Blueprint





 






Exhibit
10.1


 



SECURITIES PURCHASE AGREEMENT


 


This
Securities Purchase Agreement (this “Agreement”) is dated as
of November 9, 2017, between Sincerity Applied Materials Holdings
Corp, a Nevada corporation and its predecessors (the
“Company”), and each
purchaser identified on the signature pages hereto (each, including
its successors and permitted assigns, a “Purchaser” and
collectively, the “Purchasers”).

 


WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant
to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities
Act”), and Rule 506 promulgated thereunder, the
Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the
Company, securities of the Company as more fully described in this
Agreement.

 


NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company
and each Purchaser agree as follows:

 

 



ARTICLE I.



DEFINITIONS

 

1.1 Definitions. In addition to the
terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to
such terms in the Articles of Incorporation (as defined herein),
and (b) the following terms have the meanings set forth in this
Section 1.1:

 


“Acquiring Person” shall
have the meaning ascribed to such term in Section
4.15.

 


“Action” shall have the
meaning ascribed to such term in Section 3.1(j).

 


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

 


“Board of Directors” means
the board of directors of the Company.

 


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

 


“Closing” means a Closing of the purchase and sale of the
Securities pursuant to Section 2.1.

 


“Closing Date”
means the Business Day on which all of
the Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to (i) the
Purchasers’ obligation to pay the Subscription Amount at such
Closing, and (ii) the Company’s obligations to deliver the
Securities to be issued and sold at such Closing, in each case,
have been satisfied or waived.

 


“Closing Form
8-K” shall have the
meaning ascribed to such term in Section 4.20.

 


“COJ” means the confession
of judgment in the form annexed hereto as Exhibit F.

 




 

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

 


“Common Stock” means the
common stock of the Company, $0.001 par value per share, and any
other class of securities into which such securities may hereafter
be reclassified or changed.

 


“Common Stock Equivalents”
means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock.

 


“Company Counsel” means
CKR Law, LLP, 1330 Avenue of the Americas, 14th Floor, New York, NY
10019, Fax (212) 259–8200, Attention: Scott Rapfogel, Esq.,
E-mail Address: srapfogel@ckrlaw.com

 


 “Conversion
Price” shall have the meaning ascribed to such term in
the Note.

 


“Conversion Shares” means
shares of the Company’s Common Stock issuable upon conversion
of the Note and interest in accordance with the terms of the
Note.

 


“Disclosure Schedules”
means the Disclosure Schedules of the Company delivered
concurrently herewith.

 


“Disqualification Event”
shall have the meaning ascribed to such term in Section
3.1(gg).

 


“End Date” shall mean the
latter of (i) two years after the Closing Date; or (ii) the date no
Purchaser owns any Securities.

 


“Escrow Agreement” means
the escrow agreement to be employed in connection with the sale of
the Securities, a copy of which is annexed hereto as Exhibit C.

 


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

 


“Exempt Issuance” means
the issuance of (a) shares of Common Stock and options to officers,
directors, employees, or consultants of the Company prior to and
after the Closing Date in the amounts and on the terms set forth on
Schedule 3.1(g),
(b) securities upon the exercise or exchange of or conversion of
Securities issued hereunder (subject to adjustment for forward and
reverse stock splits and the like that occur after the date hereof)
and/or other securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on
the date of this Agreement, provided that such securities and any
term thereof have not been amended since the date of this Agreement
to increase the number of such securities or to decrease the issue
price, exercise price, exchange price or conversion price of such
securities and which securities and the principal terms thereof are
set forth on Schedule 3.1(g), (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of
the disinterested directors of the Company, provided that any such
issuance shall only be to a Person (or to the equity holders of a
Person) which is, itself or through its subsidiaries, an operating
company or an owner of an asset in a business synergistic with the
business of the Company and shall be intended to provide to the
Company substantial additional benefits in addition to the
investment of funds, but shall not include a transaction in which
the Company is issuing securities primarily for the purpose of
raising capital or to an entity whose primary business is investing
in securities, and (d) securities issued or issuable pursuant to
the Offering and this Agreement, the Note, the Warrants and other
Transaction Documents, or upon exercise or conversion of any such
securities.

 


“FCPA” means the Foreign
Corrupt Practices Act of 1977, as amended.

 


“FDA” shall have the
meaning ascribed to such term in Section 3.1(ff).

 




 

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“FDCA” shall have the
meaning ascribed to such term in Section 3.1(ff).

 


“Financial Statements”
means the financial information regarding the Company filed with
the Commission prior to the date hereof.

 


“Fully-Diluted Basis”
means the assumption that all options, warrants or other
convertible securities or instruments or other rights to acquire
Common Stock or any other existing or future classes of capital
stock have been exercised or converted, as applicable, in full,
regardless of whether any such options, warrants, convertible
securities or instruments or other rights are then vested or
exercisable or convertible in accordance with their
terms.

 


“GAAP” shall mean United
States generally accepted accounting principals applied on a
consistent basis.

 


“Indebtedness” shall have
the meaning ascribed to such term in Section 3.1(w).

 


“Intellectual Property
Rights” shall have the meaning ascribed to such term
in Section 3.1(o).

 


“Legal Opinion” means the
opinion letter of the Company’s attorneys in the form annexed
hereto as Exhibit E.

 


“Legend Removal Date”
shall have the meaning ascribed to such term in Section
4.1(d).

 


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

 


“Material Adverse Effect”
shall have the meaning assigned to such term in Section
3.1(b).

 


“Material Permits” shall
have the meaning ascribed to such term in Section
3.1(m).

 


“Maximum Rate” shall have
the meaning ascribed to such term in Section 5.17.

 


“Money Laundering
Laws” shall have the
meaning ascribed to such term in Section
3.1(aa).

 


“Notes” means the
convertible notes, in the form of Exhibit A hereto.

 


“OFAC” shall have the
meaning ascribed to such term in Section 3.1(bb).

 


“Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.

 


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

 


“Purchaser Counsel” shall
mean Grushko & Mittman, P.C., 515 Rockaway Avenue, Valley
Stream, New York 11581, facsimile: (212) 697-3575.

 


“Purchaser Party” shall
have the meaning ascribed to such term in Section 4.6.

 


“Registrable Securities”
shall mean 2,000,000 shares of Common Stock, which includes
Underlying Shares and anti-dilution shares.

 


“Regulation D” means
Regulation D under the Securities Act.

 




 

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“Required Approvals” shall
have the meaning ascribed to such term in Section
3.1(e).

 


“Required Minimum” means,
as of any date, the greater of 1,000,000 or five (5) times the
maximum aggregate number of shares of Common Stock then issued or
potentially issuable in the future pursuant to the Transaction
Documents, including but not limited to any Underlying Shares
issuable upon conversion in full of the Notes and the interest that
could accrue through three years after the term thereof and the
Warrant Shares issuable upon exercise of the Warrants, ignoring any
conversion or exercise limits set forth therein plus such
additional amounts as requested by the Purchaser pursuant to the TA
Letter.

 


“Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.

 


“Securities” means the
Notes, the Warrants, and the Underlying Shares.

 


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

 


“Subscription Amount”
means, as to each Purchaser, the
aggregate amount to be paid for the Notes and Warrants purchased
hereunder as specified below such Purchaser’s name on the
signature page of this Agreement and next to the heading
“Subscription Amount,” in United States dollars and in
immediately available funds.

 


“Subsidiary” means
with respect to any entity at any
date, any direct or indirect corporation, limited or general
partnership, limited liability company, trust, estate, association,
joint venture or other business entity of which (A) more than
25% of (i) the outstanding capital stock having (in the
absence of contingencies) ordinary voting power to elect a majority
of the board of directors or other managing body of such entity,
(ii) in the case of a partnership or limited liability
company, the interest in the capital or profits of such partnership
or limited liability company or (iii) in the case of a trust,
estate, association, joint venture or other entity, the beneficial
interest in such trust, estate, association or other entity
business is, at the time of determination, owned or controlled
directly or indirectly through one or more intermediaries, by such
entity, or (B) is under the actual control of the Company.
Representations, undertakings and obligations set forth in this
Agreement shall be applicable only to Subsidiaries which exist or
have existed at the applicable and relevant
time.

 


“TA Letter” means the
letter to the Company’s Transfer Agent in the form annexed
hereto as Exhibit
D.

 


“Termination Date” shall
have the meaning ascribed to such term in Section 2.1.

 


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

 


“Trading Market” means any
of the following markets or exchanges: the NYSE MKT LLC, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, the New York Stock Exchange, the OTC Bulletin Board, the
OTCQB, the OTCPink, or the OTCQX (or any successors to any of the
foregoing).

 


 “Transaction
Documents” means this Agreement, the Notes, the
Warrants, the Escrow Agreement, all exhibits and schedules thereto
and hereto, and any other documents or agreements executed in
connection with the transactions contemplated
hereunder.

 


“Transfer Agent” means the
transfer agent for the Common Stock, and any successor transfer
agent of the Company. As of the Closing Date, the Company’s
Transfer Agent is VStock Transfer LLC, 10 Lafayette Place,
Woodmere, NY 11598.

