Series A Convertible Preferred Stock Puchase Agreement



 EXHIBIT 10.4 
 SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE 
 AGREEMENT 
 Dated as of May 3, 2007 
 among

 ADVANCED GROWING SYSTEMS, INC. 
 and 
 THE PURCHASERS LISTED ON EXHIBIT A 







 TABLE OF CONTENTS 
  

 

					
	 	  	 	  	PAGE
	 ARTICLE I Purchase and Sale of Preferred Stock
	  	1
			
	 Section 1.1
	  	Purchase and Sale of Stock	  	1
	 Section 1.2
	  	Warrants	  	1
	 Section 1.3
	  	Conversion Shares	  	2
	 Section 1.4
	  	Purchase Price and Closing	  	2
		
	 ARTICLE II Representations and Warranties
	  	3
			
	 Section 2.1
	  	Representations and Warranties of the Company	  	3
	 Section 2.2
	  	Representations and Warranties of the Purchasers	  	13
		
	 ARTICLE III Covenants
	  	15
			
	 Section 3.1
	  	Securities Compliance	  	15
	 Section 3.2
	  	Registration and Listing	  	15
	 Section 3.3
	  	Inspection Rights	  	16
	 Section 3.4
	  	Compliance with Laws	  	16
	 Section 3.5
	  	Keeping of Records and Books of Account	  	16
	 Section 3.6
	  	Reporting Requirements	  	16
	 Section 3.7
	  	Amendments	  	16
	 Section 3.8
	  	Other Agreements	  	17
	 Section 3.9
	  	Distributions	  	17
	 Section 3.10
	  	Status of Dividends	  	17
	 Section 3.11
	  	Use of Proceeds	  	18
	 Section 3.12
	  	Reservation of Shares	  	18
	 Section 3.13
	  	Transfer Agent Instructions	  	18
	 Section 3.14
	  	Disposition of Assets	  	19
	 Section 3.15
	  	Reporting Status	  	19
	 Section 3.16
	  	Disclosure of Transaction	  	19
	 Section 3.17
	  	Disclosure of Material Information	  	19
	 Section 3.18
	  	Pledge of Securities	  	19
	 Section 3.19
	  	Form SB-2 Eligibility	  	19
	 Section 3.20
	  	Lock-Up Agreement	  	20
	 Section 3.21
	  	Listing of Common Stock on Trading Market	  	20
	 Section 3.22
	  	DTC Status	  	20
	 Section 3.23
	  	Variable Rate Transactions; Additional Registration Statements	  	20









					
	 ARTICLE IV CONDITIONS
	  	21
			
	 Section 4.1
	  	Conditions Precedent to the Obligation of the Company to Sell the Shares	  	21
	 Section 4.2
	  	Conditions Precedent to the Obligation of the Purchasers to Purchase the Shares	  	21
		
	 ARTICLE V Stock Certificate Legend
	  	24
			
	 Section 5.1
	  	Legend	  	24
		
	 ARTICLE VI Indemnification
	  	25
			
	 Section 6.1
	  	Company Indemnity	  	25
	 Section 6.2
	  	Indemnification Procedure	  	25
		
	 ARTICLE VII Miscellaneous
	  	26
			
	 Section 7.1
	  	Fees and Expenses	  	26
	 Section 7.2
	  	Specific Enforcement, Consent to Jurisdiction	  	26
	 Section 7.3
	  	Entire Agreement; Amendment	  	27
	 Section 7.4
	  	Notices	  	27
	 Section 7.5
	  	Waivers	  	28
	 Section 7.6
	  	Headings	  	28
	 Section 7.7
	  	Successors and Assigns	  	28
	 Section 7.8
	  	No Third Party Beneficiaries	  	28
	 Section 7.9
	  	Governing Law	  	29
	 Section 7.10
	  	Survival	  	29
	 Section 7.11
	  	Counterparts	  	29
	 Section 7.12
	  	Publicity	  	29
	 Section 7.13
	  	Severability	  	29
	 Section 7.14
	  	Further Assurances	  	29

  

 ii 








 SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT 
 This SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the “Agreement”) is dated as of May 3, 2007 by and among Advanced
Growing Systems, Inc., a Nevada corporation (the “Company”), and each of the Purchasers of shares of Series A Convertible Preferred Stock of the Company whose names are set forth on Exhibit A hereto (individually, a
“Purchaser” and collectively, the “Purchasers”). 
 The parties hereto agree as follows: 
 ARTICLE I 
 Purchase and Sale of
Preferred Stock 
 Section 1.1 Purchase and Sale of Stock. Upon the following terms and conditions, the Company shall issue and
sell to the Purchasers and each of the Purchasers shall purchase from the Company, the number of shares of the Company’s Series A Convertible Preferred Stock, par value $.001 per share and stated value of $0.50 per share (the “Preferred
Shares”), convertible into shares of the Company’s common stock, par value $.001 per share (the “Common Stock”), in the amounts set forth opposite such Purchaser’s name on Exhibit A hereto. The designation,
rights, preferences and other terms and provisions of the Series A Convertible Preferred Stock are set forth in the Certificate of Designation of the Relative Rights and Preferences of the Series A Convertible Preferred Stock attached hereto as
Exhibit B (the “Certificate of Designation”). The Company and the Purchasers are executing and delivering this Agreement in accordance with and in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”) or
Section 4(2) of the Securities Act. 
 Section 1.2 Warrants. Upon the following terms and conditions and for no additional
consideration, each of the Purchasers shall be issued (i) Series A Warrants, in substantially the form attached hereto as Exhibit C-1 (the “Series A Warrants”), to purchase the number of shares of Common Stock equal to
fifty percent (50%) of the number of Preferred Shares purchased by each Purchaser pursuant to the terms of this Agreement, as set forth opposite such Purchaser’s name on Exhibit A hereto, (ii) Series B Warrants, in
substantially the form attached hereto as Exhibit C-2 (the “Series B Warrants”), to purchase the number of shares of Common Stock equal to fifty percent (50%) of the number of Preferred Shares purchased by each Purchaser
pursuant to the terms of this Agreement, as set forth opposite such Purchaser’s name on Exhibit A hereto, (iii) Series J Warrants, in substantially the form attached hereto as Exhibit C-3 (the “Series J
Warrants”), to purchase the number of shares of Common Stock equal to one hundred percent (100%) of the number of Preferred Shares purchased by each Purchaser, as set forth opposite such Purchaser’s name on Exhibit A
hereto, (iv) Series C Warrants, in substantially the form attached hereto as Exhibit C-4 (the “Series C Warrants”), to purchase the number of shares of Common Stock equal to fifty percent (50%) of the number of
Preferred Shares purchased by each Purchaser pursuant to the terms of this Agreement, as set forth opposite such Purchaser’s name on Exhibit A hereto, and (v) Series D Warrants, in substantially 








 
the form attached hereto as Exhibit C-5 (the “Series D Warrants” and, together with the Series A Warrants, the Series B Warrants, the
Series J Warrants and the Series C Warrants, the “Warrants”), to purchase the number of shares of Common Stock equal to fifty percent (50%) of the number of Preferred Shares purchased by each Purchaser pursuant to the terms of
this Agreement, as set forth opposite such Purchaser’s name on Exhibit A hereto. Each of the Warrants shall have an exercise price per share equal to the Warrant Price (as defined in the applicable Warrant) and shall expire as provided
therein. 
 Section 1.3 Conversion Shares. The Company has authorized and has reserved and covenants to continue to reserve, free of
preemptive rights and other similar contractual rights of stockholders, a number of shares of Common Stock equal to one hundred twenty percent (120%) of the number of shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Preferred Shares and exercise of the Warrants then outstanding. Any shares of Common Stock issuable upon conversion of the Preferred Shares and exercise of the Warrants (and such shares when issued) are herein referred to as
the “Conversion Shares” and the “Warrant Shares”, respectively. The Preferred Shares, the Conversion Shares and the Warrant Shares are sometimes collectively referred to as the “Shares”. 

Section 1.4 Purchase Price and Closing. Subject to the terms and conditions hereof, the Company agrees to issue and sell to the Purchasers and,
in consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Purchasers, severally but not jointly, agree to purchase the Preferred Shares and the Warrants for an aggregate
purchase price of $375,000 (the “Purchase Price”). The closing of the purchase and sale of the Preferred Shares and the Warrants to be acquired by the Purchasers from the Company under this Agreement shall take place at the offices
of Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, New York 10036 (the “Closing”) at 10:00 a.m., New York time (i) on or before May 3, 2007; provided, that all of the conditions
set forth in Article IV hereof and applicable to the Closing shall have been fulfilled or waived in accordance herewith, or (ii) at such other time and place or on such date as the Purchasers and the Company may agree upon (the “Closing
Date”). Subject to the terms and conditions of this Agreement, at the Closing the Company shall deliver or cause to be delivered to each Purchaser (x) a certificate for the number of Preferred Shares set forth opposite the name of such
Purchaser on Exhibit A hereto, (y) its Warrants to purchase such number of shares of Common Stock as is set forth opposite the name of such Purchaser on Exhibit A attached hereto and (z) any other documents required to be
delivered pursuant to Article IV hereof. At the Closing, each Purchaser shall deliver its Purchase Price by wire transfer to an escrow account designated by the escrow agent. 
  

