Blueprint








 






Exhibit
10.1

 



FORM OF SECURITIES PURCHASE AGREEMENT

 


This
SECURITIES PURCHASE AGREEMENT (the “Agreement”) is dated as of and
effective as of
[                                     
] (the “Effective
Date”), by and between KNOW LABS, INC., a corporation
incorporated under the laws of the State of Nevada (the
“Company”), and
the undersigned purchaser (“Purchaser”).


 


WHEREAS, the
Company and Purchaser are executing and delivering this Agreement
in reliance upon the exemption from securities registration
afforded by Section 4(a)(2) of the Securities Act of 1933, as
amended (the “Securities
Act”), and Rule 506(c) of Regulation D
(“Regulation D”)
as promulgated by the United States Securities and Exchange
Commission (the “SEC”) under the Securities
Act.


 


WHEREAS, Purchaser
desires to purchase from Company, and the Company desires to sell
and issue to Purchaser, upon the terms and subject to the
conditions contained herein, a subordinated convertible note (the
“Convertible
Note”), in the form attached hereto as Exhibit A, and warrants to
purchase shares of Common Stock (the “Warrants”), in the form attached
hereto as Exhibit
B.

 


NOW,
THEREFORE, in consideration of the premises and the mutual
covenants of the parties hereinafter expressed and other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto, each intending to be
legally bound, agree as follows:


 


ARTICLE
I


DEFINITIONS

 


For
purposes of this Agreement, except as otherwise expressly provided
or otherwise defined elsewhere in this Agreement, or unless the
context otherwise requires, the capitalized terms in this Agreement
shall have the meanings assigned to them in the Convertible Note or
this Article as follows:

 

1.1
“Action” as to any Person, means
any action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting
such Person, any of such Person’s subsidiaries or any of such
Person’s or such subsidiaries’ respective properties,
before or by any governmental authority, arbitrator, regulatory
authority (federal, state, county, local or foreign), stock market,
stock exchange or trading facility.

 

1.2
“Business Day” shall mean any day
other than a Saturday, Sunday, or a legal holiday on which federal
banks are authorized or required to be closed for the conduct of
commercial banking business.

 

1.3
“Common Stock”
means the common stock of the Company, par value $0.001 per
share.

 

1.4
“Convertible
Note(s)” shall have the meaning given to it in the
preamble above.

 




 

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1.5
“Effective Date” means the date so
defined in the introductory paragraph of this
Agreement.

 

1.6
“Material Adverse Effect” means any
of (i) a material and adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material and
adverse effect on the results of operations, assets, properties,
business or condition (financial or otherwise) of the Company and
the subsidiaries, taken as a whole, or (iii) a material and adverse
impairment to the Company’s ability to perform on a timely
basis its obligations under any Transaction Document, provided,
however, that any effect(s) arising from or relating to any of the
following shall not be deemed, either alone or in combination, to
constitute, and shall not be taken into account in determining
whether there has been or will be, a Material Adverse Effect: (A)
conditions affecting the industries in which the business operates
(which effect(s), in each case, do not disproportionately affect
the Business relative to other companies conducting businesses
similar to the business); (B) general economic, financial market or
geopolitical conditions (which effect(s), in each case, do not
disproportionately affect the business relative to other companies
conducting businesses similar to the business); (C) any failure to
meet any projections or forecasts for the business for any period
ending (or for which revenues or earnings are released) on or after
the date hereof (provided that the underlying causes of any such
failure (subject to the other provisions of this definition) shall
not be excluded); (D) any change in accounting rules (including
generally accepted accounting principles in the United States), or
the enforcement, implementation or interpretation thereof, after
the date hereof; or (E) any effect caused by, relating to or
resulting from the announcement or pendency of the transactions
contemplated by this Agreement.

 

1.7
“Person” means any individual, sole
proprietorship, joint venture, partnership, limited liability
company, corporation, association, cooperation, trust, estate,
governmental authority, or any other entity of any nature
whatsoever.


 

1.8
“Securities” means, collectively,
the Convertible Notes, the Warrants, and any additional shares of
Common Stock issuable (i) in connection with a conversion of the
Convertible Notes,


(ii)
upon exercise of the Warrants or (iii) in accordance with any of
the terms or provisions of this Agreement or any other Transaction
Documents.

 

1.9
“Subordination Agreement” means the
Subordination Agreement dated the date hereof by and between
Purchaser and Clayton Struve, the form of which is attached hereto
as Exhibit
C.