 




 

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“Underlying Shares” means
the shares of Common Stock issued and issuable upon conversion of
the Notes and payment of interest on the Notes in accordance with
the terms of the Notes and upon exercise of the Warrants in
accordance with the terms of the Warrants.

 


“Unlegended Shares” shall
have the meaning ascribed to such term in Section
4.1(d).

 


“Warrants” means the Class
A and Class B Common Stock purchase warrants delivered to the
Purchasers at the Closing in accordance with Article II hereof, in
the forms of Exhibit B1
and B2, respectivley attached hereto.

 


“Warrant Shares” means the
shares of Common Stock issuable upon exercise of the
Warrants.

 



ARTICLE II.



PURCHASE AND SALE

 

2.1 Closing. On the Closing Dates,
upon the terms and subject to the conditions set forth herein, the
Company agrees to sell, and the Purchasers, severally and not
jointly, agree to purchase, an aggregate of up to $100,000.00
principal amount of Notes and Warrants as determined pursuant to
Section 2.2(a), such purchase and sale being the
“Closing”.
Each Purchaser shall deliver to the Company such Purchaser’s
Subscription Amount, and the Company shall deliver to each
Purchaser its respective Note and Warrants, as determined pursuant
to Section 2.2(a), and the Company and each Purchaser shall deliver
the other items set forth in Section 2.2 deliverable at a Closing.
Upon satisfaction of the covenants and conditions set forth in
Sections 2.2 and 2.3, the Closing shall occur at the offices of
G&M or such other location as the parties shall mutually agree.
Notwithstanding anything herein to the contrary, the Closing must
take place on or before November 31, 2017 (the “Termination Date”). With
respect to the Closing not held on or before the Termination Date,
the Company shall cause all subscription documents and funds, if
any, to be returned, without interest or deduction to each
prospective Purchaser.

 

2.2 Deliveries.

 

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

 

(i) this Agreement duly
executed by the Company with the schedules and exhibits thereto
current as of each such Closing Date;

 




(ii)

a Note with a
principal amount equal to 108% such Purchaser’s Subscription
Amount registered in the name of such Purchaser;





 




(iii)

Class A Warrants
registered in the names of such Purchaser equal to one warrant for
each share that the Purchaser could acquire if purchaser had
converted the entire Note immediately upon the Closing at the
Conversion Price then in effect. Such warrants shall have a per
share exercise price equal to $6.00, subject to adjustment as
provided therein;





 




(iv)

Class B Warrants
registered in the names of such Purchaser for 400,000 shares. Such
warrants shall have a per share exercise price equal to $7.50,
subject to adjustment as provided therein;





 




(v)

the TA Letter
executed by the Company and the Transfer Agent;





 

(vi) the
Legal Opinion executed by the Company’s
attorney;

 

(vii) a
COJ for each Purchaser; and

 

(viii) the
Escrow Agreement duly executed by the Company.

 




 

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

 




(i)

this Agreement duly
executed by such Purchaser;





 

(ii) such
Purchaser’s Subscription Amount by wire transfer or as
otherwise permitted under the Escrow Agreement, to the Escrow
Agent;

 

(iii) the
Escrow Agreement duly executed by such Purchaser; and

 

2.3 Closing
Conditions.

 

(a) The obligations of
the Company hereunder to effect a Closing are subject to the
following conditions being met:

 

(i) the accuracy in all
material respects (determined without
regard to any materiality, Material Adverse Effect or other similar
qualifiers therein) on the Closing Date of the
representations and warranties of the Purchasers contained herein
(unless as of a specific date therein in which case they shall be
accurate as of such date);

 

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

 

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

 

(b) The respective
obligations of a Purchaser hereunder to effect the Closing, unless
waived by such Purchaser, are subject to the following conditions
being met:

 

(iv) the
accuracy in all material respects (determined without regard to any materiality,
Material Adverse Effect or other similar qualifiers therein)
on the Closing Date of the representations and warranties of the
Company contained herein (unless as of a specific date therein in
which case they shall be accurate as of such date);

 

(v) all obligations,
covenants and agreements of the Company required to be performed at
or prior to the Closing Date shall have been
performed;

 

(vi) the
Escrow Agent shall have received executed signature pages to this
Agreement with respect to the Subscription Amounts for which such
Closing is to occur;

 

(vii) the
delivery by the Company of the items set forth in Section 2.2(a) of
performed at or prior to the Closing Date shall have been
performed;

 

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

 

(ix) from
the date hereof to the Closing Date, trading in securities in the
United States generally as reported by Bloomberg L.P. shall not
have been suspended or limited, nor shall a banking moratorium have
been declared either by the United States or New York State
authorities nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international
calamity of such magnitude in its effect on, or any material
adverse change in, any financial market which, in each case, in the
reasonable judgment of such Purchaser, makes it impracticable or
inadvisable to purchase the Securities at the Closing.

 


 




 

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ARTICLE III.



REPRESENTATIONS AND WARRANTIES

 

3.1 Representations
and Warranties of the Company. Except as set forth in the Disclosure
Schedules, which Disclosure Schedules shall be deemed a part hereof
and shall qualify any representation made herein to which it refers
and any other representation to the extent such Disclosure Schedule
reasonably relates thereto without a requirement of a
cross-reference. The Company hereby makes the following
representations and warranties to each Purchaser as of the date
hereof and the Closing Date unless as of a specific date therein in
which case they shall be accurate as of such date:

 

(a) Subsidiaries. The Company owns,
directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any Liens, and all
of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable
and free of preemptive and similar rights to subscribe for or
purchase securities. If the Company has no Subsidiaries relevant to
any component of this Agreement as of a particular date, then such
reference shall not be applicable.

 

(b) Organization and Qualification.
The Company and each of the Subsidiaries is an entity duly
incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use
its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation
nor default of any of the provisions of its respective certificate
or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not have
or reasonably be expected to result in: (i) a material adverse
effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results
of operations, assets, business, prospects or condition (financial
or otherwise) of the Company and the Subsidiaries, taken as a
whole, (iii) a material adverse effect on the Company’s
ability to perform in any material respect on a timely basis its
obligations under any Transaction Document, or (iv) the occurrence
of a Disqualification Event (any of (i), (ii), (iii) or (iv), a
“Material Adverse
Effect”) and, no Proceeding has been instituted in any
such jurisdiction revoking, limiting or curtailing or seeking to
revoke, limit or curtail such power and authority or
qualification.

 

(c) Authorization; Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and each of the other Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and each of the other
Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company and
no further action is required by the Company, the Board of
Directors or the Company’s stockholders and creditors in
connection herewith or therewith other than in connection with the
Required Approvals except those filings requires to be made with
the Commission and state agencies after the Closing Date. This
Agreement and each other Transaction Document to which it is a
party has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof
and thereof, will constitute the valid and binding obligations of
the Company enforceable against the Company in accordance with
their terms, except: (i) as limited by general equitable principles
and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable
law.

 

(d) No Conflicts. The execution,
delivery and performance by the Company of this Agreement and the
other Transaction Documents, the issuance and sale of the
Securities and the consummation by it of the transactions
contemplated hereby and thereby to which it is a party do not and
will not: (i) conflict with or violate any provision of the
Company’s or any Subsidiary’s certificate or articles
of incorporation, bylaws or other organizational or charter
documents, (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default)
under, result in the creation of any Lien upon any of the
properties or assets of the Company or any Subsidiary, or give to
others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or
by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to
which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or
asset of the Company or a Subsidiary is bound or
affected.

 


 




 

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(e) Filings, Consents and
Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than: (i) the filing of
Form D with the Commission, and (ii) such filings as are required
to be made under applicable state securities laws (collectively,
the “Required
Approvals”).

 

(f) Issuance of the Securities. The
Securities are duly authorized and, when issued and paid for in
accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of
all Liens other than those created by the Purchaser. The Company
has reserved from its duly authorized capital stock a number of
shares of Common Stock equal to the Required Minimum on the date
hereof. In order to ensure such reservation, the Company shall have
its Transfer Agent countersign the TA Letter, at the Closing. The
failure to comply with the terms of this section shall be a
material breach of the agreement.

 

(g) Capitalization. The
capitalization of the Company is as set forth in Schedule 3.1(g). Except as
disclosed on Schedule 3.1(g), no Person has any right of first
refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the
Transaction Documents. Except as disclosed on Schedule 3.1(g), there are no
outstanding options, employee or incentive stock option plans
warrants, scrip rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or
giving any Person any right to subscribe for or acquire any shares
of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock or Common
Stock Equivalents. Except as set forth on Schedule 3.1(g), there is
no stock option plan in effect as of the Closing Date. Except as
set forth on Schedule
3.1(g), the issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not
result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under any of such
securities. All of the outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and
nonassessable, have been issued in material compliance with all
federal and state securities laws, and none of such outstanding
shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. No further approval
or authorization of any stockholder, the Board of Directors or
others is required for the issuance and sale of the Securities.
There are no stockholders agreements, voting agreements or other
similar agreements with respect to the Company’s capital
stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s
stockholders.

 

(h) Financial Statements. The
Financial Statements have been prepared in accordance with GAAP.
The Financial Statements 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 to
normal, immaterial adjustments and inclusion of footnotes which
would be required pursuant to generally accepted accounting
principles. The Financial Statements include balance sheets as of
each of the most recent fiscal year ends and as of a month end
immediately preceding the relevant Closing date and income
statements as of the same dates.

