SecuritiesPurchase Agreement

 

This Securities PurchaseAgreement (this “**Agreement**”), dated as of October 28, 2014, is entered into by and between SaleenAutomotive, Inc., a Nevada corporation (“**Company**”), and TypenexCo-Investment, LLC, a Utah limited liability company, its successors and/or assigns (“Investor”).

  

A.Company and Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration affordedby the rules and regulations promulgated by the United States Securities and Exchange Commission (the “**SEC**”)under the Securities Act of 1933, as amended (the “**1933 Act**”).

 

B.Investor desires to purchase and Company desires to issue and sell, upon the terms and conditions set forth in this Agreement,a Secured Convertible Promissory Note, in the form attached hereto as Exhibit A, in the original principal amount of $215,000.00(the “**Note**”), convertible into shares of common stock, $0.001 par value per share, of Company (the “**CommonStock**”), upon the terms and subject to the limitations and conditions set forth in such Note.

 

C.This Agreement, the Note, the Security Agreement (as defined below), the Investor Notes (as defined below), and all other certificates,documents, agreements, resolutions and instruments delivered to any party under or in connection with this Agreement, as the samemay be amended from time to time, are collectively referred to herein as the “**Transaction Documents**”.

 

D.For purposes of this Agreement: “**Conversion Shares**” means all shares of Common Stock issuable upon conversionof all or any portion of the Note; and “**Securities**” means the Note and the Conversion Shares.

 

**NOW,THEREFORE**, Company and Investor hereby agree as follows:

 

1.Purchase and Sale of Securities.

 

1.1.Purchase of Securities. Company shall issue and sell to Investor and Investor agrees to purchase from Company the Note.In consideration thereof, Investor shall pay (i) the amount designated as the initial cash purchase price on Investor’ssignature page to this Agreement (the “**Initial Cash Purchase Price**”), and (ii) issue to Company the InvestorNotes (the sum of the initial principal amount of the Investor Notes, together with the Initial Cash Purchase Price, the “**PurchasePrice**”). The Purchase Price and the OID (as defined herein) are allocated to the Tranches (as defined in the Note) ofthe Note as set forth in the table attached hereto as Exhibit B.

 

1.2.Form of Payment. On the Closing Date, (i) Investor shall pay the Purchase Price to Company by delivering the followingat the Closing: (A) the Initial Cash Purchase Price, which shall be delivered by wire transfer of immediately available fundsto Company, in accordance with Company’s written wiring instructions; (B) Investor Note #1 in the principal amount of $25,000.00duly executed and substantially in the form attached hereto as Exhibit C (“**Investor Note #1**”); (C) InvestorNote #2 in the principal amount of $25,000.00 duly executed and substantially in the form attached hereto as Exhibit C (“**InvestorNote #2**”); (D) Investor Note #3 in the principal amount of $25,000.00 duly executed and substantially in the form attachedhereto as Exhibit C (“**Investor Note #3**”); (E) Investor Note #4 in the principal amount of $25,000.00duly executed and substantially in the form attached hereto as Exhibit C (“**Investor Note #4**”); and (F)Investor Note #5 in the principal amount of $25,000.00 duly executed and substantially in the form attached hereto as ExhibitC (“**Investor Note #5**”, and together with Investor Note #1, Investor Note #2, Investor Note #3, and InvestorNote #4, the “**Investor Notes**”); and (ii) Company shall deliver the duly executed Note on behalf of Company,to Investor, against delivery of such Purchase Price.

 

 

1.3.Closing Date. Subject to the satisfaction (or written waiver) of the conditions set forth in Section 5 and Section 6 below,the date and time of the issuance and sale of the Securities pursuant to this Agreement (the “**Closing Date**”)shall be 5:00 p.m., Eastern Time on or about October 28, 2014, or such other mutually agreed upon time. The closing of the transactionscontemplated by this Agreement (the “**Closing**”) shall occur on the Closing Date at the offices of Investor unlessotherwise agreed upon by the parties.

 

1.4.Collateral for the Note. The Note shall be secured by the collateral set forth in that certain Security Agreement attachedhereto as Exhibit D listing all of the Investor Notes as security for Company’s obligations under the TransactionDocuments (the “**Security Agreement**”).

 

1.5.Collateral for Investor Notes. Initially, none of the Investor Notes will be secured, but all or any of the Investor Notesmay become secured subsequent to the Closing by such collateral and at such time as determined by Investor in its sole discretion.In the event Investor desires to secure any of the Investor Notes, Company shall timely execute any and all amendments and documentsand take such other measures requested by Investor that are necessary or advisable in order to properly secure the applicableInvestor Notes.

 

1.6.Original Issue Discount: Transaction Expenses. The Note carries an original issue discount of $10,000.00 (the “**OID**”).In addition, Company agrees to pay $5,000.00 to Investor to cover Investor’s legal fees, accounting costs, due diligence,monitoring and other transaction costs incurred in connection with the purchase and sale of the Securities (the “**TransactionExpense Amount**”), all of which amount is included in the initial principal balance of the Note. The Purchase Price,therefore, shall be $200,000.00, computed as follows: $215,000.00 original principal balance, less the OID, less the TransactionExpense Amount. The Initial Cash Purchase Price shall be the Purchase Price less the sum of the initial principal amounts of theInvestor Notes. The portion of the OID and the Transaction Expense Amount allocated to the Initial Cash Purchase Price are setforth on Exhibit B.

