TWO RIVERS WATER & FARMING COMPANY 8-K


 


EXHIBIT
10.3


 


SECURITIES
PURCHASE AGREEMENT


 


THIS
SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made as of the 26th day of April, 2017 by and
between Two Rivers Water & Farming Co., a Colorado corporation (the “Company”), and Black
Mountain Equities, Inc., a California company (collectively, the “Investors”).


 


WHEREAS,
upon the terms and condition stated in the Agreement and pursuant to Section 4(a)(2) of the 1933 Act (as defined below) and Rule
506 of Regulation D promulgated thereunder, the Investors wishes to purchase, and the Company wishes to sell promissory note in
the aggregate original principal amount of $300,000, in the form attached hereto as Exhibit A (the “Notes”),
and (ii) a common stock purchase warrants, in the form attached hereto as Exhibit B (the “Warrants”),
which Warrants shall initially be exercisable into and aggregate of 440,000 Common Shares (as exercised, collectively, the “Warrant
Shares”), at an exercise price of $0.70 per Warrant Share, subject to adjustment, until 5:00 p.m. (Eastern time)
on the date of expiration of the Warrant, which is five (5) years following the Closing Date (as defined herein);


 


WHEREAS,
the parties have agreed that the obligation to repay the Note shall be an unsecured obligation of the Company; and


 


WHEREAS,
the Note, the Warrant and the Warrant Shares, are collectively referred to herein as the “Securities”
and the offering contemplated hereby is referred to herein as the “Offering”.


 


NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in consideration
of the premises and the mutual agreements, representations and warranties, provisions and covenants contained herein, the parties
hereto, intending to be legally bound hereby, agree as follows:


 


1.       Purchase
and Sale of Note and Warrant. On the Closing Date (as hereinafter defined), subject to the terms and conditions of this
Agreement, the Investors hereby agrees to purchase, and the Company hereby agrees to sell and issue, the Notes and the Warrants,
with such principal amount of Note and such number of Warrant Shares for which each Warrant is exercisable being as set forth
for each Investor on its signature page hereto. The Notes shall be issued with an original issue discount.


 


2.       Purchase
Price. The aggregate purchase price for the Notes and the Warrants to be purchased by the Investors at the Closing shall be
$300,000 (the “Purchase Price”). At the Closing, the Investors shall fund the Purchase Price by wire
transfer of immediately available funds to the account specified in writing by the Company prior to the date hereof.


 


3.       The
 Closing. Subject to the conditions set forth below, the purchase and sale of the Notes and Warrants shall take place at
a mutually agreeable location, on or about the date hereof (the “Closing” and the “Closing
Date”). At the Closing, the Company shall deliver to the Investors: (i) this Agreement duly executed by the Company,
(ii) the Notes purchased hereby duly executed by the Company and registered in the name of the Investors, and (iii) the Warrants
purchased hereby duly executed by the Company and registered in the name of the Investors. At the Closing, the Investors shall
deliver to the Company (x) this Agreement duly executed by the Investors and (y) the Purchase Price for the Notes and Warrants.


 






     


     

    

 


4.       Closing
Conditions; Certain Covenants.


 


4.1       Conditions
to the Investor’s Obligations. The obligation of the Investors to purchase the Notes and Warrants to be issued to the
Investors at the Closing is subject to the fulfillment, to the Investors’ reasonable satisfaction, prior to or at the Closing,
of each of the following conditions:


 


(a)       Representations
and Warranties. The representations and warranties of the Company contained in this Agreement shall be true and correct in
all respects on the date hereof (except for representations and warranties that speak as of a specific date, which shall be true
and correct as of such specific date).


 


(b)       Covenants.
The Company shall have performed, satisfied and complied in all respects with the covenants, agreements and conditions required
to be performed, satisfied or complied with by the Company at or prior to the Closing Date.


 


(c)       Notes
and Warrants. At the Closing, the Company shall have duly executed and delivered to the Investors the Notes and Warrants purchased
hereby, in each case duly executed by the Company and registered in the name of the Investors.


 


(d)       No
Actions. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or authority or legislative body to enjoin, restrain, prohibit or obtain substantial damages
in respect of, this Agreement or the consummation of the transactions contemplated by this Agreement.


 


(e)       Proceedings
and Documents. All proceedings in connection with the transactions contemplated hereby and all documents and instruments incident
to such transactions shall be reasonably satisfactory in substance and form to the Investors, and the Investors shall have received
all such counterpart originals or certified or other copies of such documents as they may reasonably request.


 


(f)       No
Consents. The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary
for the sale of the Securities.


