Exhibit
10.12





 


EXECUTION VERSION







 


SECURITIES
PURCHASE AGREEMENT


 


THIS
SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made as of February 7, 2020, by and among Chanticleer Holdings,
Inc., a Delaware corporation (and together with all of its current and future, direct and/or indirect, wholly owned and/or partially
owned Subsidiaries, collectively, the “Company”), and the Purchaser identified on the signature pages hereto
(each, including its successors and assigns, a “Purchaser” and, collectively, the “Purchaser”).


 


RECITALS


 


A.
The Company and the Purchaser are executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by Section 4(a)(2) of the Securities Act (as defined below), and/or Rule 506(b) of Regulation D (“Regulation
D”) as promulgated by the United States Securities and Exchange Commission under the Securities Act.


 


B.
The Purchaser, wishes to purchase, and the Company wishes to sell at each applicable closing, upon the terms and conditions stated
in this Agreement, the Securities (as defined herein), all in the amounts and for the price set forth on Schedule 1 hereto.


 


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 Purchaser hereby agrees as follows:


 


ARTICLE
1

DEFINITIONS


 


1.1
Defined Terms. In addition to terms defined elsewhere in this Agreement or in any supplement, amendment or exhibit hereto,
when used herein, the following terms shall have the following meanings:


 


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


 


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


 


(c)
“Certificate of Designation”
means the Certificate of Designation to be filed prior to the Closing by the Company with the Secretary of State of Delaware,
defining the rights, preferences and privileges of the Preferred Stock in the form of Exhibit A attached
hereto.


 


(d)
“Closing” means, as applicable,
the Initial Closing and any Subsequent Closing, if applicable.


 




    	 



    	 



    

 


(e)
“Closing Date” means each of the Initial Closing Date and any Subsequent
Closing Date.


 


(f)
“Common Stock” means (i) the Company’s common stock, par value $0.0001 per share, and (ii) any capital
stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common
stock.


 


(g)
“Common Stock Equivalents” means any securities of the Corporation or the Subsidiaries which would 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.


 


(h)
“Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise,
of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose
or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that
the holders of such liability will be protected (in whole or in part) against loss with respect thereto.


 


(i)
“Conversion Date” has the meaning set forth in the Certificate of Designations.


 


(j)
“Conversion Shares” means all shares of Common Stock issuable upon conversion of any portion of the Preferred
Stock, and/or as any other payment due under the Preferred Stock but solely to the extent and subject to any conditions set forth
in the Certificate of Designations.


 


(k)
“Debentures” means 8% secured convertible preferred debentures in principal amount of $6,000,000 held by Oz
Rey, LLC, a Texas limited liability company.


 


(l)
“Dollar(s)” and “$” means lawful money of the United States.


 


(m)
“Effective Date” means the earliest of the date that (a) the Registration
Statement registering the resale of all of the Conversion Shares issuable upon conversion of the Preferred Stock has been declared
effective by the Commission, (b) all of the Underlying Shares have been sold pursuant to Rule 144 or may be sold pursuant to Rule
144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 and
without volume or manner-of-sale restrictions, or (c) all of the Underlying Shares may be sold pursuant to an exemption from registration
under Section 4(a)(1) of the Securities Act without volume or manner-of-sale restrictions and Company Counsel has delivered to
such holders a standing written unqualified opinion that resales may then be made by such holders of the Underlying Shares pursuant
to such exemption which opinion shall be in form and substance reasonably acceptable to such holders.


 




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


 


(o)
“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, consultants,
advisors or directors of the Company pursuant to any stock or option plan duly adopted for such purpose by a majority of the members
of the Board of Directors or a majority of the members of a committee of directors established for such purpose and (b) securities
upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable
for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities
have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise,
exchange or conversion price of such securities.


 


(p)
“GAAP” means generally accepted accounting principles in the United States of America as in effect from time
to time.


 


(q)
“Indebtedness” means, with respect to any Person at any date, without duplication, (a) all indebtedness of
such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (but
excluding trade payables incurred in the ordinary course of business), (c) all obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or the
Purchaser under such agreement in the event of default are limited to repossession or sale of such property), (e) all capital
lease obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party or applicant
under acceptance, letter of credit, surety bond or similar facilities, (g) all obligations of such Person, contingent or otherwise,
to purchase, redeem, retire or otherwise acquire for value any capital stock of such Person, (h) all obligations for any earn-out
consideration, (i) the liquidation value of preferred capital stock of such Person, (j) all guarantee obligations of such Person
in respect of obligations of the kind referred to in clauses (a) through (i) above, (k) all obligations of the kind referred to
in clauses (a) through (i) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise,
to be secured by) any lien on property (including, without limitation, accounts and contract rights) owned by such Person, whether
or not such Person has assumed or become liable for the payment of such obligation and all obligations of such Person in respect
of hedge agreements; and (l) all Contingent Obligations in respect to indebtedness or obligations of any Person of the kind referred
to in clauses (a)-(k) above. The Indebtedness of any Person shall include, without duplication, the Indebtedness of any other
entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a
result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of
such Indebtedness expressly provide that such Person is not liable therefor.


 


(r)
“Initial Closing” shall
have the meaning ascribed to such term in Section 2.1(a).


 




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


 


(t)
“Initial Closing Preferred Stock”
shall have the meaning as set forth on Schedule 1 next to the heading “Initial Closing Preferred Stock,”


 


(u)
“Initial Closing Purchase Price”
shall have the meaning as set forth on Schedule 1 next to the heading “Initial Closing Purchase Price,” in United
States Dollars.


 


(v)
“Liens” or “liens” means a lien, mortgage, charge pledge, security interest, encumbrance,
right of first refusal, preemptive right or other restriction, or other clouds on title.


 


(w)
“Leak Out Agreement” means the Leak Out Agreement, dated as of the Closing Date, by and between the Company
and the Purchaser as hereinafter amended and/or supplemented altogether with all exhibits, schedules and annexes to such Leak
Out Agreement, which Leak Out Agreement is annexed hereto as Exhibit C.


 


(x)
“Liabilities” means all direct or indirect liabilities, Indebtedness and obligations of any kind of Company
to the Purchaser, howsoever created, arising or evidenced, whether now existing or hereafter arising (including those acquired
by assignment), absolute or contingent, due or to become due, primary or secondary, joint or several, whether existing or arising
through discount, overdraft, purchase, direct loan, participation, operation of law, or otherwise, including, but not limited
to, pursuant to the Certificate of Designations, this Agreement and/or any of the other Transaction Documents, all accrued but
unpaid interest on the Preferred Stock the principal, any letter of credit, any standby letter of credit, and/or outside attorneys’
and paralegals’ fees or charges relating to the preparation of the Transaction Documents and the enforcement of the Purchaser’s
rights, remedies and powers under this Agreement, the Certificate of Designations and/or the other Transaction Documents.


 


(y)
“Material Adverse Effect” means a material adverse effect on (a) the business, assets, property, operations,
or condition (financial or otherwise) of the Company, (b) the validity or enforceability of this Agreement or any of the other
Transaction Documents or (c) the rights or remedies of the Purchaser hereunder or thereunder.


 


(z)
“Merger” means the consummation of the transactions contemplated by the Merger Agreement.


 


(aa)
“Merger Agreement” means that certain Agreement and Plan of Merger dated as of October 10, 2019, as amended,
among the Company, Sonnet BioTherapeutics, Inc. and Biosub Inc.


 




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(bb)
“Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or government (whether national, federal, state, county, city, municipal
or otherwise including, without limitation, any instrumentality, division, agency, body or department thereof).


 


(cc)
“Preferred Stock” means the up to [1,500] shares of the Company’s
Series 2 Convertible Preferred Stock issued hereunder having the rights, preferences and privileges set forth in the Certificate
of Designation. 


 


(dd)
“Principal Market” means the principal Trading Market on which the Common Stock is listed or quoted for trading
on the date in question.


 


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


 


(ff)
“Purchase Price” means collectively, the Initial Closing Purchase Price and the Subsequent Closing Purchase
Price.