 

2.Investor’s Representations and Warranties. Investor represents and warrants to Company that: (i) this Agreement hasbeen duly and validly authorized; (ii) this Agreement constitutes a valid and binding agreement of Investor enforceable in accordancewith its terms; (iii) Investor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation Dof the 1933 Act, and (iv) this Agreement and the Investor Notes have been duly executed and delivered on behalf of Investor.

 

 

3.Representations and Warranties of Company. Company represents and warrants to Investor that: (i) Company is a corporationduly organized, validly existing and in good standing under the laws of its state of incorporation and has the requisite corporatepower to own its properties and to carry on its business as now being conducted; (ii) Company is duly qualified as a foreign corporationto do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by itmakes such qualification necessary; (iii) Company has registered its Common Stock under Section 12(g) of the Securities ExchangeAct of 1934, as amended (the “**1934 Act**”), and is obligated to file reports pursuant to Section 13 or Section15(d) of the 1934 Act; (iv) each of the Transaction Documents and the transactions contemplated hereby and thereby, have beenduly and validly authorized by Company; (v) this Agreement, the Note, the Security Agreement, and the other Transaction Documentshave been duly executed and delivered by Company and constitute the valid and binding obligations of Company enforceable in accordancewith their terms, subject as to enforceability only to general principles of equity and to bankruptcy, insolvency, moratorium,and other similar laws affecting the enforcement of creditors’ rights generally; (vi) the execution and delivery of theTransaction Documents by Company, the issuance of Securities in accordance with the terms hereof, and the consummation by Companyof the other transactions contemplated by the Transaction Documents do not and will not conflict with or result in a breach byCompany of any of the terms or provisions of, or constitute a default under (a) Company’s formation documents or bylaws,each as currently in effect, (b) any indenture, mortgage, deed of trust, or other material agreement or instrument to which Companyis a party or by which it or any of its properties or assets are bound, including any listing agreement for the Common Stock,or (c) to Company’s knowledge, any existing applicable law, rule, or regulation or any applicable decree, judgment, or orderof any court, United States federal or state regulatory body, administrative agency, or other governmental body having jurisdictionover Company or any of Company’s properties or assets; (vii) no further authorization, approval or consent of any court,governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders or any lenderof Company is required to be obtained by Company for the issuance of the Securities to Investor; (viii) none of Company’sfilings with the SEC contained, at the time they were filed, any untrue statement of a material fact or omitted to state any materialfact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under whichthey were made, not misleading; (ix) Company has filed all reports, schedules, forms, statements and other documents requiredto be filed by Company with the SEC under the 1934 Act on a timely basis or has received a valid extension of such time of filingand has filed any such report, schedule, form, statement or other document prior to the expiration of any such extension; (x)Company is not, nor has it at any time in the previous (12) months been, a “Shell Company,” as such type of “issuer”is described in Rule 144(i)(l) under the 1933 Act; (xi) Company has taken no action which would give rise to any claim by anyperson or entity for a brokerage commission, placement agent or finder’s fees or similar payments by Investor relating tothe Note or the transactions contemplated hereby; (xii) except for such fees arising as a result of any agreement or arrangemententered into by Investor without the knowledge of Company (an “**Investor’s Fee**”), Investor shall haveno obligation with respect to such fees or with respect to any claims made by or on behalf of other persons for fees of a typecontemplated in this subsection that may be due in connection with the transactions contemplated hereby and Company shall indemnifyand hold harmless each of Investor, Investor’s employees, officers, directors, stockholders, managers, agents, and partners,and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorneys’fees) and expenses suffered in respect of any such claimed or existing fees (other than an Investor’s Fee, if any); (xiii)when issued, each of the Securities will be validly issued, fully paid for and non-assessable, free and clear of all liens, claims,charges and encumbrances; and (xiv) Company has performed due diligence and background research on Investor and its affiliatesincluding, without limitation, John M. Fife, and, to its satisfaction, has made inquiries with respect to all matters Investormay consider relevant to the undertakings and relationships contemplated by the Transaction Documents including, among other things,the following: http://investing.businessweek.com/research/stocks/people/person.asp?personId=7505107&ticker=UAHC; SECCivil Case No. 07-C-0347 (N.D. Ill.); SEC Civil Action No. 07-CV-347 (N.D. Ill); and FINRA Case #2011029203701. Company, beingaware of the foregoing matters, acknowledges and agrees that such matters, or any similar matters, have no bearing on the transactionscontemplated by the Transaction Documents and covenants and agrees it will not use any such information as a defense to performanceof its obligations under the Transaction Documents or in any attempt to avoid, modify or reduce such obligations.

