Blueprint





 






Exhibit
10.1


 



SECURITIES PURCHASE AGREEMENT


 


This
SECURITIES PURCHASE
AGREEMENT (the “Agreement”), dated as of
November 20, 2017, by and between SINCERITY APPLIED MATERIALS HOLDINGS
CORP., a Nevada corporation, with headquarters located at
Level 4, 10 Yarra Street, South Yarra, Australia VIC 3141 (the
“Company”), and AUCTUS
FUND, LLC, a Delaware limited liability company, with its
address at 177 Huntington Avenue, 17th Floor, Boston, MA 02115 (the
“Buyer”).

 



WHEREAS:


 

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


 

1.2 Buyer desires to
purchase and the Company desires to issue and sell, upon the terms
and conditions set forth in this Agreement the 12% convertible note
of the Company, in the form attached hereto as Exhibit A, in the
aggregate principal amount of US$112,500.00 (together with any
note(s) issued in replacement thereof or as a dividend thereon or
otherwise with respect thereto in accordance with the terms
thereof, the “Note”), convertible into shares of common
stock, $0.001 par value per share, of the Company (the
“Common Stock”), upon the terms and subject to the
limitations and conditions set forth in such Note.


 

1.3 The Buyer wishes to
purchase, upon the terms and conditions stated in this Agreement,
such principal amount of Note as is set forth immediately below its
name on the signature pages hereto; and


 



NOW THEREFORE, the Company and the Buyer severally (and not
jointly) hereby agree as follows:


 

(a) PURCHASE AND SALE OF
NOTE.


 

(i) Purchase of Note. On the
Closing Date (as defined below), the Company shall issue and sell
to the Buyer and the Buyer agrees to purchase from the Company such
principal amount of Note as is set forth immediately below the
Buyer’s name on the signature pages hereto.


 

(ii) Form
of Payment. On the Closing Date (as defined below), the
Buyer shall pay the purchase price for the Note to be issued and
sold to it at the Closing (as defined below) (the “Purchase
Price”) by wire transfer of immediately available funds to
the Company, in accordance with the Company’s written wiring
instructions, against delivery of the Note in the principal amount
equal to the Purchase Price as is set forth immediately below the
Buyer’s name on the signature pages hereto, and  the
Company shall deliver such duly executed Note on behalf of the
Company, to the Buyer, against delivery of such Purchase
Price.


 

(iii) Closing
Date. Subject to the satisfaction (or written waiver) of the
conditions thereto set forth in Section 7 and Section 8 below, the
date and time of the issuance and sale of the Note pursuant to this
Agreement (the “Closing Date”) shall be 12:00 noon,
Eastern Standard Time on or about November 20, 2017, or such other
mutually agreed upon time. The closing of the transactions
contemplated by this Agreement (the “Closing”) shall
occur on the Closing Date at such location as may be agreed to by
the parties.


 




 








 






 

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


 

(i) Investment Purpose. As of the
date hereof, the Buyer is purchasing the Note and the shares of
Common Stock issuable upon conversion of or otherwise pursuant to
the Note (including, without limitation, such additional shares of
Common Stock, if any, as are issuable  on account of interest
on the Note  as a result of the events described in Sections
1.3 and 1.4(g) of the Note or  in payment of the Standard
Liquidated Damages Amount (as defined in Section 2(f) below)
pursuant to this Agreement, such shares of Common Stock being
collectively referred to herein as the “Conversion
Shares” and, collectively with the Note, the
“Securities”) for its own account and not with a
present view towards the public sale or distribution thereof,
except pursuant to sales registered or exempted from registration
under the 1933 Act; provided, however, that by making the
representations herein, the Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with
or pursuant to a registration statement or an exemption under the
1933 Act.


 

(ii) Accredited
Investor Status. The Buyer is an “accredited
investor” as that term is defined in Rule 501(a) of
Regulation D (an “Accredited Investor”).


 

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


 

(iv) Information.
The Buyer and its advisors, if any, have been, and for so long as
the Note remains outstanding will continue to be, furnished with
all materials relating to the business, finances and operations of
the Company and materials relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors.
The Buyer and its advisors, if any, have been, and for so long as
the Note remains outstanding will continue to be, afforded the
opportunity to ask questions of the Company. Notwithstanding the
foregoing, the Company has not disclosed to the Buyer any material
nonpublic information and will not disclose such information unless
such information is disclosed to the public prior to or promptly
following such disclosure to the Buyer. Neither such inquiries nor
any other due diligence investigation conducted by Buyer or any of
its advisors or representatives shall modify, amend or affect
Buyer’s right to rely on the Company’s representations
and warranties contained in Section 3 below. The Buyer understands
that its investment in the Securities involves a significant degree
of risk. The Buyer is not aware of any facts that may constitute a
breach of any of the Company's representations and warranties made
herein.


 

(v) Governmental Review. The Buyer
understands that no United States federal or state agency or any
other government or governmental agency has passed upon or made any
recommendation or endorsement of the Securities.