 


4.2       Conditions
to the Company’s Obligations. The obligation of the Company to sell and issue the Notes and Warrants to the Investors
at the Closing is subject to the fulfillment, to the Company’s reasonable satisfaction, prior to or at the Closing, of each
of the following conditions:


 


(a)       Representations
and Warranties. The representations and warranties of the Investors contained in this Agreement shall be true and correct
in all respects on the date hereof (except for representations and warranties that speak as of a specific date, which shall be
true and correct as of such specific date).


 






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(b)       Purchase
Price. At the Closing, the Investors shall have tendered to the Company the Purchase Price by wire transfer of immediately
available funds to the account specified in writing by the Company prior to the date hereof.


 


(c)       No
Actions. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or authority or legislative body to enjoin, restrain, prohibit, or obtain substantial damages
in respect of, this Agreement or the consummation of the transactions contemplated by this Agreement.


 


(d)       Proceedings
and Documents. All proceedings in connection with the transactions contemplated hereby and all documents and instruments incident
to such transactions shall be satisfactory in substance and form to the Company and the Company shall have received all such counterpart
originals or certified or other copies of such documents as the Company may reasonably request.


 


4.3       Securities
Law Disclosure; Publicity. If the Company determines in its sole discretion that a Form 8-K disclosing the material terms
of the transactions contemplated hereby is required, then it will file such Form 8-K timely. The Company represents to the Investors
that the Company has publicly disclosed all material, non-public information delivered to the Investor by the Company or any of
its Subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions contemplated
by this Agreement. The Company shall not, and the Company shall cause each of its Subsidiaries and each of its and their respective
officers, directors, employees and agents not to, provide the Investors with any material, non-public information regarding the
Company or any of its Subsidiaries from and after the date hereof without the express prior written consent of the Investors (which
may be granted or withheld in the Investors’ sole discretion). To the extent that the Company or any Person acting on its
behalf delivers any material, non-public information to the Investors (as determined in the reasonable good faith judgment of
the Investor) without the Investors’ consent, (i) the Company hereby covenants and agrees that the Investors shall not have
any duty of confidentiality with respect to, or a duty not to trade on the basis of, such material, non-public information, and
(ii) in addition to any other remedy provided herein or in the Notes or Warrants, the Investors 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 Investors 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 24 hours to publicly
disclose such material, non-public information prior to any such disclosure by the Investors, and the Company shall have failed
to publicly disclose such material, non-public information within such time period. The Company shall afford the Investors and
its counsel with a reasonable opportunity to review and comment upon, shall consult with the Investors and their counsel on the
form and substance of, and shall give due consideration to all such comments from the Investors or its counsel on, any press release,
Commission filing or any other public disclosure made by or on behalf of the Company relating to the Investors, its purchases
hereunder or any aspect of this Agreement or the transactions contemplated hereby, prior to the issuance, filing or public disclosure
thereof, and the Company shall not issue, file or publicly disclose any such information to which the Investors shall object.
For the avoidance of doubt, the Company shall not be required to submit for review any such disclosure contained in periodic reports
filed with the Commission under the Exchange Act if it shall have previously provided the same disclosure for review in connection
with a previous filing.


 






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4.4       Legends.
The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or Rule 144 (as defined below), to the Company or to an
affiliate of the applicable Investor, the Company may require the transferor thereof to provide to the Company an opinion of counsel
selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under
the 1933 Act. Each Investor understands that the Securities, except as set forth below, may bear any legends as required by applicable
state securities or “Blue Sky” laws in addition to a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock certificates):


 


[NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE]
[EXERCISABLE] HAVE BEEN][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 MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.


 