 

 

4.Company Covenants. Until all of Company’s obligations hereunder are paid and performed in full, or within the timeframesotherwise specifically set forth below, Company shall comply with the following covenants: (i) from the date hereof until thedate that is six (6) months after all the Conversion Shares either have been sold by Investor, or may permanently be sold by Investorwithout any restrictions pursuant to Rule 144, Company shall timely make all filings required to be made by it under the 1933Act, the 1934 Act, Rule 144 or any United States securities laws and regulations thereof applicable to Company or by the rulesand regulations of its principal trading market, and such filings shall conform to the requirements of applicable laws, regulationsand government agencies, and, unless such filings are publicly available on the SEC’s EDGAR system (via the SEC’sweb site at no additional charge), Company shall provide a copy thereof to Investor promptly after such filings; (ii) so longas Investor beneficially owns any of the Securities and for at least twenty (20) Trading Days thereafter, Company shall file allreports required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934 Act, and shall take all reasonable actionunder its control to ensure that adequate current public information with respect to Company, as required in accordance with Rule144, is publicly available, and shall not terminate its status as an issuer required to file reports under the 1934 Act even ifthe 1934 Act or the rules and regulations thereunder would permit such termination; (iii) the Common Stock shall be listed orquoted for trading on any of (a) the NYSE Amex, (b) the New York Stock Exchange, (c) the Nasdaq Global Market, (d) the NasdaqCapital Market, (e) the OTC Bulletin Board, (f) the OTCQX, (g) the OTCQB, or (h) the OTCPink; (iv) when issued, each of the Securities(including, without limitation, the Conversion Shares), will be validly issued, fully paid for and non-assessable, free and clearof all liens, claims, charges and encumbrances, (v) Company shall use the net proceeds received hereunder for working capitaland general corporate purposes only;*provided, however*, Company will not use such proceeds to pay fees payable (A) to anybroker or finder relating to the offer and sale of the Securities unless such broker, finder, or other party is a registered investmentadviser or registered broker-dealer and such fees are paid in full compliance with all applicable laws and regulations, or (B)to any other party relating to any financing transaction effected prior to the date hereof; and (vi) from and after the date hereofand until all of Company’s obligations hereunder and the Note are paid and performed in full, Company shall not transfer,assign, sell, pledge, hypothecate or otherwise alienate or encumber the Investor Notes in any way without the prior written consentof Investor.

 

5.Conditions to Company’s Obligation to Sell. The obligation of Company hereunder to issue and sell the Securitiesto Investor at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions:

 

5.1.Investor shall have executed this Agreement and the Investor Notes and delivered the same to Company.

 

5.2.Investor shall have delivered the Initial Cash Purchase Price to Company in accordance with Section 1.2 above.

 

6.Conditions to Investor’s Obligation to Purchase. The obligation of Investor hereunder to purchase the Securitiesat the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided thatthese conditions are for Investor’s sole benefit and may be waived by Investor at any time in its sole discretion:

 

6.1.Company shall have executed this Agreement and delivered the same to Investor.

 

6.2.Company shall have delivered to Investor the duly executed Note in accordance with Section 1.2 above.

 

6.3.The Irrevocable Letter of Instructions to Transfer Agent substantially in the form attached hereto as Exhibit E shall havebeen delivered to and acknowledged in writing by Company’s transfer agent (the “**Transfer Agent**”).

 

6.4.Company shall have delivered to Investor a fully executed Secretary’s Certificate substantially in the form attached heretoas Exhibit F evidencing Company’s approval of the Transaction Documents.

 

6.5.Company shall have delivered to Investor a fully executed Share Issuance Resolution substantially in the form attached heretoas Exhibit G to be delivered to the Transfer Agent.

 

6.6.Company shall have delivered to Investor fully executed copies of the Security Agreement and all other Transaction Documents requiredto be executed by Company herein or therein.

 

 

7.Reservation of Shares. At all times during which the Note is convertible, Company will reserve from its authorized andunissued Common Stock to provide for the issuance of Common Stock upon the full conversion of the Note. Company will at all timesreserve at least three (3) times the number of shares of Common Stock equal to the Outstanding Balance (as defined in and determinedpursuant to the Note) divided by the Conversion Price (as defined in and determined pursuant to the Note) (the “**ShareReserve**”), but in any event not less than 8,000,000 shares of Common Stock shall be reserved at all times for such purpose(the “**Transfer Agent Reserve**”). Company further agrees that it will cause the Transfer Agent to immediatelyadd shares of Common Stock to the Transfer Agent Reserve in increments of 1,000,000 shares as and when requested by Investor inwriting from time to time, provided that such incremental increases do not cause the Transfer Agent Reserve to exceed the ShareReserve. In furtherance thereof, from and after the date hereof and until such time that the Note has been paid in full, Companyshall require the Transfer Agent to reserve for the purpose of issuance of Conversion Shares under the Note, a number of sharesof Common Stock equal to the Transfer Agent Reserve. Company shall further require the Transfer Agent to hold such shares of CommonStock exclusively for the benefit of Investor and to issue such shares to Investor promptly upon Investor’s delivery ofa conversion notice under the Note. Finally, Company shall require the Transfer Agent to issue shares of Common Stock pursuantto the Note to Investor out of its authorized and unissued shares, and not the Transfer Agent Reserve, to the extent shares ofCommon Stock have been authorized, but not issued, and are not included in the Transfer Agent Reserve. The Transfer Agent shallonly issue shares out of the Transfer Agent Reserve to the extent there are no other authorized shares available for issuanceand then only with Investor’s written consent.