 

(i) Material Changes; Undisclosed Events,
Liabilities or Developments. Since the date of the most
recently dated Financial Statements: (i) there has been no event,
occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any material liabilities (contingent or otherwise)
other than trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice, (iii)
the Company has not altered its method of accounting, (iv) the
Company has not declared or made any dividend or distribution of
cash or other property to its stockholders or purchased, redeemed
or made any agreements to purchase or redeem any shares of its
capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate.

 

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

 


 




 

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

 

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

 

(m) Regulatory Permits. The Company
and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective
businesses as presently conducted, and as contemplated to be
conducted, except where the failure to possess such permits could
not reasonably be expected to result in a Material Adverse Effect
(“Material
Permits”), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation
or modification of any Material Permit.

 

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

 

(o) Intellectual
Property.

 

(i) The term
“Intellectual
Property Rights” includes:

 

1. the name of the
Company and each Subsidiary, all fictional business names, trading
names, registered and unregistered trademarks, service marks, and
applications of the Company and each Subsidiary (collectively,
“Marks'');

 

2. all patents, patent
applications, and inventions and discoveries that may be patentable
of the Company and each Subsidiary (collectively,
“Patents'');

 

3. all copyrights in
both unpublished works and published works of the Company and each
Subsidiary (collectively, “Copyrights”);

 


 




 

9








 






 

4. all rights in mask
works of the Company and each Subsidiary (collectively,
“Rights in Mask
Works'');

 

5. all know-how, trade
secrets, confidential information, customer lists, software,
technical information, data, process technology, plans, drawings,
and blue prints (collectively, “Trade Secrets''); owned, used,
or licensed by the Company and each Subsidiary as licensee or
licensor; and

 

6. the license or
right to directly or indirectly use any of the foregoing, whether
perpetually or for a fixed term, whether or not subject to
defeasement, and whether or not reduced to writing or otherwise
memorialized.

 

(ii) Know-How
Necessary for the Business. The Intellectual Property Rights
are all those necessary for the operation of the Company’s
businesses as it is currently conducted or contemplated to be
conducted. The Company is the owner of all right, title, and
interest in and to each of the Intellectual Property Rights, free
and clear of all liens, security interests, charges, encumbrances,
equities, and other adverse claims, and has the right to use all of
the Intellectual Property Rights. To the Company’s knowledge,
no employee of the Company has entered into any contract that
restricts or limits in any way the scope or type of work in which
the employee may be engaged or requires the employee to transfer,
assign, or disclose information concerning his work to anyone other
than of the Company.

 

(iii) Patents.
The Company is the owner of or licensee of all right, title and
interest in and to each of the Patents, free and clear of all Liens
and other adverse claims. All of the issued Patents are currently
in compliance with formal legal requirements (including payment of
filing, examination, and maintenance fees and proofs of working or
use), are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety days
after the Closing Date. No Patent has been or is now involved in
any interference, reissue, reexamination, or opposition proceeding.
To the Company’s knowledge: (1) there is no potentially
interfering patent or patent application of any third party, and
(2) no Patent is infringed or has been challenged or threatened in
any way. To the Company’s knowledge, none of the products
manufactured and sold, nor any process or know-how used, by the
Company infringes or is alleged to infringe any patent or other
proprietary right of any other Person.

 

(iv) Trademarks.
The Company is the owner of all right, title, and interest in and
to each of the Marks, free and clear of all Liens and other adverse
claims. All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with all
formal legal requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal
applications), are valid and enforceable, and are not subject to
any maintenance fees or taxes or actions falling due within ninety
days after the Closing Date. No Mark has been or is now involved in
any opposition, invalidation, or cancellation and, to the
Company’s knowledge, no such action is threatened with
respect to any of the Marks. To the Company’s knowledge: (1)
there is no potentially interfering trademark or trademark
application of any third party, and (2) no Mark is infringed or has
been challenged or threatened in any way. To the Company’s
knowledge, none of the Marks used by the Company infringes or is
alleged to infringe any trade name, trademark, or service mark of
any third party.

 

(v) Copyrights. The Company is the
owner of all right, title, and interest in and to each of the
Copyrights, free and clear of all Liens and other adverse claims.
All the Copyrights have been registered and are currently in
compliance with formal requirements, are valid and enforceable, and
are not subject to any maintenance fees or taxes or actions falling
due within ninety days after the date of the Closing. No Copyright
is infringed or, to the Company’s knowledge, has been
challenged or threatened in any way. To the Company’s
knowledge, none of the subject matter of any of the Copyrights
infringes or is alleged to infringe any copyright of any third
party or is a derivative work based on the work of a third party.
All works encompassed by the Copyrights have been marked with the
proper copyright notice.

 

(vi) Trade
Secrets. With respect to each Trade Secret, the
documentation relating to such Trade Secret is current, accurate,
and sufficient in detail and content to identify and explain it and
to allow its full and proper use without reliance on the knowledge
or memory of any individual. The Company has taken all reasonable
precautions to protect the secrecy, confidentiality, and value of
its Trade Secrets. The Company has good title and an absolute (but
not necessarily exclusive) right to use the Trade Secrets. The
Trade Secrets are not part of the public knowledge or literature,
and, to the Company’s knowledge, have not been used,
divulged, or appropriated either for the benefit of any Person
(other the Company) or to the detriment of the Company. No Trade
Secret is subject to any adverse claim or has been challenged or
threatened in any way.

 


 




 

10








 






 

(p) Insurance. The Company and the
Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company
and the Subsidiaries are engaged. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business without a significant
increase in cost. The Company has valid and subsisting insurance in
compliance with all applicable legal requirements.

 

(q) Transactions With Affiliates and
Employees. Except as set forth in the Financial Statements
and Transaction Documents, none of the officers or directors of the
Company or any Subsidiary and, to the knowledge of the Company,
none of the employees of the Company or any Subsidiary is presently
a party to any transaction with the Company or any Subsidiary
(other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of
real or personal property to or from, providing for the borrowing
of money from or lending of money to or otherwise requiring
payments to or from any officer, director or such employee or, to
the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an
officer, director, trustee, stockholder, member or
partner.

 

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

 

(s) Investment Company. The Company
is not, and is not an Affiliate of, and immediately after receipt
of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the
Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become an
“investment company” subject to registration under the
Investment Company Act of 1940, as amended. The Company is not
aware of any person that has been or will be paid (directly or
indirectly) remuneration for solicitation of purchasers in
connection with the sale of any Regulation D
Securities.

 

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

 

(u) Application of Takeover
Protections. As of the Closing Date, the Company will have
taken all necessary action, if any, in order to render inapplicable
as of the Closing Date and thereafter any control share
acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s certificate of
incorporation (or similar charter documents) or the laws of the
State of Nevada that is or could become applicable to the
Purchasers as a result of the Purchasers and the Company fulfilling
their obligations or exercising their rights under the Transaction
Documents, including without limitation as a result of the
Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.

 

(v) Disclosure. All of the
disclosure furnished by or on behalf of the Company to the
Purchasers regarding the Company and its Subsidiaries, their
respective businesses and the transactions contemplated hereby,
including the Disclosure Schedules to this Agreement, when taken
together as a whole, is true and correct in all material respects
and does not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which
they were made, not misleading. The Company acknowledges and agrees
that no Purchaser makes or has made any representations or
warranties with respect to the transactions contemplated hereby
other than those specifically set forth in Section
3.2.

 

(w) Solvency. Based on the
consolidated financial condition of the Company as of the Closing
Date, and the Company’s good faith estimate of the fair
market value of its assets, after giving effect to the receipt by
the Company of the proceeds from the sale of the Securities
hereunder: (i) the fair saleable value of the Company’s
assets exceeds the amount that will be required to be paid on or in
respect of the Company’s existing debts and other liabilities
(including known contingent liabilities) as they mature, (ii) the
Company’s assets do not constitute unreasonably small capital
to carry on its business as now conducted and as proposed to be
conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the
Company, consolidated and projected capital requirements and
capital availability thereof, and (iii) the current cash flow of
the Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all
amounts on or in respect of its liabilities when such amounts are
required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in
respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the
Closing Date. Except as otherwise set forth in the Schedules to
this Agreement, the Financial Statements set forth all outstanding
liens secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has
commitments. For the purposes of this Agreement,
“Indebtedness”
means (y) any liabilities for borrowed money or amounts owed in
excess of $50,000 in the aggregate and (z) the present value of any
lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with generally accepted accounting
principles. Neither the Company nor any Subsidiary is in default
with respect to any Indebtedness.

 


 




 

11








 






 

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

 

(y) Foreign Corrupt Practices.
Neither the Company nor any Subsidiary, nor to the knowledge of the
Company or any Subsidiary, any agent or other person acting on
behalf of the Company or any Subsidiary, has: (i) directly or
indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or
domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate
funds, (iii) failed to disclose fully any contribution made by the
Company or any Subsidiary (or made by any person acting on its
behalf of which the Company is aware) which is in violation of law
or (iv) violated in any material respect any provision of
FCPA.