 


(gg)
“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the Closing Date, by and
between the Company and the Purchaser as hereinafter amended and/or supplemented altogether with all exhibits, schedules and annexes
to such Registration Rights Agreement, which Registration Rights Agreement is annexed hereto as Exhibit B.


 


(hh)
“Registration Statement”
means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale
of the Conversion Shares issuable upon conversion of the Preferred Stock by the Purchaser as provided for in the Registration
Rights Agreement.


 


(ii)
“Required Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued
or potentially issuable in the future pursuant to the Transaction Documents, including any Conversion Shares, ignoring any conversion
limits set forth therein, and assuming that the Conversion Price is at all times on and after the date of determination 75% of
the then Conversion Price on the Trading Day immediately prior to the date of determination.


 


(jj)
“SEC” or “Commission” means the United States Securities and Exchange Commission.


 


(kk)
“SEC Reports” has the meaning set forth in Section 3.1(y) hereof.


 


(ll)
“Securities” means the Preferred Stock purchased pursuant to this Agreement and all Underlying Shares and any
securities of the Company issued in replacement, substitution and/or in connection with any exchange, conversion and/or any other
transaction pursuant to which all or any of such securities of the Company to the Purchaser.


 




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


 


(nn)
“Segregated Cash Account” means $1,250,000 of cash proceeds which is held is a segregated control account that
is bankruptcy remote and not subject to any security interest of the Company or Spin-Off NewCo.


 


(oo)
“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).


 


(pp)
“SMRH” means Sheppard, Mullin,
Richter & Hampton LLP, with offices located at 30 Rockefeller Plaza, 39th Floor, New York, New York 10112.


 


(qq)
“Spin-Off NewCo” means a
newly created subsidiary of the Company which will hold the current restaurant operations, including all assets and liabilities,
of the Company, the equity of which will be distributed out to the stockholders of the Company as contemplated by the Merger Agreement.


 


(rr)
“Stated Value” has the meaning set forth in the Certificate of Designations.


 


(ss)
“Subsequent Closing” shall
have the meaning ascribed to such term in Section 2.1(b). 


 


(tt)
“Subsequent Closing Date” means the Trading Day on which all of the Transaction Documents have been executed
and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchaser’ obligations to pay the
Subsequent Closing Purchase Price, including the occurrence of the Subsequent Closing Event, and (ii) the Company’s obligations
to deliver the Subsequent Closing Preferred Stock, in each case, have been satisfied or waived with respect to such Subsequent
Closing.


 


(uu)
“Subsequent Closing Event” shall refer to the following event, the occurrence of which shall be a condition
precedent to a Subsequent Closing: (i) written evidence showing receipt of the votes to approve the transactions contemplated
by the Merger Agreement.


 


(vv)
“Subsequent Closing Preferred Stock”
shall have the meaning as set forth on Schedule 1 next to the heading “Subsequent Closing Preferred Stock,”


 


(ww)
“Subsequent Closing Purchase Price”
shall have the meaning as set forth on Schedule 1 next to the heading “Subsequent Closing Purchase Price,” in United
States Dollars.


 


(xx)
“Subsidiary” means, with respect to any Person, a corporation, partnership, limited liability company or other
entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or
other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both, by such Person all of the Company’s Subsidiaries
are set forth on Schedule 3.1(a) hereto.


 




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


 


(zz)
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, the New York Stock Exchange, any market or quotation service of the OTC Markets Group or the OTC Bulletin Board (or any
successors to any of the foregoing).


 


(aaa)
“Transaction Documents” means, collectively, this Agreement, the Certificate of Designations, the Registration
Rights Agreement, the Leak Out Agreement and such other documents, instruments, certificates, supplements, amendments, exhibits
and schedules required and/or attached pursuant to this Agreement and/or any of the above documents, and/or any other document
and/or instrument related to the above agreements, documents and/or instruments, and the transactions hereunder and/or thereunder
and/or any other agreement, documents or instruments required or contemplated hereunder or thereunder, whether now existing or
at any time hereafter arising.


 


(bbb)
“Transfer Agent” means Securities Transfer Corp the current transfer agent of the Company, with a mailing address
of 2901 N. Dallas Parkway, Suite 380, Plano, TX 75093 and a phone number of (469) 633-0101 and any successor transfer agent of
the Company.


 


(ccc)
“True-Up Payment” shall
have the meaning ascribed to such term in Section 4.23(a).


 


(ddd)
“Underlying Shares” means all Conversion Shares.


 


(eee)
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if
the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported
by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB
or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding
date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and
if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar
organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock
so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser
selected in good faith by the Purchaser of a majority in interest of the Securities then outstanding and reasonably acceptable
to the Company, the fees and expenses of which shall be paid by the Company.


 




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1.2
Other Definitional Provisions.


 


(a)
Use of Defined Terms. Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings
when used in the other Transaction Documents or any certificate or other document made or delivered pursuant hereto or thereto.


 


(b)
Accounting Terms. As used herein and in the other Transaction Documents, and any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms relating to the Company not defined in Section 1.1 and accounting
terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under
GAAP (provided that all terms of an accounting or financial nature used herein shall be construed, and all computations
of amounts referred to herein shall be made without giving effect to (i) any election under Accounting Standards Codification
825-10-25 (previously referred to as Statement of Financial Accounting Standards 159) (or any other Accounting Standards Codification
or Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the Company
at “fair value”, as defined therein, and (ii) any treatment of Indebtedness in respect of convertible debt instruments
under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard
having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and
such Indebtedness shall at all times be valued at the full stated principal amount thereof).


 


(c)
Construction. The words “hereof”, “herein” and “hereunder” and
words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision
of this Agreement, and section, schedule and exhibit references are to this Agreement unless otherwise specified. The meanings
given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.


 


ARTICLE
2

PURCHASE AND SALE


 


2.1
Closing.


 


(a)
Initial Closing. On the Initial Closing Date, upon the terms and subject to the conditions set forth herein, the Company
agrees to sell, and the Purchaser agrees to purchase, the Initial Closing Preferred Stock. Purchaser shall deliver to the Company,
via wire transfer immediately available funds equal to the Initial Closing Purchase Price, and the Company shall deliver to the
Purchaser the Initial Closing Preferred Stock on the Initial Closing Date, and the Company and the Purchaser shall deliver the
other items set forth in Section 2.2 deliverable at the Initial Closing. Upon satisfaction of the covenants and conditions set
forth in Sections 2.2 and 2.3, the Initial Closing shall occur at the offices of SMRH or such other location as the parties shall
mutually agree.


 




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(b)
Subsequent Closing. On the Subsequent Closing Date, subject to the occurrence of the Subsequent Closing Event, upon the
terms and conditions set forth herein, the Company agrees to sell, and the Purchaser agrees to purchase, the Subsequent Closing
Preferred Stock. Purchaser shall deliver to the Company, via wire transfer immediately available funds equal to Purchaser’s
Subsequent Closing Purchase Price, and the Company shall deliver to the Purchaser the Subsequent Closing Preferred Stock on the
Subsequent Closing Date, and the Company and the Purchaser shall deliver the other items set forth in Section 2.2 deliverable
at the Subsequent Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Subsequent
Closing shall occur at the offices of SMRH or such other location as the parties shall mutually agree.