 

8.Miscellaneous. The provisions set forth in this Section 8 shall apply to this Agreement, as well as all other TransactionDocuments as if these terms were fully set forth therein.

 

8.1.Original Signature Pages. Each party agrees to deliver its original signature pages to the Transaction Documents to theother party within five (5) Trading Days of the date hereof. Notwithstanding the foregoing, the Transaction Documents shall befully effective upon exchange of electronic signature pages by the parties and payment of the Initial Cash Purchase Price by Investor.For the avoidance of doubt, the failure by either party to deliver its original signature pages to the other party shall not affectin any way the validity or effectiveness of any of the Transaction Documents, provided that such failure to deliver original signaturesshall be a breach of the party’s obligations hereunder.

 

8.2.Cross Default. Any Event of Default (as defined in the Note) by Company under the Note shall be deemed a default underthis Agreement, and any default by Company under this Agreement will be deemed an Event of Default under the Note.

 

8.3.Governing Law; Venue. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Utahfor contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflictof laws. Each party consents to and expressly agrees that exclusive venue for Arbitration (as defined in Exhibit H) ofany dispute arising out of or relating to any Transaction Document or the relationship of the parties or their affiliates shallbe in Salt Lake County or Utah County, Utah;*provided, however*, that notwithstanding anything herein to the contrary, enforcementof Investor’s rights under the Security Agreement will occur in accordance with the Uniform Commercial Code of the applicablestate(s) under the Security Agreement and enforcement of Company’s rights over the Collateral will occur in accordance withthe laws of the state in which the Collateral is located). Without modifying the parties obligations to resolve disputes hereunderpursuant to the Arbitration Provisions (as defined below), for any litigation arising in connection with any of the TransactionDocuments, each party hereto hereby (a) consents to and expressly submits to the exclusive personal jurisdiction of any stateor federal court sitting in Salt Lake County, Utah, (b) expressly submits to the exclusive venue of any such court for the purposeshereof, and (c) waives any claim of improper venue and any claim or objection that such courts are an inconvenient forum or anyother claim or objection to the bringing of any such proceeding in such jurisdictions or to any claim that such venue of the suit,action or proceeding is improper.

 

 

8.4.Arbitration of Claims. The parties shall submit all Claims (as defined in Exhibit H) arising under this Agreementor any other Transaction Document or other agreements between the parties and their affiliates to binding arbitration pursuantto the arbitration provisions set forth in Exhibit H attached hereto (the “**Arbitration Provisions**”).The parties hereby acknowledge and agree that the Arbitration Provisions are unconditionally binding on the parties hereto andare severable from all other provisions of this Agreement. Any capitalized term not defined in the Arbitration Provisions shallhave the meaning set forth in this Agreement. By executing this Agreement, Company represents, warrants and covenants that Companyhas reviewed the Arbitration Provisions carefully, consulted with legal counsel about such provisions (or waived its right todo so), understands that the Arbitration Provisions are intended to allow for the expeditious and efficient resolution of anydispute hereunder, agrees to the terms and limitations set forth in the Arbitration Provisions, and that Company will not takea position contrary to the foregoing representations. Company acknowledges and agrees that Investor may rely upon the foregoingrepresentations and covenants of Company regarding the Arbitration Provisions.

 

8.5.Calculation Disputes. Notwithstanding the Arbitration Provisions, in the case of a dispute as to any arithmetic calculationunder the Transaction Documents, including without limitation, calculating the Outstanding Balance, the Conversion Price, theConversion Shares, or the VWAP (as defined in the Note) (collectively, “**Calculations**”), Company or Investor(as the case may be) shall submit the disputed determinations or arithmetic calculations (as the case may be) via email or facsimilewith confirmation of receipt (a) within two (2) Trading Days after receipt of the applicable notice giving rise to such disputeto Company or Investor (as the case may be) or (b) if no notice gave rise to such dispute, at any time after Investor learnedof the circumstances giving rise to such dispute. If Investor and Company are unable to agree upon such determination or calculationwithin two (2) Trading Days of such disputed determination or arithmetic calculation (as the case may be) being submitted to Companyor Investor (as the case may be), then Investor shall, within two (2) Trading Days, submit via email or facsimile the disputedCalculation to Unkar Systems Inc. (“**Unkar Systems**”). Company shall cause Unkar Systems to perform the determinationsor calculations (as the case may be) and notify Company and Investor of the results no later than ten (10) Trading Days from thetime it receives such disputed determinations or calculations (as the case may be). Unkar Systems’ determination of thedisputed Calculation shall be binding upon all parties absent demonstrable error. Unkar Systems’ fee for performing suchCalculation shall be paid by the incorrect party, or if both parties are incorrect, by the party whose Calculation is furthestfrom the correct Calculation as determined by Unkar Systems. In the event Company is the losing party, no extension of the DeliveryDate shall be granted and Company shall incur all effects for failing to deliver the applicable shares in a timely manner as setforth in the Transaction Documents. Notwithstanding the foregoing, Investor may, in its sole discretion, designate an independent,reputable investment bank or accounting firm other than Unkar Systems to resolve any such dispute and in such event, all referencesto “Unkar Systems” herein will be replaced with references to such independent, reputable investment bank or accountingfirm so designated by Investor.