 2 








 ARTICLE II 
 Representations and Warranties 
 Section 2.1 Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchasers, as of the date hereof and the Closing Date (except as set forth on the Schedule of Exceptions attached hereto with each numbered Schedule corresponding to the section number herein), as
follows: 
 (a) Organization, Good Standing and Power. The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Nevada and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. The Company does not have any subsidiaries except as
set forth on Schedule 2.1(g) hereto. The Company and each such subsidiary is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned
by it makes such qualification necessary except for any jurisdiction(s) (alone or in the aggregate) in which the failure to be so qualified will not have a Material Adverse Effect (as defined in Section 2.1(c) hereof) on the Company’s
financial condition. 
 (b) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and
perform this Agreement, the Registration Rights Agreement in the form attached hereto as Exhibit D (the “Registration Rights Agreement”), the Lock-Up Agreement (as defined in Section 3.20 hereof) in the form attached
hereto as Exhibit E, the Escrow Agreement by and among the Company, the Purchasers and the escrow agent, dated as of the date hereof, substantially in the form of Exhibit F attached hereto (the “Escrow Agreement”), the
Irrevocable Transfer Agent Instructions (as defined in Section 3.13), the Certificate of Designation, and the Warrants (collectively, the “Transaction Documents”) and to issue and sell the Shares and the Warrants in accordance
with the terms hereof. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary
corporate action, and no further consent or authorization of the Company or its Board of Directors or stockholders is required. This Agreement has been duly executed and delivered by the Company. The other Transaction Documents will have been duly
executed and delivered by the Company at the Closing. Each of the Transaction Documents constitutes, or shall constitute when executed and delivered, a valid and binding obligation of the Company enforceable against the Company in accordance with
its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of,
creditor’s rights and remedies or by other equitable principles of general application. 
 (c) Capitalization. The authorized
capital stock of the Company and the shares thereof currently issued and outstanding as of the date hereof are set forth on Schedule 2.1(c) hereto. All of the outstanding shares of the Common Stock and the Preferred Shares have been duly and
validly authorized. Except as set forth on Schedule 2.1(c) hereto, no shares of Common Stock are entitled to preemptive rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company. There are no contracts, commitments, understandings, or arrangements by which the Company is or may become
bound to issue additional shares of the capital stock of the Company or options, securities or rights convertible into shares of capital stock of the Company. The Company is not a party to any agreement granting registration or anti-dilution rights
to any person with respect to any of its equity or debt securities. The Company is not a party to, and it has no knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of the Company. The offer and sale of
all capital stock, convertible securities, rights, 

  

 3 








 
warrants, or options of the Company issued prior to the Closing complied with all applicable Federal and state securities laws, and no stockholder has a
right of rescission or claim for damages with respect thereto which would have a Material Adverse Effect (as defined below). The Company has furnished or made available to the Purchasers true and correct copies of the Company’s Articles of
Incorporation as in effect on the date hereof (the “Articles”), and the Company’s Bylaws as in effect on the date hereof (the “Bylaws”). For the purposes of this Agreement, “Material Adverse
Effect” means any material adverse effect on the business, operations, properties, prospects, or financial condition of the Company and its subsidiaries and/or any condition, circumstance, or situation that would prohibit or otherwise
materially interfere with the ability of the Company to perform any of its obligations under this Agreement in any material respect. 
 (d)
Issuance of Shares. The Preferred Shares and the Warrants to be issued at the Closing have been duly authorized by all necessary corporate action and the Preferred Shares, when paid for or issued in accordance with the terms hereof, shall be
validly issued and outstanding, fully paid and nonassessable and entitled to the rights and preferences set forth in the Certificate of Designation. When the Conversion Shares and the Warrant Shares are issued in accordance with the terms of the
Certificate of Designation and the Warrants, respectively, such shares will be duly authorized by all necessary corporate action and validly issued and outstanding, fully paid and nonassessable, and the holders shall be entitled to all rights
accorded to a holder of Common Stock. 
 (e) No Conflicts. The execution, delivery and performance of the Transaction Documents by the
Company, the performance by the Company of its obligations under the Certificate of Designation and the consummation by the Company of the transactions contemplated herein and therein do not and will not (i) violate any provision of the
Company’s Articles or Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party or by which it or its properties or assets are bound, (iii) create or impose a
lien, mortgage, security interest, charge or encumbrance of any nature on any property of the Company under any agreement or any commitment to which the Company is a party or by which the Company is bound or by which any of its respective properties
or assets are bound, or (iv) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including Federal and state securities laws and regulations) applicable to the Company or any of
its subsidiaries or by which any property or asset of the Company or any of its subsidiaries are bound or affected, except, in all cases other than violations pursuant to clauses (i) and (iv) above, for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect. The business of the Company and its subsidiaries is not being conducted in violation of any laws,
ordinances or regulations of any governmental entity, except for possible violations which singularly or in the aggregate do not and will not have a Material Adverse Effect. The Company is not required under Federal, state or local law, rule or
regulation 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 the Transaction Documents, or issue
and sell the Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares in 

  

 4 








 
accordance with the terms hereof or thereof (other than any filings which may be required to be made by the Company with the Commission or state securities
administrators subsequent to the Closing, any registration statement which may be filed pursuant hereto, and the Certificate of Designation); provided that, for purposes of the representation made in this sentence, the Company is assuming and
relying upon the accuracy of the relevant representations and agreements of the Purchasers herein. 
 (f) Financial Statements. The
Company has delivered to the Purchasers true and complete copies of the Company’s audited financial statements for the fiscal year ended September 30, 2006 (the “Audited Financial Statements Date”) and unaudited financial
statements for the fiscal quarter ended December 31, 2006 (collectively, the “Financial Statements”). Except as disclosed on Schedule 2.1(f) hereto, the Financial Statements complied in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations of the Securities and Exchange Commission (the “Commission”) promulgated thereunder, and the
Financial Statements do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were
made, not misleading. Except as disclosed on Schedule 2.1(f) hereto, as of their respective dates, the Financial Statements were complete and correct in all material respects and complied with applicable accounting requirements and the
published rules and regulations of the Commission or other applicable rules and regulations with respect thereto. Such Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States
(“GAAP”) applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the Notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the financial position of the Company and its subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). 
 (g)
Subsidiaries. Schedule 2.1(g) hereto sets forth each subsidiary of the Company, showing the jurisdiction of its incorporation or organization and showing the percentage of each person’s ownership. For the purposes of this
Agreement, “subsidiary” shall mean any corporation or other entity of which at least a majority of the securities or other ownership interest having ordinary voting power (absolutely or contingently) for the election of directors or
other persons performing similar functions are at the time owned directly or indirectly by the Company and/or any of its other subsidiaries. All of the outstanding shares of capital stock of each subsidiary have been duly authorized and validly
issued, and are fully paid and nonassessable. There are no outstanding preemptive, conversion or other rights, options, warrants or agreements granted or issued by or binding upon any subsidiary for the purchase or acquisition of any shares of
capital stock of any subsidiary or any other securities convertible into, exchangeable for or evidencing the rights to subscribe for any shares of such capital stock. Neither the Company nor any subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the capital stock of any subsidiary or any convertible securities, rights, warrants or options of the type described in the preceding sentence. Neither the Company nor any
subsidiary is party to, nor has any knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of any subsidiary. 
  