 


2.2
Deliveries.


 


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


 


(i)
as to the Initial Closing, this Agreement duly executed by the Company;


 


(ii)
as to each Closing, a certificate representing the number of shares of Preferred Stock as set forth on Schedule 1;


 


(iii)
as to the Initial Closing, the Registration Rights Agreement duly executed by the Company;


 


(iv)
as to the Initial Closing, the Leak Out Agreement duly executed by the Company;


 


(v)
as to each Closing, the Company shall have delivered to the Purchaser a certificate, in the form acceptable to the Purchaser and
its counsel, executed by the secretary of the Company dated as of the Closing Date, as to (i) the resolutions as adopted by the
Company’s board of directors in a form acceptable to the Purchaser, (ii) certificate of incorporation or other organizational
document of each of the Company, and (iii) the Bylaws or other organizational document of the Company, each as in effect at the
applicable Closing;


 


(vi)
as to each Closing, the Purchaser shall have received a certificate, duly executed by the Chief Executive Officer of the Company,
dated as of each the Closing Date, confirming compliance with Section 2.3(a)(i) and (ii) below and as to such other matters as
may be reasonably requested by the Purchaser and its counsel in the form acceptable to the Purchaser;


 


(vii)
as to the Initial Closing, a certificate evidencing the formation and good standing of the Company in each such entity’s
jurisdiction of formation issued by the Secretary of State (or comparable office) of such jurisdiction of formation as of a date
within five (5) days of applicable Closing Date;


 




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(viii)
as to the Initial Closing, a certificate evidencing the Company’s qualification as a foreign corporation and good standing
issued by the Secretary of State (or comparable office) of each jurisdiction in which the Company conducts business and is required
to so qualify, as of a date within five (5) days of the applicable Closing Date;


 


(ix)
as to the Initial Closing, the Company shall have delivered to the Purchaser a certified copy of its certificate of incorporation,
as amended, as certified by the Delaware Secretary of State within five (5) days of the Closing Date;


 


(x)
as to each Closing, an opinion of counsel to the Company, in such form as reasonably acceptable to the Purchaser;


 


(xi)
as to the Initial Closing, the Company shall have delivered the consent of the holder of the Debentures for the establishment
of the Segregated Cash Account; and


 


(xii)
as to each Closing, the Company and the Subsidiaries shall have delivered to the Purchaser such other documents, instruments,
opinions or certificates relating to the transactions contemplated by this Agreement as the Purchaser or its counsel may reasonably
request.


 


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


 


(i)
as to the Initial Closing, this Agreement duly executed by the Purchaser;


 


(ii)
as to the Initial Closing, the Initial Closing Purchase Price subject to the closing by wire transfer;


 


(iii)
as to the Initial Closing, the Purchaser shall deliver the Registration Rights Agreement duly executed by the Purchaser;


 


(iv)
as to the Initial Closing, the Purchaser shall deliver the Leak Out Agreement duly executed by the Purchaser; and


 


(v)
as to the Subsequent Closing, the Subsequent Closing Purchase Price subject to the closing by wire transfer.


 


2.3
Conditions to Purchase the Securities. Subject to the terms and conditions of this Agreement, the Purchaser will at a Closing
purchase from the Company the Securities in the amounts and for the Purchase Price as set forth on Schedule 1, provided
the following:


 


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


 


(i)
the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material
Adverse Effect, in all respects) when made and on the date of the applicable Closing of the representations and warranties of
the Purchaser contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);


 




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


 


(iii)
the delivery by Purchaser of the items set forth in Section 2.2(b) of this Agreement.


 


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


 


(i)
the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material
Adverse Effect, in all respects) when made and on the date of the applicable Closing of the representations and warranties of
the Company contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);


 


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


 


(iii)
the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;


 


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


 


(v)
the Company shall have obtained all governmental, regulatory and third party consents and approvals, if any, necessary for the
entry into the Transaction Documents and the sale of the Securities; and


 


(vi)
no statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or Governmental Entity of competent jurisdiction that prohibits the consummation of any of the transactions contemplated
by the Transaction Documents.; and


 


(vii)
completion of the Purchaser’s due diligence to its satisfaction.


 


2.4
Purchase Price and Payment of the Purchase Price for the Securities. The Purchase Price for the Securities to be purchased
by the Purchaser at each Closing shall be as set forth on Schedule 1 and shall be paid at the applicable Closing (less
all of the Purchaser’s Expenses (as defined below)) by the Purchaser by wire transfer of immediately available funds to
the Company in accordance with the Company’s written wiring instructions, against delivery of the Securities.


 




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ARTICLE
3

REPRESENTATIONS AND WARRANTIES; OTHER ITEMS


 


3.1
Representation and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules
shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained
in the corresponding section of the Disclosure Schedules (but in no event shall qualify any indemnity obligation of the Company
hereunder), the Company (which for purposes of this Section 3.1 means the Company and all of its Subsidiaries) represents
and warrants to the Purchaser that on Closing Date (unless as of a specific date set forth below):


 


(a)
Subsidiaries. All of the direct and indirect subsidiaries of the Company and the locations thereof are set forth on Schedule
3.1(a). Except as set forth on Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital stock
or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital
stock or other interests of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities. Schedule 3.1(a) sets forth, as of each Closing Date, the jurisdiction of
organization and the location of the Company’s and its Subsidiaries’ executive offices and other places of business.


 


(b)
Organization, Etc. The Company and each of the Subsidiaries is duly organized, validly existing and in good standing under
the laws of the state of their respective organization and are duly qualified and in good standing or has applied for qualification
as a foreign corporation authorized to do business in each jurisdiction where, because of the nature of its activities or properties,
such qualification is required except where the failure to be so qualified would not reasonably be expected to have a Material
Adverse Effect.


 


(c)
Authorization: No Conflict. The execution, delivery and performance of the Transaction Documents and the transactions contemplated
thereby by the Company, including, but not limited to, the sale and issuance of the Preferred Stock for the Purchase Price, the
reservation for issuance of the shares of Common Stock required to be reserved pursuant to the terms of the Preferred Stock, the
reservation for issuance of the shares of Common Stock required to be reserved pursuant to the terms of the Preferred Stock and
of the sale and issuance the Conversion Shares into which the Preferred Stock are convertible (i) are within the Company’s
corporate powers, (ii) have been duly authorized by all necessary action by or on behalf of the Company (and/or its stockholders
to the extent required by law), (iii) the Company has received all necessary and/or required governmental, regulatory and other
approvals and consents (if any shall be required), (iv) do not and shall not contravene or conflict with any provision of, or
require any consents under (1) any law, rule, regulation or ordinance, (2) the Company’s organizational documents; and/or
(3) any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding
to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound
or affected except as would not reasonably be expected to have a Material Adverse Effect, and (v) do not result in, or require,
the creation or imposition of any Lien and/or encumbrance on any of the Company’s properties or revenues pursuant to any
law, rule, regulation or ordinance or otherwise.


 




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(d)
Validity and Binding Nature. The Transaction Documents to which the Company is a party are the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization and other similar laws of general application affecting the rights and
remedies of creditors and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).


 


(e)
Title to Assets. Except as disclosed in Schedule 3.1(g), the Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that
is material to the business of the Company and the Subsidiaries, all as described in the SEC Reports, in each case free and clear
of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with
the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens for the payment of federal,
state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and the payment of which
is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries
are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.


 


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


 


(g)
Taxes. Except as set forth on Schedule 3.1 (g) and except for matters that would not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed
all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required
by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision
reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company or of any Subsidiary know of no basis for any such claim.


 




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(h)
Licenses and Permits. Except as set forth in the SEC Reports, the Company possesses all
certificates, authorizations, consents, approvals, orders, licenses and permits issued by the appropriate federal, state or foreign
regulatory authorities (collectively, the “Permits”),
including the FDA and any other state, federal or foreign agencies or bodies engaged in the regulation of pharmaceuticals or biohazardous
materials, necessary to conduct its business as now conducted and described in the SEC Reports, other than such certificates,
authorizations, consents, approvals, orders, licenses and permits, the lack of which would not individually or in the aggregate
have a Material Adverse Effect on the Company. Except as otherwise disclosed in the SEC Reports, all of such Permits are valid
and in full force and effect, except where the invalidity of such Permits or the failure to be in full force and effect, individually
or in the aggregate, would not have a Material Adverse Effect on the Company. Except as otherwise disclosed in the SEC Reports,
there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or investigation that individually
or in the aggregate would reasonably be expected to lead to the revocation, modification, termination, suspension or any other
impairment of the rights of the holder of any such Permit which revocation, modification, termination, suspension or other impairment
would have a Material Adverse Effect on the Company.


 


(i)
Investment Company. The Company is not (i) an “investment company” or a company “controlled”, whether
directly or indirectly, by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended;
or (ii) engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System).