 

(z) Acknowledgment Regarding
Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm’s length purchaser with
respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and
any advice given by any Purchaser or any of their respective
representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely
incidental to the Purchasers’ purchase of the Securities. The
Company further represents to each Purchaser that the
Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company
and its representatives.

 

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

 

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

 

(cc) Private
Placement. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, no
registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Purchasers as
contemplated hereby.

 

(dd) No
General Solicitation or Integration. To the best knowledge
of the Company, neither the Company nor any person acting on behalf
of the Company has offered or sold any of the Securities by any
form of general solicitation or general advertising. To the best
knowledge of the Company, the Company has offered the Securities
for sale only to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the
Securities Act.

 

(ee) Indebtedness
and Seniority. Except as set forth on Schedule 3.1(ee), as
of the date hereof, all Indebtedness and Liens are as set forth on
the Financial Statements. Except as set forth on the Financial
Statements, as of the Closing Date, no Indebtedness, equity, Common
Stock Equivalent is senior to the Notes in right of payment,
whether with respect to interest or upon liquidation or
dissolution, or otherwise, and capital lease obligations (which is
senior only as to the property covered thereby).

 


 




 

12








 






 

(ff) FDA.
As to each product subject to the jurisdiction of the U.S. Food and
Drug Administration (“FDA”) under the Federal
Food, Drug and Cosmetic Act, as amended, and the regulations
thereunder (“FDCA”) that is
manufactured, packaged, labeled, tested, distributed, sold, and/or
marketed by the Company or any of its Subsidiaries (each such
product, a “Pharmaceutical Product”),
such Pharmaceutical Product is being manufactured, packaged,
labeled, tested, distributed, sold and/or marketed by the Company
in compliance with all applicable requirements under FDCA and
similar laws, rules and regulations relating to registration,
investigational use, premarket clearance, licensure, or application
approval, good manufacturing practices, good laboratory practices,
good clinical practices, product listing, quotas, labeling,
advertising, record keeping and filing of reports, except where the
failure to be in compliance would not have a Material Adverse
Effect. There is no pending, completed or, to the Company's
knowledge, threatened, action (including any lawsuit, arbitration,
or legal or administrative or regulatory proceeding, charge,
complaint, or investigation) against the Company or any of its
Subsidiaries, and none of the Company or any of its Subsidiaries
has received any notice, warning letter or other communication from
the FDA or any other governmental entity, which (i) contests the
premarket clearance, licensure, registration, or approval of, the
uses of, the distribution of, the manufacturing or packaging of,
the testing of, the sale of, or the labeling and promotion of any
Pharmaceutical Product, (ii) withdraws its approval of, requests
the recall, suspension, or seizure of, or withdraws or orders the
withdrawal of advertising or sales promotional materials relating
to, any Pharmaceutical Product, (iii) imposes a clinical hold on
any clinical investigation by the Company or any of its
Subsidiaries, (iv) enjoins production at any facility of the
Company or any of its Subsidiaries, (v) enters or proposes to enter
into a consent decree of permanent injunction with the Company or
any of its Subsidiaries, or (vi) otherwise alleges any violation of
any laws, rules or regulations by the Company or any of its
Subsidiaries, and which, either individually or in the aggregate,
would have a Material Adverse Effect. The properties, business and
operations of the Company have been and are being conducted in all
material respects in accordance with all applicable laws, rules and
regulations of the FDA.  The Company has not been informed by
the FDA that the FDA will prohibit the marketing, sale, license or
use in the United States of any product proposed to be developed,
produced or marketed by the Company nor has the FDA expressed any
concern as to approving or clearing for marketing any product being
developed or proposed to be developed by the Company.

 

(gg) No
Disqualification Events. None of the Company, any of its
predecessors, any affiliated issuer, any director, executive
officer, other officer of the Company participating in the offering
hereunder, any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power, nor any promoter (as that term is
defined in Rule 405 under the Securities Act) connected with the
Company in any capacity at the time of sale (each, an
“Issuer Covered
Person” and, together, “Issuer Covered Persons”)
is subject to any of the “Bad Actor” disqualifications
described in Rule 506(d)(1)(i) to (viii) under the Securities Act
(a “Disqualification
Event”), except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine whether any Issuer Covered Person is subject to a
Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and
has furnished to the Purchasers a copy of any disclosures provided
thereunder. The Company will notify the Purchasers in writing,
prior to the Closing Date of (i) any Disqualification Event
relating to any Issuer Covered Person and (ii) any event that
would, with the passage of time, become a Disqualification Event
relating to any Issuer Covered Person.

 

(hh) Reporting
Company/Shell Company. The Company is a publicly-held
company subject to reporting obligations pursuant to Sections 12(g)
and 13 of the Exchange Act. Pursuant to the provisions of the
Exchange Act, the Company has filed all reports and other materials
required to be filed by the Company thereunder with the SEC during
the preceding twelve months. As of the Closing Date, the Company is
not a “shell company” but is a former “shell
company” as those terms are employed in Rule 144 under the
Securities Act. The Company is, and has no reason to believe that
it will not in the foreseeable future continue to be in compliance
with all such listing and maintenance requirements.

 

(ii) Survival.
The foregoing representations and warranties shall survive the
Closing Date.

 

3.2 Representations and Warranties of the
Purchasers. Each Purchaser, for itself and for no other
Purchaser, hereby represents and warrants as of the date hereof and
as of the Closing Date to the Company as follows (unless as of a
specific date therein):

 

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

 


 




 

13








 






 

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

 

(c) Purchaser Status. At the time
such Purchaser was offered the Securities, it was, and as of the
date hereof it is, and on each date on which it converts a Note or
exercises any Warrants, it will be either: (i) an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7) or (a)(8) under the Securities Act or (ii) a
“qualified institutional buyer” as defined in Rule
144A(a) under the Securities Act. Such Purchaser is not required to
be registered as a broker-dealer under Section 15 of the Exchange
Act. Such Purchaser has the authority and is duly and legally
qualified to purchase and own the Securities. Such Purchaser is
able to bear the risk of such investment for an indefinite period
and to afford a complete loss thereof.

 

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

 

(e) Information on Company.
Purchasers are not deemed to have any knowledge of any information
not included in the Financial Statements or the Transaction
Documents unless such information is delivered in the manner
described in the next sentence.  Each Purchaser was
afforded (i) the opportunity to ask such questions as such
Purchaser deemed necessary of, and to receive answers from,
representatives of the Company concerning the merits and risks of
acquiring the Securities; (ii) the right of access to information
about the Company and its financial condition, results of
operations, business, properties, management and prospects
sufficient to enable such Purchaser to evaluate the Securities; and
(iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision
with respect to acquiring the Securities. In addition, such
Purchaser may have received in writing from the Company such other
information concerning its operations, financial condition and
other matters as such Purchaser has requested, identified thereon
as OTHER WRITTEN INFORMATION (such other information is
collectively, the “Other Written
Information”), and considered all factors such
Purchaser deems material in deciding on the advisability of
investing in the Securities.

 

(f) Compliance with Securities Act;
Reliance on Exemptions. Such Purchaser understands and
agrees that the Securities have not been registered under the 1933
Act or any applicable state securities laws, by reason of their
issuance in a transaction that does not require registration under
the 1933 Act, and that such Securities must be held indefinitely
unless a subsequent disposition is registered under the 1933 Act or
any applicable state securities laws or is exempt from such
registration. Such Purchaser understands and agrees that the
Securities are being offered and sold to such Purchaser in reliance
on specific exemptions from the registration requirements of United
States federal and state securities laws and regulations and that
the Company is relying in part upon the truth and accuracy of, and
such Purchaser’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such
Purchaser set forth herein in order to determine the availability
of such exemptions and the eligibility of such Purchaser to acquire
the Securities.

 

(g) Communication of Offer. Such
Purchaser is not purchasing the Securities as a result of any
“general solicitation” or “general
advertising,” as such terms are defined in Regulation D,
which includes, but is not limited to, any advertisement, article,
notice or other communication regarding the Securities published in
any newspaper, magazine or similar media or on the internet or
broadcast over television, radio or the internet or presented at
any seminar or any other general solicitation or general
advertisement.

 


 




 

14








 






 

(h) No Governmental Review. Such
Purchaser understands that no United States federal or state agency
or any other governmental or state agency has passed on or made
recommendations or endorsement of the Securities or the suitability
of the investment in the Securities nor have such authorities
passed upon or endorsed the merits of the offering of the
Securities.

 

(i) No Conflicts. The execution,
delivery and performance of this Agreement and performance under
the other Transaction Documents and the consummation by such
Purchaser of the transactions contemplated hereby and thereby or
relating hereto or thereto do not and will not (i) result in a
violation of such Purchaser’s charter documents, bylaws or
other organizational documents, if applicable, (ii) conflict with
nor constitute a default (or an event which with notice or lapse of
time or both would become a default) under any agreement to which
such Purchaser is a party, nor (iii) result in a violation of any
law, rule, or regulation, or any order, judgment or decree of any
court or governmental agency applicable to such Purchaser or its
properties (except for such conflicts, defaults and violations as
would not, individually or in the aggregate, have a material
adverse effect on such Purchaser). Such Purchaser is not required
to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations
under this Agreement or perform under the other Transaction
Documents nor to purchase the Securities in accordance with the
terms hereof, provided that for purposes of the representation made
in this sentence, such Purchaser is assuming and relying upon the
accuracy of the relevant representations and agreements of the
Company herein.