 5 








 (h) No Material Adverse Change. Since the Audited Financial Statements Date, the Company has not
experienced or suffered any Material Adverse Effect. 
 (i) No Undisclosed Liabilities. Since the Audited Financial Statements Date,
neither the Company nor any of its subsidiaries has incurred any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) other than those incurred in the
ordinary course of the Company’s or its subsidiaries respective businesses or which, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect. Since the Audited Financial Statements Date, none of the Company
or any of its subsidiaries has participated in any transaction material to the condition of the Company which is outside of the ordinary course of its business. 
 (j) No Undisclosed Events or Circumstances. No event or circumstance has occurred or exists with respect to the Company or its subsidiaries or their respective businesses, properties, prospects, operations or
financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed. 
 (k) Indebtedness. Schedule 2.1(k) hereto sets forth as of a recent date all outstanding 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” shall mean (a) any liabilities for borrowed money or amounts owed in excess of $100,000 (other
than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in the
Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease
payments in excess of $25,000 due under leases required to be capitalized in accordance with GAAP. Except as set forth on Schedule 2.1(k), neither the Company nor any subsidiary is in default with respect to any Indebtedness. 
 (l) Title to Assets. Each of the Company and the subsidiaries has good and marketable title to all of its real and personal property, free and
clear of any mortgages, pledges, charges, liens, security interests or other encumbrances, except for those that, individually or in the aggregate, do not cause a Material Adverse Effect. All leases of the Company and each of its subsidiaries are
valid and subsisting and in full force and effect. 
 (m) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or any other proceeding pending or, to the knowledge of the Company, threatened against the Company or any subsidiary which questions the validity of this Agreement or any of the other Transaction
Documents or the transactions contemplated hereby or thereby or any action taken or to be taken pursuant hereto or thereto. Except as set forth on Schedule 2.1(m) hereto, there is no action, suit, claim, investigation, arbitration, alternate
dispute resolution proceeding or any other proceeding pending or, to the knowledge of the 

  

 6 








 
Company, threatened, against or involving the Company, any subsidiary or any of their respective properties or assets. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any subsidiary or any officers or directors of the Company or subsidiary in their capacities as such. 
 (n) Compliance with Law. The business of the Company and the subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and ordinances, except for such noncompliance that, individually or in the aggregate, would not cause a Material Adverse Effect. The Company and each of its subsidiaries have
all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted by it unless the failure to possess such franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 
 (o) Taxes. The Company and each of the subsidiaries has accurately prepared and filed all federal, state and other tax returns required by law to
be filed by it, has paid or made provisions for the payment of all taxes shown to be due and all additional assessments, and adequate provisions have been and are reflected in the financial statements of the Company and the subsidiaries for all
current taxes and other charges to which the Company or any subsidiary is subject and which are not currently due and payable. None of the federal income tax returns of the Company or any subsidiary have been audited by the Internal Revenue Service.
The Company has no knowledge of any additional assessments, adjustments or contingent tax liability (whether federal or state) of any nature whatsoever, whether pending or threatened against the Company or any subsidiary for any period, nor of any
basis for any such assessment, adjustment or contingency. 
 (p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto,
no brokers, finders or financial advisory fees or commissions will be payable by the Company or any subsidiary or any Purchaser with respect to the transactions contemplated by this Agreement. 
 (q) Disclosure. Neither this Agreement or the Schedules hereto nor any other documents, certificates or instruments furnished to the Purchasers by
or on behalf of the Company or any subsidiary in connection with the transactions contemplated by this Agreement contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein
or therein, in the light of the circumstances under which they were made herein or therein, not misleading. 
 (r) Operation of
Business. The Company and each of the subsidiaries owns or possesses all patents, trademarks, domain names (whether or not registered) and any patentable improvements or copyrightable derivative works thereof, websites and intellectual property
rights relating thereto, service marks, trade names, copyrights, licenses and authorizations, and all rights with respect to the foregoing, which are necessary for the conduct of its business as now conducted without any conflict with the rights of
others. 
  

 7 








 (s) Environmental Compliance. The Company and each of its subsidiaries have obtained all material
approvals, authorization, certificates, consents, licenses, orders and permits or other similar authorizations of all governmental authorities, or from any other person, that are required under any Environmental Laws. “Environmental
Laws” shall mean all applicable laws relating to the protection of the environment including, without limitation, all requirements pertaining to reporting, licensing, permitting, controlling, investigating or remediating emissions,
discharges, releases or threatened releases of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, materials or wastes, whether solid, liquid or gaseous in nature, into the air, surface water, groundwater or
land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, material or wastes, whether solid,
liquid or gaseous in nature. The Company has all necessary governmental approvals required under all Environmental Laws and used in its business or in the business of any of its subsidiaries. The Company and each of its subsidiaries are also in
compliance with all other limitations, restrictions, conditions, standards, requirements, schedules and timetables required or imposed under all Environmental Laws. Except for such instances as would not individually or in the aggregate have a
Material Adverse Effect, there are no past or present events, conditions, circumstances, incidents, actions or omissions relating to or in any way affecting the Company or its subsidiaries that violate or may violate any Environmental Law after the
Closing Date or that may give rise to any environmental liability, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, study or investigation (i) under any Environmental Law, or (ii) based on or related to
the manufacture, processing, distribution, use, treatment, storage (including without limitation underground storage tanks), disposal, transport or handling, or the emission, discharge, release or threatened release of any hazardous substance.

 (t) Books and Record Internal Accounting Controls. The books and records of the Company and its subsidiaries accurately reflect in
all material respects the information relating to the business of the Company and the subsidiaries, the location and collection of their assets, and the nature of all transactions giving rise to the obligations or accounts receivable of the Company
or any subsidiary. The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company, to provide reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate actions is taken with respect to
any differences. 
 (u) Material Agreements. Except for the Transaction Documents (with respect to clause (i) only) or as set
forth on Schedule 2.1(u) hereto, or as would not be reasonably likely to have a Material Adverse Effect, (i) the Company and each of its subsidiaries have performed all obligations required to be performed by them to date under any
written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, filed or required to be filed with the Commission (the “Material Agreements”), (ii) neither the Company nor any of its subsidiaries
has received any notice of default under any Material Agreement and, (iii) to the best of the Company’s knowledge, neither the Company nor any of its subsidiaries is in default under any Material Agreement. 
  

 8 








 (v) Transactions with Affiliates. Except as set forth on Schedule 2.1(v) hereto, there are
no loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions between (a) the Company or any subsidiary on the one hand, and (b) on the other hand, any officer, employee,
consultant or director of the Company, or any of its subsidiaries, or any person owning any capital stock of the Company or any subsidiary or any member of the immediate family of such officer, employee, consultant, director or stockholder or any
corporation or other entity controlled by such officer, employee, consultant, director or stockholder, or a member of the immediate family of such officer, employee, consultant, director or stockholder. 
 (w) Securities Act of 1933. Based in material part upon the representations herein of the Purchasers, the Company has complied and will comply
with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Shares and the Warrants hereunder. Neither the Company nor anyone acting on its behalf, directly or indirectly, has or will sell, offer to
sell or solicit offers to buy any of the Shares, the Warrants or similar securities to, or solicit offers with respect thereto from, or enter into any preliminary conversations or negotiations relating thereto with, any person, or has taken or will
take any action so as to bring the issuance and sale of any of the Shares and the Warrants under the registration provisions of the Securities Act and applicable state securities laws, and neither the Company nor any of its affiliates, nor any
person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of any of the Shares and the Warrants.

 (x) Governmental Approvals. Except for the filing of any notice prior or subsequent to the Closing Date that may be required under
applicable state and/or Federal securities laws (which if required, shall be filed on a timely basis), including the filing of a Form D and a registration statement or statements pursuant to the Registration Rights Agreement, and the filing of the
Certificate of Designation with the Secretary of State for the State of Nevada, no authorization, consent, approval, license, exemption of, filing or registration with any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the execution or delivery of the Preferred Shares and the Warrants, or for the performance by the Company of its obligations under the Transaction Documents.

 (y) Employees. Neither the Company nor any subsidiary has any collective bargaining arrangements or agreements covering any of its
employees. Neither the Company nor any subsidiary has any employment contract, agreement regarding proprietary information, non-competition agreement, non-solicitation agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or consultant to be employed or engaged by the Company or such subsidiary. No officer, consultant or key employee of the Company or any subsidiary whose termination, either
individually or in the aggregate, could have a Material Adverse Effect, has terminated or, to the knowledge of the Company, has any present intention of terminating his or her employment or engagement with the Company or any subsidiary. 