 


(j)
Absence of Defaults and Conflicts. Except as otherwise disclosed in the SEC Reports,
the Company is not (i) in violation of its charter, by-laws or similar incorporation
or organizational documents or (ii) in violation or default in the performance or observance of any obligation, agreement, covenant
or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement
or instrument to which the Company is a party or by which it may be bound, or to which any of the property or assets of the Company
is subject (collectively, “Agreements and Instruments”),
except in the case of clause (ii), for such violations and defaults that would not result in a Material Adverse Effect on the
Company; and the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated in
this Agreement, and compliance by the Company with its obligations under this Agreement, do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with or result in a breach of any of the terms and provisions
of, or constitute a default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to, the Agreements and Instruments, nor will such action
result in any violation of the provisions of the charter, by-laws or similar organizational
documents of the Company or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its assets, properties
or operations, except in each case (other than with respect to such charter, by-laws or
similar organizational documents of the Company) for such conflicts, violations, breaches or defaults which would not reasonably
be expected to result in a Material Adverse Effect on the Company. As used herein, a “Repayment
Event” means any event or condition which gives the holder of any
note, debenture or other evidence of indebtedness that is material to the operations or financial results of the Company (or any
person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion
of such indebtedness by the Company.


 




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(k)
Foreign Corrupt Practices Act. Except as otherwise disclosed in the SEC Reports,
neither the Company nor, to the Company’s knowledge, any of its affiliates, directors, officers, employees, agents or other
person acting on behalf of the Company is aware of or has taken any action, directly or indirectly, that would result in a material
violation by such person 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 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 and, to the Company’s
knowledge, its affiliates have conducted their businesses in material 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.


 


(l)
Rule 506(d) Bad Actor Disqualification Representations and Covenants.


 


(i)
No Disqualification Events. Neither the Company, nor any of its predecessors, affiliates, any manager, executive officer,
other officer of the Company participating in the offering, any beneficial owner (as that term is defined in Rule 13d-3 under
the Exchange Act) 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
as of the date of this Agreement and on each Closing Date (each, a “Company Covered Person” and, together,
“Company Covered Persons”) 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). The Company has exercised reasonable care to determine (A) the identity of each person
that is a Company Covered Person; and (B) whether any Company Covered Person is subject to a Disqualification Event. The Company
will comply with its disclosure obligations under Rule 506(e).


 




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(ii)
Other Covered Persons. The Company is not aware of any person (other than any Company Covered Person) who has been or will
be paid (directly or indirectly) remuneration in connection with the purchase and sale of the Preferred Stock who is subject to
a Disqualification Event (each, an “Other Covered Person”).


 


(iii)
Reasonable Notification Procedures. With respect to each Company Covered Person, the Company has established procedures
reasonably designed to ensure that the Company receives notice from each such Company Covered Person of (A) any Disqualification
Event relating to that Company Covered Person, and (B) any event that would, with the passage of time, become a Disqualification
Event relating to that Company Covered Person; in each case occurring up to and including each Closing Date.


 


(iv)
Notice of Disqualification Events. The Company will notify the Purchaser immediately in writing upon becoming aware of
(A) any Disqualification Event relating to any Company Covered Person and (B) any event that would, with the passage of time,
become a Disqualification Event relating to any Company Covered Person and/or Other Covered Person.


 


(m)
Accuracy of Information, etc. No statement or information contained in this Agreement, the SEC Reports, any other Transaction
Document or any other document, certificate or statement furnished to the Purchaser by or on behalf of the Company in writing
for use in connection with the transactions contemplated by this Agreement and/or the other Transaction Documents contained, as
of the date such statement, information, document or certificate was made or furnished, as the case may be, any untrue statement
of a material fact or omitted to state a material fact necessary to make the statements contained herein or therein, taken as
a whole, not materially misleading. There is no fact known to the Company that would reasonably be expected to have a Material
Adverse Effect that has not been expressly disclosed herein, in the other Transaction Documents, or in any other documents, certificates
and statements furnished to the Purchaser for use in connection with the transactions contemplated hereby and by the other Documents.


 


(n)
Bankruptcy; Indebtedness. The Company has no knowledge of any facts or circumstances
which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any
jurisdiction within one year from the Closing Date. Schedule 3.1(n) sets forth
as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company
or any Subsidiary has commitments. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.


 




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


 


(p)
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 SEC Reports as necessary or required for use in connection with its business and which the failure
to so have would reasonably be expected to have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).
The Company has not received a notice (written or otherwise) that any material Intellectual Property Right has expired, terminated
or been abandoned, or is expected to expire or terminate or be abandoned. The Company has not received, since the date of the
latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge
that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as would not have or reasonably
be expected to 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 its intellectual property, except where failure
to do so would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. All Intellectual
Property Rights of the Company are set forth in the SEC Reports.


 


(q)
USA Patriot Act. The Company is in compliance, in all material respects, with (i) the Trading with the Enemy Act, as amended,
and each of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V,
as amended) and any other enabling legislation or executive order relating thereto, and (ii) the USA Patriot Act (Title III of
Pub. L. 107-56, signed into law on October 26, 2001) (the “Act”). No part of the proceeds of the Preferred
Stock will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official
of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain
or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977,
as amended.


 


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


 




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(s)
Filings, Consents and Approvals. Except as set forth on Schedule 3.1(s), the Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than: (i) the filings required pursuant to the Registration Rights Agreement and the
declaration of effectiveness by the SEC of the Registration Statement (ii) the notice and/or application(s) to each applicable
Trading Market for the issuance and sale of the Securities and the listing of the Conversion Shares for trading thereon in the
time and manner required thereby, and (iii) the filing of Form D with the Commission and such filings as are required to be made
under applicable state securities laws (collectively, the “Required Approvals”).


 


(t)
Authorization; Enforcement. All corporate action on the part of the Company, its officers, directors and stockholders necessary
for the authorization, execution and delivery of the Transaction Documents and the performance of all obligations of the Company
under the Transaction Documents and have been taken on or prior to the date hereof. Each of the Transaction Documents 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 applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’
rights generally, (ii) as limited by general equitable principles regardless of whether such enforcement is considered in a proceeding
in equity or at law, (iii) as limited by laws relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iv) insofar as indemnification and contribution provisions may be limited by applicable law.


 


(u)
Valid Issuance of Securities. The Preferred Stock has been duly authorized and, when issued and paid for in accordance
with this Agreement, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens and all restrictions
on transfer other than those expressly imposed by the federal securities laws and vest in the Purchaser full and sole title and
power to the Preferred Stock purchased hereby by the Purchaser, free and clear of all Liens, and restrictions on transfer other
than those imposed by the federal securities laws. All Conversion Shares, when issued in accordance with the terms of the Certificate
of Designations, will be duly and validly issued, fully paid and nonassessable, will be free and clear of all Liens and vest in
the holder full and sole title and power to such securities. The Company has reserved from its duly authorized unissued Common
Stock, the Required Minimum, which Required Minimum shall be continuously determined by the Company to ensure that the Required
Minimum is in reserve with the Transfer Agent at all times. The Company covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable. The Preferred Stock and the Conversion
Shares shall sometimes be collectively referred to as the “Securities.”


 


(v)
Offering. The offer and sale of the Preferred Stock, as contemplated by this Agreement, is exempt from the registration
requirements of the Securities 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.