 




 

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(vi) Transfer
or Re-sale. The Buyer understands that the sale or re-sale
of the Securities has not been and is not being registered under
the 1933 Act or any applicable state securities laws, and the
Securities may not be transferred unless  the Securities are
sold pursuant to an effective registration statement under the 1933
Act,  the Buyer shall have delivered to the Company, at the
cost of the Company, an opinion of counsel that shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption
from such registration, which opinion shall be accepted by the
Company,  the Securities are sold or transferred to an
“affiliate” (as defined in Rule 144 promulgated under
the 1933 Act (or a successor rule) (“Rule 144”)) of the
Buyer who agrees to sell or otherwise transfer the Securities only
in accordance with this Section 2(f) and who is an Accredited
Investor,  the Securities are sold pursuant to Rule 144, or
 the Securities are sold pursuant to Regulation S under the
1933 Act (or a successor rule) (“Regulation S”), and
the Buyer shall have delivered to the Company, at the cost of the
Company, an opinion of counsel that shall be in form, substance and
scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of
such Securities made in reliance on Rule 144 may be made only in
accordance with the terms of said Rule and further, if said Rule is
not applicable, any re-sale of such Securities under circumstances
in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the
1933 Act) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions of
any exemption thereunder (in each case). Notwithstanding the
foregoing or anything else contained herein to the contrary, the
Securities may be pledged as collateral in connection with a
bona fide margin
account or other lending arrangement. In the event that the Company
does not accept the opinion of counsel provided by the Buyer with
respect to the transfer of Securities pursuant to an exemption from
registration, such as Rule 144 or Regulation S, within three (3)
business days of delivery of the opinion to the Company, the
Company shall pay to the Buyer liquidated damages of five percent
(5%) of the outstanding amount of the Note per day plus accrued and
unpaid interest on the Note, prorated for partial months, in cash
or shares at the option of the Buyer (“Standard Liquidated
Damages Amount”). If the Buyer elects to be pay the Standard
Liquidated Damages Amount in shares of Common Stock, such shares
shall be issued at the Conversion Price (as defined in the Note) at
the time of payment.


 

(vii) Legends.
The Buyer understands that the Note and, until such time as the
Conversion Shares have been registered under the 1933 Act may be
sold pursuant to Rule 144 or Regulation S without any restriction
as to the number of securities as of a particular date that can
then be immediately sold, the Conversion Shares may bear a
restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the
certificates for such Securities):


 


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


 




 

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The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any
Security upon which it is stamped, if, unless otherwise required by
applicable state securities laws, (a) such Security is registered
for sale under an effective registration statement filed under the
1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities
as of a particular date that can then be immediately sold, or (b)
such holder provides the Company with an opinion of counsel, in
form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or
transfer of such Security may be made without registration under
the 1933 Act, which opinion shall be accepted by the Company so
that the sale or transfer is effected. The Buyer agrees to sell all
Securities, including those represented by a certificate(s) from
which the legend has been removed, in compliance with applicable
prospectus delivery requirements, if any. In the event that the
Company does not accept the opinion of counsel provided by the
Buyer with respect to the transfer of Securities pursuant to an
exemption from registration, such as Rule 144 or Regulation S, at
the Deadline, it will be considered an Event of Default pursuant to
Section 3.2 of the Note.


 

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


 

(ix) Residency.
The Buyer is a resident of the jurisdiction set forth in the
preamble.

 

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


 

(i) Organization and Qualification.
The Company and each of its Subsidiaries (as defined below), if
any, is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is
incorporated, with full power and authority (corporate and other)
to own, lease, use and operate its properties and to carry on its
business as and where now owned, leased, used, operated and
conducted. The Company and each of its Subsidiaries is duly
qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which its ownership or use of
property or the nature of the business conducted by it makes such
qualification necessary except where the failure to be so qualified
or in good standing would not have a Material Adverse Effect.
“Material Adverse Effect” means any material adverse
effect on the business, operations, assets, financial condition or
prospects of the Company or its Subsidiaries, if any, taken as a
whole, or on the transactions contemplated hereby or by the
agreements or instruments to be entered into in connection
herewith. “Subsidiaries” means any corporation or other
organization, whether incorporated or unincorporated, in which the
Company owns, directly or indirectly, any equity or other ownership
interest.


 

(ii) Authorization;
Enforcement. (i) The Company has all requisite corporate
power and authority to enter into and perform this Agreement, the
Note and to consummate the transactions contemplated hereby and
thereby and to issue the Securities, in accordance with the terms
hereof and thereof, (ii) the execution and delivery of this
Agreement, the Note by the Company and the consummation by it of
the transactions contemplated hereby and thereby (including without
limitation, the issuance of the Note and the issuance and
reservation for issuance of the Conversion Shares issuable upon
conversion or exercise thereof) have been duly authorized by the
Company’s Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its
shareholders is required, (iii) this Agreement has been duly
executed and delivered by the Company by its authorized
representative, and such authorized representative is the true and
official representative with authority to sign this Agreement and
the other documents executed in connection herewith and bind the
Company accordingly, and (iv) this Agreement constitutes, and upon
execution and delivery by the Company of the Note, each of such
instruments will constitute, a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with
its terms.


 




 

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(iii) Capitalization.
As of the date hereof, the authorized capital stock of the Company
consists of: (i) 290,000,000 shares of Common Stock, of which
approximately 48,333,334 shares are issued and outstanding; and
(ii) 10,000,000 shares of preferred stock, of which none are issued
and outstanding. Except as disclosed in the SEC Documents, no
shares are reserved for issuance pursuant to the Company’s
stock option plans, no shares are reserved for issuance pursuant to
securities (other than the Note) exercisable for, or convertible
into or exchangeable for shares of Common Stock and 5,000,000
shares are reserved for issuance upon conversion of the Note. All
of such outstanding shares of capital stock are, or upon issuance
will be, duly authorized, validly issued, fully paid and
non-assessable. No shares of capital stock of the Company are
subject to preemptive rights or any other similar rights of the
shareholders of the Company or any liens or encumbrances imposed
through the actions or failure to act of the Company. Except as
disclosed in the SEC Documents, as of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip,
rights to subscribe for, puts, calls, rights of first refusal,
agreements, understandings, claims or other commitments or rights
of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of
the Company or any of its Subsidiaries, or arrangements by which
the Company or any of its Subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of
its Subsidiaries, (ii) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933
Act and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in
any agreement providing rights to security holders) that will be
triggered by the issuance of the Note or the Conversion Shares. The
Company has filed in its SEC Documents true and correct copies of
the Company’s Certificate of Incorporation as in effect on
the date hereof (“Certificate of Incorporation”), the
Company’s By-laws, as in effect on the date hereof (the
“By-laws”), and the terms of all securities convertible
into or exercisable for Common Stock of the Company and the
material rights of the holders thereof in respect thereto. The
Company shall provide the Buyer with a written update of this
representation signed by the Company’s Chief Executive on
behalf of the Company as of the Closing Date.