 

(j) Survival. The foregoing
representations and warranties shall survive the Closing
Date.

 

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

 



ARTICLE IV.



OTHER AGREEMENTS OF THE PARTIES

 

4.1 Transfer
Restrictions.

 

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

 

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

 


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

 




 

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

 

(d) Legend Removal. Certificates
evidencing the Underlying Shares shall not contain any legend
(“Unlegended
Shares”) (including the legend set forth in Section
4.1(b) hereof): (i) while a registration statement covering the
resale of such security is effective under the Securities Act, (ii)
following any sale of such Underlying Shares pursuant to Rule 144,
(iii) if such Underlying Shares are eligible for sale under Rule
144, without the requirement for the Company to be in compliance
with the current public information required under Rule 144 as to
such Underlying Shares and without volume or manner-of-sale
restrictions or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue a legal
opinion to the Transfer Agent during the time any of the
aforedescribed conditions apply, to effect the removal of the
legend hereunder. If all or any Notes are converted or any portion
of a Warrant is exercised at a time when there is an effective
registration statement to cover the resale of the corresponding
Underlying Shares, or if such Underlying Shares may be sold under
Rule 144 or if such legend is not otherwise required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission) then such Underlying Shares shall be issued free of all
legends. The Company agrees that following such time as such legend
is no longer required under this Section 4.1(d), it will, no later
than five Trading Days following the delivery by the Purchaser to
the Company or the Transfer Agent of a certificate representing
Underlying Shares, as applicable, issued with a restrictive legend
(such fifth Trading Day, the “Legend Removal Date”),
deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and
other legends (however, the Corporation shall use reasonable best
efforts to deliver such shares within three (3) Trading Days). The
Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on
transfer set forth in this Section 4.1. Certificates for Underlying
Shares subject to legend removal hereunder shall be transmitted by
the Transfer Agent to the Purchaser by crediting the account of the
Purchaser’s prime broker with the Depository Trust Company
System as directed by such Purchaser.

 

(e) Legend Removal Default. In
addition to such Purchaser’s other available remedies,
provided the conditions for legend removal set forth in Section
4.1(c) exist, the Company shall pay to a Purchaser, in cash, as
partial liquidated damages and not as a penalty, for each $1,000 of
Underlying Shares (based on the higher of the actual purchase price
of the Common Stock on the date such Securities are submitted to
the Transfer Agent) delivered for removal of the restrictive legend
and subject to Section 4.1(d), $10 per Trading Day for each Trading
Day after the Legend Removal Date (increasing to $20 per Trading
Day after the fifth Trading Day) until such certificate is
delivered without a legend. Nothing herein shall limit such
Purchaser’s right to pursue actual damages for the
Company’s failure to deliver certificates representing any
Securities as required by the Transaction Documents, and such
Purchaser shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.

 

(f) DWAC.
Commencing after the Closing, in lieu of delivering physical
certificates representing the Unlegended Shares, upon request of a
Purchaser, so long as the certificates therefor do not bear a
legend and the Purchaser is not obligated to return such
certificate for the placement of a legend thereon, the Company
shall cause its transfer agent to electronically transmit the
Unlegended Shares by crediting the account of Purchaser’s
prime broker with the Depository Trust Company through its Deposit
Withdrawal At Custodian system, provided that the Company’s
Common Stock is DTC eligible and the Company’s transfer agent
participates in the Deposit Withdrawal at Custodian system. Such
delivery must be made on or before the Legend Removal
Date.

 


 




 

16








 






 

(g) Resale Requirements. Each
Purchaser, severally and not jointly with the other Purchasers,
agrees with the Company that such Purchaser will sell the
Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are
sold pursuant to a registration statement, they will be sold in
compliance with the plan of distribution set forth therein, and
acknowledges that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section
4.1 is predicated upon the Company’s reliance upon this
understanding.

 

(h) Remedies. In addition to such
Purchaser’s other available remedies, the Company shall pay
to a Purchaser, in cash, as partial liquidated damages and not as a
penalty, for each $1,000 of Conversion Shares or Warrant Shares
delivered for removal of the restrictive legend and Conversion
Shares delivered for conversion into Shares, $10 per Trading Day
for each Trading Day following the Legend Removal Date or the date
such Securities are to be delivered pursuant to the Note until such
Common Stock certificate is delivered without a legend pursuant to
Section 4.1(c) or such Conversion Shares. Nothing herein shall
limit such Purchaser’s right to elect in lieu of the
aforedescribed liquidated damages to pursue actual damages for the
Company’s failure to deliver certificates representing any
Underlying Shares as required by the Transaction Documents, and
such Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation,
a decree of specific performance and/or injunctive
relief.

 

(i)  Injunction. In the event a
Purchaser shall request delivery of Securities as described in this
Section 4.1 or Common Stock pursuant to the Note and the Company is
required to deliver such Securities, the Company may not refuse to
deliver Securities based on any claim that such Purchaser or anyone
associated or affiliated with such Purchaser has not complied with
Purchaser’s obligations under the Transaction Documents, or
for any other reason, unless, an injunction or temporary
restraining order from a court, on notice, restraining and or
enjoining delivery of such unlegended shares shall have been sought
and obtained by the Company and the Company has posted a surety
bond for the benefit of such Purchaser in the amount of 120% of the
amount of the aggregate purchase price of the Securities intended
to be subject to the injunction or temporary restraining order,
which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Purchaser to the extent Purchaser obtains
judgment in Purchaser’s favor.

 

(j)  Buy-In. In addition to any
other rights available to Purchaser, if the Company fails to
deliver to a Purchaser Securities as required pursuant to this
Agreement or the Note and after the Legend Removal Date or required
delivery date pursuant to the Note the Purchaser, or a broker on
the Purchaser’s behalf, purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Purchaser of the shares of Common
Stock which the Purchaser was entitled to receive in unlegended
form from the Company (a “Buy-In”), then the
Company shall promptly pay in cash to the Purchaser (in addition to
any remedies available to or elected by the Purchaser) the amount,
if any, by which (A) the Purchaser’s total purchase price
(including brokerage commissions, if any) for the shares of Common
Stock so purchased exceeds (B) the aggregate purchase price of the
shares of Common Stock delivered to the Company for reissuance as
unlegended Shares or as are required to be delivered pursuant to
the Note, as the case may be, together with interest thereon at a
rate of 15% per annum accruing until such amount and any accrued
interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). For example, if a
Purchaser purchases shares of Common Stock having a total purchase
price of $11,000 to cover a Buy-In with respect to $10,000 of
purchase price of Shares delivered to the Company for reissuance as
unlegended shares, the Company shall be required to pay the
Purchaser $1,000, plus interest, if any. The Purchaser shall
provide the Company written notice indicating the amounts payable
to the Purchaser in respect of the Buy-In.

 

4.2 Acknowledgment of Dilution. The
Company acknowledges that the issuance of the Securities may result
in dilution of the outstanding shares of Common Stock, which
dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligations under the
Transaction Documents, including, without limitation, its
obligation to issue the Underlying Shares pursuant to the
Transaction Documents, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the
Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the
other stockholders of the Company.

 


 




 

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4.3 Furnishing of
Information.

 

(a) At any time
commencing on the Closing Date and ending at the earliest of the
time that no Purchaser owns Securities, the Company covenants to
file all periodic reports with the Commission pursuant to Section
15(d) of the Exchange Act and under Section 12(b) or 12(g) of the
1934 Act, maintain the registration of the Common Stock under
Section 12(b) or 12(g) of the Exchange Act and to timely file (or
obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after
the date hereof pursuant to the Exchange Act even if the Company is
not then subject to the reporting requirements of the Exchange
Act.

 

(b) At any time
commencing on the Closing Date and ending at such time that all of
the Securities may be sold without the requirement for the Company
to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144, if the Company
shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) (a “Public Information
Failure”) then, in addition to such Purchaser’s other
available remedies, the Company shall pay to a Purchaser, in cash,
as partial liquidated damages and not as a penalty, by reason of
any such delay in or reduction of its ability to sell the
Securities, an amount in cash equal to two percent (2.0%) of the
aggregate principal amount of Notes and accrued interest held by
such Purchaser on the day of a Public Information Failure and on
every thirtieth (30th) day (pro-rated for periods totaling less
than thirty days) thereafter until the earlier of (a) the date such
Public Information Failure is cured and (b) such time that such
public information is no longer required for the Purchasers to
transfer the Underlying Shares pursuant to Rule 144. The payments
to which a Purchaser shall be entitled pursuant to this Section
4.2(b) are referred to herein as “Public Information Failure
Payments.” Public Information Failure Payments shall
be paid on the earlier of (i) the last day of the calendar month
during which such Public Information Failure Payments are incurred
and (ii) the third (3rd) Business Day after the event or failure
giving rise to the Public Information Failure Payments is cured. In
the event the Company fails to make Public Information Failure
Payments in a timely manner, such Public Information Failure
Payments shall bear interest at the rate of 1.5% per month
(prorated for partial months) until paid in full. Nothing herein
shall limit such Purchaser’s right to pursue actual damages
for the Public Information Failure, and such Purchaser shall have
the right to pursue all remedies available to it at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief.

