to purchase the number of Purchase Shares
which the Company is permitted to include in such Purchase
Notice.


 


(h) Adjustments for Shares. All
share-related numbers contained in this Section 2 shall be adjusted to
take into account any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction effected with
respect to the Common Stock except as specifically stated
herein.


 


3.           INVESTOR'S
REPRESENTATIONS AND WARRANTIES.


 


The
Investor represents and warrants to the Company that as of the date
hereof and as of the Commencement Date:

 


(a) Organization, Authority. The
Investor is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization,
with the requisite power and authority to enter into and to
consummate the transactions contemplated by this Agreement and
otherwise to carry out its obligations hereunder.

 


(b) Investment Purpose.  The
Investor 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
the Investor’s right to sell the Securities at any time
pursuant to the Registration Statement described herein or
otherwise in compliance with applicable federal and state
securities laws).  The Investor is acquiring the
Securities hereunder in the ordinary course of its
business.

 



            


(c)            

Accredited Investor Status. The
Investor is an "accredited investor" as that term is defined in
Rule 501(a)(3) of Regulation D promulgated under the Securities
Act.






 


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


 




 


 

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(e)           Information.
The Investor understands that its investment in the Securities
involves a high degree of risk. The Investor (i) is able to bear
the economic risk of an investment in the Securities including a
total loss thereof, (ii) has such knowledge and experience in
financial and business matters that it is capable of evaluating the
merits and risks of the proposed investment in the Securities and
(iii) has had an opportunity to ask questions of and receive
answers from the officers of the Company concerning the financial
condition and business of the Company and other matters related to
an investment in the Securities. Neither such inquiries nor any
other due diligence investigations conducted by the Investor or its
representatives shall modify, amend or affect the Investor's right
to rely on the Company's representations and warranties contained
in Section 4 below. The Investor has sought such accounting, legal
and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the
Securities.


 


(f)           No
Governmental Review. The Investor understands that no U.S.
federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of
the Securities or the fairness or suitability of an investment in
the Securities nor have such authorities passed upon or endorsed
the merits of the offering of the Securities.


 


(g)           Transfer
or Sale. The Investor understands that (i) the Securities
may not be offered for sale, sold, assigned or transferred unless
(A) registered pursuant to the Securities Act or (B) an exemption
exists permitting such Securities to be offered, sold, assigned or
transferred without such registration; and (ii) any sale of the
Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is
not applicable, any resale of the Securities under circumstances in
which the seller (or the Person through whom the sale is made) may
be deemed to be an underwriter (as that term is defined in the
Securities Act) may require compliance with some other exemption
under the Securities Act or the rules and regulations of the SEC
thereunder.


 


(h)           Validity;
Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Investor and is
a valid and binding agreement of the Investor enforceable against
the Investor in accordance with its terms, subject as to
enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and
remedies.


 


(i)           Residency.
The Investor is a resident of the State of Illinois.


 


(j)           No
Short Selling. The Investor represents and warrants to the
Company that at no time prior to the date of this Agreement has any
of the Investor, its agents, representatives or affiliates engaged
in or effected, in any manner whatsoever, directly or indirectly,
any (i) "short sale" (as such term is defined in Rule 200 of
Regulation SHO of the Exchange Act) of the Common Stock or (ii)
hedging transaction, which establishes a net short position with
respect to the Common Stock.


 


(k)           Organization,
Authority. The Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its organization, with the requisite power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and otherwise to carry out its obligations
hereunder.


 




 


 

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4.           REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.


 


The
Company represents and warrants to the Investor that, except as set
forth in the disclosure schedules attached hereto or as disclosed
in the SEC Documents (as defined below), which disclosures shall be
deemed to be a part of the representations and warranties made
hereunder, as of the date hereof and as of the Commencement
Date:


 


(a)           Organization
and Qualification. The Company and each of its 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 corporate
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 of its Subsidiaries is in violation or default
of any of the provisions of its respective articles or certificate
of incorporation, bylaws or other organizational or charter
documents. Each of the Company and its Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not have
or reasonably be expected to result in a Material Adverse Effect
and no proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification. The Company has
no Subsidiaries except as set disclosed in the SEC
Documents.


 


(b)           Authorization;
Enforcement; Validity. (i) The Company has the requisite
corporate power and authority to enter into and perform its
obligations under this Agreement and each of the Transaction
Documents, and to issue the Securities in accordance with the terms
hereof and thereof, (ii) the execution and delivery of the
Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby, including without
limitation, the issuance of the Commitment Shares (as defined below
in Section 5(e))
and the Initial Purchase Shares, and the reservation for issuance
and the issuance of the Purchase Shares issuable under this
Agreement, have been duly authorized by the Company's Board of
Directors and no further consent or authorization is required by
the Company, its Board of Directors or its stockholders (except as
provided in this Agreement), (iii) each of this Agreement and the
Registration Rights Agreement has been, and each other Transaction
Document shall be on the Commencement Date, duly executed and
delivered by the Company, and (iv) each of this Agreement and the
Registration Rights Agreement constitutes, and each other
Transaction Document upon its execution on behalf of the Company,
shall constitute, the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of creditors' rights and remedies. The
Board of Directors of the Company has approved of resolutions (the
“Signing
Resolutions”), a copy of which has been provided to
the Investor, authorizing this Agreement, the Registration Rights
Agreement and the transactions contemplated hereby. The Signing
Resolutions are valid, in full force and effect and have not been
modified or supplemented in any respect. The Company has delivered
to the Investor a true and correct copy of a unanimous written
consent adopting the Signing Resolutions executed by all of the
members of the Board of Directors of the Company. Except as set
forth in this Agreement, no other approvals or consents of the
Company’s Board of Directors, any authorized committee
thereof, and/or stockholders is necessary under Applicable Laws and
the Certificate of Incorporation or Bylaws (each as defined below)
to authorize the execution and delivery of the Transaction
Documents or any of the transactions contemplated thereby,
including, but not limited to, the issuance of the Commitment
Shares and the issuance of the Purchase Shares.


 




 


 

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(c)           Capitalization.
As of the date hereof, the authorized capital stock of the Company
is set forth in Schedule
4(c) hereof.
Except as disclosed in the SEC Documents (as defined below), (i) no
shares of the Company’s capital stock are subject to
preemptive rights or any other similar rights or any liens,
encumbrances and defects (“Liens”) suffered or
permitted by the Company, (ii) there are no outstanding debt
securities, (iii) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any
of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or
may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into,
any shares of capital stock of the Company or any of its
Subsidiaries, (iv) there are no agreements or arrangements under
which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the Securities
Act (except the Registration Rights Agreement), (v) there are no
outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions,
and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or
may become bound to redeem a security of the Company or any of its
Subsidiaries, (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities as described in this
Agreement and (vii) the Company does not have any stock
appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. The Company has furnished to the
Investor true and correct copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the
"Certificate of
Incorporation"), and the Company's Amended and Restated
Bylaws, as amended and as in effect on the date hereof (the
"Bylaws"),
summaries of the terms of all securities convertible into or
exercisable for Common Stock, if any, and copies of any documents
containing the material rights of the holders thereof in respect
thereto.


 


(d)           Issuance
of Securities. Upon issuance and payment therefor in
accordance with the terms and conditions of this Agreement, the
Purchase Shares shall be validly issued, fully paid and
nonassessable and free from all taxes, Liens, charges,
restrictions, rights of first refusal and preemptive rights with
respect to the issue thereof, with the holders being entitled to
all rights accorded to a holder of Common Stock. Seventy Three
Million (73,000,000) shares of Common Stock have been duly
authorized and reserved for issuance upon purchase under this
Agreement as Purchase Shares (excluding the Initial Purchase
Shares). One Million Five Hundred Thousand (1,500,000) shares of
Common Stock have been duly authorized and reserved for issuance as
Commitment Shares (as defined below in Section 5(e)) in accordance
with this Agreement. The Commitment Shares shall be validly issued,
fully paid and nonassessable and free from all taxes, liens,
charges, restrictions, rights of first refusal and preemptive
rights with respect to the issue thereof, with the holders being
entitled to all rights accorded to a holder of Common
Stock.