 

(iv) Issuance
of Shares. The issuance of the
Note is duly authorized and, upon issuance in accordance with the
terms of this Agreement, will be validly issued, fully paid and
non-assessable and free from all preemptive or similar rights,
taxes, liens, charges and other encumbrances with respect to the
issue thereof. The Conversion Shares are duly authorized and
reserved for issuance and, upon conversion of the Note in
accordance with its respective terms, will be validly issued, fully
paid and non-assessable, and free from all taxes, liens, claims and
encumbrances with respect to the issue thereof and shall not be
subject to preemptive rights or other similar rights of
shareholders of the Company and will not impose personal liability
upon the holder thereof.


 

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


 




 

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(vi) No
Conflicts. The execution, delivery and performance of this
Agreement and the Note by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation for
issuance of the Conversion Shares) will not (i) conflict with or
result in a violation of any provision of the Certificate of
Incorporation or By-laws, or (ii) violate or conflict with, or
result in a breach of any provision of, or constitute a default (or
an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
indenture, patent, patent license or instrument to which the
Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or
any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). Neither the Company nor
any of its Subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and
no event has occurred which with notice or lapse of time or both
could put the Company or any of its Subsidiaries in default) under,
and neither the Company nor any of its Subsidiaries has taken any
action or failed to take any action that would give to others any
rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any
of its Subsidiaries is a party or by which any property or assets
of the Company or any of its Subsidiaries is bound or affected,
except for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. The businesses of the
Company and its Subsidiaries, if any, are not being conducted, and
shall not be conducted so long as the Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any
governmental entity. Except as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable
state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory
agency, self-regulatory organization or stock market or any third
party in order for it to execute, deliver or perform any of its
obligations under this Agreement, the Note in accordance with the
terms hereof or thereof or to issue and sell the Note in accordance
with the terms hereof and to issue the Conversion Shares upon
conversion of the Note. All consents, authorizations, orders,
filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected
on or prior to the date hereof. The Company is not in violation of
the listing requirements of the OTC Pink (the “OTC
Pink”), the OTCQB or any similar quotation system, and does
not reasonably anticipate that the Common Stock will be delisted by
the OTC Pink, the OTCQB or any similar quotation system, in the
foreseeable future nor are the
Company's securities “chilled” by DTC. The
Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the
foregoing.


 




 

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(vii) SEC
Documents; Financial Statements. The Company has timely
filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended
(the “1934 Act”) (all of the foregoing filed prior to
the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits
to such documents) incorporated by reference therein, being
hereinafter referred to herein as the “SEC Documents”).
The Company has delivered to the Buyer true and complete copies of
the SEC Documents, except for such exhibits and incorporated
documents. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and
the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at
the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. None of the statements made in any such
SEC Documents is, or has been, required to be amended or updated
under applicable law (except for such statements as have been
amended or updated in subsequent filings prior the date hereof). As
of their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with United
States generally accepted accounting principles, consistently
applied, during the periods involved and fairly present in all
material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for
the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set
forth in the financial statements of the Company included in the
SEC Documents, the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to June 30, 2017, and (ii)
obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally
accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not
material to the financial condition or operating results of the
Company. The Company is subject to the reporting requirements of
the 1934 Act. For the avoidance of doubt, filing of the documents
required in this Section 3(g) via the SEC’s Electronic Data
Gathering, Analysis, and Retrieval system (“EDGAR”)
shall satisfy all delivery requirements of this Section
3(g).


 

(viii) Absence
of Certain Changes. Since June 30, 2017, there has been no
material adverse change and no material adverse development in the
assets, liabilities, business, properties, operations, financial
condition, results of operations, prospects or 1934 Act reporting
status of the Company or any of its Subsidiaries.


 

(ix) Absence
of Litigation. There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or,
to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company or any of its
Subsidiaries, or their officers or directors in their capacity as
such, that could have a Material Adverse Effect. Schedule 3(i)
contains a complete list and summary description of any pending or,
to the knowledge of the Company, threatened proceeding against or
affecting the Company or any of its Subsidiaries, without regard to
whether it would have a Material Adverse Effect. The Company and
its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.


 




 

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(x) Patents, Copyrights, etc. The
Company and each of its Subsidiaries owns or possesses the
requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets,
trademarks, trademark applications, service marks, service names,
trade names and copyrights (“Intellectual Property”)
necessary to enable it to conduct its business as now operated
(and, as presently contemplated to be operated in the future).
Except as disclosed in the SEC Documents, there is no claim or
action by any person pertaining to, or proceeding pending, or to
the Company’s knowledge threatened, which challenges the
right of the Company or of a Subsidiary with respect to any
Intellectual Property necessary to enable it to conduct its
business as now operated (and, as presently contemplated to be
operated in the future); to the best of the Company’s
knowledge, the Company’s or its Subsidiaries’ current
and intended products, services and processes do not infringe on
any Intellectual Property or other rights held by any person; and
the Company is unaware of any facts or circumstances which might
give rise to any of the foregoing. The Company and each of its
Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of their Intellectual
Property.


 

(xi) No
Materially Adverse Contracts, Etc. Neither the Company nor
any of its Subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of the Company’s officers
has or is expected in the future to have a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement which in the judgment of the Company’s
officers has or is expected to have a Material Adverse
Effect.