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The
Company shall use its reasonable best efforts to cause its transfer agent to remove the legend set forth above and to issue a
certificate without such legend to the holder of the Securities upon which it is stamped, or to issue to such holder by electronic
delivery at the applicable balance account at the Depository Trust Company (“DTC”), unless otherwise
required by state securities or “blue sky” laws, at such time as (i) such Securities are registered for resale under
the 1933 Act, (ii) in connection with a sale, assignment or other transfer, such holder provides the Company with an opinion of
counsel, in a form generally acceptable to the Company’s legal counsel, to the effect that such sale, assignment or transfer
of the Securities may be made without registration under the 1933 Act, or (iii) such holder provides the Company and its legal
counsel with reasonable assurance in writing that the Securities can be sold, assigned or transferred pursuant to Rule 144 or
Rule 144A. In furtherance of the foregoing, the Company agrees that, following the effective date of a registration statement
covering the resale of such Securities or at such time as such legend is not required pursuant to this Section 4.4, the Company
shall, no later than three Trading Days following the delivery by the Investor to the Company or the Company’s transfer
agent of a certificate representing the Warrant Shares, as applicable, issued with a restrictive legend (such third Trading Day,
the “Legend Removal Date”), either: (A) issue and deliver (or cause to be issued and delivered) to such
Investor a certificate representing such Warrant Shares that is free from all restrictive and other legends or (B) cause the Company’s
transfer agent to credit such Investor’s or its designee’s account at DTC through its Deposit/Withdrawal at Custodian
(DWAC) system with a number of Common Shares equal to the number of Warrant Shares represented by the certificate so delivered
by such Investor. If the Company fails on or prior to the Legend Removal Date to either (i) issue and deliver (or cause to be
issued and delivered) to such Investor a certificate representing the Warrant Shares that is free from all restrictive and other
legends or (ii) cause the Company’s transfer agent to credit the balance account of such Investor or its designee at DTC
through its Deposit/Withdrawal at Custodian (DWAC) system with a number of Common Shares equal to the number of Warrant Shares
represented by the certificate delivered by such Investor pursuant hereto, then, in addition to all other remedies available to
such Investor, the Company shall pay in cash to the Investor on each day after the Legend Removal Date that the issuance or credit
of such shares is not timely effected an amount equal to 1.0% of the product of (A) the sum of the number of Warrant Shares not
issued to such Investor on a timely basis and to which such Investor is entitled and (B) the VWAP for the five Trading Day period
immediately preceding the Legend Removal Date. In addition to the foregoing, if the Company fails to so properly deliver such
unlegended certificates or so properly credit the account of such Investor or its designee at DTC by the Legend Removal Date,
and if on or after the Legend Removal Date such Investor purchases (in an open market transaction or otherwise) Common Shares
to deliver in satisfaction of a sale by such Investor of Warrant Shares that such Investor anticipated receiving from the Company
without any restrictive legend, then the Company shall, within three Trading Days after such Investor’s request, pay cash
to such Investor in an amount equal to such Investor’s total purchase price (including brokerage commissions, if any) for
the Common Shares so purchased, at which point the Company’s obligation to deliver a certificate or credit such Investor’s
or its designee’s account at DTC for such Warrant Shares shall terminate and such shares shall be cancelled.


 


5.       Representations
and Warranties of the Company. Except as set forth in the Disclosure Schedules or the Public Reports (as defined herein),
which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the
extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following
representations and warranties to the Investors:


 


5.1       Organization,
Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. The Company is duly qualified to transact business and is in good standing in each jurisdiction
in which the failure to so qualify would have a Material Adverse Effect.


 






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5.3       Authorization;
Enforcement. All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the Notes and the Warrants, and the performance of all obligations of the Company, and
the authorization (or reservation for issuance), sale and issuance of the Notes, the Warrants, and the Warrant Shares, have been
taken on or prior to the date hereof. Each of this Agreement, the Notes and the Warrants has been duly executed by the Company
and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’
rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.


 


5.4       Valid
Issuance of the Securities; The Notes and the Warrants are duly authorized and, when issued and paid for in accordance with
this Agreement, will be duly and validly issued, and free and clear of all Liens imposed by the Company other than restrictions
on transfer under this Agreement and under applicable state and federal securities laws. The Warrant Shares when issued and delivered
in accordance with the terms of this Agreement and the Warrant for the consideration expressed herein and therein, will be duly
and validly issued, fully paid and non-assessable and free and clear of all Liens imposed by the Company other than restrictions
on transfer under this Agreement and under applicable state and federal securities laws.


 


5.5       Offering.
Subject to the truth and accuracy of the Investor’s representations set forth in Section 6 of this Agreement, the offer
and sale of the Securities, as contemplated by this Agreement are exempt from the registration requirements of the Securities
Act of 1933, as amended (the “1933 Act”), and the qualification or registration requirements of state
securities laws or other applicable blue sky laws. Neither the Company nor any authorized agent acting on its behalf will take
any action hereafter that would cause the loss of such exemptions.


 


5.6       Public
Reports. The Company is current in its filing obligations under the 1934 Act, including without limitation as to its filings
of Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (collectively, the “Public
Reports”). The Public Reports do not contain any untrue statement of a material fact or omit to state any fact necessary
to make any statement therein not misleading. The financial statements included within Company’s Annual Report on Form 10-K
for the year ended December 31, 2015 and for each quarterly period thereafter (the “Financial Statements”)
have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a
consistent basis throughout the periods indicated and with each other, except that unaudited Financial Statements may not contain
all footnotes required by generally accepted accounting principles. The Financial Statements fairly present, in all material respects,
the financial condition and operating results of the Company as of the dates, and for the periods, indicated therein, subject
in the case of unaudited Financial Statements to normal year-end audit adjustments.