 

8.6.Counterparts. Each Transaction Document may be executed in any number of counterparts, each of which shall be deemed anoriginal, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of anotherparty’s executed counterpart of a Transaction Document (or such party’s signature page thereof) will be deemed tobe an executed original thereof.

 

8.7.Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect theinterpretation of, this Agreement.

 

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

 

 

8.9.Entire Agreement: Amendments. This Agreement and the instruments and exhibits referenced herein contain the entire understandingof the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein,neither Company nor Investor makes any representation, warranty, covenant or undertaking with respect to such matters. No provisionof this Agreement may be waived or amended other than by an instrument in writing signed by the parties hereto.

 

8.10.Notices. Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shallbe deemed effectively given on the earliest of: (a) the date delivered, if delivered by personal delivery as against written receipttherefor or by email to an executive officer, or by facsimile (with successful transmission confirmation), (b) the earlier ofthe date delivered or the third Trading Day after deposit, postage prepaid, in the United States Postal Service by certified mail,or (c) the earlier of the date delivered or the third Trading Day after mailing by express courier, with delivery costs and feesprepaid, in each case, addressed to each of the other parties thereunto entitled at the following addresses (or at such otheraddresses as such party may designate by five (5) calendar days’ advance written notice similarly given to each of the otherparties hereto):

 

Ifto Company:

 

SaleenAutomotive, Inc.

Attn:Steve Saleen

2375Wardlow Road

Corona,California 92882

 

Ifto Investor:

 

TypenexCo-Investment, LLC

Attn:John Fife

303East Wacker Drive, Suite 1200

Chicago,Illinois 60601

 

Witha copy to (which copy shall not constitute notice):

 

HansenBlack Anderson Ashcraft PLLC

Attn:Jonathan K. Hansen

3051West Maple Loop, Suite 325

Lehi,Utah 84043

 

8.11.Successors and Assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or to beperformed by Investor hereunder may be assigned by Investor to a third party, including its financing sources, in whole or inpart, without the need to obtain Company’s consent thereto. Company may not assign its rights or obligations under thisAgreement or delegate its duties hereunder without the prior written consent of Investor.

 

8.12.Survival. The representations and warranties of Company and the agreements and covenants set forth in this Agreement shallsurvive the Closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of Investor. Company agreesto indemnify and hold harmless Investor and all its officers, directors, employees, attorneys, and agents for loss or damage arisingas a result of or related to any breach or alleged breach by Company of any of its representations, warranties and covenants setforth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as theyare incurred.

 

 

8.13.Publicity. Company and Investor shall have the right to review a reasonable period of time before issuance of any pressreleases by the other party with respect to the transactions contemplated hereby.

 

8.14.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 reasonablyrequest in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactionscontemplated hereby.

 

8.15.Investor’s Rights and Remedies Cumulative; Liquidated Damages. All rights, remedies, and powers conferred in thisAgreement and the Transaction Documents are cumulative and not exclusive of any other rights or remedies, and shall be in additionto every other right, power, and remedy that Investor may have, whether specifically granted in this Agreement or any other TransactionDocument, or existing at law, in equity, or by statute, and any and all such rights and remedies may be exercised from time totime and as often and in such order as Investor may deem expedient. The parties acknowledge and agree that upon Company’sfailure to comply with the provisions of the Transaction Documents, Investor’s damages would be uncertain and difficult(if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates and futureshare prices, Investor’s increased risk, and the uncertainty of the availability of a suitable substitute investment opportunityfor Investor, among other reasons. Accordingly, any fees, charges, and default interest due under the Note and the other TransactionDocuments are intended by the parties to be, and shall be deemed, liquidated damages (under Company’s and Investor’sexpectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding periodunder Rule 144). The parties agree that such liquidated damages are a reasonable estimate of Investor’s actual damages andnot a penalty, and shall not be deemed in any way to limit any other right or remedy Investor may have hereunder, at law or inequity. The parties acknowledge and agree that under the circumstances existing at the time this Agreement is entered into, suchliquidated damages are fair and reasonable and are not penalties. All fees, charges, and default interest provided for in theTransaction Documents are agreed to by the parties to be based upon the obligations and the risks assumed by the parties as ofthe Closing Date and are consistent with investments of this type. The liquidated damages provisions of the Transaction Documentsshall not limit or preclude a party from pursuing any other remedy available at law or in equity;*provided, however,* thatthe liquidated damages provided for in the Transaction Documents are intended to be in lieu of actual damages.

 

8.16.Ownership Limitation. Notwithstanding anything to the contrary contained in this Agreement or the other Transaction Documents,if at any time Investor shall or would be issued shares of Common Stock under any of the Transaction Documents, but such issuancewould cause Investor (together with its affiliates) to beneficially own a number of shares exceeding the Maximum Percentage (asdefined in the Note), then Company must not issue to Investor the shares that would cause Investor to exceed the Maximum Percentage.The shares of Common Stock issuable to Investor that would cause the Maximum Percentage to be exceeded are referred to hereinas the “**Ownership Limitation Shares**”. Company will reserve the Ownership Limitation Shares for the exclusivebenefit of Investor. From time to time, Investor may notify Company in writing of the number of the Ownership Limitation Sharesthat may be issued to Investor without causing Investor to exceed the Maximum Percentage. Upon receipt of such notice, Companyshall be unconditionally obligated to immediately issue such designated shares to Investor, with a corresponding reduction inthe number of the Ownership Limitation Shares. For purposes of this Section, beneficial ownership of Common Stock will be determinedunder Section 13(d) of the 1934 Act.