 

 9 








 (z) Absence of Certain Developments. Except as set forth on Schedule 2.1(z) hereto, since
the Audited Financial Statements Date, neither the Company nor any subsidiary has: 
 (i) issued any stock, bonds or other
corporate securities or any rights, options or warrants with respect thereto; 
 (ii) borrowed any amount or incurred or
become subject to any liabilities (absolute or contingent) except current liabilities incurred in the ordinary course of business which are comparable in nature and amount to the current liabilities incurred in the ordinary course of business during
the comparable portion of its prior fiscal year, as adjusted to reflect the current nature and volume of the Company’s or such subsidiary’s business; 
 (iii) discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business; 
 (iv) declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or redeemed, or made any agreements so to purchase or redeem, any shares of its capital stock; 
 (v) sold, assigned or transferred any other tangible assets, or canceled any debts or claims, except in the ordinary course of business;

 (vi) sold, assigned or transferred any patent rights, trademarks, trade names, copyrights, trade secrets or other
intangible assets or intellectual property rights, or disclosed any proprietary confidential information to any person except to customers in the ordinary course of business or to the Purchasers or their representatives; 
 (vii) suffered any substantial losses or waived any rights of material value, whether or not in the ordinary course of business, or
suffered the loss of any material amount of prospective business; 
 (viii) made any changes in employee compensation except
in the ordinary course of business and consistent with past practices; 
 (ix) made capital expenditures or commitments
therefor that aggregate in excess of $100,000; 
 (x) entered into any other transaction other than in the ordinary course of
business, or entered into any other material transaction, whether or not in the ordinary course of business; 
 (xi) made
charitable contributions or pledges in excess of $25,000; 
 (xii) suffered any material damage, destruction or casualty loss,
whether or not covered by insurance; 
  

 10 








 (xiii) experienced any material problems with labor or management in connection with the
terms and conditions of their employment; 
 (xiv) effected any two or more events of the foregoing kind which in the
aggregate would be material to the Company or its subsidiaries; or 
 (xv) entered into an agreement, written or otherwise, to
take any of the foregoing actions. 
 (aa) Investment Company Act Status. The Company is not, and as a result of and immediately upon
the Closing will not be, an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended. 
 (bb) ERISA. No liability to the Pension Benefit Guaranty Corporation has been incurred with respect to any Plan (as defined below) by the Company
or any of its subsidiaries which is or would be materially adverse to the Company and its subsidiaries. The execution and delivery of this Agreement and the issuance and sale of the Preferred Shares will not involve any transaction which is subject
to the prohibitions of Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended, provided that, if any of the Purchasers, or any person or entity that
owns a beneficial interest in any of the Purchasers, is an “employee pension benefit plan” (within the meaning of Section 3(2) of ERISA) with respect to which the Company is a “party in interest” (within the meaning of
Section 3(14) of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this Section 2.1(ac), the term “Plan” shall mean an “employee pension benefit plan” (as
defined in Section 3 of ERISA) which is or has been established or maintained, or to which contributions are or have been made, by the Company or any subsidiary or by any trade or business, whether or not incorporated, which, together with the
Company or any subsidiary, is under common control, as described in Section 414(b) or (c) of the Code. 
 (cc) Dilutive
Effect. The Company understands and acknowledges that its obligation to issue Conversion Shares upon conversion of the Preferred Shares in accordance with this Agreement and the Certificate of Designation and its obligations to issue the Warrant
Shares upon the exercise of the Warrants in accordance with this Agreement and the Warrants, is, in each case, absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interest of other stockholders
of the Company. 
 (dd) No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the offering of the Shares pursuant to this Agreement to be integrated with prior offerings
by the Company for purposes of the Securities Act which would prevent the Company from selling the Shares pursuant to Rule 506 under the Securities Act, or any applicable exchange-related stockholder approval provisions, nor will the Company or any
of its affiliates or subsidiaries take any action or steps that would cause the offering of the Shares to be integrated with other offerings. The Company does not have any registration statement pending before the Commission or currently under the
Commission’s review and since July 1, 2006, the Company has not offered or sold any of its equity securities or debt securities convertible into shares of Common Stock. 
  

 11 








 (ee) Sarbanes-Oxley Act. The Company is in compliance with the applicable provisions of the
Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), and the rules and regulations promulgated thereunder, that are effective, and intends to comply with other applicable provisions of the Sarbanes-Oxley Act, and the rules and
regulations promulgated thereunder, upon the effectiveness of such provisions. 
 (ff) Transfer Agent. The name, address, telephone
number, fax number, contact person and email address of the Company’s transfer agent is set forth on Schedule 2.1(ff) hereto. 
 (gg) Independent Nature of Purchasers. The Company acknowledges that the obligations of each Purchaser under the Transaction Documents are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other Purchaser under the Transaction Documents. The Company acknowledges that the decision of each Purchaser to purchase securities pursuant to this Agreement has been made by
such Purchaser independently of any other purchase and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of its Subsidiaries which may have made or given by any other Purchaser or by any agent or employee of any other Purchaser, and no Purchaser or any of its agents or employees shall have any liability to any
Purchaser (or any other person) relating to or arising from any such information, materials, statements or opinions. The Company acknowledges that nothing contained herein, or in any Transaction Document, and no action taken by any Purchaser
pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction Documents. The Company acknowledges that each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights
arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. The Company acknowledges that for reasons of
administrative convenience only, the Transaction Documents have been prepared by counsel for one of the Purchasers and such counsel does not represent all of the Purchasers but only such Purchaser and the other Purchasers have retained their own
individual counsel with respect to the transactions contemplated hereby. The Company acknowledges that it has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers. The Company acknowledges that such procedure with respect to the Transaction Documents in no way creates a presumption that the Purchasers are in any way acting in concert or as a group with
respect to the Transaction Documents or the transactions contemplated hereby or thereby. 
  

 12 








 Section 2.2 Representations and Warranties of the Purchasers. Each of the Purchasers hereby makes
the following representations and warranties to the Company with respect solely to itself and not with respect to any other Purchaser: 
 (a)
Organization and Standing of the Purchasers. If the Purchaser is an entity, such Purchaser is a corporation or partnership duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization. 
 (b) Authorization and Power. Each Purchaser has the requisite power and authority to enter into and
perform this Agreement and to purchase the Preferred Shares and Warrants being sold to it hereunder. The execution, delivery and performance of this Agreement and the Registration Rights Agreement by such Purchaser and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all necessary corporate or partnership action, and no further consent or authorization of such Purchaser or its Board of Directors, stockholders, or partners, as the case may
be, is required. Each of this Agreement and the Registration Rights Agreement has been duly authorized, executed and delivered by such Purchaser and constitutes, or shall constitute when executed and delivered, a valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with the terms thereof. 
 (c) No Conflicts. The execution, delivery and
performance of this Agreement and the Registration Rights Agreement and the consummation by such Purchaser of the transactions contemplated hereby and thereby or relating hereto do not and will not (i) result in a violation of such
Purchaser’s charter documents or bylaws or other organizational documents or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of any agreement, indenture or instrument or obligation to which such Purchaser is a party or by which its properties or assets are bound, or 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 the Registration Rights Agreement or to purchase the Preferred Shares or acquire the Warrants 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. 
 (d) Acquisition for Investment.
Each Purchaser is acquiring the Preferred Shares and the Warrants solely for its own account for the purpose of investment and not with a view to or for sale in connection with distribution. Each Purchaser does not have a present intention to sell
the Preferred Shares or the Warrants, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of the Preferred Shares or the Warrants to or through any person or entity; provided, however,
that by making the representations herein and subject to Section 2.2(h) below, such Purchaser does not agree to hold the Shares or the Warrants for any 

  

 13 








 
minimum or other specific term and reserves the right to dispose of the Shares or the Warrants at any time in accordance with Federal and state securities
laws applicable to such disposition. Each Purchaser acknowledges that it is able to bear the financial risks associated with an investment in the Preferred Shares and the Warrants and that it has been given full access to such records of the Company
and the subsidiaries and to the officers of the Company and the subsidiaries and received such information as it has deemed necessary or appropriate to conduct its due diligence investigation and has sufficient knowledge and experience in investing
in companies similar to the Company in terms of the Company’s stage of development so as to be able to evaluate the risks and merits of its investment in the Company. 
 (e) Status of Purchasers. Such Purchaser is an “accredited investor” as defined in Regulation D promulgated under the Securities Act.
Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act and such Purchaser is not a broker-dealer. 
 (f) Opportunities for Additional Information. Each Purchaser acknowledges that such Purchaser has had the opportunity to ask questions of and receive answers from, or obtain additional information from, the
executive officers of the Company concerning the financial and other affairs of the Company, and to the extent deemed necessary in light of such Purchaser’s personal knowledge of the Company’s affairs, such Purchaser has asked such
questions and received answers to the full satisfaction of such Purchaser, and such Purchaser desires to invest in the Company. 
 (g) No
General Solicitation. Each Purchaser acknowledges that the Preferred Shares and the Warrants were not offered to such Purchaser by means of any form of general or public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio, or (ii) any seminar or meeting to
which such Purchaser was invited by any of the foregoing means of communications. 
 (h) Rule 144. Such Purchaser understands that the
Shares must be held indefinitely unless such Shares are registered under the Securities Act or an exemption from registration is available. Such Purchaser acknowledges that such Purchaser is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act (“Rule 144”), and that such person has been advised that Rule 144 permits resales only under certain circumstances. Such Purchaser understands that to the extent
that Rule 144 is not available, such Purchaser will be unable to sell any Shares without either registration under the Securities Act or the existence of another exemption from such registration requirement. 
 (i) General. Such Purchaser understands that the Shares are being offered and sold in reliance on a transactional exemption from the registration
requirement of Federal and state securities laws and the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to determine the
applicability of such exemptions and the suitability of such Purchaser to acquire the Shares. 
  