 




 


 

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(e)           No
Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby
(including, without limitation, the reservation for issuance and
the issuance of the Purchase Shares and the Commitment Shares) will
not (i) result in a violation of the Certificate of Incorporation
(including any Certificate of Designations, Preferences and Rights
of any outstanding series of preferred stock of the Company) or the
Bylaws or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a
party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the Principal
Market applicable to the Company or any of its Subsidiaries) or by
which any property or asset of the Company or any of its
Subsidiaries is bound or affected, except in the case of conflicts,
defaults, terminations, amendments, accelerations, cancellations
and violations under clause (ii), which could not reasonably be
expected to result in a Material Adverse Effect. Neither the
Company nor any Subsidiary is in violation or default of or under
(i) any provision of the Certificate of Incorporation or Bylaws or
under its respective certificate or articles of incorporation, any
certificate of designation, preferences and rights of any
outstanding series of preferred stock, organizational charter or
bylaws, respectively, (ii) the terms of any indenture, contract,
lease, mortgage, deed of trust, note agreement, loan agreement or
other agreement, obligation, condition, covenant or instrument to
which it is a party or bound or to which its property is subject,
or (iii) any judgment, order or decree of any court, regulatory
body, administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company or any of its
properties, which, in the case of clauses (ii) or (iii), could be
reasonably expected to have a Material Adverse Effect. Except as
specifically contemplated by this Agreement and as required under
the Securities Act or applicable state securities laws and the
rules and regulations of the Principal Market, the Company is not
required to obtain any consent, Authorization or order of, or make
any filing or registration with, any court or governmental agency
or any regulatory or self-regulatory agency in order for it to
execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents in accordance with the
terms hereof or thereof. Except as set forth elsewhere in this
Agreement, all consents, Authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to
the preceding sentence shall be obtained or effected on or prior to
the Commencement Date.


 


(f)           SEC
Documents; Financial Statements. The Company has filed all
reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the 24 months preceding the date hereof (or such shorter period
as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto
and documents incorporated by reference therein, being collectively
referred to herein as the “SEC Documents”) on a
timely basis or has received a valid extension of such time of
filing and has filed any such SEC Documents prior to the expiration
of any such extension.  As of their respective dates, the
SEC Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act, as
applicable. None of the SEC Documents, when filed, contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under
which they were made, not misleading. The financial statements of
the Company included in the SEC Documents comply in all material
respects with applicable accounting requirements and the rules and
regulations of the SEC with respect thereto as in effect at the
time of filing.  Such financial statements have been
prepared in accordance with 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. Except as set forth in the
SEC Documents, the Company has received no notices or
correspondence from the SEC for the one year preceding the date
hereof. The SEC has not commenced any enforcement proceedings
against the Company or any of its Subsidiaries.


 




 


 

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(g)           Absence
of Certain Changes. Except as disclosed in the SEC
Documents, since December 31, 2019, there has been no material
adverse change in the business, properties, operations, financial
condition or results of operations of the Company or its
Subsidiaries. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to
any Bankruptcy Law nor does the Company or any of its Subsidiaries
have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy or insolvency
proceedings.


 


(h)           Absence
of Litigation. There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened
against or affecting the Company, the Common Stock or any of the
Company's or its Subsidiaries' officers or directors in their
capacities as such, which could reasonably be expected to have a
Material Adverse Effect.


 


(i)           Acknowledgment
Regarding Investor's Status. The Company acknowledges and
agrees that the Investor is acting solely in the capacity of arm's
length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further
acknowledges that the Investor is not 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 hereby and thereby and any advice given by the
Investor or any of its representatives or agents in connection with
the Transaction Documents and the transactions contemplated hereby
and thereby is merely incidental to the Investor's purchase of the
Securities. The Company further represents to the Investor that the
Company's decision to enter into the Transaction Documents has been
based solely on the independent evaluation by the Company and its
representatives and advisors.


 


(j)           Principal
Market Rules. The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the
Principal Market.


 


(k)        
Intellectual Property
Rights. The Company and its Subsidiaries own or possess
adequate rights or licenses to use all material trademarks, trade
names, service marks, service mark registrations, service names,
patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and rights
necessary to conduct their respective businesses as now conducted.
None of the Company’s material trademarks, trade names,
service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals,
government authorizations, trade secrets or other intellectual
property rights have expired or terminated, or, by the terms and
conditions thereof, could expire or terminate within two years from
the date of this Agreement. The Company and its Subsidiaries do not
have any knowledge of any infringement by the Company or its
Subsidiaries of any material trademark, trade name rights, patents,
patent rights, copyrights, inventions, licenses, service names,
service marks, service mark registrations, trade secret or other
similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others, and
there is no claim, action or proceeding being made or brought
against, or to the Company’s knowledge, being threatened
against, the Company or its Subsidiaries regarding trademark, trade
name, patents, patent rights, invention, copyright, license,
service names, service marks, service mark registrations, trade
secret or other infringement, which could reasonably be expected to
have a Material Adverse Effect.


 


(l)           Environmental
Laws. The Company and its Subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants (“Environmental Laws”),
(ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all
terms and conditions of any such permit, license or approval,
except where, in each of the three foregoing clauses, the failure
to so comply could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.


 




 


 

-15-








 






 


 


(m)           Title.
The Company and its Subsidiaries own no real property. Except as
disclosed in the SEC Documents, 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 its Subsidiaries, in each case free and clear of all
Liens and, except for Liens as do not materially affect the value
of such property and do not materially interfere with the use made
and proposed to be made of such property by the Company and its
Subsidiaries and Liens for the payment of federal, state or other
taxes, the payment of which is neither delinquent nor subject to
penalties.  Any real property and facilities held under
lease by the Company and its Subsidiaries are held by them under
valid, subsisting and enforceable leases with which the Company and
its Subsidiaries are in compliance with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its
Subsidiaries.


 


(n)           Insurance.
The Company and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and
its Subsidiaries are engaged. Neither the Company nor any such
Subsidiary has been refused any insurance coverage sought or
applied for and neither the Company nor any such Subsidiary has any
reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to
continue its business at a cost that could not reasonably be
expected to have a Material Adverse Effect.


 


(o)           Regulatory
Permits. The Company and its Subsidiaries possess all
material certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses, and neither the
Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such
certificate, authorization or permit.


 


(p)           Tax
Status. The Company and each of its Subsidiaries has made or
filed all federal and state income and all other material tax
returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company
and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being
contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for
any such claim.


 


(q)           Transactions
With Affiliates.  Except as set forth in the SEC
Documents, none of the officers or directors of the Company and, to
the knowledge of the Company, none of the Company’s
stockholders, the officers or directors of any stockholder of the
Company, or any family member or affiliate of any of the foregoing,
has either directly or indirectly any interest in, or is a party
to, any transaction that is required to be disclosed as a related
party transaction pursuant to Item 404 of Regulation S-K
promulgated under the Securities Act.


 


(r)           Application
of Takeover Protections. The Company and its Board of
Directors have taken or will take prior to the Commencement Date
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 Certificate of
Incorporation or the laws of the state of its incorporation which
is or could become applicable to the Investor as a result of the
transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Securities and the
Investor's ownership of the Securities.


 




 


 

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(s)            Disclosure.  Except
with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents that will be
timely publicly disclosed by the Company, the Company confirms that
neither it nor any other Person acting on its behalf has provided
the Investor or its agents or counsel with any information that it
believes constitutes or might constitute material, non-public
information which is not otherwise disclosed in the Registration
Statement or the SEC Documents.   The Company
understands and confirms that the Investor will rely on the
foregoing representation in effecting purchases and sales of
securities of the Company.  All of the disclosure
furnished by or on behalf of the Company to the Investor regarding
the Company, its business and the transactions contemplated hereby,
including the disclosure schedules to this Agreement, is true and
correct in all material respects and does not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading. The
press releases disseminated by the Company during the twelve (12)
months preceding the date of this Agreement taken as a whole do not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under
which they were made and when they were made, not
misleading.  The Company acknowledges and agrees that the
Investor neither makes nor has made any representations or
warranties with respect to the transactions contemplated hereby
other than those specifically set forth in Section 3 hereof.