 

 

8.17.Attorneys’ Fees and Cost of Collection. In the event of any arbitration or action at law or in equity to enforceor interpret the terms of this Agreement or any of the other Transaction Documents, the parties agree that the party who is awardedthe most money shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award ofthe full amount of the attorneys’ fees, deposition costs, and expenses paid by such prevailing party in connection witharbitration or litigation without reduction or apportionment based upon the individual claims or defenses giving rise to the feesand expenses. Nothing herein shall restrict or impair an arbitrator’s or a court’s power to award fees and expensesfor frivolous or bad faith pleading. If (a) the Note is placed in the hands of an attorney for collection or enforcement priorto commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Investorotherwise takes action to collect amounts due under the Note or to enforce the provisions of the Note; or (b) there occurs anybankruptcy, reorganization, receivership of Company or other proceedings affecting Company’s creditors’ rights andinvolving a claim under the Note; then Company shall pay the costs incurred by Investor for such collection, enforcement or actionor in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’fees, expenses, deposition costs, and disbursements.

 

8.18.Waiver. No waiver of any provision of this Agreement shall be effective unless it is in the form of a writing signed bythe party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of anyother provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuingwaiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth inwriting.

 

8.19.Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMANDTHAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE RELATIONSHIPS OF THEPARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAWOR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILYWAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.

 

8.20.Time of the Essence. Time is expressly made of the essence with respect to each and every provision of this Agreement andthe other Transaction Documents.

 

*[Remainderof page intentionally left blank; signature page follows]*

 

 

INWITNESS WHEREOF, the undersigned Investor and Company have caused this Agreement to be duly executed as of the date first abovewritten.

 

 

 

 

 

 

**EXHIBITH**

** **

**ARBITRATIONPROVISIONS**

 

1.Dispute Resolution. For purposes of this Exhibit H. the term “**Claims**” means any disputes, claims,demands, causes of action, liabilities, damages, losses, or controversies whatsoever arising from related to or connected withthe transactions contemplated in the Transaction Documents and any communications between the parties related thereto, includingwithout limitation any claims of mutual mistake, mistake, fraud, misrepresentation, failure of formation, failure of consideration,promissory estoppel, unconscionability, failure of condition precedent, rescission, and any statutory claims, tort claims, contractclaims, or claims to void, invalidate or terminate the Agreement or any of the other Transaction Documents. The term “Claims”specifically excludes a dispute over Calculations (as defined in the Agreement) enforcement of Investor’s rights and remediesagainst the personal property described in the Security Agreement under the applicable provisions of the Uniform Commercial Code.The parties hereby agree that the arbitration provisions set forth in this Exhibit H (“**Arbitration Provisions**”)are binding on the parties hereto and are severable from all other provisions in the Transaction Documents. As a result, any attemptto rescind the Agreement or declare the Agreement or any other Transaction Document invalid or unenforceable for any reason issubject to these Arbitration Provisions. These Arbitration Provisions shall also survive any termination or expiration of theAgreement.

 

2.Arbitration. Except as otherwise provided herein, all Claims must be submitted to arbitration (“**Arbitration**”)to be conducted in Salt Lake County, Utah or Utah County, Utah and pursuant to the terms set forth in these Arbitration Provisions.The parties agree that the award of the arbitrator shall be final and binding upon the parties; shall be the sole and exclusiveremedy between them regarding any Claims, counterclaims, issues, or accountings presented or pleaded to the arbitrator; and shallpromptly be payable in United States dollars free of any tax, deduction or offset (with respect to monetary awards). Any costsor fees, including without limitation attorneys’ fees, incident to enforcing the arbitrator’s award shall, to themaximum extent permitted by law, be charged against the party resisting such enforcement. The award shall include Default Interest(as defined in the Note) both before and after the award. Judgment upon the award of the arbitrator will be entered and enforcedby a state court sitting in Salt Lake County, Utah. The parties hereby incorporate herein the provisions and procedures set forthin the Utah Uniform Arbitration Act, U.C.A.§ 78B-11-101*et seq.* (as amended or superseded from time to time, the “**ArbitrationAct**”). Pursuant to Section 78B-11-105 of the Arbitration Act, in the event of conflict between the terms of these ArbitrationProvisions and the provisions of the Arbitration Act, the terms of these Arbitration Provisions shall control.