 

1.10
“Subscription Agreement” means the
Subscription Agreement, Suitability Questionnaire, and Accredited
Investor Status Certification executed by Purchaser, the form of
which is attached hereto as Exhibit D.

 

1.11
“Transaction Documents” means this
Agreement any and all documents or instruments executed or to be
executed by the Company in connection with this Agreement,
including the Subscription Agreement(s), the Convertible Note(s),
the Warrant(s), and the Subordination Agreement(s), together with
all modifications, amendments, extensions, future advances,
renewals, and substitutions thereof.

 




 

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1.12
“Warrant(s)”
shall have the meaning given to it in the preamble
above.


 


ARTICLE
II



PURCHASE AND SALE OF CONVERTIBLE NOTES AND WARRANTS


 

2.1 Purchase and Sale. Subject to
the satisfaction (or waiver) of the terms and conditions of this
Agreement, Purchaser agrees to purchase, and Company agrees to sell
and issue to Purchaser, the Convertible Notes and the Warrants in
the amount of the Purchase Price, all as set forth on Schedule 1 attached hereto. The
Purchase Price for each Convertible Note purchased shall be equal
to its face value. The aggregate principal amount of Convertible
Notes which may be purchased under this Agreement from time to time
shall not exceed $5,000,000; provided, that the Company may
increase such aggregate principal amount of Convertible Notes in
its sole discretion. The Company shall notify Purchaser of any such
increase, but Purchaser shall have no right of first offer,
preemptive right, or any similar right with respect to such
additional Convertible Notes.

 

2.2 Closing Date. The purchase and
sale of the Convertible Notes and Warrants to Purchaser shall take
place on the Effective Date, or such later date as the Company and
Purchaser may agree in writing, subject to satisfaction of the
conditions set forth in this Agreement (the “Closing Date”). Additional
closings with other purchasers of the Convertible Notes and
Warrants may be held from time to time in the sole discretion of
the Company.


 

2.3 Form of Payment. Subject to the
satisfaction of the terms and conditions of this Agreement, on the
Closing Date: (i) Purchaser shall deliver to the Company, to the
account designated in the Subscription Agreement, the Purchase
Price for the Convertible Note and Warrants and (ii) the Company
shall deliver to Purchaser the Convertible Note(s) and Warrant(s)
which Purchaser is purchasing hereunder, duly executed on behalf of
the Company, together with any other documents required to be
delivered pursuant to this Agreement.

 

ARTICLE
III



REPRESENTATIONS AND WARRANTIES OF PURCHASER

 


Purchaser
represents and warrants to the Company as follows:

 

3.1 Certifications in Subscription
Agreement. The certifications of Purchaser contained in the
Subscription Agreement are true and correct as of the Effective
Date, and Purchaser hereby reaffirms the representations,
warranties, agreements, acknowledgments, and understandings of
Purchaser contained in the Subscription Agreement as of the
Effective Date.


 

3.2 Additional Information. The
Purchaser understands and agrees that the Purchaser may be asked or
required to provide documentation (“Documentation”) to verify the
Purchaser’s accredited investor status. Notwithstanding
anything else contained herein or in other materials
provided to Purchaser, this Documentation may be retained and
reviewed by the Company and copies of the Documentation may be
provided to affiliates of the Company and Boustead Securities, LLC,
a member of FINRA and SIPC, who is acting as the Company’s
exclusive placement agent in connection with this offering (the
“Placement
Agent”), and its affiliates. Purchaser understands
that the Company may not accept Purchaser’s subscription if
Purchaser is not able to provide Documentation acceptable to
Company and the Placement Agent, or for any other
reason.

 



 

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

 

3.4 Authorization, Enforcement.
This Agreement has been duly and validly authorized, executed and
delivered by, or on behalf of, Purchaser and is a valid and binding
agreement of Purchaser, enforceable in accordance with its terms,
except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation, and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’
rights and remedies.


 

3.5 Foreign Investors. If Purchaser
is not a United States person (as defined by Section 7701(a)(30) of
the Internal Revenue Code of 1986, as amended), Purchaser hereby
represents that it has satisfied itself as to the full observance
of the laws of its jurisdiction in connection with any invitation
to subscribe for the Securities or any use of this Subscription
Agreement, including (i) the legal requirements within its
jurisdiction for the purchase of the Securities, (ii) any foreign
exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained, and
(iv) the income tax and other tax consequences, if any, that may be
relevant to the purchase, holding, redemption, sale, or transfer of
the Securities. Purchaser’s subscription and payment for and
continued beneficial ownership of the Securities will not violate
any applicable securities or other laws of the Purchaser’s
jurisdiction.