 


(t)           Foreign
Corrupt Practices. Neither the Company nor any of the
Subsidiaries nor, to the knowledge of the Company, any director,
officer, agent, employee or affiliate of the Company or any of the
Subsidiaries is aware of or has taken any action, directly or
indirectly, that would result in a violation by such persons of the
Foreign Corrupt Practices Act of 1977, as amended, and the rules
and regulations thereunder (the “FCPA”), including,
without limitation, making use of the mails or any means or
instrumentality of interstate commerce corruptly in furtherance of
an offer, payment, promise to pay or authorization of the payment
of any money, or other property, gift, promise to give, or
authorization of the giving of anything of value to any
“foreign official” (as such term is defined in the
FCPA) or any foreign political party or official thereof or any
candidate for foreign political office, in contravention of the
FCPA; and the Company, the Subsidiaries and, to the knowledge of
the Company, its affiliates have conducted their businesses in
compliance with the FCPA and have instituted and maintain policies
and procedures designed to ensure, and which are reasonably
expected to continue to ensure, continued compliance therewith. The
operations of the Company and the Subsidiaries are and have been
conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements and the money laundering
statutes and the rules and regulations thereunder and any related
or similar rules, regulations or guidelines, issued, administered
or enforced by any applicable governmental agency, including,
without limitation, Title 18 U.S. Code section 1956 and 1957, the
Patriot Act, the Bank Secrecy Act, and international anti-money
laundering principles or procedures by an intergovernmental group
or organization, such as the Financial Action Task Force on Money
Laundering, of which the United States is a member and with which
designation the United States representative to the group or
organization continues to concur, all as amended, and any Executive
order, directive or regulation pursuant to the authority of any of
the foregoing, or any orders or licenses issued 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 of its Subsidiaries with respect to the Money
Laundering Laws is pending or, to the knowledge of the Company,
threatened. Neither the Company nor any of its Subsidiaries, nor to
the knowledge of the Company any of the directors, officers or
employees, agents, affiliates or representatives of the Company or
its Subsidiaries, is an individual or entity that is, or is owned
or controlled by an individual or entity that is: (i) the subject
of any sanctions administered or enforced by the U.S. Department of
Treasury's Office of Foreign Assets Control, the United Nations
Security Council, the European Union, Her Majesty’s Treasury,
or other relevant sanctions authority (collectively,
“Sanctions”), nor (ii)
located, organized or resident in a country or territory that is
the subject of Sanctions (including, without limitation, the
Balkans, Belarus, Burma/Myanmar, Cote D’Ivoire, Cuba,
Democratic Republic of Congo, Iran, Iraq, Liberia, Libya, North
Korea, Sudan, Syria, Venezuela and Zimbabwe). Neither the Company
nor any of its Subsidiaries will, directly or indirectly, use the
proceeds of the transactions contemplated hereby, or lend,
contribute or otherwise make available such proceeds to any
subsidiary, joint venture partner or other individual or entity:
(i) to fund or facilitate any activities or business of or with any
individual or entity or in any country or territory that, at the
time of such funding or facilitation, is the subject of Sanctions
or (ii) in any other manner that will result in a violation of
Sanctions by any individual or entity (including any individual or
entity participating in the transactions contemplated hereby,
whether as underwriter, advisor, investor or otherwise). For the
past five years, neither the Company nor any of its Subsidiaries
has knowingly engaged in, and is not now knowingly engaged in, any
dealings or transactions with any individual or entity, or in any
country or territory, that at the time of the dealing or
transaction is or was the subject of Sanctions.


 




 


 

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(u)           
DTC Eligibility.
The Company, through the Transfer Agent, currently participates in
the DTC Fast Automated Securities Transfer (FAST) Program and the
Common Stock can be transferred electronically to third parties via
the DTC Fast Automated Securities Transfer (FAST)
Program.


 


(v)           Accounting
Controls; Sarbanes-Oxley. The Company maintains a system of
internal accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in accordance with
management’s general or specific authorization; (B)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain
accountability for assets; (C) access to assets is permitted only
in accordance with management’s general or specific
authorization; and (D) the recorded accountability for assets is
compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. Except
as disclosed in the SEC Documents, the Company has concluded that
its internal control over financial reporting is effective and the
Company is not aware of any “significant deficiencies”
or “material weaknesses” (each as defined by the rules
adopted by the SEC) in its internal control over financial
reporting, or any fraud, whether or not material, that involves
management or other employees of the Company and its Subsidiaries
who have a significant role in the Company’s internal
controls; and since the end of the latest audited fiscal year,
there has been no change in the Company’s internal control
over financial reporting (whether or not remediated) that has
materially affected, or is reasonably likely to materially affect,
the Company’s internal control over financial reporting. The
Board of Directors has, subject to the exceptions, cure periods and
the phase in periods specified in the applicable stock exchange
rules of the Principal Market (“Exchange
Rules”), validly appointed an audit
committee to oversee internal accounting controls whose composition
satisfies the applicable independence and other requirements of the
Exchange Rules and the rules under the Exchange Act, and the Board
of Directors has adopted a charter for the audit committee that
satisfies the requirements of the Exchange Rules and the rules
under the Exchange Act. No relationship, direct or indirect, exists
between or among the Company, on the one hand, and the directors,
officers, stockholders, customers or suppliers of the Company, on
the other hand, which is required to be described in the
Registration Statement which is not so described. The Company has
not, directly or indirectly, extended or maintained credit, or
arranged for the extension of credit, or renewed an extension of
credit, in the form of a personal loan to or for any of its
directors or executive officers in violation of Applicable Laws,
including Section 402 of the Sarbanes-Oxley Act of 2002 and the
rules and regulations promulgated in connection
therewith.


 


(w)           Certain
Fees. No brokerage or finder’s fees or commissions are
or will be payable by the Company to any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. The Investor shall have no obligation with
respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this
Section 4(w) that
may be due in connection with the transactions contemplated by the
Transaction Documents.


 


(x)           Investment
Company. The Company is not, and immediately after giving
effect to the sale of the Purchase Shares in accordance with this
Agreement and the application of the proceeds as described in the
Registration Statement under the caption “Use of
Proceeds,” will not be, an “investment company”
within the meaning of the Investment Company Act of 1940, as
amended.

 


(y)           Listing
and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) of the Exchange Act, and the Company
has taken no action designed to, or which to its knowledge is
likely to have the effect of, terminating the registration of the
Common Stock pursuant to the Exchange Act nor has the Company
received any notification that the SEC is currently contemplating
terminating such registration. Except as disclosed in the SEC
Documents, the Company has not, in the twelve (12) months preceding
the date hereof, received any notice from any Person to the effect
that the Company is not in compliance with the listing or
maintenance requirements of the Principal Market. Except as
disclosed in the SEC Documents, 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.

 


 




 


 

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(z)           Accountants.
The Company’s accountants are set forth in the SEC Documents
and, to the knowledge of the Company, such accountants are an
independent registered public accounting firm as required by the
Securities Act.

 


(aa)           No
Market Manipulation.  The Company has not, and to its
knowledge no Person 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.

 


(bb)           Shell
Company Status. The Company is not currently, and has never
been, an issuer identified in Rule 144(i)(1) under the Securities
Act.

 


(cc)           Benefit
Plans; Labor Matters. Each
benefit and compensation plan, agreement, policy and arrangement
that is maintained, administered or contributed to by the Company
for current or former employees or directors of, or independent
contractors with respect to, the Company has been maintained in
compliance with its terms and the requirements of any applicable
statutes, orders, rules and regulations, and the Company has
complied in all material respects with all applicable statutes,
orders, rules and regulations in regard to such plans, agreements,
policies and arrangements. Each stock option granted under any
equity incentive plan of the Company (each, a
“Stock
Plan”) was granted with a
per share exercise price no less than the market price per common
share on the grant date of such option in accordance with the rules
of the Principal Market, and no such grant involved any
“back-dating,” “forward-dating” or similar
practice with respect to the effective date of such grant; each
such option (i) was
granted in compliance in all material respects with Applicable Laws
and with the applicable Stock Plan(s), (ii) was duly approved by
the Board of Directors or a
duly authorized committee thereof, and (iii) has been (or will
be, if granted after March 31, 2020) properly accounted for in the
Company’s financial statements and disclosed, to the extent
required, in the Company’s filings or submissions with the
SEC, and the Principal Market. No labor problem or dispute with the
employees of the Company exists or is threatened or imminent, and
the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers or
contractors, that would have a Material Adverse
Effect.

 


(dd)           Regulatory.
During the 12-month period immediately preceding the date hereof,
except as described in the SEC Documents, the Company and each of
its Subsidiaries: (A) is and at all times has been in material
compliance with all applicable U.S. and foreign statutes, rules,
regulations, or guidance applicable to Company and its Subsidiaries
(“Applicable
Laws”), except as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect; (B) have not received any notice of adverse finding,
warning letter, untitled letter or other correspondence or notice
from any other federal, state, or foreign governmental authority
having authority over the Company (“Governmental Authority”)
alleging or asserting noncompliance with any Applicable Laws or any
licenses, certificates, approvals, clearances, authorizations,
permits and supplements or amendments thereto required by any such
Applicable Laws (“Authorizations”); (C)
possess all material Authorizations and such material
Authorizations are valid and in full force and effect and are not
in violation of any term of any such material Authorizations; (D)
have not received notice of any claim, action, suit, proceeding,
hearing, enforcement, investigation, arbitration or other action
from any Governmental Authority or third party alleging that any
product, operation or activity is in violation of any Applicable
Laws or Authorizations and have no knowledge that any such
Governmental Authority or third party is considering any such
claim, litigation, arbitration, action, suit, investigation or
proceeding; (E) have not received notice that any Governmental
Authority has taken, is taking or intends to take action to limit,
suspend, modify or revoke any Authorizations and the Company has no
knowledge that any such Governmental Authority is considering such
action; and (F) have filed, obtained, maintained or submitted all
material reports, documents, forms, notices, applications, records,
claims, submissions and supplements or amendments as required by
any Applicable Laws or material Authorizations and that all such
reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments were complete and correct
in all material respects on the date filed (or were corrected or
supplemented by a subsequent submission).