 



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5.7       Compliance
With Laws. The Company has not violated any law or any governmental regulation or requirement which violation has had or would
reasonably be expected to have a Material Adverse Effect on its business and the Company has not received written notice of any
such violation. The Company is not in violation of the requirements of the Trading Market and has no knowledge of any facts or
circumstances which could reasonably lead to delisting or suspension of the Common Shares in the foreseeable future.


 


5.8       Violations.
The consummation of the transactions contemplated by this Agreement and all other documents and instruments required to be delivered
in connection therewith will not result in or constitute any of the following: (a) a violation of any provision of the articles
of incorporation, bylaws or other governing documents of the Company; (b) a violation of any provisions of any applicable law
or of any writ or decree of any court or governmental instrumentality; (c) a default or an event that, with notice or lapse of
time or both, would be a default, breach, or violation of a lease, license, promissory notes, conditional sales contract, commitment,
indenture, mortgage, deed of trust, or other agreement, instrument, or arrangement to which the Company is a party or by which
the Company or its property is bound; (d) an event that would permit any party to terminate any agreement or to accelerate the
maturity of any indebtedness or other obligation of the Company; or (e) the creation or imposition of any lien, pledge, option,
security agreement, equity, claim, charge, encumbrance or other restriction or limitation on the capital stock or on any of the
properties or assets of the Company.


 


5.9       Consents;
Waivers. No consent, waiver, approval or authority of any nature, or other formal action, by any Person, or any agency, bureau
or department of any government or any subdivision thereof, not already obtained, is required in connection with the execution
and delivery of this Agreement by the Company or the consummation by the Company of the transactions provided for herein.


 


5.10       Sarbanes-Oxley
Act. The Company is in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective
as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective
as of the date hereof.


 


5.11       Absence
of Litigation. Except as disclosed in the Company’s Public Reports, 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, threatened against or affecting the Company, the Common Shares or any of the Company’s officers
or directors in their capacities as such.


 






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5.12       Material
Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included
within the Public Reports, except as specifically disclosed in a subsequent Public Report filed prior to the date hereof: (i)
there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company
has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock
and (v) the Company has not issued any equity securities to any officer, director or affiliate, except pursuant to existing Company
stock option plans. The Company does not have pending before the Commission any request for confidential treatment of information.
Except for the issuance of the Securities contemplated by this Agreement, no event, liability, fact, circumstance, occurrence
or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries
or their respective businesses, properties, operations, assets or financial condition, that would be required to be disclosed
by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly
disclosed at least one Trading Day prior to the date that this representation is made.


 


5.13       Intellectual
Property. The Company has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service
marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights
as described in the Public Reports as necessary or required for use in connection with their respective businesses and which the
failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).
The Company has not received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated
or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement.
The Company has not received, since the date of the latest audited financial statements included within the Public Reports, a
written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights
of any Person, except as could not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the
Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any
of the Intellectual Property Rights. The Company has taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.


 


5.14       Intentionally
Deleted.


 


5.15       Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by this Agreement, the Company confirms
that neither it nor any other Person acting on its behalf has provided any Investor or its agents or counsel with any information
that it believes constitutes or might constitute material, non-public information. The Company understands and confirms that the
Investors will rely on the foregoing representation in effecting transactions in securities of the Company. All of the disclosure
furnished by or on behalf of the Company to the Investors regarding the Company and its Subsidiaries, their respective businesses
and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not
contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company
during the twelve 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 made, not misleading. The Company acknowledges and agrees that the Investors
do not make nor has made any representations or warranties with respect to the transactions contemplated hereby other than those
specifically set forth in Section 6 hereof.


 






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5.16       No
Integrated Offering. Assuming the accuracy of each Investor’s representations and warranties set forth in Section 6,
neither the Company, nor any of its affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering
of the Securities to be integrated with prior offerings by the Company for purposes of (i) the 1933 Act which would require the
registration of any such securities under the 1933 Act, or (ii) any applicable shareholder approval provisions of any Trading
Market on which any of the securities of the Company are listed or designated.


 


5.17       No
General Solicitation; Placement Agent’s Fees. Neither the Company, nor any of its Subsidiaries or affiliates, nor any
Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with the offer or sale of the Securities. The Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for Persons engaged by the Investor)
relating to or arising out of the transactions contemplated hereby. Neither the Company nor any of its Subsidiaries has engaged
any placement agent or other agent in connection with the offer or sale of the Securities.