 14 








 (j) Independent Investment. Except as may be disclosed in any filings with the Commission by the
Purchasers under Section 13 and/or Section 16 of the Exchange Act, no Purchaser has agreed to act with any other Purchaser for the purpose of acquiring, holding, voting or disposing of the Shares purchased hereunder for purposes of
Section 13(d) under the Exchange Act, and each Purchaser is acting independently with respect to its investment in the Shares. 
 (k)
Trading Activities. Each Purchaser’s trading activities with respect to the Shares shall be in compliance with all applicable federal and state securities laws. No Purchaser nor any of its affiliates has an open short position in the
Common Stock, each Purchaser agrees that it shall not, and that it will cause its affiliates not to, engage in any short sales with respect to the Common Stock. 
 ARTICLE III 
 Covenants 
 The Company covenants with each of the Purchasers as follows, which covenants are for the benefit of the Purchasers and their permitted assignees (as
defined herein). 
 Section 3.1 Securities Compliance. The Company shall notify the Commission in accordance with their rules and
regulations, of the transactions contemplated by any of the Transaction Documents, including filing a Form D with respect to the Preferred Shares, Warrants, Conversion Shares and Warrant Shares as required under Regulation D, and shall take all
other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares to the Purchasers or
subsequent holders. 
 Section 3.2 Registration and Listing. The Company shall cause its Common Stock to be registered under Sections
12(b) or 12(g) of the Exchange Act no later than the effective date of the Registration Statement (as defined in the Registration Rights Agreement), to comply in all respects with its reporting and filing obligations under the Exchange Act, to
comply with all requirements related to any registration statement filed pursuant to this Agreement or the Registration Rights Agreement, and to not take any action or file any document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under the Exchange Act or Securities Act, except as permitted herein. Subject to the terms of the Transaction
Documents, the Company further covenants that it will take such further action as the Purchasers may reasonably request, all to the extent required from time to time to enable the Purchasers to sell the Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act. Upon the request of the Purchasers, the Company shall deliver to the Purchasers a written certification of a duly authorized officer as
to whether it has complied with such requirements. 
  

 15 








 Section 3.3 Inspection Rights. The Company shall permit, during normal business hours and upon
reasonable request and reasonable notice, each Purchaser or any employees, agents or representatives thereof, so long as such Purchaser shall be obligated hereunder to purchase the Preferred Shares or shall beneficially own any Preferred Shares, or
shall own Conversion Shares which, in the aggregate, represent more than 2% of the total combined voting power of all voting securities then outstanding, for purposes reasonably related to such Purchaser’s interests as a stockholder to examine
and make reasonable copies of and extracts from the records and books of account of, and visit and inspect the properties, assets, operations and business of the Company and any subsidiary, and to discuss the affairs, finances and accounts of the
Company and any subsidiary with any of its officers, consultants, directors, and key employees. 
 Section 3.4 Compliance with Laws.
The Company shall comply, and cause each subsidiary to comply, with all applicable laws, rules, regulations and orders, noncompliance with which could have a Material Adverse Effect. 
 Section 3.5 Keeping of Records and Books of Account. The Company shall keep and cause each subsidiary to keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP consistently applied, reflecting all financial transactions of the Company and its subsidiaries, and in which, for each fiscal year, all proper reserves for depreciation,
depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made. 
 Section 3.6
Reporting Requirements. Following such time that the Company is required to become registered under the Exchange Act pursuant to the terms of this Agreement, if the Commission ceases making the Company’s periodic reports available via
the Internet without charge, then the Company shall, promptly after filing with the Commission, furnish the following to each Purchaser so long as such Purchaser shall be obligated hereunder to purchase the Securities or shall beneficially own
Shares or Warrant Shares: 
 (a) Quarterly Reports on Form 10-Q or Form 10-QSB filed with the Commission; 
 (b) Annual Reports on Form 10-K or Form 10-KSB filed with the Commission; and 
 (c) Copies of all notices, information and proxy statements in connection with any meetings that are, in each case, provided to holders of shares of
Common Stock, contemporaneously with the delivery of such notices or information to such holders of Common Stock. 
 Section 3.7
Amendments. The Company shall not amend or waive any provision of the Articles or Bylaws of the Company in any way that would adversely affect the liquidation preferences, dividends rights, conversion rights, voting rights or redemption
rights of the Preferred Shares; provided, however, that any creation and issuance of another series of Junior Stock (as defined in the Certificate of Designation) or any other class or series of equity securities which by its terms
shall rank on parity with the Preferred Shares shall not be deemed to materially and adversely affect such rights, preferences or privileges. 
  

 16 








 Section 3.8 Other Agreements. The Company shall not enter into any agreement in which the terms of
such agreement would restrict or impair the right or ability to perform of the Company or any subsidiary under any Transaction Document. 
 Section 3.9 Distributions. So long as any Preferred Shares or Warrants remain outstanding, the Company agrees that it shall not (i) declare or pay any dividends or make any distributions to any holder(s) of Common Stock or
(ii) purchase or otherwise acquire for value, directly or indirectly, any Common Stock or other equity security of the Company. 
 Section 3.10 Status of Dividends. The Company covenants and agrees that (i) no Federal income tax return or claim for refund of Federal income tax or other submission to the Internal Revenue Service (the
“Service”) will adversely affect the Preferred Shares, any other series of its Preferred Stock, or the Common Stock, and no deduction shall operate to jeopardize the availability to Purchasers of the dividends received deduction
provided by Section 243(a)(1) of the Code or any successor provision, (ii) in no report to shareholders or to any governmental body having jurisdiction over the Company or otherwise will it treat the Preferred Shares other than as equity
capital or the dividends paid thereon other than as dividends paid on equity capital unless required to do so by a governmental body having jurisdiction over the accounts of the Company or by a change in generally accepted accounting principles
required as a result of action by an authoritative accounting standards setting body, and (iii) it will take no action which would result in the dividends paid by the Company on the Preferred Shares out of the Company’s current or
accumulated earnings and profits being ineligible for the dividends received deduction provided by Section 243(a)(1) of the Code. The preceding sentence shall not be deemed to prevent the Company from designating the Preferred Stock as
“Convertible Preferred Stock” in its annual and quarterly financial statements in accordance with its prior practice concerning other series of preferred stock of the Company. In the event that the Purchasers have reasonable cause to
believe that dividends paid by the Company on the Preferred Shares out of the Company’s current or accumulated earnings and profits will not be treated as eligible for the dividends received deduction provided by Section 243(a)(1) of the
Code, or any successor provision, the Company will, at the reasonable request of the Purchasers of 51% of the outstanding Preferred Shares, join with the Purchasers in the submission to the Service of a request for a ruling that dividends paid on
the Shares will be so eligible for Federal income tax purposes, at the Purchasers expense. In addition, the Company will reasonably cooperate with the Purchasers (at Purchasers’ expense) in any litigation, appeal or other proceeding challenging
or contesting any ruling, technical advice, finding or determination that earnings and profits are not eligible for the dividends received deduction provided by Section 243(a)(1) of the Code, or any successor provision to the extent that the
position to be taken in any such litigation, appeal, or other proceeding is not contrary to any provision of the Code. Notwithstanding the foregoing, nothing herein contained shall be deemed to preclude the Company from claiming a deduction with
respect to such dividends if (i) the Code shall hereafter be amended, or final Treasury regulations thereunder are issued or modified, to provide that dividends on the Preferred Shares or Conversion Shares should not be treated as dividends for
Federal income tax purposes or that a deduction with respect to all or a portion of the dividends on the Shares is allowable for Federal income tax purposes, or (ii) in the absence of such an amendment, 

  

 17 








 
issuance or modification and after a submission of a request for ruling or technical advice, the Service shall issue a published ruling or advise that
dividends on the Shares should not be treated as dividends for Federal income tax purposes. If the Service specifically determines that the Preferred Shares or Conversion Shares constitute debt, the Company may file protective claims for refund.

 Section 3.11 Use of Proceeds. The net proceeds from the sale of the Preferred Shares hereunder shall be used by the Company for the
acquisition of the currently contemplated fertilizer producer and capital expenditures necessary at the Company’s current and future nurseries (and any remaining proceeds may be used for working capital and general corporate purposes), and not
to redeem any Common Stock or securities convertible, exercisable or exchangeable into Common Stock or to settle any outstanding litigation. 
 Section 3.12 Reservation of Shares. So long as any of the Preferred Shares or Warrants remain outstanding, the Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less
than one hundred twenty percent (120%) the aggregate number of shares of Common Stock needed to provide for the issuance of the Conversion Shares and the Warrant Shares. 
 Section 3.13 Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates, registered in the name of each Purchaser or its respective nominee(s), for the Conversion Shares and the Warrant Shares in such amounts as specified from time to time by each Purchaser to the Company upon conversion of
the Preferred Shares or exercise of the Warrants in the form of Exhibit G attached hereto (the “Irrevocable Transfer Agent Instructions”). Prior to registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend specified in Section 5.1 of this Agreement. The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this
Section 3.13 will be given by the Company to its transfer agent and that the Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Registration Rights
Agreement. If a Purchaser provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Shares may be made without registration under the Securities Act or the
Purchaser provides the Company with reasonable assurances that the Shares can be sold pursuant to Rule 144 without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold, the Company shall
permit the transfer, and, in the case of the Conversion Shares and the Warrant Shares, promptly instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by such Purchaser and without any
restrictive legend. The Company acknowledges that a breach by it of its obligations under this Section 3.13 will cause irreparable harm to the Purchasers by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly,
the Company acknowledges that the remedy at law for a breach of its obligations under this Section 3.13 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 3.13,
that the Purchasers shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any
bond or other security being required. 
  