 


 




 


 

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(ee)           No
Disqualification Events. None of the Company, any of its
predecessors, any affiliated issuer, any director, executive
officer, other officer of the Company participating in the
transactions contemplated hereby, any beneficial owner of 20% or
more of the Company's outstanding voting equity securities,
calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the Securities Act) connected
with the Company in any capacity at the time of sale (each, an
“Issuer Covered
Person”) is subject to any of the “Bad
Actor” disqualifications described in Rule 506(d)(1)(i) to
(viii) under the Securities Act (a “Disqualification Event”),
except for a Disqualification Event covered by Rule 506(d)(2) or
(d)(3) under the Securities Act. The Company has exercised
reasonable care to determine whether any Issuer Covered Person is
subject to a Disqualification Event.

 


(ff)           Absence
of Schedules. In the event of
an undelivered disclosure schedule to any of the representations
and warranties set forth in this Section 4, the Company hereby
acknowledges and agrees that each such undelivered disclosure
schedule shall be deemed to read as follows: “Nothing to
Disclose”.

 


5.           COVENANTS.


 


(a)           Filing
of Current Report and Registration Statement. The Company
agrees that it shall, within the time required under the Exchange
Act, file with the SEC a report on Form 8-K relating to the
transactions contemplated by, and describing the material terms and
conditions of, the Transaction Documents (the “Current Report”). The
Company shall also file with the SEC by May 31, 2021 a new
registration statement (the “Registration Statement”)
covering only the resale of Purchase Shares, the Initial Purchase
Shares and the Commitment Shares, in accordance with the terms of
the Registration Rights Agreement. The Company shall permit the
Investor to review and comment upon the final pre-filing draft
version of the Current Report at least one (1) Business Day prior
to its filing with the SEC, and the Company shall not file the
Current Report or the Registration Statement with the SEC in a form
to which the Investor reasonably objects. The Investor shall use
its reasonable best efforts to comment upon the final pre-filing
draft version of the Current Report within on the Business Day the
Investor receives it from the Company.


 


(b)           Blue
Sky. The Company shall take all such action, if any, as is
reasonably necessary in order to obtain an exemption for or to
register or qualify (i) the issuance of the Commitment Shares and
the sale of the Purchase Shares to the Investor under this
Agreement and (ii) any subsequent resale of all Commitment Shares
and all Purchase Shares by the Investor, in each case, under
applicable securities or “Blue Sky” laws of the states
of the United States in such states as is reasonably requested by
the Investor from time to time, and shall provide evidence of any
such action so taken to the Investor.


 


(c)           Listing/DTC.
The Company shall promptly secure the listing of all of the
Purchase Shares and Commitment Shares to be issued to the Investor
hereunder on the Principal Market (subject to official notice of
issuance) and upon each other national securities exchange or
automated quotation system, if any, upon which the Common Stock is
then listed, and shall maintain, so long as any shares of Common
Stock shall be so listed, such listing of all such Securities from
time to time issuable hereunder. The Company shall maintain the
listing of the Common Stock on the Principal Market and shall
comply in all respects with the Company’s reporting, filing
and other obligations under the bylaws or rules and regulations of
the Principal Market. Neither the Company nor any of its
Subsidiaries shall take any action that would reasonably be
expected to result in the delisting or suspension of the Common
Stock on the Principal Market. The Company shall promptly, and in
no event later than the following Business Day, provide to the
Investor copies of any notices it receives from any Person
regarding the continued eligibility of the Common Stock for listing
on the Principal Market; provided, however, that the Company shall
not provide the Investor copies of any such notice that the Company
reasonably believes constitutes material non-public information,
and the Company would not be required to publicly disclose such
notice in any report or statement filed with the SEC under the
Exchange Act (including on Form 8-K) or the Securities Act. The
Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 5(c). The Company shall take all
action necessary to ensure that its Common Stock can be transferred
electronically as DWAC Shares.


 




 


 

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(d)           Prohibition
of Short Sales and Hedging Transactions. The Investor agrees
that beginning on the date of this Agreement and ending on the date
of termination of this Agreement as provided in Section 11, the Investor and
its agents, representatives and affiliates shall not in any manner
whatsoever enter into or effect, directly or indirectly, any (i)
“short sale” (as such term is defined in Rule 200 of
Regulation SHO of the Exchange Act) of the Common Stock or (ii)
hedging transaction, which establishes a net short position with
respect to the Common Stock.


 


(e)           Issuance
of Commitment Shares. In consideration for the
Investor’s execution and delivery of this Agreement, the
Company shall cause to be issued a total of One Million (1,000,000)
shares of Common Stock (the “Commitment Shares”)
directly to the Investor and shall deliver to the Transfer Agent
the Irrevocable Transfer Agent Instructions (as defined below). For
the avoidance of doubt, all of the Commitment Shares shall be fully
earned as of the date of this Agreement, whether or not the
Commencement shall occur or any Purchase Shares, except the Initial
Purchase Shares, are purchased by the Investor under this Agreement
and irrespective of any termination of this Agreement.


 


(f)           Due
Diligence; Non-Public Information. The Investor shall have
the right, from time to time as the Investor may reasonably deem
appropriate, to perform reasonable due diligence on the Company
during normal business hours. The Company and its officers and
employees shall provide information and reasonably cooperate with
the Investor in connection with any reasonable request by the
Investor related to the Investor’s due diligence of the
Company. Each party hereto agrees not to disclose any Confidential
Information of the other party to any third party and shall not use
the Confidential Information for any purpose other than in
connection with, or in furtherance of, the transactions
contemplated hereby in full compliance with applicable securities
laws. Each party hereto acknowledges that the Confidential
Information shall remain the property of the disclosing party and
agrees that it shall take all reasonable measures to protect the
secrecy of any Confidential Information disclosed by the other
party. The Company confirms that neither it nor any other Person
acting on its behalf shall provide the Investor or its agents or
counsel with any information that constitutes or might constitute
material, non-public information, unless a public announcement
thereof is made by the Company in the manner contemplated by
Regulation FD under the Exchange Act. In the event of a breach of
the foregoing covenant by the Company or any Person acting on its
behalf (as determined in the reasonable good faith judgment of the
Investor), in addition to any other remedy provided herein or in
the other Transaction Documents, the Investor shall have the right
to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, non-public
information without the prior approval by the Company; provided the
Investor shall have first provided notice to the Company that it
believes it has received information that constitutes material,
non-public information, the Company shall have at least one (1)
Business Day to publicly disclose such material, non-public
information prior to any such disclosure by the Investor, and the
Company shall have failed to publicly disclose such material,
non-public information within such time period. The Investor shall
not have any liability to the Company, any of its Subsidiaries, or
any of their respective directors, officers, employees,
stockholders or agents, for any such disclosure. The Company
understands and confirms that the Investor shall be relying on the
foregoing covenants in effecting transactions in securities of the
Company.

 


(g)         
Purchase Records. The Investor
and the Company shall each maintain records showing the remaining
Available Amount at any given time and the dates and Purchase
Amounts for each Regular Purchase, Accelerated Purchase and
Additional Accelerated Purchase or shall use such other method,
reasonably satisfactory to the Investor and the
Company.

 


(h)           Taxes.
 The Company
shall pay any and all transfer, stamp or similar taxes that may be
payable with respect to the issuance and delivery of any shares of
Common Stock to the Investor made under this
Agreement.


 




 


 

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(i)           Reserved.

 


(j)           Use
of Proceeds. The Company may use the net proceeds from any
sale of Purchase Shares for any corporate purpose at its sole
discretion.

 


(k)           Other
Transactions. The Company shall not enter into, announce or
recommend to its stockholders any agreement, plan, arrangement or
transaction in or of which the terms thereof would restrict,
materially delay, conflict with or impair the ability or right of
the Company to perform its obligations under the Transaction
Documents, including, without limitation, the obligation of the
Company to deliver the Purchase Shares and the Commitment Shares to
the Investor in accordance with the terms of the Transaction
Documents.

 


(l)           Integration.
From and after the date of this Agreement, neither the Company, nor
any of its affiliates will, and the Company shall use its
reasonable best efforts to ensure that no Person acting on their
behalf will, directly or indirectly, make any offers or sales of
any security or solicit any offers to buy any security, under
circumstances that would require registration of the offer and sale
of any of the Securities under the Securities Act.