 


5.18       Bankruptcy
Status; Indebtedness. Neither the Company nor any of its Subsidiaries has taken any steps to seek protection pursuant to any
law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up, nor does the Company
or any Subsidiary have any knowledge or reason to believe that any of their respective creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so. Schedule 5.18 sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness (as defined below) of the Company or any of its
Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness”
means (x) any liabilities for borrowed money or amounts owed (other than trade accounts payable incurred in the ordinary course
of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether
or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties
by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business;
and (z) the present value of any lease payments due under leases required to be capitalized in accordance with GAAP. The Company
is not in default with respect to any Indebtedness. The Company and its Subsidiaries, individually and on a consolidated basis,
are not, and after giving effect to the transactions contemplated hereby to occur at the Closing will not be, Insolvent (as defined
below). “Insolvent” means, (I) with respect to the Company and its Subsidiaries, on a consolidated basis,
(i) the present fair saleable value of the Company’s and its Subsidiaries’ assets is less than the amount required
to pay the Company’s and its Subsidiaries’ total Indebtedness (as defined below), (ii) the Company and its Subsidiaries
are unable to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute
and matured or (iii) the Company and its Subsidiaries intend to incur or believe that they will incur debts that would be beyond
their ability to pay as such debts mature; and (II) with respect to the Company and each Subsidiary, individually, (i) the present
fair saleable value of the Company’s or such Subsidiary’s (as the case may be) assets is less than the amount required
to pay its respective total Indebtedness, (ii) the Company or such Subsidiary (as the case may be) is unable to pay its respective
debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (iii)
the Company or such Subsidiary (as the case may be) intends to incur or believes that it will incur debts that would be beyond
its respective ability to pay as such debts mature. Neither the Company nor any of its Subsidiaries has engaged in any business
or in any transaction, and is not about to engage in any business or in any transaction, for which the Company’s or such
Subsidiary’s remaining assets constitute unreasonably small capital.


 






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


 


5.20       Acknowledgment
Regarding Investor’s Purchase of Securities. The Company acknowledges and agrees that each Investor is acting solely
in the capacity of an arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby and
that such Investor is not (i) an officer or director of the Company or any of its Subsidiaries, (ii) an “affiliate”
(as defined in Rule 144) of the Company or any of its Subsidiaries or (iii) to its knowledge, a “beneficial owner”
of more than 10% of the Common Shares (as defined for purposes of Rule 13d-3 of the 1934 Act). The Company further acknowledges
that such Investor is not acting as a financial advisor or fiduciary of the Company or any of its Subsidiaries (or in any similar
capacity) with respect to this Agreement and the transactions contemplated hereby, and any advice given by such Investor or any
of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental
to such Investor’s purchase of the Securities. The Company further represents to such Investor that the Company’s
decision to enter into this Agreement has been based solely on the independent evaluation by the Company and its representatives.


 


5.21       Shell
Company Status. The Company is not a shell company (as defined in Rule 405 under the Securities Act) and has not been a shell
company within the past 2 years. The Company has filed “Form 10 information” with the Commission as described pursuant
to Rule 144 under the Securities Act and at least 12 months has passed since such “Form 10 information” was filed
with the Commission.


 






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5.22       Dilutive
Effect. The Company acknowledges that its obligation to issue the Warrant Shares upon exercise of the Warrants in accordance
with this Agreement and the Warrants is absolute and unconditional, regardless of the dilutive effect that such issuance may have
on the ownership interests of other stockholders of the Company.


 


5.23       Application
of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary action, if any,
in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including,
without limitation, any distribution under a rights agreement), stockholder rights plan or other similar anti-takeover provision
under the articles of incorporation, bylaws or other organizational documents or the laws of the jurisdiction of its incorporation
or otherwise which is or could become applicable to either Investor as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company’s issuance of the Securities and such Investor’s ownership of the Securities.
The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any stockholder
rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Shares or a change in control of
the Company or any of its Subsidiaries.


 


5.24       Insurance.
The Company is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the business in which the Company is engaged. The Company has
not been refused any insurance coverage sought or applied for, and the Company has no reason to believe that it will be unable
to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.


 


5.25       Employee
Relations. The Company is not a party to any collective bargaining agreement and does not employ any member of a union. The
Company believes that its relations with its employees are good. No executive officer (as defined in Rule 501(f) promulgated under
the 1933 Act) or other key employee of the Company has notified the Company that such officer intends to leave the Company or
otherwise terminate such officer’s employment with the Company. No executive officer or other key employee of the Company
is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer or other key employee (as the case may be) does not subject the Company to any liability
with respect to any of the foregoing matters. The Company is in compliance with all federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and
hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.


 



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5.26       Title.
The Company and its Subsidiaries have good and marketable title in fee simple to all real property, and have good and marketable
title to all personal property, owned by them which is material to the business of the Company and its Subsidiaries, in each case,
free and clear of all liens, encumbrances and defects except such as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the Company and any of its Subsidiaries. Any real
property and facilities held under lease by the Company or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases 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 or any of its Subsidiaries.