 18 








 Section 3.14 Disposition of Assets. So long as the Preferred Shares remain outstanding, neither
the Company nor any Subsidiary shall sell, transfer or otherwise dispose of any of its properties, assets and rights including, without limitation, its software and intellectual property, to any person except for sales to customers in the ordinary
course of business or with the prior written consent of the holders of a majority of the Preferred Shares then outstanding. 
 Section 3.15
Reporting Status. So long as a Purchaser beneficially owns any of the Shares, the Company shall timely file all reports required to be filed with the Commission pursuant to the Exchange Act, and the Company shall not terminate its
status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination. 
 Section 3.16 Disclosure of Transaction. The Company shall issue a press release describing the material terms of the transactions contemplated hereby (the “Press Release”) as soon as
practicable after the Closing but in no event later than 9:00 A.M. Eastern Time on the first Trading Day following the Closing Date. The Press Release shall be subject to prior review and comment by the Purchasers. “Trading Day”
means any day during which the OTC Bulletin Board (or other principal exchange on which the Common Stock is traded) shall be open for trading. 
 Section 3.17 Disclosure of Material Information. The Company covenants and agrees that neither it nor any other person acting on its behalf has provided or will provide any Purchaser or its agents or counsel with any information that
the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that
each Purchaser shall be relying on the foregoing representations in effecting transactions in securities of the Company. 
 Section 3.18
Pledge of Securities. The Company acknowledges and agrees that the Shares may be pledged by a Purchaser in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Common Stock.
The pledge of Common Stock shall not be deemed to be a transfer, sale or assignment of the Common Stock hereunder, and no Purchaser effecting a pledge of Common Stock shall be required to provide the Company with any notice thereof or otherwise make
any delivery to the Company pursuant to this Agreement or any other Transaction Document; provided that a Purchaser and its pledgee shall be required to comply with the provisions of Article V hereof in order to effect a sale, transfer or assignment
of Common Stock to such pledgee. At the Purchasers’ expense, the Company hereby agrees to execute and deliver such documentation as a pledgee of the Common Stock may reasonably request in connection with a pledge of the Common Stock to such
pledgee by a Purchaser. 
 Section 3.19 Form SB-2 Eligibility. The Company currently meets the “registrant eligibility” and
transaction requirements set forth in the general instructions to Form SB-2 applicable to “resale” registrations on Form SB-2 and the Company shall file all reports required to be filed by the Company with the Commission in a timely
manner. 
  

 19 








 Section 3.20 Lock-Up Agreement. The persons listed on Schedule 3.20 attached hereto shall
be subject to the terms and provisions of a lock-up agreement in substantially the form as Exhibit E hereto (the “Lock-Up Agreement”), which shall provide the manner in which such persons will sell, transfer or dispose of
their shares of Common Stock. 
 Section 3.21 Listing of Common Stock on Trading Market. Within six (6) months following the
Closing Date, the Company shall list and trade its shares of Common Stock on the Nasdaq OTC Bulletin Board, the Nasdaq Capital Market, the Nasdaq Global Market, the American Stock Exchange, Inc. or the New York Stock Exchange, Inc. (each, a
“Trading Market”). In the event the shares of Common Stock are not listed and trading on a Trading Market by the date that is six (6) months following the Closing Date, the Conversion Price (as defined in the Certificate of
Designation) shall be adjusted to a price equal to seventy-five percent (75%) of the Conversion Price then in effect. In the event the shares of Common Stock are not listed and trading on a Trading Market by the date that is twelve
(12) months following the Closing Date, the Conversion Price shall be adjusted to a price equal to fifty percent (50%) of the Conversion Price then in effect. 
 Section 3.22 DTC Status. Prior to the effective date of the Registration Statement, the Company’s transfer agent shall be a participant in and the Common Stock shall be eligible for transfer pursuant to
the Depository Trust Company Automated Securities Transfer Program. 
 Section 3.23 Variable Rate Transactions; Additional Registration
Statements. 
 (a) For a period of two (2) years following the Closing Date, the Company shall be prohibited from effecting or
entering into an agreement to effect any Subsequent Financing involving a “Variable Rate Transaction”. The term “Variable Rate Transaction” shall mean a transaction in which the Company issues or sells (i) any
debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion, exercise or exchange rate or other price that is based upon
and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset
at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or
(ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company may sell securities at a future determined price. 
 (b) For the period commencing on the Closing Date and ending on the date that is one hundred eighty (180) days following the effective date of the Registration Statement (as defined in the Registration Rights
Agreement), the Company shall not file any registration statement under the Securities Act without the prior written consent of the Purchasers. 
  

 20 








 ARTICLE IV 
 CONDITIONS 
 Section 4.1 Conditions Precedent to the Obligation of the Company to Sell the
Shares. The obligation hereunder of the Company to issue and sell the Preferred Shares and the Warrants to the Purchasers is subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set forth below. These
conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion. 
 (a) Accuracy of
Each Purchaser’s Representations and Warranties. The representations and warranties of each Purchaser shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time, except
for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such date. 
 (b) Performance by the Purchasers. Each Purchaser shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Purchaser at or prior to the Closing. 
 (c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.

 (d) Delivery of Purchase Price. The Purchase Price for the Preferred Shares and Warrants has been delivered to the Company at the
Closing Date. 
 (e) Delivery of Transaction Documents. The Transaction Documents shall have been duly executed and delivered by the
Purchasers and, with respect to the Escrow Agreement, the escrow agent, to the Company. 
 Section 4.2 Conditions Precedent to the
Obligation of the Purchasers to Purchase the Shares. The obligation hereunder of each Purchaser to acquire and pay for the Preferred Shares and the Warrants is subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for each Purchaser’s sole benefit and may be waived by such Purchaser at any time in its sole discretion. 
 (a) Accuracy of the Company’s Representations and Warranties. Each of the representations and warranties of the Company in this Agreement and the Registration Rights Agreement shall be true and correct in
all respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that are expressly made as of a particular date), which shall be true and correct in all respects as of such
date. 
  

 21 








 (b) Performance by the Company. The Company shall have performed, satisfied and complied in all
respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing. 
 (c) No Suspension, Etc. Trading in the Common Stock shall not have been suspended by the Commission or the principal exchange or market on which Common Stock is traded (except for any suspension of trading of
limited duration agreed to by the Company, which suspension shall be terminated prior to the Closing), and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg Financial Markets
(“Bloomberg”) shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by Bloomberg, or on the New York Stock Exchange, 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 or crisis of such magnitude in its effect on, or
any material adverse change in any financial market which, in each case, in the judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Preferred Shares. 
 (d) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. 
 (e) No Proceedings or Litigation. No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been
threatened, against the Company or any subsidiary, or any of the officers, directors or affiliates of the Company or any subsidiary seeking to restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions. 
 (f) Certificate of Designation of Rights and Preferences. Prior to the Closing, the Certificate
of Designation in the form of Exhibit B attached hereto shall have been filed with the Secretary of State of Nevada. 
 (g) Opinion
of Counsel, Etc. At the Closing, the Purchasers shall have received an opinion of counsel to the Company, dated the date of the Closing, in the form of Exhibit H hereto, and such other certificates and documents as the Purchasers or its
counsel shall reasonably require incident to the Closing. 
 (h) Registration Rights Agreement. At the Closing, the Company shall have
executed and delivered the Registration Rights Agreement to each Purchaser. 
 (i) Certificates. The Company shall have executed and
delivered to the Purchasers the certificates (in such denominations as such Purchaser shall request) for the Preferred Shares and the Warrants being acquired by such Purchaser at the Closing (in such denominations as such Purchaser shall request).