 

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


 

(xiii) Certain
Transactions. Except for arm’s length transactions
pursuant to which the Company or any of its Subsidiaries makes
payments in the ordinary course of business upon terms no less
favorable than the Company or any of its Subsidiaries could obtain
from third parties and other than the grant of stock options
disclosed on Schedule 3(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (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, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of
the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or
partner.


 




 

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(xiv) Disclosure.
All information relating to or concerning the Company or any of its
Subsidiaries set forth in this Agreement and provided to the Buyer
pursuant to Section 2(d) hereof and otherwise in connection with
the transactions contemplated hereby is true and correct in all
material respects and the Company has not omitted to state any
material fact necessary in order to make the statements made herein
or therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or
exists with respect to the Company or any of its Subsidiaries or
its or their business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the
Company but which has not been so publicly announced or disclosed
(assuming for this purpose that the Company’s reports filed
under the 1934 Act are being incorporated into an effective
registration statement filed by the Company under the 1933
Act).


 

(xv) Acknowledgment
Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the Buyer
is acting solely in the capacity of arm’s length purchasers
with respect to this Agreement and the transactions contemplated
hereby. The Company further acknowledges that the Buyer is not
acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any statement made by the
Buyer or any of its respective representatives or agents in
connection with this Agreement and the transactions contemplated
hereby is not advice or a recommendation and is merely incidental
to the Buyer’ purchase of the Securities. The Company further
represents to the Buyer that the Company’s decision to enter
into this Agreement has been based solely on the independent
evaluation of the Company and its
representatives.


 

(xvi) No
Integrated Offering. 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 in any security or
solicited any offers to buy any security under circumstances that
would require registration under the 1933 Act of the issuance of
the Securities to the Buyer. The issuance of the Securities to the
Buyer will not be integrated with any other issuance of the
Company’s securities (past, current or future) for purposes
of any shareholder approval provisions applicable to the Company or
its securities.


 

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


 

(xviii) Permits;
Compliance. The Company and each of its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses,
permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its
properties and to carry on its business as it is now being
conducted (collectively, the “Company Permits”), and
there is no action pending or, to the knowledge of the Company,
threatened regarding suspension or cancellation of any of the
Company Permits. Neither the Company nor any of its Subsidiaries is
in conflict with, or in default or violation of, any of the Company
Permits, except for any such conflicts, defaults or violations
which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. Since June 30, 2017,
neither the Company nor any of its Subsidiaries has received any
notification with respect to possible conflicts, defaults or
violations of applicable laws, except for notices relating to
possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse
Effect.


 




 

9








 






 

(xix) Environmental
Matters.


 


There
are, to the Company’s knowledge, with respect to the Company
or any of its Subsidiaries or any predecessor of the Company, no
past or present violations of Environmental Laws (as defined
below), releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or
contractual obligations which may give rise to any common law
environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or
similar federal, state, local or foreign laws and neither the
Company nor any of its Subsidiaries has received any notice with
respect to any of the foregoing, nor is any action pending or, to
the Company’s knowledge, threatened in connection with any of
the foregoing. The term “Environmental Laws” means all
federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface
or subsurface strata), including, without limitation, laws relating
to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous
Materials”) into the environment, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as
all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated
or approved thereunder.


 


Other
than those that are or were stored, used or disposed of in
compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or
used by the Company or any of its Subsidiaries, and no Hazardous
Materials were released on or about any real property previously
owned, leased or used by the Company or any of its Subsidiaries
during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of
the Company’s or any of its Subsidiaries’
business.


 


There
are no underground storage tanks on or under any real property
owned, leased or used by the Company or any of its Subsidiaries
that are not in compliance with applicable law.


 

(xx) Title
to Property. Except as disclosed in the SEC Documents the
Company and its Subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all
personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of
all liens, encumbrances and defects or such as would not have a
Material Adverse Effect. Any real property and facilities held
under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions
as would not have a Material Adverse Effect.


 

(xxi) Internal
Accounting Controls. Except as disclosed in the SEC
Documents the Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment
of the Company’s board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with
management’s general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.


 




 

10








 






 

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


 

(xxiii) Solvency.
The Company (after giving effect to the transactions contemplated
by this Agreement) is solvent (i.e., its assets have a fair
market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and
matured) and currently the Company has no information that would
lead it to reasonably conclude that the Company would not, after
giving effect to the transaction contemplated by this Agreement,
have the ability to, nor does it intend to take any action that
would impair its ability to, pay its debts from time to time
incurred in connection therewith as such debts mature. The Company
did not receive a qualified opinion from its auditors with respect
to its most recent fiscal year end and, after giving effect to the
transactions contemplated by this Agreement, does not anticipate or
know of any basis upon which its auditors might issue a qualified
opinion in respect of its current fiscal year. For the avoidance of
doubt any disclosure of the Borrower’s ability to continue as
a “going concern” shall not, by itself, be a violation
of this Section 3(w).


 

(xxiv) No
Investment Company. The Company is not, and upon the
issuance and sale of the Securities as contemplated by this
Agreement will not be an “investment company” required
to be registered under the Investment Company Act of 1940 (an
“Investment Company”). The Company is not controlled by
an Investment Company.


 

(xxv)  Insurance.
The Company and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and
its Subsidiaries are engaged. Neither the Company nor any such
Subsidiary has 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. Upon written request the Company will
provide to the Buyer true and correct copies of all policies
relating to directors’ and officers’ liability
coverage, errors and omissions coverage, and commercial general
liability coverage.

 

(xxvi) Bad
Actor.  No officer or director of the Company
would be disqualified under Rule 506(d) of the Securities Act as
amended on the basis of being a “bad actor” as
that term is established in the September 19, 2013 Small Entity
Compliance Guide published by the SEC.