 


 




 


 

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(m)           Limitation
on Variable Rate Transactions. From and until the later of:
(i) Twenty-Four (24) months from the date hereof or (ii) the
Maturity Date (irrespective of any earlier termination of this
Agreement, the Company shall be prohibited from effecting or
entering into an agreement to effect any issuance by the Company or
any of its Subsidiaries of Common Stock or Common Stock Equivalents
(or a combination of units thereof) involving a Variable Rate
Transaction, other than in connection with an Exempt Issuance. The
Investor shall be entitled to seek injunctive relief against the
Company and its Subsidiaries to preclude any such issuance, which
remedy shall be in addition to any right to collect damages,
without the necessity of showing economic loss and without any bond
or other security being required. “Common Stock Equivalents”
means any securities of the Company or its Subsidiaries which
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
“Variable Rate
Transaction” means a transaction, from and until the
later of (i) twenty-four (24) months from the date hereof or (ii)
the Maturity Date, in which the Company (i) issues or sells any
equity or debt securities that are convertible into, exchangeable
or exercisable for, or include the right to receive additional
shares of Common Stock or Common Stock Equivalents either (A) at a
conversion price, exercise price, exchange rate or other price that
is based upon and/or varies with the trading prices of or
quotations for the Common Stock at any time after the initial
issuance of such equity or debt securities (including, without
limitation, pursuant to any “cashless exercise”
provision), or (B) with a conversion, exercise or exchange price
that is subject to being reset at some future date after the
initial issuance of such equity or debt security or upon the
occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common
Stock (including, without limitation, any “full
ratchet” or “weighted average” anti-dilution
provisions, but not including any standard anti-dilution protection
for any reorganization, recapitalization, non-cash dividend, stock
split, reverse stock split or other similar transaction), (ii)
issues or sells any equity or debt securities, including without
limitation, Common Stock or Common Stock Equivalents, either
(A) at a price that is subject to being reset at some future
date after the initial issuance of such debt or equity security or
upon the occurrence of specified or contingent events directly or
indirectly related to the business of the Company or the market for
the Common Stock (other than standard anti-dilution protection for
any reorganization, recapitalization, non-cash dividend, stock
split, reverse stock split or other similar transaction), or (B)
that is subject to or contains any put, call, redemption, buy-back,
price-reset or other similar provision or mechanism (including,
without limitation, a “Black-Scholes” put or call
right) that provides for the issuance of additional equity
securities of the Company or the payment of cash by the Company, or
(iii) enters into any agreement, including, but not limited to, an
“equity line”, “at-the-market offering”
that is not an Exempt Issuance or other continuous offering or
similar offering of Common Stock or Common Stock Equivalents,
whereby the Company may sell Common Stock or Common Stock
Equivalents at a future determined price. “Exempt Issuance” means
the issuance of (a) Common Stock, options, restricted stock units
or other equity incentive awards to employees, officers, directors
or vendors of the Company pursuant to any equity incentive plan
duly adopted for such purpose, by the Board of Directors of the
Company or a majority of the members of a committee of directors
established for such purpose, (b) any Securities issued to the
Investor pursuant to this Agreement, (c) shares of Common Stock,
Common Stock Equivalents or other securities issued to the Investor
pursuant to any other existing or future contract, agreement or
arrangement between the Company and the Investor, (d) shares of
Common Stock, Common Stock Equivalents or other securities upon the
exercise, exchange or conversion of any shares of Common Stock,
Common Stock Equivalents or other securities held by the Investor
at any time, (e) any securities issued upon the exercise or
exchange of or conversion of any Common Stock Equivalents issued
and outstanding on the date hereof, provided that such securities
or Common Stock Equivalents referred to in this clause (e) have not
been amended since the date hereof to increase the number of such
securities or Common Stock underlying such securities or to
decrease the exercise price, exchange price or conversion price of
such securities, (f) Common Stock Equivalents that are convertible
into, exchangeable or exercisable for, or include the right to
receive shares of Common Stock at a conversion price, exercise
price, exchange rate or other price (which may be below the then
current market price of the Common Stock) that is fixed at the time
of initial issuance of such Common Stock Equivalents (subject only
to standard anti-dilution protection for any reorganization,
recapitalization, non-cash dividend, stock split, reverse stock
split or other similar transaction), which fixed conversion price,
exercise price, exchange rate or other price shall not at any time
after the initial issuance of such Common Stock Equivalent be based
upon or varying with the trading prices of or quotations for the
Common Stock or subject to being reset at some future date, (g)
securities issued pursuant to acquisitions, divestitures, licenses,
partnerships, collaborations or strategic transactions approved by
the Board of Directors of the Company or a majority of the members
of a committee of directors established for such purpose, which
acquisitions, divestitures, licenses, partnerships, collaborations
or strategic transactions can have a Variable Rate Transaction
component, provided that any such issuance shall only be to a
Person (or to the equity holders of a Person) which is, itself or
through its subsidiaries, an operating company or an asset in a
business synergistic with the business of the Company and shall
provide to the Company additional benefits in addition to the
investment of funds, but shall not include a transaction in which
the Company is issuing securities primarily for the purpose of
raising capital or to an entity whose primary business is investing
in securities, (h) Common Stock issued pursuant to an
“at-the-market offering” by the Company exclusively
through a registered broker-dealer acting as agent of the Company
pursuant to a written agreement between the Company and such
registered broker-dealer or (i) equity securities issued in
connection with future financings or offerings of the Company, such
as but not limited to, registered direct offerings, rights
offerings, and confidentially marketed public offerings; provided
such underlying transactions do not involve a Variable Rate
Transaction.

 


 




 


 

-23-








 






 

 


6.           TRANSFER
AGENT INSTRUCTIONS.


 


(a)   On the date of this
Agreement, the Company shall issue irrevocable instructions to the
Transfer Agent substantially in the form attached hereto as
Exhibit
C to issue the Initial Purchase Shares and the Commitment
Shares in accordance with the terms of this Agreement (the
“Irrevocable
Transfer Agent Instructions”). The certificate(s) or
book-entry statement(s) representing the Initial Purchase Shares
and the Commitment Shares, except as set forth below, shall bear
the following restrictive legend (the “Restrictive
Legend”):

 


THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE
144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION
OF HOLDER’S COUNSEL, IN A CUSTOMARY FORM, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS.

 


(b) On the earlier of
(i) the Commencement Date and (ii) such time that the Investor
shall request, provided all conditions of Rule 144 under the
Securities Act are met, the Company shall, no later than one (1)
Business Day following the delivery by the Investor to the Company
or the Transfer Agent of one or more legended certificates or
book-entry statements representing the Initial Purchase Shares and
the Commitment Shares (which certificates or book-entry statements
the Investor shall promptly deliver on or prior to the first to
occur of the events described in clauses (i) and (ii) of this
sentence), as directed by the Investor, issue and deliver (or cause
to be issued and delivered) to the Investor, as requested by the
Investor, either: (A) a certificate or book-entry statement
representing such Initial Purchase Shares and Commitment Shares
that is free from all restrictive and other legends or (B) a number
of shares of Common Stock equal to the number of Commitment Shares
represented by the certificate(s) or book-entry statement(s) so
delivered by the Investor as DWAC Shares. The Company shall take
all actions to carry out the intent and accomplish the purposes of
the immediately preceding sentence, including, without limitation,
delivering all such legal opinions, consents, certificates,
resolutions and instructions to the Transfer Agent, and any
successor transfer agent of the Company, as may be requested from
time to time by the Investor or necessary or desirable to carry out
the intent and accomplish the purposes of the immediately preceding
sentence. On the Commencement Date, the Company shall issue to the
Transfer Agent, and any subsequent transfer agent, (i) irrevocable
instructions in the form substantially similar to those used by the
Investor in substantially similar transactions (the
“Commencement
Irrevocable Transfer Agent Instructions”) and (ii)
confirmation that such registration statement has been declared
effective by the SEC in a form acceptable to the transfer agent
(the “Notice of
Effectiveness of Registration Statement”), in each
case to issue the Initial Purchase Shares and the Commitment Shares
and the Purchase Shares in accordance with the terms of this
Agreement and the Registration Rights Agreement. All Purchase
Shares to be issued from and after Commencement to or for the
benefit of the Investor pursuant to this Agreement shall be issued
only as DWAC Shares. The Company represents and warrants to the
Investor that, while this Agreement is effective, no instruction
other than the Commencement Irrevocable Transfer Agent Instructions
and the Notice of Effectiveness of Registration Statement referred
to in this Section
6(b) will be
given by the Company to the Transfer Agent with respect to the
Commitment Shares or the Purchase Shares from and after
Commencement, and the Commitment Shares, and the Purchase Shares
and the Commitment Shares covered by the Registration Statement
shall otherwise be freely transferable on the books and records of
the Company. The Company agrees that if the Company fails to fully
comply with the provisions of this Section 6(b) within five (5)
Business Days of the Investor providing the deliveries referred to
above, the Company shall, at the Investor’s written
instruction, purchase such shares of Common Stock containing the
Restrictive Legend from the Investor at the greater of the (i)
Purchase Price or Accelerated Purchase Price paid for such shares
of Common Stock (as applicable) and (ii) the Closing Sale Price of
the Common Stock on the date of the Investor’s written
instruction.