 

4.4 Conversion and Exercise
Procedures. Each of the form of Notice of Conversion
attached to the Note and form of Notice of Exercise included in the
Warrants sets forth the totality of the procedures required of the
Purchasers in order to convert the Note or exercise the Warrant. No
additional legal opinion, other information or instructions shall
be required of the Purchasers to convert their Note or exercise
their Warrants. The Company shall honor conversions of the Note and
exercises of the Warrants and shall deliver Underlying Shares in
accordance with the terms, conditions and time periods set forth in
the Transaction Documents.

 

4.5 Use
of Proceeds. The proceeds of the offering will be employed
by the Company substantially for the purposes set forth on
Schedule
4.5.

 

4.6 Indemnification of Purchasers.
Subject to the provisions of this Section 4.6, the Company will
indemnify and hold each Purchaser and its directors, officers,
shareholders, members, partners, employees and agents (and any
other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any
other title), each Person who controls such Purchaser (within the
meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, shareholders, agents,
members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such
controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to
(a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against
Purchaser Parties in any capacity, or any of them or their
respective Affiliates, by any stockholder of the Company who is not
an Affiliate of such Purchaser Party, with respect to any of the
transactions contemplated by the Transaction Documents (unless such
action is based upon a breach of such Purchaser Party’s
representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party
may have with any such stockholder or any violations by such
Purchaser Party of state or federal securities laws or any conduct
by such Purchaser Party which constitutes fraud, gross negligence,
willful misconduct or malfeasance). If any action shall be brought
against any Purchaser Party in respect of which indemnity may be
sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have
the right to assume the defense thereof with counsel of its own
choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing,
(ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action
there is, in the reasonable opinion of counsel, a material conflict
on any material issue between the position of the Company and the
position of such Purchaser Party, in which case the Company shall
be responsible for the reasonable fees and expenses of no more than
one such separate counsel. The Company will not be liable to any
Purchaser Party under this Agreement (y) for any settlement by a
Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or
(z) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party’s
breach of its representations, warranties or covenants under the
Transaction Documents. The indemnification required by this Section
4.6 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are
received or are incurred. The indemnity agreements contained herein
shall be in addition to any cause of action or similar right of any
Purchaser Party against the Company or others and any liabilities
the Company may be subject to pursuant to law.

 


 




 

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4.7 Reservation and Listing of
Securities.

 

(a) The Company shall
maintain a reserve from its duly authorized shares of Common Stock
for issuance pursuant to the Transaction Documents in such amount
as may then be required to fulfill its obligations in full under
the Transaction Documents, but not less than the Required
Minimum.

 

(b) If, on any date,
the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than the Required Minimum on such
date, then the Board of Directors shall amend the Company’s
certificate or articles of incorporation to increase the number of
authorized but unissued shares of Common Stock to at least the
Required Minimum at such time, as soon as possible and in any event
not later than the 60th day after such
date. In the event of a shortfall in the Required Minimum, any
shares reserved for issuance to the Company’s officers and
directors (not including Purchasers, if applicable) will be made
available for issuance to the Purchasers.

 

4.8 Form D; Blue Sky Filings. The
Company agrees to timely file a Form D with respect to the
Securities as required under Regulation D and to provide a copy
thereof, promptly upon request of any Purchaser. The Company shall
take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for, or to qualify the
Securities for, sale to the Purchasers at the Closing under
applicable securities or “Blue Sky” laws of the states
of the United States, and shall provide evidence of such actions
promptly upon request of any Purchaser.

 

4.9 Most Favored Nation Provision.
From the date hereof and for so long as a Purchaser holds any
Securities, in the event that the Company issues or sells any
Common Stock or Common Stock Equivalents, if a Purchaser then
holding outstanding Securities reasonably believes that any of the
terms and conditions appurtenant to such issuance or sale are more
favorable to such investors than are the terms and conditions
granted to the Purchasers hereunder, upon notice to the Company by
such Purchaser within five (5) Trading Days after disclosure of
such issuance or sale, the Company shall amend the terms of this
transaction as to such Purchaser only so as to give such Purchaser
the benefit of such more favorable terms or conditions. This
Section 4.9 shall not apply with respect to an Exempt Issuance. The
Company shall provide each Purchaser with notice of any such
issuance or sale not later than ten (10) Trading Days before such
issuance or sale.

 

4.10 Equal
Treatment of Purchasers. No consideration (including any
modification of any Transaction Document) shall be offered or paid
to any Person to amend or consent to a waiver or modification of
any provision of any of the Transaction Documents unless the same
or substantially similar consideration is also offered,
mutatis mutandis, on a
ratable basis to all of the parties to this Agreement. For
clarification purposes, this provision constitutes a separate right
granted to each Purchaser by the Company and negotiated separately
by each Purchaser, and is intended for the Company to treat the
Purchasers as a class and shall not in any way be construed as the
Purchasers acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or
otherwise.

 

4.11 Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale or resale of the
Securities.

 

4.12 Maintenance
of Property and Insurance. Until the End Date, the Company
shall keep all of its property, which is necessary or useful to the
conduct of its business, in good working order and condition,
ordinary wear and tear excepted. Until the End Date, the Company
will maintain insurance coverage of the type and not less than the
amount in effect as of the Closing Date.

 


4.13                   Preservation
of Corporate Existence. Until the End Date, the Company
shall preserve and maintain its corporate existence, rights,
privileges and franchises in the jurisdiction of its incorporation,
and qualify and remain qualified, as a foreign corporation in each
jurisdiction in which such qualification is necessary in view of
its business or operations and where the failure to qualify or
remain qualified might reasonably have a Material Adverse Effect
upon the financial condition, business or operations of the Company
taken as a whole.

 


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

 


 




 

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4.15                   Reimbursement.
If any Purchaser becomes involved in any capacity in any Proceeding
by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar
transactions by such Purchaser to or with any current stockholder),
solely as a result of such Purchaser’s acquisition of the
Securities under this Agreement, the Company will reimburse such
Purchaser 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. The reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company
may otherwise have, shall extend upon the same terms and conditions
to any Affiliates of the Purchasers who are actually named in such
action, proceeding or investigation, and partners, directors,
agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, the Purchasers and any
such Affiliate and any such Person. The Company also agrees that
neither the Purchasers nor any such Affiliates, partners,
directors, agents, employees or controlling persons shall have any
liability to the Company or any Person asserting claims on behalf
of or in right of the Company solely as a result of acquiring the
Securities under this Agreement.

 


4.16                   Registrations.

 


(a)                   On
or prior to the 30th day after the
Closing Date (the “Filing Date”), the
Company shall prepare and file with the Commission a registration
statement (the “Registration Statement”)
covering the resale of all of the Registrable Securities for an
offering to be made on a continuous basis pursuant to Rule 415. The
Registration Statement required hereunder shall be on Form
S-1.  The Company shall cause the Registration Statement to be
declared effective under the Securities Act as promptly as possible
after the filing thereof, but in any event not later than the
120th day
after the Closing Date (the “Effectiveness Date”), and
shall use its best efforts to keep the Registration Statement
continuously effective under the Securities Act until the earlier
of (i) three years from the Effectiveness Date, (ii) the date when
all securities underlying the Notes and Warrants have been sold
thereunder or pursuant to Rule 144; or (iii)the date when all
securities underlying the Notes and Warrants may be sold without
volume or manner-of-sale restrictions pursuant to Rule 144 and
without the requirement for the Company to be in compliance with
the current public information requirement under Rule 144, as
determined by counsel to the Company pursuant to a written opinion
letter to such effect, addressed and acceptable to the
Company’s transfer agent and the Purchaser (the
“Effectiveness
Period”). The maximum amount of Registrable Securities
that may be included in the Registration Statement at any one time
shall be limited by Rule 415 or as may otherwise be required by the
Commission. In the event that there is a limitation by the
Commission on the number of Registrable Securities that may be
included for registration on the Registration Statements at one
time, the removal of the securities shall be applied, first to the
Conversion Shares then to the Warrant Shares issuable upon exercise
of the Warrants (the “Order of Cutback”). The
foregoing notwithstanding, the Company undertakes to register a
minimum of 2,000,000 shares of Common Stock on behalf of Purchaser
in the Registration Statement (the “Registration
Shares”). In the event, any Registrable Securities shall be
removed from the Registration Statement, the Company shall promptly
advise any Purchaser holding such Registrable
Securities.