 


ARTICLE
IV



REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 


The
Company represents and warrants to Purchaser as
follows:


 

4.1 Organization. The Company is a
corporation, duly incorporated, validly existing and in good
standing under the laws of the State of Nevada. The Company has the
full corporate power and authority to: (i) enter into and execute
this Agreement and the other Transaction Documents and to perform
all of its obligations hereunder and thereunder; and (ii) own and
to conduct and carry on its business as currently conducted. The
Company is duly qualified to transact business and is in good
standing as a foreign corporation in each jurisdiction where
the character of its
business or the ownership or use and operation of its assets or
properties requires such qualification.

 



 

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4.2 Authority and Approval of Agreement;
Binding Effect. The execution and delivery by Company of
this Agreement and the other Transaction Documents, and the
performance by Company of all of its obligations hereunder and
thereunder, including the issuance of the Securities, have been
duly and validly authorized and approved by the Company and its
board of directors pursuant to all applicable laws and no other
action or consent on the part of Company, its board directors or
any other Person is necessary or required by the Company to execute
this Agreement and the other Transaction Documents, consummate the
transactions contemplated herein and therein, perform all of
Company’s obligations hereunder and thereunder, or to issue
the Securities. This Agreement and each of the other Transaction
Documents have been duly and validly executed by Company (and the
officer executing this Agreement and all such other Transaction
Documents is duly authorized to act and execute same on behalf of
Company) and constitute the valid and legally binding agreements of
Company, enforceable against Company in accordance with their
respective terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, and other similar laws
relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies.

 

4.3 SEC Reports. Other than as
disclosed in the SEC Reports (with respect to a potential late
filing of a Form 8-K on June 27, 2017, about which the Company is
engaged in discussions with the SEC), the Company has filed all
reports, schedules, forms, statements and other documents required
to be filed by it under the Securities Exchange Act of 1934 (the
“Exchange Act”),
including pursuant to Section 13(a) or 15(d) thereof, for the two
years preceding the date hereof (or such shorter period as the
Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports”), on a timely basis
or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such
extension. As of their respective filing dates, or to the extent
corrected by a subsequent restatement, the SEC Reports complied in
all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the SEC
promulgated thereunder, and none of the SEC Reports, as amended
from time to time, 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. All material agreements to which the Company or any
subsidiary is a party or to which the property or assets of the
Company or any of its subsidiaries are subject are included as part
of or specifically identified in the SEC Reports. The private
placement memorandum (the “PPM”) prepared in connection with
the offering contemplated by this Agreement and delivered to the
Purchaser does not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports
complies in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with U.S. generally
accepted accounting principles, and fairly present in all
material respects the
financial position of the Company and its consolidated subsidiaries
as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit
adjustments.

 



 

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4.4 Capitalization. The authorized
capital stock of the Company is as set forth in the Company’s
latest Annual Report on Form 10-K or Quarterly Report on Form 10-Q
(as applicable) as filed with the SEC. As of the Effective Date,
and except as disclosed in the SEC Reports, (i) no shares of the
Company’s capital stock are subject to preemptive rights or
any other similar rights or any claims or encumbrances suffered or
permitted by the Company; (ii) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company, or
contracts, commitments, understandings or arrangements by which the
Company is or may become bound to issue additional shares of
capital stock of the Company, or options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares
of capital stock of the Company; (iii) there are no outstanding
debt securities, notes, credit agreements, credit facilities or
other contracts or instruments evidencing indebtedness of the
Company or any of its, or by which the Company is or may become
bound; (iv) there are no outstanding registration statements with
respect to the Company or any of its securities; (v) there are no
agreements or arrangements under which the Company is obligated to
register the sale of any of their securities under the Securities
Act (except pursuant to this Agreement); (vi) there are no
financing statements securing obligations filed in connection with
the Company or any of its assets; (vii) there are no securities or
instruments containing anti-dilution or similar provisions that
will be triggered by this Agreement or any related agreement or the
consummation of the transactions described herein or therein; and
(viii) there are no outstanding securities or instruments of the
Company which contain any redemption or similar provisions, and
there are no contracts by which the Company is or may become bound
to redeem a security of the Company. No further approval or
authorization of any stockholder, the Board of Directors or others
is required for the issuance and sale of the
Securities.