 


 




 


 

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7.            

CONDITIONS
TO THE COMPANY'S RIGHT TO COMMENCE SALES OF SHARES OF COMMON
STOCK.






 


The
right of the Company hereunder to commence sales of the Purchase
Shares (other than the Initial Purchase Shares) on the Commencement
Date is subject to the satisfaction of each of the following
conditions:


 


(a)            The
Investor shall have executed each of the Transaction Documents and
delivered the same to the Company;


 


(b)            The
Registration Statement covering the resale of the Purchase Shares
in accordance with the Registration Rights Agreement and all of the
Initial Purchase Shares and Commitment Shares shall have been
declared effective under the Securities Act by the SEC, and no stop
order with respect to the Registration Statement shall be pending
or threatened by the SEC;


 


(c) All Securities to
be issued by the Company to the Investor under the Transaction
Documents shall have been approved for listing on the Principal
Market in accordance with the applicable rules and regulations of
the Principal Market, subject only to official notice of issuance;
and

 


(d)            The
representations and warranties of the Investor shall be true and
correct in all material respects as of the date hereof and as of
the Commencement Date as though made at that time.


 

8. 
CONDITIONS TO THE INVESTOR'S OBLIGATION TO PURCHASE SHARES OF
COMMON STOCK.


 


The
obligation of the Investor to buy Purchase Shares (other than the
Initial Purchase Shares) under this Agreement is subject to the
satisfaction of each of the following conditions on or prior to the
Commencement Date and, once such conditions have been initially
satisfied, there shall not be any ongoing obligation to satisfy
such conditions after the Commencement has occurred:


 


(a)           The
Company shall have executed each of the Transaction Documents and
delivered the same to the Investor;


 

(b)           
The Company shall have (i) caused the Commitment Shares and the
Initial Purchase Shares to be delivered as DWAC Shares or (ii)
removed all restrictive and other legends from the certificates or
book-entry statements representing the Commitment Shares, in each
case in accordance with Section 6(b);


 


(c)           The
Common Stock shall be listed or quoted on the Principal Market,
trading in the Common Stock shall not have been within the last 365
days suspended by the SEC or the Principal Market for one or more
Trading Day, and all Securities to be issued by the Company to the
Investor pursuant to this Agreement shall have been, approved for
listing or quotation on the Principal Market in accordance with the
applicable rules and regulations of the Principal Market, subject
only to official notice of issuance;

 


(d)           The
Investor shall have received the opinion letter of the Company's
legal counsel dated as of the Commencement Date substantially in
the form agreed prior to the date of this Agreement by the
Company’s legal counsel and the Investor’s legal
counsel;


 


(e)           The
representations and warranties of the Company shall be true and
correct in all material respects (except to the extent that any of
such representations and warranties is already qualified as to
materiality in Section
4 above, in which case, such representations and warranties
shall be true shall be true and correct without further
qualification) as of the date hereof and as of the Commencement
Date as though made at that time (except for representations and
warranties that speak as of a specific date, which and correct as
of such date) and the Company shall have performed, satisfied and
complied with the covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied
with by the Company at or prior to the Commencement Date. The
Investor shall have received a certificate, executed by the CEO,
President or CFO of the Company, dated as of the Commencement Date,
to the foregoing effect in the form attached hereto as Exhibit
A;


 




 


 

-25-








 






 


 


(f)           The
Board of Directors of the Company shall have adopted the Signing
Resolutions, which shall be in full force and effect without any
amendment or supplement thereto as of the Commencement
Date;


 


(g)           As
of the Commencement Date, the Company shall have reserved out of
its authorized and unissued Common Stock, solely for the purpose of
effecting purchases of Purchase Shares hereunder (other than the
Initial Purchase Shares), Seventy Three Million (73,000,000) shares
of Common Stock;


 


(h)           The
Commencement Irrevocable Transfer Agent Instructions and the Notice
of Effectiveness of Registration Statement each shall have been
delivered to and acknowledged in writing by the Company and the
Company’s Transfer Agent (or any successor transfer
agent);


 


(i)           The
Company shall have delivered to the Investor (i) a certificate
evidencing the incorporation and good standing of the Company in
the State of Delaware issued by the Secretary of State of the State
of Delaware and (ii) a certificate or its equivalent evidencing the
good standing of the Company as a foreign corporation in the State
of California, issued by the Secretary of State of the State of
California, and in any other jurisdiction where the Company is duly
qualified to conduct business, in each case, as of a date within
ten (10) Business Days of the Commencement Date;


 


(j)           The
Company shall have delivered to the Investor a certified copy of
the Certificate of Incorporation as certified by the Secretary of
State of the State of Delaware within ten (10) Business Days of the
Commencement Date;


 


(k)           The
Company shall have delivered to the Investor a secretary's
certificate executed by the Secretary of the Company, dated as of
the Commencement Date, in the form attached hereto as Exhibit
B;


 


(l)           The
Registration Statement covering the resale of such number of the
Purchase Shares as the Company is permitted to register under the
Registration Statement pursuant to the Registration Rights
Agreement and all of the Initial Purchase Shares and Commitment
Shares shall have been declared effective under the Securities Act
by the SEC, and no stop order with respect to the Registration
Statement shall be in effect or threatened by the SEC. The Company
shall have prepared and filed with the SEC, not later than one (1)
Business Day after the effective date of the Registration
Statement, a final and complete prospectus (the preliminary form of
which shall be included in the Registration Statement) and shall
have delivered to the Investor a true and complete copy thereof.
Such prospectus shall be current and available for the resale by
the Investor of all of the Securities covered thereby. The Current
Report shall have been filed with the SEC, as required pursuant to
Section 5(a). All
reports, schedules, registrations, forms, statements, information
and other documents required to have been filed by the Company with
the SEC at prior to the Commencement Date pursuant to the reporting
requirements of the Exchange Act shall have been filed with the SEC
within the applicable time periods prescribed for such filings
under the Exchange Act;


 


(m)           No
Event of Default has occurred, or any event which, after notice
and/or lapse of time, would become an Event of Default has
occurred;


 


(n)           All
federal, state and local governmental laws, rules and regulations
applicable to the transactions contemplated by the Transaction
Documents and necessary for the execution, delivery and performance
of the Transaction Documents and the consummation of the
transactions contemplated thereby in accordance with the terms
thereof shall have been complied with, and all consents,
Authorizations and orders of, and all filings and registrations
with, all federal, state and local courts or governmental agencies
and all federal, state and local regulatory or self-regulatory
agencies necessary for the execution, delivery and performance of
the Transaction Documents and the consummation of the transactions
contemplated thereby in accordance with the terms thereof shall
have been obtained or made, including, without limitation, in each
case those required under the Securities Act, the Exchange Act,
applicable state securities or “Blue Sky” laws or
applicable rules and regulations of the Principal Market, or
otherwise required by the SEC, the Principal Market or any state
securities regulators;

 


 




 


 

-26-








 






 

 


(o)           No
statute, regulation, order, decree, writ, ruling or injunction
shall have been enacted, entered, promulgated, threatened or
endorsed by any federal, state, local or foreign court or
Governmental Authority of competent jurisdiction which prohibits
the consummation of or which would materially modify or delay any
of the transactions contemplated by the Transaction
Documents;

 


(p)           No
action, suit or proceeding before any federal, state, local or
foreign arbitrator or any court or Governmental Authority of
competent jurisdiction shall have been commenced or threatened, and
no inquiry or investigation by any federal, state, local or foreign
Governmental Authority of competent jurisdiction shall have been
commenced or threatened, against the Company, or any of the
officers, directors or affiliates of the Company, seeking to
restrain, prevent or change the transactions contemplated by the
Transaction Documents, or seeking material damages in connection
with such transactions; and

 


(q)           The
Company shall have provided the Investor with the information
requested by the Investor in connection with its due diligence
requests in accordance with the terms of Section 5(f) hereof.


 


 




 


 

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9. 

INDEMNIFICATION.