 

(xxvii) Shell
Status. The Company represents that it is not a
“shell” issuer and has never been a “shell”
issuer, or that if it previously has been a “shell”
issuer, that at least twelve (12) months have passed since the
Company has reported Form 10 type information indicating that it is
no longer a “shell” issuer. Further, the Company will instruct its counsel to
either (i) write a 144- 3(a)(9) opinion to allow for salability of
the Conversion Shares or (ii) accept such opinion from
Holder’s counsel.

 




 

11








 






 

(xxviii)  No-Off
Balance Sheet Arrangements.
There is no transaction, arrangement, or other relationship between
the Company or any of its Subsidiaries and an unconsolidated or
other off balance sheet entity that is required to be disclosed by
the Company in its 1934 Act filings and is not so disclosed or that
otherwise could be reasonably likely to have a Material Adverse
Effect.

 

(xxix) 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.

 

(xxx) Sarbanes-Oxley
Act. The Company and each
Subsidiary is in material compliance with all applicable
requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the
date hereof, and all applicable rules and regulations promulgated
by the SEC thereunder that are effective as of the date
hereof.

 

(xxxi) Employee
Relations. Neither the Company
nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. The Company believes
that its and its Subsidiaries’ relations with their
respective employees are good. No executive officer (as defined in
Rule 501(f) promulgated under the 1933 Act) or other key employee
of the Company or any of its Subsidiaries has notified the Company
or any such Subsidiary that such officer intends to leave the
Company or any such Subsidiary or otherwise terminate such
officer’s employment with the Company or any such Subsidiary.
To the knowledge of the Company, no executive officer or other key
employee of the Company or any of its Subsidiaries is, or is now
expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant, and the continued employment
of each such executive officer or other key employee (as the case
may be) does not subject the Company 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 federal,
state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and
conditions of employment and wages and hours, except where failure
to be in compliance would not, either individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect.

 

(xxxii) Breach
of Representations and Warranties by the Company. The
Company agrees that if the Company breaches any of the
representations or warranties set forth in this Section 3, and in
addition to any other remedies available to the Buyer pursuant to
this Agreement and it being considered an Event of Default under
Section 3.5 of the Note, the Company shall pay to the Buyer the
Standard Liquidated Damages Amount in cash or in shares of Common
Stock at the option of the Company, until such breach is cured. If
the Company elects to pay the Standard Liquidated Damages Amounts
in shares of Common Stock, such shares shall be issued at the
Conversion Price at the time of payment.

 

(d) COVENANTS.


 

(i) Best Efforts. The parties shall
use their commercially reasonable best efforts to satisfy timely
each of the conditions described in Section 7 and 8 of this
Agreement.


 




 

12








 






 

(ii) Form
D; Blue Sky Laws. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to
provide a copy thereof to the Buyer promptly after such filing. The
Company shall, on or before the Closing Date, take such action as
the Company shall reasonably determine is necessary to qualify the
Securities for sale to the Buyer at the applicable closing pursuant
to this Agreement under applicable securities or “blue
sky” laws of the states of the United States (or to obtain an
exemption from such qualification), and shall provide evidence of
any such action so taken to the Buyer on or prior to the Closing
Date.


 

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


 

(iv) Right
of First Refusal. Unless it shall have first delivered to
the Buyer, at least seventy two (72) hours prior to the closing of
such Future Offering (as defined herein), written notice describing
the proposed Future Offering, including the terms and conditions
thereof, and providing the Buyer an option during the seventy two
(72) hour period following delivery of such notice to purchase the
securities being offered in the Future Offering on the same terms
as contemplated by such Future Offering (the limitations referred
to in this sentence and the preceding sentence are collectively
referred to as the “Right of First Refusal”) (and
subject to the exceptions described below), the Company will not
conduct any equity financing (including debt with an equity
component) (“Future Offerings”) during the period
beginning on the Closing Date and ending twelve (12) months
following the Closing Date. In the event the terms and conditions
of a proposed Future Offering are amended in any respect after
delivery of the notice to the Buyer concerning the proposed Future
Offering, the Company shall deliver a new notice to the Buyer
describing the amended terms and conditions of the proposed Future
Offering and the Buyer thereafter shall have an option during the
seventy two (72) hour period following delivery of such new notice
to purchase its pro rata share of the securities being offered on
the same terms as contemplated by such proposed Future Offering, as
amended. The foregoing sentence shall apply to successive
amendments to the terms and conditions of any proposed Future
Offering. The Right of First Refusal shall not apply to any
transaction involving (i) issuances of securities in a firm
commitment underwritten public offering (excluding a continuous
offering pursuant to Rule 415 under the 1933 Act), (ii) issuances
to employees, officers, directors, contractors, consultants or
other advisors approved by the Board, (iii) issuances to strategic
partners or other parties in connection with a commercial
relationship, or providing the Company with equipment leases, real
property leases or similar transactions approved by the Board (iv)
issuances of securities as consideration for a merger,
consolidation or purchase of assets, or in connection with any
strategic partnership or joint venture (the primary purpose of
which is not to raise equity capital), or in connection with the
disposition or acquisition of a business, product or license by the
Company. The Right of First Refusal also shall not apply to the
issuance of securities upon exercise or conversion of the
Company’s options, warrants or other convertible securities
outstanding as of the date hereof or to the grant of additional
options or warrants, or the issuance of additional securities,
under any Company stock option or restricted stock plan approved by
the shareholders of the Company.


 




 

13








 






 

(v) Expenses. The Company shall reimburse Buyer for any and all
expenses incurred by them in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement
and the other agreements to be executed in connection herewith
(“Documents”), including, without limitation,
reasonable attorneys’ and consultants’ fees and
expenses, transfer agent fees, fees for stock quotation services,
fees relating to any amendments or modifications of the Documents
or any consents or waivers of provisions in the Documents, fees for
the preparation of opinions of counsel, escrow fees, and costs of
restructuring the transactions contemplated by the Documents. When
possible, the Company must pay these fees directly, including, but
not limited to, any and all wire fees, otherwise the Company must
make immediate payment for reimbursement to the Buyer for all fees
and expenses immediately upon written notice by the Buyer or the
submission of an invoice by the Buyer. At Closing, the
Company’s initial obligation with respect to this transaction
is to reimburse Buyer’s legal expenses shall be $2,750.00
plus the cost of wire fees.