 

4.5 No Conflicts; Consents and
Approvals. The execution, delivery, and performance of this
Agreement and the Transaction Documents, and the consummation of
the transactions contemplated hereby and thereby, including the
issuance of any of the Securities, will not: (i) constitute a
violation of or conflict with the Articles of Incorporation or
Bylaws of the Company (the “Organizational Documents”); (ii)
constitute a violation of, or a default or breach under (either
immediately, upon notice, upon lapse of time, or both), or
conflicts with, or gives to any other Person any rights of
termination, amendment, acceleration or cancellation of, any
provision of any material contract to which Company is a party or
by which any of its assets or properties may be bound; or (iii)
constitute a violation of, or conflict with, any law (including
United States federal and state securities laws). The Company is
not in violation of its Organizational Documents and the Company is
not in default or breach (and no event has occurred which with
notice or lapse of time or both could put the Company in default or
breach) under, and the Company has not taken any action or failed
to take any action that would give to any other Person any rights
of termination, amendment, acceleration, or cancellation of, any
material contract to which the Company is a party or by which any
property or assets of the Company are bound or
affected.

 




 

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4.6 Issuance of Securities. The
Securities are duly authorized and, upon issuance in accordance
with the terms hereof, shall be duly issued, fully paid and
non-assessable, and free from all encumbrances with respect to the
issue thereof, and will be issued in compliance with all applicable
United States federal and state securities laws.


 

4.7 Brokerage Fees. There is no
Person acting on behalf of the Company who is entitled to or has
any claim for any brokerage or finder’s fee or commission in
connection with the execution of this Agreement or the consummation
of the transactions contemplated hereby, except for Boustead
Securities, LLC, which is acting as placement agent (the
“Placement
Agent”) for the sale of the Securities.

 

4.8 No Material Adverse Changes.
Since the date of the latest audited financial statements included
within the SEC Reports and except as otherwise disclosed in the
PPM, there has not been any adverse change in the business,
financial condition, operations, results of operations, or future
prospects of the Company.


 

4.9 Litigation. There is no Action
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) except as disclosed in the SEC Reports or the
PPM, could, if there were an unfavorable decision, individually or
in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any subsidiary,
nor to the knowledge of the Company or any subsidiary, any director
or officer thereof (in his or her capacity as such), is or has been
the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of
breach of fiduciary duty, except as disclosed in the SEC Reports or
the PPM. There has not been, and to the knowledge of the Company,
there is not pending or contemplated any investigation by the SEC
involving the Company or any current or former director or officer
of the Company (in his or her capacity as such). The SEC has not
issued any stop order or other order suspending the effectiveness
of any registration statement filed by the Company under the
Exchange Act or the Securities Act.


 

4.10 No
Undisclosed Material Liabilities. There are no liabilities
of the Company or any subsidiary of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such
a liability, other than: (a) liabilities provided for in the
audited consolidated balance sheet of the Company and the
subsidiaries as of September 30, 2018 or disclosed in the notes
thereto; and (b) other undisclosed liabilities which, individually
or in the aggregate, have not resulted in or could reasonably be
expected to result in a Material Adverse Effect.

 

4.11 Intellectual
Property. The Company and its subsidiaries have, or have
rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights,
licenses and other similar rights (collectively, the
“Intellectual Property
Rights”) that are necessary or material for use in
connection with the business of the Company as described in the SEC
Reports and which the failure to so have could, individually or in
the aggregate, have or reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any
subsidiary has received a written notice that the Intellectual
Property Rights used by the Company or any subsidiary violates or
infringes upon the rights of any Person. Except as set forth in the
SEC Reports or the PPM, to the Company’s knowledge, all such
Intellectual Property Rights are enforceable and there is no
existing infringement by another Person of any of the Intellectual
Property Rights. The Company and its subsidiaries have taken
reasonable steps to protect the Company’s and its
subsidiaries’ rights in their Intellectual Property Rights
and confidential information (the “Confidential Information”). Each
employee, consultant and contractor who has had access to
Confidential Information which is necessary for the conduct of the
business of the Company and its subsidiaries as currently conducted
or as currently proposed to be conducted has executed an agreement
to maintain the confidentiality of such Confidential Information
and has executed appropriate agreements that are substantially
consistent with the Company’s standard forms thereof. Except
under confidentiality obligations, there has been no material
disclosure of any of the Company’s or its subsidiaries’
Confidential Information to any third party.