 




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(w)
Capitalization and Voting Rights. The capitalization of the Company is as set forth on Schedule 3.1(w), which Schedule
3.1(w) shall also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company
as of the date hereof. The authorized capital stock of the Company and all securities of the Company issued and outstanding are
set forth in the SEC Reports as of the dates reflected therein. All of the outstanding shares of Common Stock and other securities
of the Company have been duly authorized and validly issued, and are fully paid and nonassessable. Other than as described in
the SEC Reports, the Company has not issued any capital stock since its most recently filed periodic report under the Exchange
Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance
of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion
and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange
Act. Except as set forth on Schedule 3.1(w), no Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as set forth on Schedule
3.1(w), there are no agreements or arrangements under which the Company is obligated to register the sale of any of the Company’s
securities under the Securities Act. Except as set forth on Schedule 3.1(w), no shares of Common Stock and/or other securities
of the Company are entitled to preemptive rights and there are no outstanding debt securities and no contracts, commitments, understandings,
or arrangements by which the Company is or may become bound to issue additional shares of the capital stock and/or other securities
of the Company or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating
to, or securities or rights convertible into or exchangeable for, any shares of capital stock of the Company other than those
issued or granted in the ordinary course of business pursuant to the Company’s equity incentive and/or compensatory plans
or arrangements. Except for customary transfer restrictions contained in agreements entered into by the Company to sell restricted
securities and/or as set forth on Schedule 3.1(w), the Company is not a party to, and it has no knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock and/or other securities of the Company. Except as set forth
on Schedule 3.1(w), the offer and sale of all capital stock, convertible or exchangeable securities, rights, warrants,
options and/or any other securities of the Company when any such securities of the Company were issued complied with all applicable
federal and state securities laws, and no current and/or prior holder of any securities of the Company has any right of rescission
or damages or any “put” or similar right with respect thereto that would reasonably be expected to have a Material
Adverse Effect. Except as set forth on Schedule 3.1(w), there are no securities or instruments of the Company containing
anti-dilution or similar provisions that will be triggered by the issuance and/or sale of the Securities and/or the consummation
of the transactions described herein or in any of the other Transaction Documents.


 




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(x)
SEC Reports. 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 two years
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 Reports”) on a timely basis or has received a valid extension of such time of filing
and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of
the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were
made, not misleading. The Company has never been an issuer subject to Rule 144(i) under the Securities Act. The financial statements
of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods
involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material
respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results
of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.


 


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


 




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(z)
Litigation. Except as set forth on Schedule 3.1(z), there is no action, suit, inquiry, notice of violation, proceeding
or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary,
nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company,
there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director
or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.


 


(aa)
Material Changes; Undisclosed Events, Liabilities or Developments. Except as provided in Schedule 3.1(aa), since
the date of the latest audited financial statements included in the SEC Reports, except as specifically disclosed in a subsequent
SEC Report filed with the SEC prior to the date hereof: (i) there has been no event, occurrence or development that has had or
that would reasonably be expected to have 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 SEC Reports pursuant to SEC rules and/or regulations, (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 business, 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.


 




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(bb)
Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction
Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any Purchaser or its respective
agents or counsel with any information that constitutes material, non-public information. The Company understands that the Purchaser
may rely on the Transaction Documents, the information included therein, including, but not limited to, the foregoing representation
and the SEC Reports in purchasing the Preferred Stock. All of the disclosure furnished by or on behalf of the Company to the Purchaser
in the Transaction Documents and/or in the SEC Reports, regarding, among other matters relating to the Company, its business and
the transactions contemplated in the Transaction Documents, is true and correct in all material respects as of the date made and
does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that
none of the Purchaser does make nor has made any representations or warranties with respect to the transactions contemplated in
the Transaction Documents other than those specifically set forth in Section 3.2 hereof.


 


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


 


(dd)
Insurance. Except as set forth in the SEC Reports, the Company is insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are prudent and customary in the business in which it is engaged; the Company
has not been refused any coverage sought or applied for; and the Company does not have 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 would not have a Material Adverse Effect on the Company.


 


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


 


(ff)
Registration Rights. Except as set forth on Schedule 3.1(ff), no Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the Company or any Subsidiaries.


 




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


 


(hh)
Dilutive Effect. The Company understands and acknowledges that the number of Conversion Shares issuable upon conversion
of the Preferred Stock, pursuant to the terms thereof, will increase in certain circumstances. The Company further acknowledges
that its obligations to issue Conversion Shares pursuant to the terms of the Preferred Stock in accordance with this Agreement
and the Preferred Stock is absolute and unconditional regardless of the dilutive effect that any such issuances may have on the
percentage ownership interests of other stockholders of the Company.


 


(ii)
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, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provisions under the Company’s articles of incorporation,
as amended, or the laws of the jurisdiction of its formation that are or could become applicable to the Purchaser as a result
of the transactions contemplated by this Agreement and/or the other Transaction Documents, including, without limitation, the
Company’s issuance of the Securities and the Purchaser’s ownership of the Securities. The Company has not adopted
a stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a change
in control of the Company.


 


(jj)
Manipulation of Price. 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, or that could reasonably be expected to cause or 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.


 




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(kk)
DTC Eligible. The Common Stock is DTC eligible and DTC has not placed a “freeze” or a “chill” on
the Common Stock and the Company has no reason to believe that DTC has any intention to make the Common Stock not DTC eligible,
or place a “freeze” or “chill” on the Common Stock. No federal or state regulatory authority has indicated
that it will prohibit the listing of the Company’s securities based upon its sale of CBD products nor will the Purchaser
be prohibited from depositing, clearing or settling the Securities, including through the DTC or otherwise, on account of the
Company’s sale of CBD products.


 


(ll)
Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) 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 under the Exchange Act nor has the Company received any notification that the Commission is contemplating
terminating such registration. Except as set forth in the SEC Reports, the Company has not, in the 12 months preceding the date
hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Common Stock is eligible
for quotation on the Principal Market and the Company has no reason to believe that the Principal Market has any intention of
delisting the Common Stock from the Principal Market. The issuance and sale of the Securities hereunder does not contravene the
rules and regulations of the Trading Market. All Underlying Shares have been approved, if so required, for listing or quotation
on the Trading Market, subject only to notice of issuance.


 


(mm)
No General Solicitation. Neither the Company, nor any of its affiliates, nor, to the knowledge of the Company, any Person
acting on its 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.


 


(nn)
Acknowledgment Regarding the Purchaser’s Purchase of Securities. The Company acknowledges and agrees that the Purchaser
is acting solely in the capacity of an arm’s length purchaser with respect to the other Transaction Documents and the transactions
contemplated hereby and thereby and that such Purchaser is not (i) an officer or director of the Company, (ii) an Affiliate of
the Company or (iii) to the knowledge of the Company, a “beneficial owner” of more than 10% of the shares of Common
Stock (as defined for purposes of Rule 13d-3 of the Exchange Act). The Company further acknowledges that the Purchaser 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 such Purchaser or any of its representatives or
agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental
to such Purchaser’s purchase of the Securities. The Company further represents to the Purchaser that the Company’s
decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives.


 




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(oo)
Off-Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company and an
unconsolidated or other off-balance sheet entity that is required to be disclosed by the Company in its Exchange Act filings and
is not so disclosed or that otherwise would be reasonably likely to have a Material Adverse Effect.


 


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


 


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


 


(rr)
Environmental Laws. The Company and its Subsidiaries, to the best of the Company’s knowledge, (i) are in compliance
with all federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including
ambient air, surface water, groundwater, land surface or subsurface strata), including 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 (“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 where in each clause (i), (ii) and (iii),
the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.


 


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


 




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3.2
Representation and Warranties of The Purchaser. The Purchaser hereby represents and warrants as of the date hereof and
as of each Closing Date to the Company as follows:


 


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


 


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


 


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


 


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


 




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


 


(f)
Access to Information. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents
(including all exhibits and schedules thereto) and the SEC Reports and has been afforded (i) the opportunity to ask such questions
as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions
of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the
Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable
it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can
acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment.


 


(g)
Certain Transactions and Confidentiality. The Purchaser has not directly or indirectly, nor has any Person acting on behalf
of or pursuant to any understanding with such Purchaser, executed any purchases or sales, including Short Sales, of the securities
of the Company during the period commencing as of the time that such Purchaser first received a term sheet (written or oral) from
the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder
and ending immediately prior to the execution hereof. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed
investment vehicle, whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s
assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager
that made the investment decision to purchase the Securities covered by this Agreement. Other than to other Persons party to this
Agreement or to such Purchaser’s representatives, including, without limitation, its officers, directors, partners, legal and
other advisors, employees, agents and Affiliates, such Purchaser has maintained the confidentiality of all disclosures made to
it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing,
for avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with
respect to the identification of the availability of, or securing of, available shares to borrow in order to effect Short Sales
or similar transactions in the future.