 

(vi) Financial
Information. The Company agrees to send or make available
the following reports to the Buyer until the Buyer transfers,
assigns, or sells all of the Securities:  within ten (10) days
after the filing with the SEC, a copy of its Annual Report on Form
10-K its Quarterly Reports on Form 10-Q and any Current Reports on
Form 8-K;  within one (1) day after release, copies of all
press releases issued by the Company or any of its Subsidiaries;
and  contemporaneously with the making available or giving to
the shareholders of the Company, copies of any notices or other
information the Company makes available or gives to such
shareholders. For the avoidance of doubt, filing the documents
required in (i) above via EDGAR or releasing any documents set
forth in (ii) above via a recognized wire service shall satisfy the
delivery requirements of this Section 4(f).


 

(vii) Listing.
The Company shall promptly secure the listing of the Conversion
Shares upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and, so long
as the Buyer owns any of the Securities, shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing
of all Conversion Shares from time to time issuable upon conversion
of the Note. The Company will obtain and, so long as the Buyer owns
any of the Securities, maintain the listing and trading of its
Common Stock on the OTC Pink, OTCQB or any equivalent replacement
exchange, the Nasdaq National Market (“Nasdaq”), the
Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New
York Stock Exchange (“NYSE”), or the NYSE MKT and will
comply in all respects with the Company’s reporting, filing
and other obligations under the bylaws or rules of the Financial
Industry Regulatory Authority (“FINRA”) and such
exchanges, as applicable. The Company shall promptly provide to the
Buyer copies of any material notices it receives from the OTC Pink,
OTCQB and any other exchanges or quotation systems on which the
Common Stock is then listed regarding the continued eligibility of
the Common Stock for listing on such exchanges and quotation
systems. The Company shall pay any and all fees and expenses in
connection with satisfying its obligation under this Section
4(g).


 

(viii) Corporate
Existence. So long as the Buyer beneficially owns any Note,
the Company shall maintain its corporate existence and shall not
sell all or substantially all of the Company’s assets, except
in the event of a merger or consolidation or sale of all or
substantially all of the Company’s assets, where the
surviving or successor entity in such transaction (i) assumes the
Company’s obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose Common Stock is listed for
trading on the OTC Pink, OTCQB, Nasdaq, NasdaqSmallCap, NYSE or
AMEX.


 




 

14








 






 

(ix) No
Integration. The Company shall not make any offers or sales
of any security (other than the Securities) under circumstances
that would require registration of the Securities being offered or
sold hereunder under the 1933 Act or cause the offering of the
Securities to be integrated with any other offering of securities
by the Company for the purpose of any stockholder approval
provision applicable to the Company or its securities.


 

(x) Failure to Comply with the 1934
Act. So long as the Buyer beneficially owns the Note, the
Company shall comply with the reporting requirements of the 1934
Act; and the Company shall continue to be subject to the reporting
requirements of the 1934 Act.


 

(xi) Trading
Activities. Neither the Buyer
nor its affiliates has an open short position (or other hedging or
similar transactions) in the common stock of the Company and the
Buyer agree that it shall not, and that it will cause its
affiliates not to, engage in any short sales of or hedging
transactions with respect to the common stock of the
Company.


 

(xii) Restriction
on Activities. Commencing as of
the date first above written, and until the sooner of the six month
anniversary of the date first written above or payment of the Note
in full, or full conversion of the Note, the Company shall not,
directly or indirectly, without the Buyer’s prior written
consent, which consent shall not be unreasonably withheld: (a)
change the nature of its business; (b) sell, divest, acquire,
change the structure of any material assets other than in the
ordinary course of business; or
(c) solicit any offers for, respond to any unsolicited offers for,
or conduct any negotiations with any other person or entity in
respect of any variable rate debt transactions (i.e., transactions
were the conversion or exercise price of the security issued by the
Company varies based on the market price of the Common Stock) above
$500,000, whether a transaction similar to the one contemplated
hereby or any other investment; or (d) file any registration
statements with the SEC.


 

(xiii) Legal
Counsel Opinions. Upon the request of the Buyer from to time
to time, the Company shall be responsible (at its cost) for
promptly (within two (2) business days from Buyer’s request)
supplying to the Company’s transfer agent and the Buyer a
customary legal opinion letter of its counsel (the “Legal
Counsel Opinion”) to the effect that the sale of Conversion
Shares by the Buyer or its affiliates, successors and assigns is
exempt from the registration
requirements of the 1933 Act pursuant to Rule 144 (provided the
requirements of Rule 144 are satisfied and provided the Conversion
Shares are not then registered under the 1933 Act for resale
pursuant to an effective registration statement). Should the
Company’s legal counsel fail for any reason to issue the
Legal Counsel Opinion, the Buyer may (at the Company’s cost)
secure another legal counsel to issue the Legal Counsel Opinion,
and the Company will instruct its transfer agent to accept such
opinion.


 

(xiv) Par
Value.  If the closing bid
price at any time the Note is outstanding falls below $0.001, the
Company shall cause the par value of its Common Stock to be reduced
to $0.0001 or less.