 



 

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4.12 Solvency.
The Company has not (a) made a general assignment for the benefit
of creditors; (b) filed any voluntary petition in bankruptcy or
suffered the filing of any involuntary petition by its creditors;
(c) suffered the appointment of a receiver to take possession of
all, or substantially all, of its assets; (d) suffered the
attachment or other judicial seizure of all, or substantially all,
of its assets; (e) admitted in writing its inability to pay its
debts as they come due; or (f) made an offer of settlement,
extension or composition to its creditors generally.

 

4.13 Related
Party Transactions. Except as set forth in the SEC Reports
or the PPM: (a) none of the Company or any of its affiliates,
officers, directors, stockholders or employees, or any affiliate of
any of such Person, has any material interest in any property, real
or personal, tangible or intangible, including the Company’s
Intellectual Property used in or pertaining to the business of the
Company, except for the normal rights of a stockholder, or, to the
Company’s knowledge, any supplier, distributor or customer of
the Company, (b) there are no agreements, understandings or
proposed transactions between the Company and any of its officers,
directors, employees, affiliates, or, to the Company’s
knowledge, any affiliate thereof, (c) to the Company’s
knowledge, no employee, officer or director of the Company or any
of its Subsidiaries has any direct or indirect ownership interest
in any firm or corporation with which the Company is affiliated or
with which the Company has a business relationship, or any firm or
corporation that competes with the Company; (d) to the
Company’s knowledge, no member of the immediate family of any
officer or director of the Company is directly or indirectly
interested in any material contract of the Company filed as an
exhibit to the Company’s SEC Reports, or (e) there are no
amounts owed (cash and stock) to officers, directors and
consultants (salary, bonuses or other forms of
compensation).


 

4.14 Disclosure.
Neither the Company nor any Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any
information that constitutes or might constitute material,
non-public information, other than the terms of the transactions
contemplated hereby and other information that will be disclosed
promptly following the execution of this Agreement. The Company
understands and confirms that the Purchasers will rely on the
foregoing representation in effecting transactions in securities of
the Company.

 

 

 

 

 

 

 

 

 

 




 

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ARTICLE
V


COVENANTS

 

5.1    
Covenants.

 

(a) Corporate Existence. The
Company shall at all times preserve and maintain its: (i) existence
and good standing in the jurisdiction of its organization; and (ii)
its qualification to do business and good standing in each
jurisdiction where the nature of its business makes such
qualification necessary, and shall at all times continue as a going
concern in the business which the Company is presently
conducting.

 

(b)   
Notice of Default.
The Company shall, promptly, but not more than five
(5)
days after the commencement thereof, give notice to Purchaser in
writing of the occurrence of any “Event of Default” (as such term is
defined in any of the Transaction Documents) or of any event which,
with the lapse of time, the giving of notice or both, would
constitute an Event of Default hereunder or under any other
Transaction Document.

 

(c) Reservation of Shares. So long
as any Securities are owned beneficially and/or of record by any
Purchaser or any transferee thereof, the Company covenants and
agrees that it will at all times reserve and keep available out of
its authorized and unissued shares of Common Stock a number of
shares of Common Stock sufficient for the sole purpose of issuance
upon conversion of the Convertible Notes, payment of interest on
the Convertible Note and exercise of the Warrants (and/or any
transferee thereof), free from preemptive rights or any other
actual contingent purchase rights of persons other than the
applicable Purchaser (and any other holders of any Convertible Note
and/or Warrants transferred from a Purchaser).

 

(d)   
Transferability;
Certificate.

 

(i) The
Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of the
Securities other than pursuant to an effective registration
statement, to the Company, to an affiliate of a Purchaser or in
connection with a pledge as contemplated in Section 7.1(d)(ii), the
Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor, the form
and substance of which opinion shall be reasonably satisfactory to
the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities
Act.

 

(ii) Certificates
evidencing Securities will contain a standard legend referring to
transfer restrictions under the Securities Act.

 

(iii) The
Company acknowledges and agrees that a Purchaser may from time to
time pledge, and/or grant a security interest in some or all of the
Securities pursuant to a bona fide margin agreement in connection
with a bona fide margin account and, if required under the terms of
such agreement or account, such Purchaser may transfer pledged or
secured Securities to the pledgees or secured parties. Such a
pledge or transfer would not be subject to approval or consent of
the Company and no legal opinion of legal counsel to the pledgee,
secured party or pledgor shall be required in connection with the
pledge, but such legal opinion may be required in
connection with a subsequent transfer following default by the
Purchaser transferee of the pledge. No notice shall be required of
such pledge. At the appropriate Purchaser’s expense, the
Company will execute and deliver such reasonable documentation as a
pledgee or secured party of Securities may reasonably request in
connection with a pledge or transfer thereof including the
preparation and filing of any required prospectus supplement under
Rule 424(b)(3) of the Securities Act or other applicable provision
of the Securities Act to appropriately amend the list of selling
stockholders thereunder. Except as otherwise provided in Section
7.1(d)(iv), any Securities subject to a pledge or security interest
as contemplated by this Section 7.1(d)(iii) shall continue to bear
the legend set forth in this Section 7.1(d)(ii) and be subject to
the restrictions on transfer set forth in Section
7.1(d)(i).