 


In
consideration of the Investor’s execution and delivery of the
Transaction Documents and acquiring the Securities hereunder and in
addition to all of the Company’s other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify
and hold harmless the Investor and all of its affiliates,
stockholders, officers, directors, members, managers, employees and
direct or indirect investors and any of the foregoing
Person’s agents or other representatives (including, without
limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the
“Indemnitees”) from and
against any and all actions, causes of action, suits, claims,
losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and
disbursements (the “Indemnified
Liabilities”), incurred by any Indemnitee as a result
of, or arising out of or relating to: (a) any misrepresentation or
breach of any representation or warranty made by the Company in the
Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (c) any cause of action,
suit or claim brought or made against such Indemnitee and arising
out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby, (d) any
violation of the Securities Act, the Exchange Act, state securities
or “Blue Sky” laws, or the rules and regulations of the
Principal Market in connection with the transactions contemplated
by the Transaction Documents by the Company or any of its
Subsidiaries, affiliates, officers, directors or employees, (e) any
untrue statement or alleged untrue statement of a material fact
contained, or incorporated by reference, in the Registration
Statement or any amendment thereto or any omission or alleged
omission to state therein, or in any document incorporated by
reference therein, a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (f) any
untrue statement or alleged untrue statement of a material fact
contained, or incorporated by reference, in the Registration
Statement, or any omission or alleged omission to state therein, or
in any document incorporated by reference therein, a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading; provided, however, that (I) the indemnity
contained in clause (c) of this Section 9 shall not apply to
any Indemnified Liabilities which directly and primarily result
from the fraud, gross negligence or willful misconduct of an
Indemnitee, (II) the indemnity contained in clauses (d), (e) and
(f) of this Section9 shall not apply to any
Indemnified Liabilities to the extent, but only to the extent,
arising out of or based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and
in conformity with written information furnished to the Company by
or on behalf of the Investor expressly for use in any Registration
Statement and (III) the indemnity in this Section 9 shall not apply to
amounts paid in settlement of any claim if such settlement is
effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld, conditioned or delayed.
To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law,
provided that no seller of Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller
of Securities who was not guilty of fraudulent misrepresentation.
Payment under this indemnification shall be made within thirty (30)
days from the date the Indemnitee makes written request for it. A
certificate containing reasonable detail as to the amount of such
indemnification submitted to the Company by the Indemnitee shall be
conclusive evidence, absent manifest error, of the amount due from
the Company to the Indemnitee. If any action shall be brought
against any Indemnitee with respect to which indemnity may be
sought pursuant to this Agreement, such Indemnitee 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 the Indemnitee. Any Indemnitee 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 Indemnitee, 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 such separate counsel, a material
conflict on any material issue between the position of the Company
and the position of such Indemnitee, in which case the Company
shall be responsible for the reasonable fees and expenses of no
more than one such separate counsel.


 




 


 

-28-








 






 


 


10.           EVENTS
OF DEFAULT.


 


An
"Event of Default"
shall be deemed to have occurred at any time as any of the
following events occurs:


 


(a)           the
effectiveness of a registration statement registering the resale of
the Securities lapses for any reason (including, without
limitation, the issuance of a stop order or similar order) or such
registration statement (or the prospectus forming a part thereof)
is unavailable to the Investor for resale of any or all of the
Securities to be issued to the Investor under the Transaction
Documents, and such lapse or unavailability continues for a period
of ten (10) consecutive Business Days or for more than an aggregate
of thirty (30) Business Days in any 365-day period, but excluding a
lapse or unavailability where (i) the Company terminates a
registration statement after the Investor has confirmed in writing
that all of the Securities covered thereby have been resold or (ii)
the Company supersedes one registration statement with another
registration statement, including (without limitation) by
terminating a prior registration statement when it is effectively
replaced with a new registration statement covering Securities
(provided in the case of this clause (ii) that all of the
Securities covered by the superseded (or terminated) registration
statement that have not theretofore been resold are included in the
superseding (or new) registration statement);


 


(b)           the
suspension of the Common Stock from trading on the Principal Market
for a period of one (1) Business Day, provided that the Company may
not direct the Investor to purchase any shares of Common Stock
during any such suspension;


 


(c)           the
delisting of the Common Stock from the OTCQB, provided, however,
that the Common Stock is not immediately thereafter trading on The
Nasdaq Capital Market, the New York Stock Exchange, The Nasdaq
Global Market, The Nasdaq Global Select Market, the NYSE American,
the NYSE Arca, the OTC Bulletin Board, the OTCQX operated by the
OTC Markets Group, Inc. (or nationally recognized successor to any
of the foregoing);


 


 (d)           the
failure for any reason by the Transfer Agent to issue Purchase
Shares to the Investor within three (3) Business Days after the
applicable Purchase Date, Accelerated Purchase Date or Additional
Accelerated Purchase Date (as applicable) on which the Investor is
entitled to receive such Purchase Shares;


 


(e)           the
Company breaches any representation, warranty, covenant or other
term or condition under any Transaction Document if such breach has
or could have a Material Adverse Effect and except, in the case of
a breach of a covenant which is reasonably curable, only if such
breach continues for a period of at least five (5) Business
Days;


 


(f)           if
any Person commences a proceeding against the Company pursuant to
or within the meaning of any Bankruptcy Law;


 


(g)           if,
pursuant to or within the meaning of any Bankruptcy Law, the
Company (i) commences a voluntary case, (ii) consents to the entry
of an order for relief against it in an involuntary case, (iii)
consents to the appointment of a Custodian of it or for all or
substantially all of its property, or (iv) makes a general
assignment for the benefit of its creditors or is generally unable
to pay its debts as the same become due;


 


(h)           a
court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (i) is for relief against the Company in an
involuntary case, (ii) appoints a Custodian of the Company or for
all or substantially all of its property, or (iii) orders the
liquidation of the Company or any Subsidiary or;


 


(i)           if
at any time the Company is not eligible to transfer its Common
Stock electronically as DWAC Shares.


 


In
addition to any other rights and remedies under applicable law and
this Agreement, so long as an Event of Default has occurred and is
continuing, or if any event which, after notice and/or lapse of
time, would become an Event of Default, has occurred and is
continuing, the Company shall not deliver to the Investor any
Regular Purchase Notice or Accelerated Purchase
Notice.


 




 


 

-29-








 






 


 


11.           TERMINATION


 


This
Agreement may be terminated only as follows:

 


(a) If pursuant to or
within the meaning of any Bankruptcy Law, the Company commences a
voluntary case or any Person commences a proceeding against the
Company, a Custodian is appointed for the Company or for all or
substantially all of its property, or the Company makes a general
assignment for the benefit of its creditors (any of which would be
an Event of Default as described in Sections 10(f), 10(g) and 10(h) hereof), this Agreement
shall automatically terminate without any liability or payment to
the Company (except as set forth below) without further action or
notice by any Person.

 


(b) In the event that
the Commencement shall not have occurred on or before July 2, 2021,
due to the failure to satisfy the conditions set forth in
Sections 7 and
8 above with
respect to the Commencement, either the Company or the Investor
shall have the option to terminate this Agreement at the close of
business on such date or thereafter without liability of any party
to any other party (except as set forth below); provided, however,
that the right to terminate this Agreement under this Section 11(b) shall not be available to
any party if such party is then in breach of any covenant or
agreement contained in this Agreement or any representation or
warranty of such party contained in this Agreement fails to be true
and correct such that the conditions set forth in Section 7(d) or Section 8(e), as applicable, could not
then be satisfied.

 


(c) At any time after
the Commencement Date, the Company shall have the option to
terminate this Agreement for any reason or for no reason by
delivering notice (a “Company Termination
Notice”) to the Investor electing to terminate this
Agreement without any liability whatsoever of any party to any
other party under this Agreement (except as set forth below). The
Company Termination Notice shall not be effective until one (1)
Business Day after it has been received by the
Investor.

 


(d)           This
Agreement shall automatically terminate on the date that the
Company sells and the Investor purchases the full Available Amount
as provided herein, without any action or notice on the part of any
party and without any liability whatsoever of any party to any
other party under this Agreement (except as set forth
below).


 


(e)           If,
for any reason or for no reason, the full Available Amount has not
been purchased in accordance with Section 2 of this Agreement by
the Maturity Date, this Agreement shall automatically terminate on
the Maturity Date, without any action or notice on the part of any
party and without any liability whatsoever of any party to any
other party under this Agreement (except as set forth
below).


 


Except
as set forth in Sections
11(a) (with
respect to an Event of Default under Sections 10(f), 10(g) and 10(h)), 11(d) and 11(e), any termination of this
Agreement pursuant to this Section 11 shall be effected by
written notice from the Company to the Investor, or the Investor to
the Company, as the case may be, setting forth the basis for the
termination hereof. The representations and warranties and
covenants of the Company and the Investor contained in Sections 3, 4, 5, and 6 hereof, the indemnification
provisions set forth in Section 9 hereof and the
agreements and covenants set forth in Sections 10,
11 and 12 shall survive the
Commencement and any termination of this Agreement. No termination
of this Agreement shall (i) affect the Company’s or the
Investor’s rights or obligations under (A) this Agreement
with respect to pending Regular Purchases, Accelerated Purchases,
and Additional Accelerated Purchases and the Company and the
Investor shall complete their respective obligations with respect
to any pending Regular Purchases, Accelerated Purchases and
Additional Accelerated Purchases under this Agreement and (B) the
Registration Rights Agreement, which shall survive any such
termination, or (ii) be deemed to release the Company or the
Investor from any liability for intentional misrepresentation or
willful breach of any of the Transaction Documents.