 


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


 




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ARTICLE
4

OTHER AGREEMENTS OF THE PARTIES


 


4.1
Transfer Restrictions.


 


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


 


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


 


[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [CONVERTIBLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS
SECURITY [AND THE SECURITIES ISSUABLE UPON [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR”
AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.


 


The
Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited
investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees
or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel
of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such
pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a
pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including,
if the Securities are then registered for resale on a registration statement, the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately
amend the list of Selling Stockholders thereunder.


 






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(c)
Certificates evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof):
(i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under
the Securities Act, (ii) following any sale of such Underlying Shares pursuant to Rule 144, (iii) if such Underlying Shares are
eligible for sale under Rule 144 or (iv) if such legend is not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue
a legal opinion to the Transfer Agent promptly after the Effective Date or at such time as such legend is no longer required under
this Section 4.1(c) if required by the Transfer Agent to effect the removal of the legend hereunder, or if requested by a Purchaser.
If any portion of the Preferred Stock is converted at a time when there is an effective registration statement to cover the resale
of the Underlying Shares, or if such Underlying Shares may be sold under Rule 144 and the Company is then in compliance with the
current public information required under Rule 144, or if the Underlying Shares may be sold under Rule 144 without the requirement
for the Company to be in compliance with the current public information required under Rule 144 as to such Underlying Shares and
without volume or manner-of-sale restrictions or if such legend is not otherwise required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) then such Underlying
Shares shall be issued free of all legends. The Company agrees that following the Effective Date or at such time as such legend
is no longer required under this Section 4.1(c), it will, no later than the earlier of (i) two (2) Trading Days and (ii) the number
of Trading Days comprising the Standard Settlement Period (as defined below) following the delivery by a Purchaser to the Company
or the Transfer Agent of a certificate representing Underlying Shares, as applicable, issued with a restrictive legend (such date,
the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such
shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions
to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Certificates for Underlying Shares
subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the
Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser. As used herein, “Standard
Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in effect on the date of delivery of a certificate representing Underlying
Shares, as applicable, issued with a restrictive legend.


 






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(d)
In addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, the greater of
(i) as partial liquidated damages and not as a penalty, for each $1,000 of Underlying Shares (based on the VWAP of the Common
Stock on the date such Securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject
to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five (5) Trading Days after such damages have begun
to accrue) for each Trading Day after the Legend Removal Date until such certificate is delivered without a legend and (ii) if
the Company fails to (i) issue and deliver (or cause to be delivered) to a Purchaser by the Legend Removal Date a certificate
representing the Securities so delivered to the Company by such Purchaser that is free from all restrictive and other legends
or (ii) if after the Legend Removal Date such Purchaser purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by such Purchaser of all or any portion of the number of shares of Common Stock, or
a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock that such Purchaser
anticipated receiving from the Company without any restrictive legend, then, an amount equal to the excess of such Purchaser’s
total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock
so purchased (including brokerage commissions and other out-of-pocket expenses, if any) (the “Buy-In Price”)
over the product of (A) such number of shares of common stock that the Company was required to deliver to such Purchaser by the
Legend Removal Date multiplied by (B) the lowest closing sale price of the Common Stock on any Trading Day during the period commencing
on the date of the delivery by such Purchaser to the Company of the applicable shares of Common Stock and ending on the date of
such delivery and payment under this clause (ii).


 


4.2
Furnishing of Information. Until the one year anniversary of the date of this Agreement, the Company covenants to timely
file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements
of the Exchange Act.


 


4.3
Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in
a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated
with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require
shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing
of such subsequent transaction.


 


4.4
Securities Laws Disclosure; Publicity. The Company shall (a) by 9:00am on the 1st Trading Day after the date
of this Agreement, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a
Current Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time required
by the Exchange Act. From and after the issuance of such press release, the Company represents to the Purchaser that it shall
have publicly disclosed all material, non-public information delivered to any of the Purchaser by the Company or any of its Subsidiaries,
or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction
Documents. In addition, effective upon the issuance of such press release, the Company acknowledges and agrees that any and all
confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries
or any of their respective officers, directors, agents, employees or Affiliates on the one hand, and any of the Purchaser or any
of their Affiliates on the other hand, shall terminate. The Company and the Purchaser shall consult with each other in issuing
any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall
issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect
to any press release of any Purchaser, or without the prior consent of the Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case
the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding
the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except
(a) as required by federal securities law in connection with the filing of final Transaction Documents with the Commission and
(b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the
Purchaser with prior notice of such disclosure permitted under this clause (b).


 




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4.5
Shareholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other
Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter
adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue
of receiving Securities under the Transaction Documents.


 


4.6
Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the
Transaction Documents, which shall be disclosed pursuant to Section 4.4, the Company covenants and agrees that neither it, nor
any other Person acting on its behalf will provide the Purchaser or its agents or counsel with any information that constitutes,
or the Company reasonably believes constitutes, material non-public information, unless prior thereto the Purchaser shall have
consented to the receipt of such information and agreed with the Company to keep such information confidential. The Company understands
and confirms that the Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.
To the extent that the Company delivers any material, non-public information to a Purchaser without such Purchaser’s consent,
the Company hereby covenants and agrees that such Purchaser shall not have any duty of confidentiality to the Company, any of
its Subsidiaries, or any of their respective officers, directors, agents, employees or Affiliates, or a duty to the Company, any
of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates not to trade on the basis
of, such material, non-public information, provided that the Purchaser shall remain subject to applicable law. To the extent that
any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding
the Company or any Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report
on Form 8-K. The Company understands and confirms that the Purchaser shall be relying on the foregoing covenant in effecting transactions
in securities of the Company.


 


4.7
Use of Proceeds. Except as set forth on Schedule 4.7 attached hereto, until immediately prior to the Merger, provided
the Segregated Cash Account is established and funded in full, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and shall not use such proceeds: (a) for the satisfaction of any portion of the Company’s
debt (other than payment of trade payables in the ordinary course of the Company’s business and prior practices), (b) for
the redemption of any Common Stock or Common Stock Equivalents, (c) for the settlement of any outstanding litigation or (d) in
violation of FCPA or OFAC regulations. Notwithstanding the foregoing, for as long as the Preferred Stock is outstanding, the Company
shall not use more than $1,000,000 of the net proceeds from the sale of the Securities for working capital purposes.


 




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4.8
Indemnification of Purchaser. Subject to the provisions of this Section 4.8, the Company will indemnify and hold the Purchaser
and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls
such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors,
officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser
Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses,
as incurred, arising out of or relating to (i) any untrue or alleged untrue statement of a material fact contained in such registration
statement, any prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus,
or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of any prospectus or supplement thereto, in the light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent, that such untrue statements or omissions are based
solely upon information regarding such Purchaser Party furnished in writing to the Company by such Purchaser Party expressly for
use therein, or (ii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities
law, or any rule or regulation thereunder in connection therewith. If any action shall be brought against any Purchaser Party
in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company
in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable
to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate
in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the
extent that (x) the employment thereof has been specifically authorized by the Company in writing, (y) the Company has failed
after a reasonable period of time to assume such defense and to employ counsel or (z) in such action there is, in the reasonable
opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser
Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.
The Company will not be liable to any Purchaser Party under this Agreement (1) for any settlement by a Purchaser Party effected
without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (2) to the extent,
but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of
the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction
Documents. The indemnification required by this Section 4.8 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein
shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities
the Company may be subject to pursuant to law.