 



 

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(iv) Certificates
representing Securities shall be eligible for removal of the
restrictive legend (including the legend set forth in Section
7.1(d)(ii)): (i) following any sale of such Securities pursuant to
the plan of distribution in an effective registration statement (in
compliance with any prospectus delivery requirements) or (ii)
following a sale or transfer of such Securities pursuant to Rule
144 (assuming the transferee is not an affiliate of the Company),
or (iii) while such
Securities are eligible for sale by the selling Purchaser without
the requirement for the Company to be in compliance with the
current public information required under Rule 144 as to such
Securities and without volume or manner-of-sale restrictions. The
Company agrees that following such time as legends are no longer
required to be set forth on certificates representing Securities
under this Section 7.1(d), it will, no longer than three trading
days following the delivery by a Purchaser to the Company or the
transfer agent of a certificate representing such Securities
containing a restrictive legend, deliver or instruct the transfer
agent to deliver to such Purchaser, Securities which are free of
all restrictive and other legends. If the Company is then eligible,
certificates for Securities subject to legend removal hereunder
shall be transmitted by the transfer agent to a Purchaser by
crediting the prime brokerage account of such Purchaser with the
Depository Trust Company System as directed by such
Purchaser.

 

(e) Furnishing of Information. As
long as any Purchaser or any transferee owns any Securities, the
Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant
to the Exchange Act. As long as any Purchaser owns Securities, if
the Company is not required to file reports pursuant to such laws,
it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144.
The Company further covenants that it will take such further action
as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell the
Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.

 

(f) Integration. The Company shall
not, and shall use its best efforts to ensure that no affiliate of
the Company shall, sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities
to the Purchasers, or that would be integrated with the offer or
sale of the Securities for purposes of the rules and regulations of
any trading market on which the Common Stock of the Company then
trades in a manner that would require stockholder
approval of the sale of the Securities to the
Purchasers.

 



 

10







 






 

(g) Securities Laws Disclosure;
Publicity. By (i) 9:30 a.m. (New York time) on the trading
day following the Closing Date, the Company shall issue a press
release, disclosing the transactions contemplated by the
Transaction Documents and the Closing and by (ii) 5:30
p.m.
(New York time) on the fourth Trading Day following the Closing
Date, the Company will file a Current Report on Form 8-K,
disclosing the material terms of the Transaction Documents (and
attach as exhibits thereto all existing Transaction Documents) and
the Closing. The Company covenants that following such disclosure,
the Purchasers shall no longer be in possession of any material,
non-public information with respect to the Company or any
subsidiary. In addition, the Company will make such other filings
and notices in the manner and time required by the SEC and the
trading market on which the Common Stock of the Company is quoted.
Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory
agency or trading market, without the prior written consent of such
Purchaser, except to the extent such disclosure is required by law
or trading market regulations.

 

(h) Indemnification of Purchasers.
The Company will indemnify and hold the Purchasers and their
respective directors, officers, shareholders, partners, members,
affiliates, employees and agents (each, an “Purchaser Party”) harmless
from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation in respect thereof
(collectively, “Losses”) that any such
Purchaser Party may suffer or incur as a result of or relating to
any misrepresentation, breach or inaccuracy of any representation,
warranty, covenant or agreement made by any of the Company in any
Transaction Document or in any certificate or other instrument
delivered by or on behalf of the Company. In addition to the
indemnity contained herein, the Company will reimburse each
Purchaser Party for its reasonable legal and other expenses
(including the cost of any investigation, preparation and travel in
connection therewith) incurred in connection therewith, as such
expenses are incurred.

 

(i) Non-Public
Information. The Company covenants and agrees that, except
as specifically contemplated by the Transaction Documents, neither
it nor any other Person acting on its behalf will provide any
Purchaser or its agents or counsel with any information that the
Company believes constitutes material non-public information,
unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing representations in
effecting transactions in securities of the Company.