  

 22 








 (j) Resolutions. The Board of Directors of the Company shall have adopted resolutions consistent
with Section 2.1(b) hereof in a form reasonably acceptable to such Purchaser (the “Resolutions”). 
 (k) Reservation
of Shares. As of the Closing Date, the Company shall have reserved out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Preferred Shares and the exercise of the Warrants, a number of shares
of Common Stock equal to one hundred twenty percent (120%) of the aggregate number of Conversion Shares issuable upon conversion of the Preferred Shares outstanding on the Closing Date and the number of Warrant Shares issuable upon exercise of
the number of Warrants assuming such Warrants were granted on the Closing Date. 
 (l) Transfer Agent Instructions. The Irrevocable
Transfer Agent Instructions, in the form of Exhibit G attached hereto, shall have been delivered to and acknowledged in writing by the Company’s transfer agent. 
 (m) Lock-Up Agreement. As of the Closing Date, the persons listed on Schedule 3.20 hereto shall have delivered to the Purchasers a fully
executed Lock-Up Agreement in the form of Exhibit E attached hereto. 
 (n) Escrow Agreement. At the Closing, the Company
and the escrow agent shall have executed and delivered the Escrow Agreement to each Purchaser. 
 (o) Secretary’s Certificate.
The Company shall have delivered to such Purchaser a secretary’s certificate, dated as of the Closing Date, as to (i) the Resolutions, (ii) the Articles, (iii) the Bylaws, (iv) the Certificate of Designation, each as in
effect at the Closing, and (iv) the authority and incumbency of the officers of the Company executing the Transaction Documents and any other documents required to be executed or delivered in connection therewith. 
 (p) Officer’s Certificate. The Company shall have delivered to the Purchasers a certificate of an executive officer of the Company, dated as
of the Closing Date, confirming the accuracy of the Company’s representations, warranties and covenants as of the Closing Date and confirming the compliance by the Company with the conditions precedent set forth in this Section 4.2 as of
the Closing Date. 
 (q) Variable-Priced Securities. Prior to the Closing Date, any and all outstanding variable-priced securities of
the Company shall be redeemed or prepaid or otherwise converted into or exchanged for fixed-priced securities of the Company. 
 (r)
Material Adverse Effect. No Material Adverse Effect shall have occurred at or before the Closing Date. 
  

 23 








 ARTICLE V 
 Stock Certificate Legend 
 Section 5.1 Legend. Each certificate representing the Preferred
Shares and the Warrants, and, if appropriate, securities issued upon conversion thereof, shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required by applicable state securities or
“blue sky” laws): 
 THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR
ADVANCED GROWING SYSTEMS, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED. 
 The Company agrees to reissue certificates representing any of the Conversion Shares and the Warrant Shares, without the legend set forth above if at
such time, prior to making any transfer of any such securities, such holder thereof shall give written notice to the Company describing the manner and terms of such transfer and removal as the Company may reasonably request. Such proposed transfer
and removal will not be effected until: (a) either (i) the Company has received an opinion of counsel reasonably satisfactory to the Company, to the effect that the registration of the Conversion Shares or the Warrant Shares under the
Securities Act is not required in connection with such proposed transfer, (ii) a registration statement under the Securities Act covering such proposed disposition has been filed by the Company with the Commission and has become effective under
the Securities Act, (iii) the Company has received other evidence reasonably satisfactory to the Company that such registration and qualification under the Securities Act and state securities laws are not required, or (iv) the holder
provides the Company with reasonable assurances that such security can be sold pursuant to Rule 144 under the Securities Act; and (b) either (i) the Company has received an opinion of counsel reasonably satisfactory to the Company, to the
effect that registration or qualification under the securities or “blue sky” laws of any state is not required in connection with such proposed disposition, or (ii) compliance with applicable state securities or “blue sky”
laws has been effected or a valid exemption exists with respect thereto. The Company will respond to any such notice from a holder within five (5) business days. In the case of any proposed transfer under this Section 5.1, the Company will
use reasonable efforts to comply with any such applicable state securities or “blue sky” laws, but shall in no event be required, (x) to qualify to do business in any state where it is not then qualified, (y) to take any action
that would subject it to tax or to the general service of process in any state where it is not then subject, or (z) to comply with state securities or “blue sky” laws of any state for which registration by coordination is unavailable
to the Company. The restrictions on transfer contained in this Section 5.1 shall be in addition to, and not by way of 

  

 24 








 
limitation of, any other restrictions on transfer contained in any other section of this Agreement. Whenever a certificate representing the Conversion Shares
or Warrant Shares is required to be issued to a Purchaser without a legend, in lieu of delivering physical certificates representing the Conversion Shares or Warrant Shares (provided that a registration statement under the Securities Act providing
for the resale of the Warrant Shares and Conversion Shares is then in effect and such request is in connection with a sale), the Company shall cause its transfer agent to electronically transmit the Conversion Shares or Warrant Shares to a Purchaser
by crediting the account of such Purchaser’s Prime Broker with the Depository Trust Company (“DTC”) through its Deposit Withdrawal Agent Commission (“DWAC”) system (to the extent not inconsistent with any
provisions of this Agreement) provided that the Company and the Company’s transfer agent are participating in DTC through the DWAC system. 
 ARTICLE VI 
 Indemnification 
 Section 6.1 Company Indemnity. The Company agrees to indemnify and hold harmless the Purchasers (and their respective directors, officers, managers, partners, members, shareholders, affiliates, agents,
successors and assigns) from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by the Purchasers as a result of
any inaccuracy in or breach of the representations, warranties or covenants made by the Company herein. 
 Section 6.2 Indemnification
Procedure. Any party entitled to indemnification under this Article VI (an “indemnified party”) will give written notice to the indemnifying party of any matters giving rise to a claim for indemnification; provided, that the failure of
any party entitled to indemnification hereunder to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Article VI except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any action, proceeding or claim is brought against an indemnified party in respect of which indemnification is sought hereunder, the indemnifying party shall be entitled to participate in and, unless in the reasonable
judgment of the indemnified party a conflict of interest between it and the indemnifying party may exist with respect of such action, proceeding or claim, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party.
In the event that the indemnifying party advises an indemnified party that it will contest such a claim for indemnification hereunder, or fails, within thirty (30) days of receipt of any indemnification notice to notify, in writing, such person
of its election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at any time after it commences such defense), then the indemnified party may, at its option, defend, settle
or otherwise compromise or pay such action or claim. In any event, unless and until the indemnifying party elects in writing to assume and does so assume the defense of any such claim, proceeding or action, the indemnified party’s costs and
expenses arising out of the defense, settlement or compromise of any such action, claim or proceeding shall be losses subject to indemnification hereunder. The indemnified party shall cooperate fully with the indemnifying party in connection with
any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all 

  

 25 








 
information reasonably available to the indemnified party which relates to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. If the indemnifying party elects to defend any such action or claim, then the indemnified party shall be entitled to participate in such
defense with counsel of its choice at its sole cost and expense. The indemnifying party shall not be liable for any settlement of any action, claim or proceeding effected without its prior written consent. Notwithstanding anything in this Article VI
to the contrary, the indemnifying party shall not, without the indemnified party’s prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof which imposes any future obligation on the
indemnified party or which does not include, as an unconditional term thereof, the giving by the claimant or the plaintiff to the indemnified party of a release from all liability in respect of such claim. The indemnification required by this
Article VI shall be made by periodic payments of the amount thereof during the course of investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred, so long as the indemnified party irrevocably agrees
to refund such moneys if it is ultimately determined by a court of competent jurisdiction that such party was not entitled to indemnification. The indemnity agreements contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and (b) any liabilities the indemnifying party may be subject to pursuant to the law. 
 ARTICLE VII 
 Miscellaneous 
 Section 7.1 Fees and Expenses. Except as otherwise set forth in this Agreement and the other Transaction Documents, each party shall pay the fees
and expenses of its advisors, 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, provided that the
Company shall pay all actual attorneys’ fees and expenses (including disbursements and out-of-pocket expenses) incurred by the Purchasers in connection with (i) the preparation, negotiation, execution and delivery of this Agreement and the
other Transaction Documents and the transactions contemplated thereunder, which payment shall be made at the Closing, (ii) the filing and declaration of effectiveness by the Commission of the Registration Statement (as defined in the
Registration Rights Agreement) and (iii) any amendments, modifications or waivers of this Agreement or any of the other Transaction Documents. The Company shall also pay all reasonable fees and expenses incurred by the Purchasers in connection
with the enforcement of this Agreement or any of the other Transaction Documents, including, without limitation, all reasonable attorneys’ fees and expenses. 
 Section 7.2 Specific Enforcement, Consent to Jurisdiction. 
 (a) The Company and the
Purchasers acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement or the other Transaction Documents were not performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement or the Registration Rights Agreement and to enforce specifically the terms and provisions
hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity. 
  