 

3.Arbitration Proceedings. Arbitration between the parties will be subject to the following procedures:

 

3.1Pursuant to Section 110 of the Arbitration Act, the parties agree that a party may initiate Arbitration by giving written noticeto the other party (“**Arbitration Notice**”) in the same manner that notice is permitted under Section 8.10 ofthe Agreement; *provided, however,* that the Arbitration Notice may not be given by email or fax. Arbitration will be deemedinitiated as of the date that the Arbitration Notice is deemed delivered under Section 8.10 of the Agreement (the “**ServiceDate**”). After the Service Date, information may be delivered, and notices may be given, by email or fax pursuant toSection 8.10 of the Agreement or any other method permitted thereunder. The Arbitration Notice must describe the nature of thecontroversy, the remedies sought, and the election to commence Arbitration proceedings. All Claims in the Arbitration Notice mustbe pleaded consistent with the Utah Rules of Civil Procedure.

 

3.2Within ten (10) calendar days after the Service Date, Investor shall select and submit to Company the names of three arbitratorsthat are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com) (suchthree designated persons hereunder are referred to herein as the “**Proposed Arbitrators**”). For the avoidanceof doubt, each Proposed Arbitrator must be qualified as a “neutral” with Utah ADR Services. Within ten (10) calendardays after Investor has submitted to Company the names of the Proposed Arbitrators, Company must select, by written notice toInvestor, one (1) of the Proposed Arbitrators to act as the arbitrator for the parties under these Arbitration Provisions. IfCompany fails to select one of the Proposed Arbitrators in writing within such 10-day period, then Investor may select the arbitratorfrom the Proposed Arbitrators by providing written notice of such selection to Company. If Investor fails to identify the ProposedArbitrators within the time period required above, then Company may at any time prior to Investor designating the Proposed Arbitrators,select the names of three arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Serviceby written notice to Investor. Investor may then, within ten (10) calendar days after Company has submitted notice of its selectedarbitrators to Investor, select, by written notice to Company, one (1) of the selected arbitrators to act as the arbitrator forthe parties under these Arbitration Provisions. If Investor fails to select in writing and within such 10-day period one of thethree arbitrators selected by Company, then Company may select the arbitrator from its three previously selected arbitrators byproviding written notice of such selection to Investor. Subject to Paragraph 3.12 below, the cost of the arbitrator must be paidequally by both parties;*provided, however,* that if one party refuses or fails to pay its portion of the arbitrator fee,then the other party can advance such unpaid amount (subject to the accrual of Default Interest thereupon), with such amount addedto or subtracted from, as applicable, the award granted by the arbitrator. If Utah ADR Services ceases to exist or to providea list of neutrals, then the arbitrator shall be selected under the then prevailing rules of the American Arbitration Association.The date that the selected arbitrator agrees in writing to serve as the arbitrator hereunder is referred to herein as the “**ArbitrationCommencement Date**”.

 

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3.3An answer and any counterclaims to the Arbitration Notice, which must be pleaded consistent with the Utah Rules of Civil Procedure,shall be required to be delivered to the other party within twenty (20) calendar days after the Service Date. Upon request, thearbitrator is hereby instructed to render a default award, consistent with the relief requested in the Arbitration Notice, againsta party that fails to submit an answer within such time period.

 

3.4The party that delivers the Arbitration Notice to the other party shall have the option to also commence legal proceedings withany state court sitting in Salt Lake County, Utah (“**Litigation Proceedings**”), subject to the following: (i)the complaint in the Litigation Proceedings is to be substantially similar to the claims set forth in the Arbitration Notice,provided that an additional cause of action to compel arbitration will also be included therein, (ii) so long as the other partyfiles an answer to the complaint in the Litigation Proceedings and an answer to the Arbitration Notice, the Litigation Proceedingswill be stayed pending an award of the arbitrator hereunder, (iii) if the other party fails to file an answer in the LitigationProceedings or an answer in the Arbitration Proceedings, then the party initiating Arbitration shall be entitled to a defaultjudgment consistent with the relief requested, to be entered in the Litigation Proceedings, and (iv) any legal or procedural issuearising under the Arbitration Act that requires a decision of a court of competent jurisdiction may be determined in the LitigationProceedings. Any award of the arbitrator may be entered in such Litigation Proceedings pursuant to the Arbitration Act.

 

3.5Pursuant to Section 118(8) of the Arbitration Act, the parties agree that discovery shall be conducted in accordance with theUtah Rules of Civil Procedure;*provided, however*, that incorporation of such rules will in no event supersede the ArbitrationProvisions set forth herein, including without limitation the time limitation set forth in Paragraph 3.9 below, and the following:

 

(a)Discovery will only be allowed if the likely benefits of the proposed discovery outweigh the burden or expense, and the discoverysought is likely to reveal information that will satisfy a specific element of a claim or defense already pleaded in the Arbitration.The party seeking discovery shall always have the burden of showing that all of the standards and limitations set forth in theseArbitration Provisions are satisfied. The scope of discovery in the Arbitration proceedings shall also be limited as follows:

 

(i)To facts directly connected with the transactions contemplated by the Agreement.

 

(ii)To facts and information that cannot be obtained from another source that is more convenient, less burdensome or less expensive.

 

(c)No party shall be allowed (a) more than fifteen (15) interrogatories (including discrete subparts), (b) more than fifteen (15)requests for admission (including discrete subparts), (c) more than ten (10) document requests (including discrete subparts),or (d) more than three depositions (excluding expert depositions) for a maximum of seven (7) hours per deposition.