 


(b)                   If
at any time until two years after the Closing Date there is not an
effective registration statement covering all of the Conversion
Shares, and Warrant Shares and the Company shall determine to
prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of
others under the 1933 Act of any of its equity securities, but
excluding Forms S-4 or S-8 and similar forms which do not permit
such registration, then the Company shall send to each holder of
any of the Securities written notice of such determination and, if
within fifteen calendar days after receipt of such notice, any such
holder shall so request in writing, the Company shall include in
such registration statement all or any part of the Conversion
Shares, and Warrant Shares such holder requests to be registered,
subject to customary underwriter cutbacks applicable to all holders
of registration rights and any cutbacks in accordance with guidance
provided by the Securities and Exchange Commission (including, but
not limited to, Rule 415). The obligations of the Company under
this Section may be waived by any holder of any of the Securities
entitled to registration rights under this Section 11.1. The
holders whose Conversion Shares, and Warrant Shares are included or
required to be included in such registration statement are granted
the same rights, benefits, liquidated or other damages and
indemnification granted to other holders of securities included in
such registration statement. Notwithstanding anything to the
contrary herein, the registration rights granted hereunder to the
holders of Securities shall not be applicable for such times as
such Conversion Shares, and Warrant Shares may be sold by the
holder thereof without restriction pursuant to Section 144(b)(1) of
the 1933 Act. In no event shall the liability of any holder of
Securities or permitted successor in connection with any Conversion
Shares, and Warrant Shares included in any such registration
statement be greater in amount than the dollar amount of the net
proceeds actually received by such Subscriber upon the sale of the
Conversion Shares, and Warrant Shares sold pursuant to such
registration or such lesser amount in proportion to all other
holders of Securities included in such registration statement. All
expenses incurred by the Company in complying with Section 11,
including, without limitation, all registration and filing fees,
printing expenses (if required), fees and disbursements of counsel
and independent public accountants for the Company, fees and
expenses (including reasonable counsel fees) incurred in connection
with complying with state securities or “blue sky”
laws, fees of the NASD, transfer taxes, and fees of transfer agents
and registrars, are called “Registration Expenses.” All
underwriting discounts and selling commissions applicable to the
sale of registrable securities are called "Selling Expenses." The
Company will pay all Registration Expenses in connection with the
registration statement under Section 11. Selling Expenses in
connection with each registration statement under Section 11 shall
be borne by the holder and will be apportioned among such holders
in proportion to the number of Shares included therein for a holder
relative to all the Securities included therein for all selling
holders, or as all holders may agree.

 




 

20








 






 


4.17                   Capital
Raise. Within one (1) business day after the closing of a
transaction or series of transaction resulting in a capital raise
of at least $100,000.00, the Company shall pay to the Purchasers,
pro rata to the principal amount of their Notes outstanding at the
time of such closing, 25% of the gross proceeds as a payment toward
amount due on the Notes.

 


4.18                   Subsequent
Equity Sales. From the date hereof until the Notes are no
longer outstanding, the Company will not, without the consent of
the Purchasers, enter into any Equity Line of Credit or similar
agreement nor issue nor agree to issue any common stock at a per
share price less than the then in effect Conversion Price, floating
or Variable Priced Equity Linked Instruments nor any of the
foregoing or equity with price reset rights (subject to adjustment
for stock splits, distributions, dividends, recapitalizations and
the like) (collectively, the “Variable Rate
Transaction”). For purposes hereof, “Equity Line of
Credit” shall include any transaction involving a written
agreement between the Company and an investor or underwriter
whereby the Company has the right to “put” its
securities to the investor or underwriter over an agreed period of
time and at an agreed price or price formula, and “Variable
Priced Equity Linked Instruments” shall include: (A) any debt
or equity securities which are convertible into, exercisable or
exchangeable for, or carry the right to receive additional shares
of Common Stock either (1) at any conversion, exercise or exchange
rate or other price that is based upon and/or varies with the
trading prices of or quotations for Common Stock at any time after
the initial issuance of such debt or equity security, or (2) with a
fixed conversion, exercise or exchange price that is subject to
being reset at some future date at any time after the initial
issuance of such debt or equity security due to a change in the
market price of the Company’s Common Stock since date of
initial issuance, and (B) any amortizing convertible security which
amortizes prior to its maturity date, where the Company is required
or has the option to (or any investor in such transaction has the
option to require the Company to) make such amortization payments
in shares of Common Stock which are valued at a price that is based
upon and/or varies with the trading prices of or quotations for
Common Stock at any time after the initial issuance of such debt or
equity security (whether or not such payments in stock are subject
to certain equity conditions). For purposes of determining the
total consideration for a convertible instrument (including a right
to purchase equity of the Company) issued, subject to an original
issue or similar discount or which principal amount is directly or
indirectly increased after issuance, the consideration will be
deemed to be the actual net cash amount received by the Company in
consideration of the original issuance of such convertible
instrument. From the Closing Date until the date on which the Notes
are no longer outstanding, except for Exempt Issuances, the Company
will not issue any Common Stock or Common Stock Equivalents to
officers, directors, employees, consultants and service providers
of the Company in an amount, on an aggregate basis, in excess of
5,000,000 shares. For so long as the Notes are outstanding the
Company will not amend the terms of any securities, except as
applicable to presently outstanding securities (provided such
change shall result in a reset under the Notes and Warrants), or
Common Stock Equivalents or of any agreement outstanding or in
effect as of the date of this Agreement or at any time thereafter,
pursuant to which same were or may be acquired, if such issuance or
the result of such amendment would be at an effective price per
share of Common Stock less than the Conversion Price in effect at
the time of such amendment.

 


4.19                   Non-Public
Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction
Documents, the Company covenants and agrees that 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 entered into a written agreement
with the Company regarding the confidentiality and use of such
information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.

 


4.20                   Securities
Laws Disclosure; Publicity. The Company shall, file a
Current Report on Form 8-K including the Transaction Documents as
exhibits thereto (the “Closing Form 8-K”
mutatis mutandem) within
one Business Day of the date hereof.

 


4.21                   Par
Value. In the event the Conversion Price of the Notes is
reduced below the par value of the common stock, the Company shall
within 30 days thereafter, reduce the par value of its common stock
so that the Conversion Price shall be greater than the par value of
the Common Stock.

 


 




 

21








 






 



ARTICLE V.



MISCELLANEOUS

 

5.1 Termination.  This
Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other
Purchasers, by written notice to the other parties, if the Closing
has not been consummated on or before November 31, 2017;
provided,
however, that such
termination will not affect the right of any party to sue for any
breach by any other party or parties.

 

5.2 Fees and Expenses. Except as
expressly set forth on Schedule 3.1(r), each party
shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company
shall pay all Transfer Agent fees, stamp taxes and other taxes and
duties levied in connection with the delivery of any Securities to
the Purchasers. The Company agrees to
pay pursuant to the Escrow Agreement legal fees and Escrow Agent
fees of G&M, counsel to some of the Purchasers, in the amount
of $4,500 (“Legal Fees”), incurred in connection with
the preparation, execution and delivery of the Transaction
Documents and Closing.

 

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

 

5.4 Notices. All notices, demands,
requests, consents, approvals, and other communications required or
permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service
with charges prepaid, or (iv) transmitted by hand delivery,
telegram, email or facsimile, addressed as set forth below or to
such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon
hand delivery or delivery by facsimile or email, with accurate
confirmation generated by the transmitting facsimile machine or
transmitting computer (email), at the address or number designated
below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be: (i) if to
the Company, to: Sincerity Applied Materials Holdings Corp, Level
4, 10 Yarra Street, South Yarra, VIC 3141 Australia, Attn: Zhang
(“James”) Yiwen, President and CEO, email: james@sincerityplastics.com,
with a copy by fax or email only to (which shall not constitute
notice): Scott Rapfogel, Esq., Fax: (212) 259–8200 e-Mail:
srapfogel@ckrlaw.com
and (ii) if to the Purchasers, to: the addresses and fax numbers
indicated on the signature pages hereto, with an additional copy by
fax only to (which shall not constitute notice): Grushko &
Mittman, P.C., 515 Rockaway Avenue, Valley Stream, New York 11581,
Attn: Eliezer Drew, Esq., facsimile: (212) 697-3575.

 

5.5 Amendments; Waivers. No
provision of this Agreement nor any other Transaction Document may
be waived, modified, supplemented or amended nor consent obtained
or approval deemed granted except in a written instrument signed,
in the case of an amendment, by the Company and the Purchasers or,
in the case of a waiver, by the party against whom enforcement of
any such waived provision is sought. No waiver of any default with
respect to any provision, condition or requirement of this
Agreement nor any other Transaction Document shall be deemed to be
a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or
requirement thereof, nor shall any delay or omission of any party
to exercise any right thereunder in any manner impair the exercise
of any such right. Any Purchaser may waive in writing any right or
benefit granted to or available to such Purchaser pursuant to the
Transaction Documents.

 

5.6 Headings. The headings herein
are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the
provisions hereof.

 


 




 

22








 






 

5.7 Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company may
not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser (other than by
merger). Following the Closing, any Purchaser may assign, on ten
(10) Business Day prior notice any or all of its rights under this
Agreement to any Person to whom such Purchaser assigns or transfers
any Securities, provided that such transferee agrees in writing to
be bound with respect to the transferred Securities by the
provisions of the Transaction Documents that apply to the
“Purchasers” and is able to make each and every
representation made by Purchasers in this Agreement. No assignment
by a Purchaser will be allowed if the result would be an increase
in the number of actual or beneficial owners of the assigned
securities.

 

5.8 No Third-Party Beneficiaries.
This Agreement is intended for the benefit of the parties hereto
and their respective successors and permitted assigns and is not
for the benefit of, nor may any provision hereof be enforced by,
any other Person, except as otherwise set forth in Section
4.10.