 

(xv) Breach
of Covenants. The Company agrees that if the Company
breaches any of the covenants set forth in this Section 4, and in
addition to any other remedies
available to the Buyer pursuant to this Agreement, it will be
considered an Event of Default under Section 3.4 of the Note, the
Company shall pay to the Buyer the Standard Liquidated Damages
Amount in cash or in shares of Common Stock at the option of the
Buyer, until such breach is cured, or with respect to Section 4(d)
above, the Company shall pay to the Buyer the Standard Liquidated
Damages Amount in cash or shares of Common Stock, at the option of
the Buyer, upon each violation of such provision. If the Company
elects to pay the Standard Liquidated Damages Amounts in shares of
Common Stock, such shares shall be issued at the Conversion Price
at the time of payment.


 




 

15








 






 

(e) Transaction Expense
Amount.  Upon Closing, the Company shall pay Nine
Thousand Seven Hundred Fifty and No/100 United States Dollars
(US$9,750.00) to Auctus Fund Management, LLC (“Auctus
Management”) to cover  the Holder's due diligence,
monitoring, and other transaction costs incurred for services
rendered in connection herewith (the “Transaction Expense
Amount”).  The Transaction Expense Amount shall be
offset against the proceeds of the Note and shall be paid to Auctus
Management upon the execution hereof.


 

(f) Transfer
Agent Instructions. The Company
shall issue irrevocable instructions to its transfer agent to issue
certificates, registered in the name of the Buyer or its nominee,
for the Conversion Shares in such amounts as specified from time to
time by the Buyer to the Company upon conversion of the Note in
accordance with the terms thereof (the “Irrevocable Transfer
Agent Instructions”).  In the event that the Borrower
proposes to replace its transfer agent, the Borrower shall provide,
prior to the effective date of such replacement, a fully executed
Irrevocable Transfer Agent Instructions in a form as initially
delivered pursuant to the Purchase Agreement (including but not
limited to the provision to irrevocably reserve shares of Common
Stock in the Reserved Amount) signed by the successor transfer
agent to Borrower and the Borrower. Prior to registration of the
Conversion Shares under the 1933 Act or the date on which the
Conversion Shares may be sold pursuant to Rule 144 without any
restriction as to the number of Securities as of a particular date
that can then be immediately sold, all such certificates shall bear
the restrictive legend specified in Section 2(g) of this
Agreement.  The Company warrants that: (i) no instruction
other than the Irrevocable Transfer Agent Instructions referred to
in this Section, and stop transfer instructions to give effect to
Section 2(f) hereof (in the case of the Conversion Shares, prior to
registration of the Conversion Shares under the 1933 Act or the
date on which the Conversion Shares may be sold pursuant to Rule
144 without any restriction as to the number of Securities as of a
particular date that can then be immediately sold), will be given
by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement and the
Note; (ii) it will not direct its transfer agent not to transfer or
delay, impair, and/or hinder its transfer agent in transferring (or
issuing)(electronically or in certificated form) any certificate
for Conversion Shares to be issued to the Buyer upon conversion of
or otherwise pursuant to the Note as and when required by the Note
and this Agreement; and (iii) it will not fail to remove (or
directs its transfer agent not to remove or impairs, delays, and/or
hinders its transfer agent from removing) any restrictive legend
(or to withdraw any stop transfer instructions in respect thereof)
on any certificate for any Conversion Shares issued to the Buyer
upon conversion of or otherwise pursuant to the Note as and when
required by the Note and this Agreement.  Nothing in this
Section shall affect in any way the Buyer’s obligations and
agreement set forth in Section 2(g) hereof to comply with all
applicable prospectus delivery requirements, if any, upon re-sale
of the Securities.  If the Buyer provides the Company, at the
cost of the Company, with (i) an opinion of counsel in form,
substance and scope customary for opinions in comparable
transactions, to the effect that a public sale or transfer of such
Securities may be made without registration under the 1933 Act and
such sale or transfer is effected or (ii) the Buyer provides
reasonable assurances that the Securities can be sold pursuant to
Rule 144, the Company shall permit the transfer, and, in the case
of the Conversion Shares, promptly instruct its transfer agent to
issue one or more certificates, free from restrictive legend, in
such name and in such denominations as specified by the
Buyer.  The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyer, by
vitiating the intent and purpose of the transactions contemplated
hereby.  Accordingly, the Company acknowledges that the remedy
at law for a breach of its obligations under this Section may be
inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section, that the
Buyer shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach and requiring
immediate transfer, without the necessity of showing economic loss
and without any bond or other security being
required.


 




 

16








 






 

(g) CONDITIONS PRECEDENT TO THE
COMPANY’S OBLIGATIONS TO SELL. The obligation of the
Company hereunder to issue and sell the Note to the Buyer at the
Closing is subject to the satisfaction, at or before the Closing
Date of each of the following conditions thereto, provided that
these conditions are for the Company’s sole benefit and may
be waived by the Company at any time in its sole
discretion:


 

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


 

(ii) The
Buyer shall have delivered the Purchase Price in accordance with
Section 1(b) above.


 

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


 

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


 

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


 

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


 

(ii) The
Company shall have delivered to the Buyer the duly executed Note
(in such denominations as the Buyer shall request) and in
accordance with Section 1(b) above.


 

(iii) The
Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to a majority-in-interest of the Buyer, shall have
been delivered to and acknowledged in writing by the
Company’s Transfer Agent.


 

(iv) The
representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. The Buyer
shall have received a certificate or certificates, executed by the
chief executive officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may
be reasonably requested by the Buyer including, but not limited to
certificates with respect to the Company’s Certificate of
Incorporation, By-laws and Board of Directors’ resolutions
relating to the transactions contemplated hereby.


 




 

17








 






 

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


 

(vi) No
event shall have occurred which could reasonably be expected to
have a Material Adverse Effect on the Company including but not
limited to a change in the 1934 Act reporting status of the Company
or the failure of the Company to be timely in its 1934 Act
reporting obligations.