 


 




 


 

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12.           MISCELLANEOUS.


 


(a)           Governing
Law; Jurisdiction; Jury Trial. The corporate laws of the
State of Delaware shall govern all issues concerning the relative
rights of the Company and its stockholders. All other questions
concerning the construction, validity, enforcement and
interpretation of this Agreement and the other Transaction
Documents shall be governed by the internal laws of the State of
Illinois, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of Illinois or any
other jurisdictions) that would cause the application of the laws
of any jurisdictions other than the State of Illinois. Each party
hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the State of Illinois, County
of Cook, for the adjudication of any dispute hereunder or under the
other Transaction Documents or in connection herewith or therewith,
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 any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that
the venue of such suit, action or proceeding is improper. 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 to such party at the address
for such 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 manner permitted by
law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.


 


(b)           Counterparts.
This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party; provided
that a facsimile signature or signature delivered by e-mail in a
“.pdf” format data file shall be considered due
execution and shall be binding upon the signatory thereto with the
same force and effect as if the signature were an original
signature.


 


(c)           Headings.
The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this
Agreement.


 


(d)           Severability.
If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of
the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in
any other jurisdiction.


 


(e)           Entire
Agreement. The Transaction Documents supersede all other
prior oral or written agreements between the Investor, the Company,
their affiliates and Persons acting on their behalf with respect to
the subject matter thereof, and this Agreement, the other
Transaction Documents and the instruments referenced herein contain
the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Investor makes any
representation, warranty, covenant or undertaking with respect to
such matters. The Company acknowledges and agrees that has not
relied on, in any manner whatsoever, any representations or
statements, written or oral, other than as expressly set forth in
the Transaction Documents.


 




 


 

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(f)           Notices.
Any notices, consents or other communications required or permitted
to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (i) upon receipt when
delivered personally; (ii) upon receipt when sent by facsimile or
email (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or
(iii) one Business Day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses for such communications
shall be:


 


If to
the Company:


 


ImageWare Systems,
Inc.


13500
Evening Creek Drive North


Suite
550


San
Diego, CA 92128


Telephone:
858-573-8600


Attention: Kristen
A. Taylor


E-Mail:
ktaylor@iwsinc.com


 


With a
copy to (which shall not constitute notice or service of
process):


 


Disclosure Law
Group, a Professional Corporation


655
West Broadway, Suite 870


San
Diego, CA 92101



Telephone:                                 

619-272-7063







Facsimile:                       

619-330-2101







E-mail:                                 

drumsey@disclosurelawgroup.com







Attention:                       

Daniel W.
Rumsey






 


If to
the Investor:


 


Lincoln
Park Capital Fund, LLC


440
North Wells, Suite 410


Chicago, IL
60654



Telephone:                                 

312-822-9300







Facsimile:                       

312-822-9301







E-mail:                                 

jscheinfeld@lpcfunds.com
and jcope@lpcfunds.com







Attention:                       

Josh Scheinfeld or
Jonathan Cope






 


With a
copy to (which shall not constitute notice or service of
process):


 


K&L
Gates, LLP


200 S.
Biscayne Blvd., Ste. 3900


Miami,
Florida 33131


Telephone:
305-539-3306


Facsimile:
305-358-7095


E-mail:
clayton.parker@klgates.com


Attention: Clayton
E. Parker, Esq.


 


If to
the Transfer Agent:


 


Computershare Trust
Company, Inc.


350
Indiana Street, Suite 800


Golden,
Colorado 80401


Telephone: 303-262-0790 


 Facsimile:
303-262-0610


Attention: Lee
Meier


E-Mail:
lee.meier@computershare.com


 




 


 

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or at
such other address and/or facsimile number and/or email address
and/or to the attention of such other Person as the recipient party
has specified by written notice given to each other party three (3)
Business Days prior to the effectiveness of such change. Written
confirmation of (A) receipt given by the recipient of such notice,
consent or other communication, (B) delivery mechanically or
electronically generated by the sender's facsimile machine or email
account containing the time, date, and recipient facsimile number
or email address, as applicable and an image of the first page of
such transmission, or (C) delivery provided by a nationally
recognized overnight delivery service, shall be rebuttable evidence
of personal service, receipt by facsimile or email or receipt from
a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.


 


(g)           Successors
and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights
or obligations hereunder without the prior written consent of the
Investor, including by merger or consolidation. The Investor may
not assign its rights or obligations under this
Agreement.


 


(h)           No
Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted
successors and assigns, and, except as set forth in Section 9, is not for the
benefit of, nor may any provision hereof be enforced by, any other
Person.


 


(i)           Publicity.
The Company shall afford the Investor and its counsel with the
opportunity to review and comment upon, shall consult with the
Investor and its counsel on the form and substance of, and shall
give due consideration to all such comments from the Investor or
its counsel on, any press release, SEC filing or any other public
disclosure by or on behalf of the Company relating to the Investor,
its purchases hereunder or any aspect of the Transaction Documents
or the transactions contemplated thereby, not less than 24 hours
prior to the issuance, filing or public disclosure thereof. Unless
the parties agree otherwise, which agreement may be oral or
electronic, the Investor must be provided with a final version of
any such press release, SEC filing or other public disclosure at
least 24 hours prior to any release, filing or use by the Company
thereof.


(j)           Further
Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably
request in order to consummate and make effective, as soon as
reasonably possible, the Commencement, and to carry out the intent
and accomplish the purposes of this Agreement and the consummation
of the transactions contemplated hereby.


 


(k)           No
Financial Advisor, Placement Agent, Broker or Finder. The
Company represents and warrants to the Investor that it has not
engaged any financial advisor, placement agent, broker or finder in
connection with the transactions contemplated hereby. The Investor
represents and warrants to the Company that it has not engaged any
financial advisor, placement agent, broker or finder in connection
with the transactions contemplated hereby. The Company shall be
responsible for the payment of any fees or commissions, if any, of
any financial advisor, placement agent, broker or finder relating
to or arising out of the transactions contemplated hereby. The
Company shall pay, and hold the Investor harmless against, any
liability, loss or expense (including, without limitation,
attorneys' fees and out of pocket expenses) arising in connection
with any such claim.


 


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


 




 


 

-33-








 






 


 


(m)           Remedies,
Other Obligations, Breaches and Injunctive Relief. The
Investor’s remedies provided in this Agreement, including,
without limitation, the Investor’s remedies provided in
Section 9, shall be
cumulative and in addition to all other remedies available to the
Investor under this Agreement, at law or in equity (including a
decree of specific performance and/or other injunctive relief), no
remedy of the Investor contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and
nothing herein shall limit the Investor’s right to pursue
actual damages for any failure by the Company to comply with the
terms of this Agreement. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the
Investor and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees that, in the event of any
such breach, the Investor shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach,
without the necessity of showing economic loss and without any bond
or other security being required.


 

(n)           
Enforcement Costs.
If: (i) this Agreement is placed by the Investor in the hands of an
attorney for enforcement or is enforced by the Investor through any
legal proceeding; (ii) an attorney is retained to represent the
Investor in any bankruptcy, reorganization, receivership or other
proceedings affecting creditors’ rights and involving a claim
under this Agreement; or (iii) an attorney is retained to represent
the Investor in any other proceedings whatsoever in connection with
this Agreement, then the Company shall pay to the Investor, as
incurred by the Investor, all reasonable costs and expenses
including reasonable attorneys’ fees incurred in connection
therewith, in addition to all other amounts due
hereunder.


 

(o)           
Amendment and Waiver;
Failure or Indulgence Not Waiver. No provision of this
Agreement may be amended other than by a written instrument signed
by both parties hereto and (ii) no provision of this Agreement may
be waived other than in a written instrument signed by the party
against whom enforcement of such waiver is sought. No failure or
delay in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or
privilege.


 


 


 



** Signature Page Follows **


 


 




 


 

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


 


 


 



THE COMPANY:


 


IMAGEWARE
SYSTEMS, INC.


 


 


By:
/s/ 
Kristin Taylor


Name:
Kristin Taylor


Title:
Chief Executive Officer


 


 


 



INVESTOR:


 


LINCOLN
PARK CAPITAL FUND, LLC


BY:
LINCOLN PARK CAPITAL, LLC


BY:
Rockledge Capital Corporation



 


 


By:
/s/ Joshua B.
Scheinfeld



Name:
Joshua
B. Scheinfeld


Title:
President


 


 


[Exhibits
and Schedules Intentionally Omitted]

 


 




 





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