 




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4.9 Reservation
of Common Stock. As of the date hereof, the Company has reserved and the Company shall
continue to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock
equal to the Required Minimum for the purpose of enabling the Company to issue the Conversion Shares and any other shares that
may be issuable pursuant to the Certificate of Designations. If, on any date, the number of authorized but unissued (and
otherwise unreserved) shares of Common Stock is less than the Required Minimum on such date, then the Board of Directors shall
use commercially reasonable efforts to amend the Company’s certificate or articles of incorporation to increase the number
of authorized but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible and in any
event not later than the 75th day after such date


 


4.10 Listing
of Common Stock. The Company hereby agrees to use commercially reasonable efforts to
maintain the listing or quotation of the Common Stock on the Trading Market on which it is currently listed, and concurrently
with each Closing, the Company shall apply to list or quote all of the Underlying Shares on such Trading Market and promptly secure
the listing of all of the Underlying Shares on such Trading Market. The Company further agrees, if the Company applies to have
the Common Stock traded on any other Trading Market, it will then include in such application all of the Underlying Shares, and
will take such other action as is necessary to cause all of the Underlying Shares to be listed or quoted on such other Trading
Market as promptly as possible. The Company will then take all action reasonably necessary to continue the listing and trading
of its Common Stock on a Trading Market and will comply in all respects with the Company’s reporting, filing and other obligations
under the bylaws or rules of the Trading Market. The Company agrees to maintain the eligibility of the Common Stock for electronic
transfer through the Depository Trust Company or another established clearing corporation, including, without limitation, by timely
payment of fees to the Depository Trust Company or such other established clearing corporation in connection with such electronic
transfer.


 




    	33



     


    

 


4.11 Certain
Transactions and Confidentiality. The Purchaser, severally and not jointly with the
other Purchaser, covenants that neither it nor any Affiliate acting on its behalf or pursuant to any understanding with it will
execute any purchases or sales, including Short Sales of any of the Company’s securities during the period commencing with
the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly
announced pursuant to the initial press release as described in Section 4.4. The Purchaser, severally and not jointly with the
other Purchaser, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the
Company pursuant to the initial press release as described in Section 4.4, such Purchaser will maintain the confidentiality of
the existence and terms of this transaction and the information included in the Disclosure Schedules. Notwithstanding the foregoing
and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i)
no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities
of the Company after the time that the transactions contemplated by this Agreement are first publicly announced, (ii) no Purchaser
shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable
securities laws from and after the time that the transactions contemplated by this Agreement are first publicly announced pursuant
to the initial press release as described in Section 4.4 and (iii) no Purchaser shall have any duty of confidentiality or duty
not to trade in the securities of the Company to the Company or its Subsidiaries after the issuance of the initial press release.
Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set
forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision
to purchase the Securities covered by this Agreement.


 


4.12 Exercise
Procedures. The form of Notice of Conversion in the Preferred Stock set forth the totality
of the procedures required of the Purchaser in order to convert the Preferred Stock. No additional legal opinion, other information
or instructions shall be required of the Purchaser to exercise the Preferred Stock. Without limiting the preceding sentences,
no ink-original Notice of Conversion shall be required, nor shall any medallion guarantee
(or other type of guarantee or notarization) of any Notice of Conversion form be required in order to covert and/or exercise the
Securities. The Company shall honor conversions of the Securities and shall deliver applicable Underlying Shares in accordance
with the terms, conditions and time periods set forth in the Transaction Documents.


 


4.13 Form
D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. 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 Purchaser at the applicable Closing under applicable securities or “Blue Sky” laws of
the states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser.


 


4.14 Maintenance
of Property. Until the Preferred Stock is no longer outstanding, the Company shall use its commercially reasonable efforts
to keep all of its property, which is necessary or useful to the conduct of its business, in good working order and condition,
ordinary wear and tear excepted.


 


4.15 Preservation
of Corporate Existence. Until the Preferred Stock is no longer outstanding, the Company shall preserve and maintain its corporate
existence, rights, privileges and franchises in the jurisdiction of its incorporation, and qualify and remain qualified, as a
foreign corporation in each jurisdiction in which such qualification is necessary in view of its business or operations and where
the failure to qualify or remain qualified would reasonably be expected to have a Material Adverse Effect.


 




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4.16 Furnishing
of Information. Until the Preferred Stock is no longer outstanding, the Company covenants to maintain the registration of
the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act. As long as any Purchaser owns Securities, if the Company is not required to file reports pursuant to the Exchange
Act, it will prepare and furnish to the Purchaser and make publicly available in accordance with Rule 144(c) such information
as is required for the Purchaser to sell the Securities under Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, to the extent required from time to time to enable such Person to sell
such Securities without registration under the Securities Act within the requirements of the exemption provided by Rule 144.


 


4.17 DTC
Program. Until the Preferred Stock is no longer outstanding, the Company will employ as the transfer agent for the Common
Stock a participant in the Depository Trust Company Automated Securities Transfer Program and cause the Common Stock to be transferable
pursuant to such program.


 


4.18 Subsequent
Equity Sales. Until the Preferred Stock is no longer outstanding, 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. “Variable Rate Transaction” means
a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion price, exercise
price or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares
of Common Stock at any time after the initial issuance of such debt or equity securities, 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 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 or (ii) enters into, or effects a transaction under, any agreement, including, but not limited to, an equity
line of credit, whereby the Company may issue securities at a future determined price. Any Purchaser shall be entitled to obtain
injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect
damages.


 




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4.19 Transfer
Agent Instructions. The Company shall issue irrevocable instructions to the Transfer Agent in a form acceptable to the Purchaser
(the “Irrevocable Transfer Agent Instructions”) to issue certificates or credit shares to the applicable balance
accounts at The Depository Trust Company (“DTC”), registered in the name of the Purchaser or its respective
nominee(s), for the Conversion Shares in such amounts as specified from time to time by each Purchaser to the Company upon conversion
of the Preferred Stock. The Company represents and warrants that no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section will be given by the Company to its Transfer Agent with respect to the Securities, and that the Securities
shall otherwise be freely transferable on the books and records of the Company, as applicable, to the extent provided in this
Agreement and the other Transaction Documents. In the event that such sale, assignment or transfer involves Conversion Shares
sold, assigned or transferred pursuant to an effective registration statement or in compliance with Rule 144, the transfer agent
shall issue such shares to such Buyer, assignee or transferee (as the case may be) without any restrictive legend in accordance
with Section 4.1 The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to Purchaser.
Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section will be inadequate
and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that Purchaser shall
be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. The
Company shall cause its counsel to issue the legal opinion referred to in the Irrevocable Transfer Agent Instructions to the Company’s
transfer agent from and after the Applicable Date. Any fees (with respect to the transfer agent, counsel to the Company or otherwise)
associated with the issuance of such opinion or the removal of any legends on any of the Securities shall be borne by the Company.
“Applicable Date” means the first date on which all of the Underlying Securities are eligible to be resold by the
Purchaser pursuant to Rule 144 or an effective registration statement is in effect.


 


4.20 Capital
Changes. Until the earlier of (i) the date the Preferred Stock is no longer oustanding and (ii) one year anniversary of the
Closing Date, except for any proposed capital change announced prior to the Closing Date, the Company shall not undertake a reverse
or forward stock split or reclassification of the Common Stock without the prior written consent of the Purchaser.


 


4.22 Spin-Off
NewCo.


 


(a) At
the Initial Closing or as soon as possible thereafter, the Company shall cause Spin-Off NewCo to issue to the Purchaser a five-year
warrant (“Spin-Off Warrant”) to purchase 350,000 shares of Spin-Off NewCo’s common stock at an exercise price
of $1.25 per share, substantially in the form to be agreed upon between the parties after the Closing. The number of shares underlying
the Spin- Off Warrant and the exercise price per share will be adjusted proportionately for the reverse stock split contemplated
by the Merger based on the quotient of the aggregate number of shares of common stock of the Company outstanding immediately prior
to the Merger and the reverse stock split and the number of shares of common stock distributed in Spin-Off NewCo provided all
shareholders of Spin-Off NewCo are subject to adjustment as described above.


 


(b) At
the Subsequent Closing or as soon as possible thereafter, but in no event no later the date of closing of the Merger, the Company
shall cause Spin-Off NewCo to enter into a registration rights agreement with the Purchaser, on substantially similar terms as
set forth in the Registration Rights Agreement.