 


ARTICLE
VI



CONDITIONS PRECEDENT TO THE COMPANY’ S OBLIGATIONS TO
SELL

 


The
obligation of the Company hereunder to issue and sell the
Securities to Purchaser is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions;
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:


 



 

11







 






 

6.1 Purchaser shall
have executed the Transaction Documents and delivered the Purchase
Price to the Company.

 

6.2 The representations
and warranties of Purchaser shall be true and correct in all
material respects as of the Closing Date (except for
representations and warranties that speak as of a specific date),
and Purchaser 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 Purchaser at or prior to the Closing Date.


 

6.3 The Company shall
have received such certificates, confirmations, resolutions,
acknowledgements, or other documentation necessary or advisable
from all applicable governmental authorities, including, but not
limited to, those located in the State of Nevada, as the Company
may require in order to evidence such governmental
authorities’ approval of this Agreement, the Transaction
Documents and the purchase of the Securities contemplated
hereby.

 

6.4 No statute, rule,
regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the
Transaction Documents.

 

ARTICLE
VII



CONDITIONS PRECEDENT TO THE PURCHASER’S OBLIGATIONS TO
PURCHASE

 


The
obligation of Purchaser hereunder to purchase the Convertible Note
is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions (in addition to any other
conditions precedent elsewhere in this Agreement); provided, that
these conditions are for Purchaser’s sole benefit and may be
waived by Purchaser at any time in its sole
discretion:

 

7.1 The Company shall
have executed and delivered the Transaction Documents to
Purchaser.

 

7.2 The representations
and warranties of the Company shall be true and correct in all
material respects as of the Closing Date (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.

 

7.3 No statute, rule,
regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the
Transaction Documents.

 

 

 




 

12








 





 

7.4 No stop order or
suspension of trading shall have been imposed by the SEC or any
other governmental or regulatory body having jurisdiction over the
Company or the market(s) where the Common Stock of the Company is
listed or quoted with respect to public trading in the Common Stock
of the Company.


 

7.5 The Company shall
have executed such other agreements, certificates, confirmations or
resolutions as Purchaser may require to consummate the transactions
contemplated by this Agreement and the Transaction Documents,
including a closing statement and joint disbursement instructions
as may be required by Purchaser.


 


ARTICLE
IX


MISCELLANEOUS

 

8.1 Notices. All notices of
request, demand and other communications hereunder shall be
addressed to the parties as follows:

 


	


If to the Company:

	


Know Labs, Inc.


	
 

	


500 Union Street, Suite 810


	
 

	


Seattle, WA, 98101


	
 

	


Attn: Ronald P. Erickson, Chairman


	
 

	


E-mail: ron@knowlabs.co


	
 

	
 


	


If to Purchaser:

	


To the address and other contact information specified in the
Subscription Agreement.






  


unless
the address is changed by the party by like notice given to the
other party. Notice shall be in writing and shall be deemed
delivered: (i) if mailed by certified mail, return receipt
requested, postage prepaid and properly addressed to the address
below, then three (3) Business Days after deposit of same in a
regularly maintained U.S. Mail receptacle; or (ii) if mailed by
Federal Express, UPS, or other nationally recognized overnight
courier service, next day delivery, then one (1) Business Day after
deposit of same in a regularly maintained receptacle of such
overnight courier; or (iii) if hand delivered or sent by email,
then upon hand delivery or receipt thereof. Notwithstanding the
foregoing, notice, consents, waivers, or other communications
referred to in this Agreement sent by e-mail shall be deemed to
have been delivered only when the sending party has confirmed (by
reply e-mail or some other form of written confirmation from the
receiving party) that the notice has been received by the other
party.

 

8.2 Entire Agreement. This
Agreement and the other Transaction Documents: (i) constitute the
entire agreement between the parties and (ii) are the final
expression of the intentions of the Company and Purchaser. No
promises, either expressed or implied, exist between the Company
and Purchaser, unless contained herein or in the Transaction
Documents. This Agreement and the Transaction Documents supersede
all negotiations, representations, warranties, commitments, offers,
and contracts (of any kind or nature, whether oral or written)
prior to the execution hereof.

 




 

13








 





 

8.3 Amendments; Waivers. No
amendment, modification, or termination of any provision of this
Agreement or of the Transaction Documents, or waiver or consent to
any departure by either party therefrom, shall in any event be
effective unless the same shall be in writing and signed by the
other party, and any such waiver or consent shall be effective only
for the specific purpose for which given.