 

3.6Any party submitting any written discovery requests, including interrogatories, requests for production, subpoenas to a partyor a third party, or requests for admissions, must prepay the estimated attorneys’ fees and costs, as determined by thearbitrator, before the responding party has any obligation to produce or respond.

 

(a)All discovery requests must be submitted in writing to the arbitrator and the other party before issuing or serving such discoveryrequests. The party issuing the written discovery requests must include with such discovery requests a detailed explanation ofhow the proposed discovery requests satisfy the requirements of these Arbitration Provisions and the Utah Rules of Civil Procedure.Any party will then be allowed, within ten (10) calendar days of receiving the proposed discovery requests, to submit to the arbitratoran estimate of the attorneys’ fees and costs associated with responding to such written discovery requests and a writtenchallenge to each applicable discovery request. After receipt of an estimate of attorneys’ fees and costs and/or challenge(s)to one or more discovery requests, the arbitrator will make a finding as to the likely attorneys’ fees and costs associatedwith responding to the discovery requests and issue an order that (A) requires the requesting party to prepay the attorneys’fees and costs associated with responding to the discovery requests, and (B) requires the responding party to respond to the discoveryrequests as limited by the arbitrator within a certain period of time after receiving payment from the requesting party. If aparty entitled to submit an estimate of attorneys’ fees and costs and/or a challenge to discovery requests fails to do sowithin such 10-day period, the arbitrator will make a finding that (A) there are no attorneys’ fees or costs associatedwith responding to such discovery requests, and (B) the responding party must respond to such discovery requests (as may be limitedby the arbitrator) within a certain period of time as determined by the arbitrator.

 

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(b)In order to allow a written discovery request, the arbitrator must find that the discovery request satisfies the standards setforth in these Arbitration Provisions and the Utah Rules of Civil Procedure. The arbitrator must strictly enforce these standards.If a discovery request does not satisfy any of the standards set forth in these Arbitration Provisions or the Utah Rules of CivilProcedure, the arbitrator may modify such discovery request to satisfy the applicable standards, or strike such discovery requestin whole or in part.

 

(c)Discovery deadlines will be set forth in a scheduling order issued by the arbitrator. The parties hereby authorize and directthe arbitrator to take such actions and make such rulings as may be necessary to carry out the parties’ intent for the arbitrationproceedings to be efficient and expeditious.

 

3.7Each party may submit expert reports (and rebuttals thereto), provided that such reports must be submitted by the deadlines establishedby the arbitrator. Expert reports must contain the following: (a) a complete statement of all opinions the expert will offer attrial and the basis and reasons for them; (b) the expert’s name and qualifications, including a list of all publicationswithin the preceding 10 years, and a list of any other cases in which the expert has testified at trial or in a deposition orprepared a report within the preceding 10 years; and (c) the compensation to be paid for the expert’s study and testimony.The parties are entitled to depose any other party’s expert witness one time for no more than 4 hours. An expert may nottestify in a party’s case-in-chief concerning any matter not fairly disclosed in the expert report.

 

3.8All information disclosed by either party during the Arbitration process (including without limitation information disclosed duringthe discovery process) shall be considered confidential in nature. Each party agrees not to disclose any confidential informationreceived from the other party during the discovery process unless (i) prior to or after the time of disclosure such informationbecomes public knowledge or part of the public domain, not as a result of any inaction or action of the receiving party, (ii)such information is required by a court order, subpoena or similar legal duress to be disclosed if such receiving party has notifiedthe other party thereof in writing and given it a reasonable opportunity to obtain a protective order from a court of competentjurisdiction prior to disclosure; or (iii) disclosed to the receiving party’s agents, representatives and legal counselon a need to know basis who each agree in writing not to disclose such information to any third party. Pursuant to Section 118(5)of the Arbitration Act, the arbitrator is hereby authorized and directed to issue a protective order to prevent the disclosureof privileged information and confidential information upon the written request of either party.

 

3.9The parties hereby authorize and direct the arbitrator to take such actions and make such rulings as may be necessary to carryout the parties’ intent for the arbitration proceedings to be efficient and expeditious. Pursuant to Section 120 of theArbitration Act, the parties hereby agree that an award of the arbitrator must be made within 150 days after the Arbitration CommencementDate. The arbitrator is hereby authorized and directed to hold a scheduling conference within ten (10) calendar days after theArbitration Commencement Date in order to establish a scheduling order with various binding deadlines for discovery, expert testimony,and the submission of documents by the parties to enable the arbitrator to render a decision prior to the end of such 150-dayperiod. The Utah Rules of Evidence will apply to any final hearing before the arbitrator.

 

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3.10The arbitrator shall have the right to award or include in the arbitrator’s award any relief which the arbitrator deemsproper under the circumstances, including, without limitation, specific performance and injunctive relief, provided that the arbitratormay not award exemplary or punitive damages.

 

3.11If any part of these Arbitration Provisions is found to violate applicable law or to be illegal, then such provision shall bemodified to the minimum extent necessary to make such provision enforceable under applicable law.

 

3.12The arbitrator is hereby directed to require the losing party to (i) pay the full amount of the costs and fees of the arbitrator,and (ii) reimburse the prevailing party the reasonable attorneys’ fees, arbitrator costs, deposition costs, and other discoverycosts incurred by the prevailing party.

 

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