 

5.9 Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense
of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or
its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of
New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any action, suit or
proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or
proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law. If either party shall
commence an action or proceeding to enforce any provisions of the
Transaction Documents, then, in addition to the obligations of the
Company under Section 4.10, the prevailing party in such action,
suit or proceeding shall be reimbursed by the other party for its
reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of
such action or proceeding.

 

5.10 Survival.
The representations and warranties contained herein shall survive
the Closing and the delivery of the Securities.

 

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

 

5.12 Severability.
If any term, provision, covenant or restriction of any Transaction
Document is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.

 


 




 

23








 






 

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

 

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

 

5.15 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific
performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert
in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate. The Company’s
obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of
the Company and shall not terminate until all unpaid partial
liquidated damages and other amounts have been paid notwithstanding
the fact that the instrument or security pursuant to which such
partial liquidated damages or other amounts are due and payable
shall have been canceled.

 

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

 

5.17 Usury.
To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any claim, action or
proceeding that may be brought by any Purchaser in order to enforce
any right or remedy under any Transaction Document. Notwithstanding
any provision to the contrary contained in any Transaction
Document, it is expressly agreed and provided that the total
liability of the Company under the Transaction Documents for
payments in the nature of interest shall not exceed the maximum
lawful rate authorized under applicable law (the
“Maximum
Rate”), and, without limiting the foregoing, in no
event shall any rate of interest or default interest, or both of
them, when aggregated with any other sums in the nature of interest
that the Company may be obligated to pay under the Transaction
Documents exceed such Maximum Rate. It is agreed that if the
maximum contract rate of interest allowed by law and applicable to
the Transaction Documents is increased or decreased by statute or
any official governmental action subsequent to the date hereof, the
new maximum contract rate of interest allowed by law will be the
Maximum Rate applicable to the Transaction Documents from the
effective date thereof forward, unless such application is
precluded by applicable law. If under any circumstances whatsoever,
interest in excess of the Maximum Rate is paid by the Company to
any Purchaser with respect to indebtedness evidenced by the
Transaction Documents, such excess shall be applied by such
Purchaser to the unpaid principal balance of any such indebtedness
or be refunded to the Company, the manner of handling such excess
to be at such Purchaser’s election.

 


 




 

24








 






 

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

 

5.19 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto. In addition, each
and every reference to share prices and shares of Common Stock in
any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the
date of this Agreement.

 

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

 


5.21                   Equitable
Adjustment. The Conversion
Price, Warrant exercise price, trading volume amounts, price/volume
amounts and similar figures in the Transaction Documents shall be
equitably adjusted (but without duplication) to offset the effect
of stock splits, similar events and as otherwise described in the
Transaction Documents.

 


 

 



(Signature Pages Follow)

 


 




 

25








 






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

 


	


Sincerity Applied Materials Holdings Corp

	


Address for Notice:


 


Level
4, 10 Yarra Street


South
Yarra, VIC 3141


Australia


Email:
james@sincerityplastics.com


 


	

By:
/s/ Zhang Yiwen


      Name:
Zhang Yiwen



      Title: President and
CEO


 


 

	
 


	
 

	
 







 

 


 

 


 

 


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

 


SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

 


 




 

26








 






[PURCHASER
SIGNATURE PAGE TO SINCERITY APPLIED MATERIALS HOLDINGS
CORP

 


SECURITIES PURCHASE
AGREEMENT]

 


 

 


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

 


Name of
Purchaser: Emunah Funding,
LLC _______________________________________

 


Signature of Authorized Signatory of
Purchaser: /s/ Gabriel
Berkowitz_______________________

 


Name of
Authorized Signatory: _Gabriel
Berkowitz_____________________________________

 


Title
of Authorized Signatory: _Manager______________________________________________

 


Email
Address of Authorized Signatory: _gabriel@arcadia.capital__________________________

 


Facsimile Number of
Authorized Signatory:
__________________________________________

 


Address
for Notice to Purchaser:

 


 

 


1361
East 10th Street

 


Brooklyn,
NY 11730

 


Fax:
(727) 547-7350

 


 

 


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

 


 


______________________________________________________________________________

 


 


______________________________________________________________________________

 


 


______________________________________________________________________________

 


 


 




 

27








 






 

 


Subscription
Amount: $50,000.00

 

 


Note
Principal: $54,000.00

 

 


Warrants:
___Class A 51,429 and Class B
400,000___________

 

 


EIN
Number, if applicable, will be provided under separate cover:
________________________

 


 


 

 


[SIGNATURE
PAGES CONTINUE]

 




 

28








 






[PURCHASER
SIGNATURE PAGE TO SINCERITY APPLIED MATERIALS HOLDINGS
CORP

 


SECURITIES PURCHASE
AGREEMENT]

 

 


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

 


Name of
Purchaser: Fourth Man,
LLC _______________________________________

 


Signature of Authorized Signatory of
Purchaser: /s/ Edward H.
Deese _____________

 


Name of
Authorized Signatory: _ Edward H.
Deese _____________________________________

 


Title
of Authorized Signatory: _Manager______________________________________________

 


Email
Address of Authorized Signatory: _ edeese@sbcglobal.net
__________________________

 


Facsimile Number of
Authorized Signatory:
__________________________________________

 


Address
for Notice to Purchaser:

 

 


2522
Chambers Road, Suite 100

 


Tustin,
CA 92780

 

 


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

 


______________________________________________________________________________

 


______________________________________________________________________________

 


______________________________________________________________________________

 


 




 

29








 






 

 


Subscription
Amount: $50,000.00

 


Note
Principal: $54,000.00

 


Warrants:
___Class A 51,429 and Class B
400,000___________

 


 


EIN
Number, if applicable, will be provided under separate cover:
________________________

 


 


 

 


[SIGNATURE
PAGES CONTINUE]

 


 




 

30








 






 

 



EXHIBITS AND SCHEDULES

 


 

 

Exhibit
A    Form of Note

 

Exhibit
B1    Form of Class A Warrant

 

Exhibit
B2    Form of Class B Warrant

 

Exhibit
C    Escrow Agreement

 

Exhibit
D    TA Letter

 

Exhibit
E    Legal Opinion

 

Exhibit
F    COJ

 


 

Schedule
3.1(g)    Capitalization

 

Schedule
3.1(n)    Liens

 

Schedule
3.1(r)    Broker’s Fees

 

Schedule
3.1(t)    Registration Rights

 

Schedule
3.1(ee)    Indebtedness

 

Schedule
4.5    Use of Proceeds

 


 




 

31








 






 


SCHEDULES
TO SECURITIES PURCHASE AGREEMENT

 


Schedule
3.1(g)

 




A.

Pending Stock
Issuances to Company Officers, Directors, Employees or
Consultants





 


	              
Name	Relationship	Number of Shares to be
Issued
	              
Nils Ollquist	Officer,
Director	1,000,000




 


 




B.

Outstanding Company
Securities Subject to Exercise or Conversion





 



i.            

$150,000 Promissory
Note (presently convertible into 500,010 shares)





 



ii.            

15 Warrants to
purchase an aggregate of 500,010 shares (33,334 shares per
Warrant)





 


The
foregoing securities have anti-dilution rights as set forth therein
and the number of shares issuable upon conversion or exercise is
subject to adjustment. See form of Note and Warrant filed as
Exhibit 10.3 and 10.4 to the Company’s Form 8-K filed with
the SEC on September 25,2017.

 




C.

Company
Capitalization





 


i.       
     48,333,334 shares of common stock presently
issued and outstanding

 


ii.       
    1,000,000 shares of common stock to be issued per (A)
above

 


iii.           1,020,000
shares of common stock underlying the Notes and Warrants referenced
in (B) above

 




D.

2013 Equity
Incentive Plan





 


62,074
shares of common stock remain available for issuance under the
Company’s 2013 Equity Incentive Plan No Plan awards are
presently issued and outstanding.

 



Schedule 3.1(n)

 


The
holder of the Notes and Warrants referenced in Schedule 3.1(g)(B)
has a security interest in the Company’s assets as set forth
in the September 19, 2017 Security Agreement filed as Exhibit 10.6
to the Company’s Form 8-K filed on September 25,
2017.

 



Schedule 3.1(r)

 


Not
applicable.

 



Schedule 3.1(t)

 


The
holder of the Notes and Warrants referenced in Schedule 3.1(g)(B)
and CKR Law LLP have registration rights with respect to the shares
underlying the Notes and Warrants (1,020,000 shares plus
anti-dilution shares) and the common stock owned (or to be owned by
CKR following a pending transfer) by CKR Law LLP (3,840,565
shares).

 


 




 

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Schedule 3.1(ee)

 


The
Company’s June 30, 2017 financial statements do not include
(i) Indebtedness incurred in the ordinary course of business since
June 30, 2017; (ii) reference to the Notes and Warrants referenced
in Schedule 3.1(g)(B), which Notes and Warrants was issued
subsequent to June 30, 2017; or (iii) reference to the Security
Interest in favor of the holder of the Notes and Warrants
referenced in Schedule 3.1(g)(B). Such Notes and Warrants are
senior in right of payment to the Notes being issued pursuant to
the Securities Purchase Agreement.

 



Schedule 4.5

 


The
proceeds of the Offering will be utilized by the Company for
general working capital purposes.

 

 

 




 

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