 


5.27       Environmental
Laws. The Company and its Subsidiaries (i) are in compliance with all Environmental Laws (as defined below), (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 where, in each of the foregoing
clauses (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate,
a Material Adverse Effect. “Environmental Laws” means all federal, state, local or foreign laws relating
to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous
Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand
letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated
or approved thereunder.


 


5.28       Tax
Status. The Company and each of its Subsidiaries (i) has timely made or filed all foreign, federal and state income and all
other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has timely 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 (iii) 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 and its Subsidiaries know of no basis for any such claim. The Company is not operated in such a manner as to qualify
as a passive foreign investment company, as defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended (the
“Code”).


 






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


 


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


 


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


 


5.32       Money
Laundering. The Company and its Subsidiaries are in compliance with, and have not previously violated, the USA Patriot Act
of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, without limitation,
the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including,
without limitation, (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions
With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations
contained in 31 CFR, Subtitle B, Chapter V.


 


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


 


5.34       U.S.
Real Property Holding Corporation. Neither the Company nor any of its Subsidiaries is, or has ever been, and so long as any
of the Securities are held by either Investor, shall become, a U.S. real property holding corporation within the meaning of Section
897 of the Code, and the Company and each Subsidiary shall so certify upon any Investor’s request.


 






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5.35       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 offering 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 1933 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 1933 Act
(a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3)
under the 1933 Act. The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification
Event.


 


6.       Representations
and Warranties of the Investors. Each Investor hereby represents, warrants and covenants, as to itself only and not the other
Investor, that:


 


6.1       Authorization.
The Investor has full power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby and has taken all action necessary to authorize the execution and delivery of this Agreement,
the performance of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby.


 


6.2       No
Public Sale or Distribution. The Investor is (i) acquiring its Note and Warrant, and (ii) upon exercise of its Warrant will
acquire its Warrant Shares, in each case for its own account, not as a nominee or agent, and not with a view towards, or for resale
in connection with, the public sale or distribution of any part thereof, except pursuant to sales registered or exempted under
the 1933 Act. The Investor is acquiring the Securities hereunder in the ordinary course of its business. The Investor does not
presently have any contract, agreement, undertaking, arrangement or understanding, directly or indirectly, with any individual,
a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof (a “Person”) to sell, transfer, pledge, assign or otherwise distribute
any of the Securities.


 


6.3       Accredited
Investor Status; Investment Experience. The Investor is an “accredited investor” as that term is defined in Rule
501(a) of Regulation D. The Investor can bear the economic risk of its investment in the Securities, and has such knowledge and
experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Securities.


 


6.4       Reliance
on Exemptions. The Investor understands that the Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities laws and that the Company is relying in part
upon the truth and accuracy of, and 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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6.5       Information.
The Investor and its advisors, if any, have been furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities which have been requested by the Investor. The Investor
and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other
due diligence investigations conducted by the Investor or its advisors, if any, or its representatives shall modify, amend or
affect the Investor’s right to rely on the Company’s representations and warranties contained herein. The Investor
understands that its investment in the Securities involves a high degree of risk. 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.
The Investor is relying solely on its own accounting, legal and tax advisors, and not on any statements of the Company or any
of its agents or representatives, for such accounting, legal and tax advice with respect to its acquisition of the Securities
and the transactions contemplated by this Agreement.


 


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


 


6.7       Validity;
Enforcement; No Conflicts. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Investor
and shall constitute the legal, valid and binding obligation of the Investor enforceable against the Investor in accordance with
its terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies. The execution, delivery and performance by the Investor of this Agreement and the consummation
by the Investor of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of
the Investor or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become
a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture
or instrument to which the Investor is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities or “Blue Sky” laws) applicable to the Investor, except in the case
of clause (ii) above, for such conflicts, defaults or rights which would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of the Investor to perform its obligations hereunder.


 


7.       Use
of Proceeds. The Company shall use the proceeds from the sale of the Securities for general working capital purposes.


 