 

(vii) The
Conversion Shares shall have been authorized for quotation on the
OTC Pink, OTCQB or any similar quotation system and trading in the
Common Stock on the OTC Pink, OTCQB or any similar quotation system
shall not have been suspended by the SEC or the OTC Pink, OTCQB or
any similar quotation system.


 

(viii) The
Buyer shall have received an officer’s certificate described
in Section 3(c) above, dated as of the Closing Date.


 

(i) GOVERNING LAW;
MISCELLANEOUS.


 

(i) Governing Law. This Agreement
shall be governed by and construed in accordance with the laws of
the State of Nevada without regard to principles of conflicts of
laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement, the
Note or any other agreement, certificate, instrument or document
contemplated hereby shall be brought only in the state courts of
Massachusetts or in the federal courts located in the state of
Massachusetts. The parties to this Agreement hereby irrevocably
waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack
of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER
TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF THIS
AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY OR THEREBY. The prevailing party shall
be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith
is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to
conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision of any
agreement. Each party hereby irrevocably waives personal service of
process and consents to process being served in any suit, action or
proceeding in connection with this Agreement or any other
Transaction Document 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.


 




 

18








 






 

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


 

(iii) Construction;
Headings.  This Agreement shall be deemed to be jointly
drafted by the Company and the Buyer and shall not be construed
against any person as the drafter hereof. The headings of this
Agreement are for convenience of reference only and shall not form
part of, or affect the interpretation of, this
Agreement.


 

(iv) Severability.
In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any provision hereof which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision
hereof.


 

(v) Entire Agreement; Amendments.
This Agreement, the Note and the instruments referenced herein
contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set
forth herein or therein, neither the Company nor the Buyer makes
any representation, warranty, covenant or undertaking with respect
to such matters. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the
majority in interest of the Buyer.


 

(vi) Notices.
All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally
served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable
air courier service with charges prepaid, or (iv) transmitted by
hand delivery, telegram, email, or facsimile, addressed as set
forth below or to such other address as such party shall have
specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by email or
facsimile, with accurate confirmation generated by the transmitting
facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:


 


If to
the Company, to:


 


Sincerity Applied
Materials Holdings Corp.


Level
4, 10 Yarra Street


South
Yarra, Australia VIC 3141


Attn: Zhang Yiwen


E-mail:
info@sincerityplastics.com


 




 

19








 






 


If to
the Buyer:


 


Auctus
Fund, LLC


177
Huntington Avenue, 17th Floor


Boston,
MA 02115


Attn: Lou Posner


Facsimile: (617)
532-6420


 


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


 


Chad
Friend, Esq., LL.M.


Legal
& Compliance, LLC


330
Clematis Street, Suite 217


West
Palm Beach, FL 33401


E-mail:
CFriend@LegalandCompliance.com


 


Each
party shall provide notice to the other party of any change in
address.


 

(vii) Successors
and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or
any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, subject to
Section 2(f), the Buyer may assign its rights hereunder to any
person that purchases Securities in a private transaction from the
Buyer or to any of its “affiliates,” as that term is
defined under the 1934 Act, without the consent of the
Company.


 

(viii) Third
Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.


 

(ix) Survival.
The representations and warranties of the Company and the
agreements and covenants set forth in this Agreement shall survive
the closing hereunder not withstanding any due diligence
investigation conducted by or on behalf of the Buyer. The Company
agrees to indemnify and hold harmless the Buyer and all their
officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and
covenants set forth in this Agreement or any of its covenants and
obligations under this Agreement, including advancement of expenses
as they are incurred.


 

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


 

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


 


 




 

20








 






 

(xii) Remedies.
The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer by vitiating the
intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Agreement will be inadequate
and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Agreement, that the Buyer shall
be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to
an injunction or injunctions restraining, preventing or curing any
breach of this Agreement and to enforce specifically the terms and
provisions hereof, without the necessity of showing economic loss
and without any bond or other security being required.


 

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


 

(xiv) Indemnification.
In consideration of the Buyer’s execution and delivery of
this Agreement and acquiring the Securities hereunder, and in
addition to all of the Company’s other obligations under this
Agreement or the Note, the Company shall defend, protect, indemnify
and hold harmless the Buyer and its stockholders, partners,
members, officers, directors, employees and direct or indirect
investors and any of the foregoing persons’ agents or other
representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”) from and against any
and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee
is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and
disbursements (the “Indemnified Liabilities”), incurred
by any Indemnitee as a result of, or arising out of, or relating to
(a) any misrepresentation or
breach of any representation or warranty made by the Company in
this Agreement or the Note or any other agreement, certificate,
instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company
contained in this Agreement or the Note or any other agreement,
certificate, instrument or document contemplated hereby or thereby
or (c) any cause of action, suit or claim brought or made against
such Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company) and arising out
of or resulting from (i) the execution, delivery, performance or
enforcement of this Agreement or the Note or any other agreement,
certificate, instrument or document contemplated hereby or thereby,
(ii) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of the issuance of
the Securities, or (iii) the status of the Buyer or holder of the
Securities as an investor in the Company pursuant to the
transactions contemplated by this Agreement. To the extent that the
foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities
that is permissible under applicable law

 


[signature
page follows]

 


 




 

21








 






 


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


 

 



SINCERITY APPLIED MATERIALS HOLDINGS CORP.

 


By:
/s/ Zhang
Yiwen


Name:
Zhang Yiwen


Title:
Chief Executive Officer


 


 



AUCTUS FUND, LLC

 



By: /s/ Lou
Posner



Name: Lou Posner



Title: Managing Director

 


 


AGGREGATE
SUBSCRIPTION AMOUNT:

 


 



Aggregate Principal
Amount of
Note:                                                            



US$112,500.00





 


 



Aggregate Purchase
Price:                                                 



US$112,500.00





 

 




 

22