 


(c)
 The Company shall cause Spin-Off NewCo to use its best efforts to register its securities with the Commission as well as
file an application to have its securities quoted on an over-the-counter market tier maintained by The OTC Markets Group, Inc.
as soon as practicable after the date of the Agreement, but in no event no later than the date of the Subsequent Closing.


 




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4.23 True-Up.


 


(a) In
the event that the proceeds received by the Purchaser from the sale of all the Conversion Shares do not equal at least 125% of
the Stated Value of the Preferred Stock on the first Trading Day after the six month anniversary of the Closing Date (the “True-Up
Payment Date”), Spin-Off NewCo or, solely in the event that the transactions contemplated by the Merger Agreement have
not been consummated, the Company shall pay the Purchaser an amount in cash (the “True-Up Payment”) equal to
the dollar value of 125% of the Stated Value of the Preferred Stock less the proceeds previously realized by the Purchaser from
the sale of the Conversion Shares, net of brokerage commissions and any other fees incurred by Purchaser in connection with the
sale of any Conversion Shares (“Net Proceeds”).


 


(b) The
True-Up Payment will be paid by Spin-Off NewCo or, solely in the event that the transactions contemplated by the Merger Agreement
have not been consummated, the Company, as the case may be, out of either (i) the proceeds from the exercise by Spin-Off NewCo
of existing warrants to purchase shares of the Company’s common stock held by Spin-Off NewCo or (ii) the Segregated Cash
Account. If any portion of the True-Up Payment has not been paid by Spin-Off NewCo or the Company, as the case may be, on the
True-Up Payment Date, interest shall accrue on such unpaid amount until such amount is paid in full at a rate equal to the lesser
of (i) 18% per annum or (ii) the maximum rate permitted by applicable law. Upon payment in full of the True-Up Payment, any portion
of the Segregated Cash Account not used to pay the True-Up Payment will be transferred to the Company or Spin-Off NewCo (in the
event that the transactions contemplated by the Merger Agreement have been consummated).


 


(c) The
Segregated Cash Account will be maintained until the True-Up Payment is paid in full, provided that beginning on the three month
anniversary of the Closing Date, and on each monthly anniversary thereafter, Spin-Off NewCo may withdraw funds from the Segregated
Cash Account in an amount equal to $1,250,000 multiplied by a fraction, the numerator of which is equal to the Net Proceeds and
denominator of which is equal to $375,000. Notwithstanding the foregoing, Spin-Off NewCo may not withdraw funds from the Segregated
Cash Account to the extent the portion of the Net Proceeds realized by the Purchaser is not in excess of $20,000.


 


ARTICLE
5

MISCELLANEOUS


 


5.1 Fees
and Expenses. Except as expressly set forth below and in the Transaction Documents to the contrary, each party shall pay the
reasonable, documented fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company
shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction
letter delivered by the Company and any exercise notice delivered by a Purchaser), stamp taxes and other taxes and duties levied
in connection with the delivery of any Securities to the Purchaser. Notwithstanding the foregoing, the Company agrees to pay all
direct and indirect costs and expenses of the Purchaser related to the negotiation, due diligence, preparation, closing, and all
other items regarding or related to this Agreement and the other Transaction Documents and all of the transactions contemplated
herein and/or therein, including, but not limited to, the legal fees and expenses of the Purchaser’ legal counsel (collectively,
the “Purchaser’s Expenses”), not to exceed $35,000, $______ of which has been paid on or prior to the
date of this Agreement as well as any additional fees and expenses (including the fees and expenses of any counsel) required for
the establishment of the Segregated Cash Account. In addition, on the Initial Closing Date, the Company shall pay the Purchaser
a closing fee equal to $90,000 payable in cash.


 




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


 


5.3 Notices.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and
shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered
via facsimile or email attachment at the facsimile number or email address as set forth on the signature pages attached hereto
at or prior to 5:30 p.m. (New York City time) on a Business Day, (b) the next Business Day after the date of transmission, if
such notice or communication is delivered via facsimile or email attachment at the facsimile number or email address as set forth
on the signature pages attached hereto on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any
Business Day, (c) the second (2nd) Business Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for
such notices and communications shall be as set forth on the signature pages attached hereto.


 


5.4 Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and the Purchaser or, in the case of a waiver, by the party against whom enforcement
of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right. Any amendment effected in accordance with accordance with this Section 5.5 shall
be binding upon the Purchaser and holder of Securities and the Company.


 


5.5 Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of
the Purchaser (other than by merger). Purchaser may assign any or all of its rights under this Agreement to any Person to whom
Purchaser assigns or transfers any Securities in compliance with the Transaction Documents, provided that such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents and applicable
securities laws that apply to the “Purchaser,” and provided further that (i) such transferee is an “accredited
investor” within the meaning of Rule 501 under the Securities Act and (ii) such transferee is not a direct competitor of
the Company or any Subsidiary.


 




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


 


5.7 Governing
Law; Exclusive Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of the Transaction
Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without
regard to the principles of conflicts of law thereof. Each party agrees that all legal Proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought
against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for
the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not
to assert in any Action or Proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that
such Action or Proceeding is improper or is an inconvenient venue for such Proceeding. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such Action or Proceeding by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If any party
shall commence an Action or Proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations
of the Company elsewhere in this Agreement, the prevailing party in such Action or Proceeding shall be reimbursed by the non-prevailing
party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution
of such Action or Proceeding.


 


5.8 Survival.
The representations and warranties contained herein shall survive the Subsequent Closing and the delivery of the Securities at
the Subsequent Closing.


 


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


 




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5.10 Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain
in full force and effect and shall in no way be affected, impaired, or invalidated, as long as the essential terms and conditions
of the this Agreement and the Certificate of Designations for each party remain valid, binding, and enforceable. The parties shall
use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or restriction.


 


5.11 Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without
limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods
therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to
the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided,
however, that, in the case of a rescission of a conversion of the Preferred
Stock, the Purchaser shall be required to return any shares of Common Stock subject to any such rescinded conversion notice concurrently
with the return to such Purchaser of the aggregate exercise price paid to the Company for such shares and the restoration of such
Purchaser’s right to acquire such shares pursuant to the Certificate of Designations.


 


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


 


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


 


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


 




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


 


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


 


5.17 Construction.
The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto.


 


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


 


(Signature
Pages Follow)


 




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


 


	CHANTICLEER HOLDINGS, INC.	 	Address for Notice:
	 	 	 	 
	By:	                                                              	 	Email:
	Name:	 	 	 
	Title:	 	 	 
	 	 	 	 
	With a copy to (which shall not
    constitute notice):	 	 


 


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK


 


SIGNATURE
PAGE FOR PURCHASER FOLLOWS]


 


[Securities Purchase Agreement]







 




    	 



     


    

 


 


PURCHASER
SIGNATURE PAGES TO BURG SECURITIES PURCHASE AGREEMENT


 


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


 


Name
of Purchaser: _____________________________________________


 


Signature
of Authorized Signatory of Purchaser: __________________________________


 


Name
of Authorized Signatory: _______________________________________


 


Title
of Authorized Signatory: _____ _______________________________________


 


Email
Address of Authorized Signatory: _____________________


 


Facsimile
Number of Authorized Signatory: __________________________________________


 


Address
for Notice to Purchaser:


 


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


 


EIN
Number: ________________


 




    	 



     


    

 


EXHIBIT
A


 


Form
of Certificate of Designations


 




    	 



     


    

 


EXHIBIT
B


 


Form
of Registration Rights Agreement


 




    	 



     


    

 


EXHIBIT
C


 


Form
of Leak Out Agreement


 




    	 



     


    

 


Schedule
1


 


Purchase
Price; Securities Purchased


 





	Name
of

Purchaser
	 	Initial
Closing Purchase Price
	 	Number
        of Shares of

                                                                                                         Initial Closing

                                                                                                         Preferred Stock

                                                                                                         being
                                                                                                         Purchased
	 	Subsequent
    Closing Purchase Price	 	Number of shares of

                                                                                Subsequent Closing Preferred Stock

                                                                                to be Purchased