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8.       Rule
144 Availability; Public Information. At all times during the period commencing on the Closing Date and ending at such time
that all of the Securities can be sold without the requirement to be in compliance with Rule 144(c)(1) under the 1933 Act and
otherwise without restriction or limitation pursuant to Rule 144 under the 1933 Act, the Company shall use its reasonable best
efforts to ensure the availability of Rule 144 under the 1933 Act to the Investors with regard to the Warrant Shares, including
compliance with Rule 144(c)(1) under the 1933 Act. If, (i) at any time any Investor owns any Securities, the Company shall fail
for any reason to satisfy the current public information requirement under Rule 144(c) under the 1933 Act (a “Public
Information Failure”), or (ii) the Company shall fail to take such action as is reasonably requested by any Investor
to enable such Investor to sell the Warrant Shares pursuant to Rule 144 under the 1933 Act (including, without limitation, delivering
all such legal opinions, consents, certificates, resolutions and instructions to the Company’s transfer agent as may be
reasonably requested from time to time by such Investor and otherwise fully cooperate with Investor and Investor’s broker
to effect such sale of securities pursuant to Rule 144 under the 1933 Act), then, in either case, in addition to such Investor’s
other available remedies, the Company shall pay to such Investor, in cash, as liquidated damages and not as a penalty, by reason
of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to one percent (1.0%) of the
aggregate Purchase Price of such Investor’s Securities on the day of a Public Information Failure and on every thirtieth
(30th) day (pro rated for periods totaling less than thirty days) thereafter until the earlier of (a) the date such Public Information
Failure is cured and (b) such time that such public information is no longer required for such Investor to transfer the Warrant
Shares pursuant to Rule 144 under the 1933 Act. The payments to which the Investor shall be entitled pursuant to this Section
8 are referred to herein as “Rule 144 Failure Payments.” Rule 144 Failure Payments shall be paid on
the earlier of (i) the last day of the calendar month during which such Rule 144 Failure Payments are incurred and (ii) the third
(3rd) Trading Day after the event or failure giving rise to the Rule 144 Failure Payments is cured.


 


9.       Indemnification.
In consideration of each Investor’s execution and delivery of this Agreement and acquiring the Securities hereunder and
in addition to all of the Company’s other obligations under this Agreement, the Notes and the Warrants, the Company shall
defend, protect, indemnify and hold harmless each Investor and each holder of any Securities and all of their stockholders, partners,
members, officers, directors, employees and direct or indirect investors and any of the foregoing Persons’ 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 this
Agreement, the Notes or the Warrants, (b) any breach of any covenant, agreement or obligation of the Company contained in any
of this Agreement, the Notes or the Warrants, or (c) any cause of action, suit, proceeding or claim brought or made against such
Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company or any Subsidiary)
or which otherwise involves such Indemnitee that arises out of or results from (i) the execution, delivery, performance or enforcement
of any of this Agreement, the Notes or the Warrants, (ii) any transaction financed or to be financed in whole or in part, directly
or indirectly, with the proceeds of the issuance of the Securities, or (iii) the status of the Investor or holder of the Securities
either as an investor in the Company pursuant to the transactions contemplated by this Agreement or as a party to this Agreement
(including, without limitation, as a party in interest or otherwise in any action or proceeding for injunctive or other equitable
relief). 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.


 






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10.       Listing;
Blue Sky. The Company shall promptly secure the approval for listing of the maximum number of Warrant Shares issuable upon
exercise of the Warrant (without taking into account any limitations on the exercise of the Warrant set forth therein) that may
from time to time be issuable under the terms of the Warrant, in each case on the Trading Market, if required by the Trading Market.
The Company shall not take any action which could be reasonably expected to result in the delisting or suspension of the quotation
of the Common Shares on the Trading Market. The Company shall take such action as the Company shall reasonably determine is necessary
in order to obtain an exemption for, or to, qualify the Securities for sale to the Investors at the Closing pursuant to this Agreement
under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from
such qualification), and shall provide evidence of any such action so taken to the Investors on or prior to the Closing Date.
Without limiting any other obligation of the Company under this Agreement, the Company shall timely make all filings and reports
relating to the offer and sale of the Securities required under all applicable securities laws (including,
without limitation, all applicable federal securities laws and all applicable “Blue Sky” laws), and the Company shall
comply with all applicable federal, foreign, state and local laws, statutes, rules, regulations and the like relating to the offering
and sale of the Securities to the Investor. The Company shall pay all fees and expenses in connection with satisfying its obligations
under this Section 10.


 


11.


 


12.       Conduct
of Business. The business of the Company and its Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not result, either individually or in the aggregate,
in a Material Adverse Effect.


 


13.       Passive
Foreign Investment Company. The Company shall conduct its business, and shall cause its Subsidiaries to conduct their respective
businesses, in such a manner as will ensure that the Company will not be deemed to constitute a passive foreign investment company
within the meaning of Section 1297 of the Code.


 


14.       Restriction
on Redemption and Cash Dividends. So long as any Note is outstanding, the Company shall not, directly or indirectly, redeem,
or declare or pay any cash dividend or distribution on, any securities of the Company without the prior express written consent
of each Investor still holding a Note.


 


15.       Corporate
Existence. So long as any Note or Warrant is outstanding, the Company shall not be party to any Fundamental Transaction (as
defined in the Notes) unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set
forth in the Notes and the Warrants.


 






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16.       Limitation
on Variable Rate and Section 3(a)(10) Transactions.


 


(a)       So
long as any Note or Warrant is outstanding, the Company agrees not to enter into any debt settlement agreements pursuant to Section
3(a)(10) of the Securities Act of 1933.