 

8.4 Assignability. Purchaser may at
any time assign Purchaser’s rights in this Agreement, the
Convertible Notes, any Transaction Document, or any part thereof,
subject to applicable law, including federal and state securities
laws. The Company may not sell or assign this Agreement, any
Transaction Document, or any other agreement with Purchaser, or any
portion thereof, either voluntarily or by operation of law, nor
delegate any of its duties of obligations hereunder or thereunder,
without the prior written consent of Purchaser, which consent shall
not be unreasonably withheld. This Agreement shall be binding upon
Purchaser and the Company and their respective legal
representatives, successors and permitted assigns.

 

8.5 Governing Law. This Agreement
shall be governed by and be construed in accordance with the laws
of the State of Nevada without regard to the conflicts of law rules
of such state. The parties hereby irrevocably and unconditionally
submit, for themselves and their property, to the jurisdiction of
the state or federal courts situated in Las Vegas, Nevada, in
respect of actions brought against it in any action, suit, or
proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties
hereto hereby irrevocably and unconditionally agrees that all
claims in respect of any such action, suit or proceeding may be
heard and determined in such courts. Each of the parties hereto
agrees that a final judgment in any such action, suit, or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by law.

 

8.6 Enforceability; Severability.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by, unenforceable or invalid under any jurisdiction,
such provision shall as to such jurisdiction, be severable and be
ineffective to the extent of such prohibition or invalidity,
without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of such provision in any
other jurisdiction.

 

8.7 Interpretation. If any
provision in this Agreement requires judicial or similar
interpretation, the judicial or other such body interpreting or
construing such provision shall not apply the assumption that the
terms hereof shall be more strictly construed against one party
because of the rule that an instrument must be construed more
strictly against the party which itself or through its agents
prepared the same. The parties hereby agree that all parties and
their agents have participated in the preparation hereof
equally.

 

8.8 Execution. This Agreement may
be executed in one or more counterparts, all of which taken
together shall be deemed and considered one and the same Agreement,
and same shall become effective when counterparts have been signed
by each party and each party has delivered its signed counterpart
to the other party. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a
“.pdf’ format file or other similar format file,
such signature shall be
deemed an original for all purposes and shall create a valid and
binding obligation of the party executing same with the same force
and effect as if such facsimile or “.pdf’ signature
page was an original thereof.

 



 

14







 





 

8.9 Headings. The article and
section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or
interpretation of the Agreement.

 

8.10 No
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.


 

8.11 Fees
and Expenses. Each party shall be responsible for paying its
own fees and expenses in connection with this Agreement, the other
Transaction Agreements, and the transactions contemplated hereby
and thereby. Notwithstanding the foregoing, the Company shall be
directly responsible for the payment the fees or commissions
payable to the Placement Agent.


 

8.12 Survival.
The representations, warranties, agreements and covenants contained
herein shall survive the Closing and the delivery of the Securities
for 18 months following the Closing Date.


 


 



(signature page follows)


 


 


 


 


 


 


 


 




 

15








 





 


IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date and year set forth above.

 


	


COMPANY:

	
 


	
 

	
 


	


KNOW LABS, INC.

	
 


	
 

	
 


	
 

	
 


	


By:

	
 


	


Name: Ronald P. Erickson

	
 


	


Title: Chairman

	
 


	
 

	
 


	


By:

	
 


	


Name: Phillip A. Bosua

	
 


	


Title: Chief Executive Officer

	
 


	
 

	
 


	
 

	
 


	


PURCHASER:

	
 


	
 

	
 


	
 

	
 


	


Signature:

	
 


	


Name:

	
 






 



 

 

 

 

 




 

16








 





 


SCHEDULE
1


PURCHASE PRICE;
SECURITIES PURCHASED


 


 


	

Name of
Purchaser

	

Purchase Price and
Principal Amount of Convertible Note Being Purchased

	

Number
of Shares issuable upon exercise of Warrant Purchased


	
 

	
 


 


$

	
 







 

 

 

 

 

 

 

 

 

 

 

 

 



 







 





 



EXHIBIT A

 


FORM OF
CONVERTIBLE NOTE


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 




 








 





 



EXHIBIT B

 


FORM OF
WARRANT


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 




 








 





 



EXHIBIT C

 


FORM OF
SUBORDINATION AGREEMENT


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 




 








 





 



EXHIBIT D

 


FORM OF
SUBSCRIPTION AGREEMENT