 


17.       Miscellaneous


 


17.1       Successors
and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties (including transferees of the Securities). Nothing in
this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto or their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.


 


17.2       Governing
Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of Nevada, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of California or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of California. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in San Diego County, California, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of 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 WITH OR ARISING
OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.


 


17.3       Titles
and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered
in construing or interpreting this Agreement.


 


17.4       Notices.
All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery
to the party to be notified, (b) when sent by confirmed telex or facsimile or email if sent during normal business hours of the
recipient; if not, then on the next Trading Day, (c) five (5) Trading Days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All communications shall be sent to (a) in the case of the Company, to
Two Rivers Water & Farming, Co., 3025 South Parker Rd. Suite 140 Aurora, CO. 80014 bgregorak@2riverswater.com and (b)
in the case of the Investors, as the case may be, to INSERT ADDRESS AND EMAIL,
Email:, or Black Mountain Equities, Inc., Email: adam@blackmountainequities.com.


 






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17.5       Amendments
and Waivers. No provision of this Agreement may be amended other than by a written instrument signed by both parties hereto.
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 exercises thereof
or of any other right, power or privilege.


 


17.6       Brokers
or Finder’s Fees. The Company shall indemnify and hold harmless each Investor from any liability for any commission
or compensation in the nature of a broker’s or finders’ fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.


 


17.7       Severability.
If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.


 


17.8       Entire
Agreement. This Agreement and the documents referred to herein constitute the entire agreement among the parties and no party
shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically
set forth herein or therein.


 


17.9       Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.


 


17.10       Interpretation.
Unless the context of this Agreement clearly requires otherwise, (a) references to the plural include the singular, the singular
the plural, the part the whole, (b) references to any gender include all genders, (c) “including” has the inclusive
meaning frequently identified with the phrase “but not limited to” and (d) references to “hereunder” or
“herein” relate to this Agreement.


 


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


 






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18.       Additional
Defined Terms. In addition to the terms defined elsewhere in this Agreement, the Note and the Warrant, the following terms
have the meanings set forth in this Section 18:


 


18.1       “1934
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.


 


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


 


18.3       “Common
Shares” means the common stock, par value $0.001 per share, of the Company.


 


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


 


18.5       “Material
Adverse Effect” means (i) a material adverse effect on the legality, validity or enforceability of this Agreement,
the Note or the Warrant, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition
(financial or otherwise) of the Company and its Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s
ability to perform in any material respect on a timely basis its obligations under this Agreement, the Note or the Warrant.


 


18.6       “Registrable
Securities” means (i) the Warrant Shares issuable upon exercise of the Warrant (without taking into account any
limitations on the exercise of the Warrant set forth therein), and (ii) any capital stock of the Company issued or issuable with
respect to the Warrant Shares, including, without limitation, (1) as a result of any stock split, stock dividend, recapitalization,
exchange or similar event or otherwise and (2) shares of capital stock of the Company into which the Common Shares are exercised
or exchanged and shares of capital stock of a successor entity into which the Common Shares are converted or exchanged.


 


18.7       “Subsidiary”
means any corporation or other entity of which at least a majority of the securities or other ownership interest having ordinary
voting power for the election of directors or other persons performing similar functions are at the time owned directly or indirectly
by the Company and/or any of its other Subsidiaries.


 


18.8       “Trading
Day” means any day on which the Common Shares are traded on the Trading Market, provided that “Trading
Day” shall not include any day on which the Common Shares are scheduled to trade on the Trading Market for less
than 4.5 hours or any day that the Common Shares are suspended from trading during the final hour of trading on the Trading Market
(or if the Trading Market does not designate in advance the closing time of trading on the Trading Market, then during the hour
ending at 4:00:00 p.m., Eastern time) unless such day is otherwise designated as a Trading Day in writing by the Investor.


 






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18.9       “Trading
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 Shares are 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 MKT, or the OTCQX operated by
the OTC Markets Group, Inc. (or any nationally recognized successor to any of the foregoing), then the “Trading Market”
shall mean such other market or exchange on which the Company’s Common Shares are then listed or traded.


 


18.10       “VWAP”
means the volume weighted average price (the aggregate sales price of all trades of Common Shares during a Trading Day divided
by the total number of Common Shares traded during such Trading Day) of the Common Shares during a Trading Day as reported by
www.NASADAQ.com.


 


[SIGNATURES
ON THE FOLLOWING PAGE]


 




    	20 



     


    

 


IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date provided above.


 


	 	THE COMPANY
	 	 
	 	TWO RIVERS WATER & FARMING
    CO.
	 	 
	 	By: 	 
	 	 	Name:
    Wayne Harding
Title: CEO