 26 








 (b) Each of the Company and the Purchasers (i) hereby irrevocably submits to the jurisdiction of the
United States District Court sitting in the Southern District of New York and the courts of the State of New York located in New York county for the purposes of any suit, action or proceeding arising out of or relating to this Agreement or any of
the other Transaction Documents or the transactions contemplated hereby or thereby and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such
court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Each of the Company and the Purchasers consents to process being served in any such suit, action or
proceeding by mailing a copy thereof 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 in this
Section 7.2 shall affect or limit any right to serve process in any other manner permitted by law. 
 Section 7.3 Entire Agreement;
Amendment. This Agreement and the Transaction Documents contains the entire understanding and agreement of the parties with respect to the matters covered hereby and, except as specifically set forth herein or in the Transaction Documents,
neither the Company nor any of the Purchasers makes any representations, warranty, covenant or undertaking with respect to such matters and they supersede all prior understandings and agreements with respect to said subject matter, all of which are
merged herein. No provision of this Agreement may be waived or amended other than by a written instrument signed by the Company and the holders of at least seventy-five percent (75%) of the Preferred Shares then outstanding, and no provision
hereof may be waived other than by an a written instrument signed by the party against whom enforcement of any such amendment or waiver is sought. No such amendment shall be effective to the extent that it applies to less than all of the holders of
the Preferred Shares then outstanding. No consideration 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 consideration is also offered to all
of the parties to the Transaction Documents or holders of Preferred Shares, as the case may be. 
 Section 7.4 Notices. Any notice,
demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telex (with correct answer back received), telecopy, e-mail or facsimile 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: 
  

 27 









			
	If to the Company:	  	 Advanced Growing Systems, Inc.
 755 Union Hill
Road
 Alpharetta, Georgia 30004
 Attention: Christopher
Nichols
 Tel. No.: (678) 990-7792
 Fax No.: (678)
990-7797

		
	with copies to:	  	 Joseph I. Emas
 Attorney at Law
 1224 Washington Avenue
 Miami Beach, Florida 33139
 Tel. No.: (305) 531-1174
 Fax No.: (305) 531-1274

		
	If to any Purchaser:	  	At the address of such Purchaser set forth on Exhibit A to this Agreement, with copies to Purchaser’s counsel as set forth on Exhibit A or as specified in writing by such
Purchaser with copies to:
		
		  	 Kramer Levin Naftalis & Frankel LLP
 1177 Avenue of
the Americas
 New York, New York 10036
 Attention: Christopher S.
Auguste
 Tel No.: (212) 715-9100
 Fax No.: (212)
715-8000


 Any party hereto may from time to time change its address for notices by giving at least ten
(10) days written notice of such changed address to the other party hereto. 
 Section 7.5 Waivers. No waiver by either party of
any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. 
 Section 7.6
Headings. The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof.

 Section 7.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their
successors and assigns. 
 Section 7.8 No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person. 
  

 28 








 Section 7.9 Governing Law. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction. This Agreement shall not be interpreted or construed
with any presumption against the party causing this Agreement to be drafted. 
 Section 7.10 Survival. The representations and
warranties of the Company and the Purchasers shall survive the execution and delivery hereof and the Closing until the second anniversary of the Closing Date, except the agreements and covenants set forth in Articles I, III, V, VI and VII of this
Agreement shall survive the execution and delivery hereof and the Closing hereunder. 
 Section 7.11 Counterparts. This Agreement may
be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof. 
 Section 7.12 Publicity. The Company agrees that it will not disclose, and will not include in any public announcement, the name of the Purchasers
without the consent of the Purchasers unless and until such disclosure is required by law or applicable regulation, and then only to the extent of such requirement. 
 Section 7.13 Severability. The provisions of this Agreement and the Transaction Documents are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the
provisions or part of the provisions contained in this Agreement or the Transaction Documents shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement or the Transaction Documents and such provision shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained
herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible. 
 Section 7.14 Further
Assurances. From and after the date of this Agreement, upon the request of any Purchaser or the Company, each of the Company and the Purchasers shall execute and deliver such instrument, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement, the Preferred Shares, the Conversion Shares, the Warrants, the Warrant Shares, the Certificate of Designation, and the Registration
Rights Agreement. 
 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 
  

 29 








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

			
	ADVANCED GROWING SYSTEMS, INC.
		
	By:	 	  
		 	Name:
		 	Title:
	
	PURCHASER
		
	By:	 	  
		 	Name:
		 	Title:









 EXHIBIT A to the 
 SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 
 ADVANCED GROWING SYSTEMS, INC.

  

						
	 Names and Addresses
 of Purchasers
	  	 Number of Preferred Shares
 & Warrants Purchased
	  	Dollar Amount of
Investment
	 Sands Brothers Venture Capital LLC
 90 Park Avenue, 31st Floor
 New York, NY 10016
 Fax: 212-867-1416
 Attn: Scott A. Baily,
          Chief Operating Officer
 Tel #: (212) 953-4983
 Fax #: (212) 953-4970
 E-mail: sbaily@laidlawltd.com
	  	 Preferred Shares: 100,000
 Series A Warrants: 50,000
 Series B Warrants: 50,000
 Series J Warrants: 100,000
 Series C Warrants: 50,000
 Series D Warrants: 50,000
	  	$	50,000
			
	 Sands Brothers Venture Capital II LLC
 90 Park Avenue, 31st Floor
 New York, NY 10016
 Fax: 212-867-1416
 Attn: Scott A. Baily,
          Chief Operating Officer
 Tel #: (212) 953-4983
 Fax #: (212) 953-4970
 E-mail: sbaily@laidlawltd.com
	  	 Preferred Shares: 100,000
 Series A Warrants: 50,000
 Series B Warrants: 50,000
 Series J Warrants: 100,000
 Series C Warrants: 50,000
 Series D Warrants: 50,000
	  	$	50,000
			
	 Sands Brothers Venture Capital III LLC
 90 Park Avenue, 31st Floor
 New York, NY 10016
 Fax: 212-867-1416
 Attn: Scott A. Baily,
          Chief Operating Officer
 Tel #: (212) 953-4983
 Fax #: (212) 953-4970
 E-mail:
sbaily@laidlawltd.com
	  	 Preferred Shares: 350,000
 Series A Warrants: 175,000
 Series B Warrants: 175,000
 Series J Warrants: 350,000
 Series C Warrants: 175,000
 Series D Warrants: 175,000
	  	$	175,000
			
	 Sands Brothers Venture Capital IV LLC
 90 Park Avenue, 31st Floor
 New York, NY 10016
 Fax: 212-867-1416
 Attn: Scott A. Baily,
          Chief Operating Officer
 Tel #: (212) 953-4983
 Fax #: (212) 953-4970
 E-mail: sbaily@laidlawltd.com
	  	 Preferred Shares: 200,000
 Series A Warrants: 100,000
 Series B Warrants: 100,000
 Series J Warrants: 200,000
 Series C Warrants: 100,000
 Series D Warrants: 100,000
	  	$	100,000








 EXHIBIT B to the 
 SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 
 ADVANCED GROWING SYSTEMS, INC.

 FORM OF CERTIFICATE OF DESIGNATION 







 EXHIBIT C-1 to the 
 SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 
 ADVANCED GROWING SYSTEMS, INC.

 FORM OF SERIES A WARRANT 







 EXHIBIT C-2 to the 
 SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 
 ADVANCED GROWING SYSTEMS, INC.

 FORM OF SERIES B WARRANT 







 EXHIBIT C-3 to the 
 SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 
 ADVANCED GROWING SYSTEMS, INC.

 FORM OF SERIES J WARRANT 







 EXHIBIT C-4 to the 
 SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 
 ADVANCED GROWING SYSTEMS, INC.

 FORM OF SERIES C WARRANT 







 EXHIBIT C-5 to the 
 SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 
 ADVANCED GROWING SYSTEMS, INC.

 FORM OF SERIES D WARRANT 







 EXHIBIT D to the 
 SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 
 ADVANCED GROWING SYSTEMS, INC.

 FORM OF REGISTRATION RIGHTS AGREEMENT 







 EXHIBIT E to the 
 SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 
 ADVANCED GROWING SYSTEMS, INC.

 FORM OF LOCK-UP AGREEMENT 









 EXHIBIT F to the 
 SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 
 ADVANCED GROWING SYSTEMS, INC.

 FORM OF ESCROW AGREEMENT 







 EXHIBIT G to the 
 SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 
 ADVANCED GROWING SYSTEMS, INC.

 FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS 
 ADVANCED GROWING SYSTEMS, INC. 
 as of May 3, 2007 
 [Name and address of Transfer Agent] 
 Attn:
                     
 Ladies and Gentlemen:

 Reference is made to that certain Series A Convertible Preferred Stock Purchase Agreement (the “Purchase Agreement”),
dated as of May 3, 2007, by and among Advanced Growing Systems, Inc., a Nevada corporation (the “Company”), and the purchasers named therein (collectively, the “Purchasers”) pursuant to which the Company is
issuing to the Purchasers shares of its Series A Convertible Preferred Stock, par value $.001 per share, (the “Preferred Shares”) and warrants (the “Warrants”) to purchase shares of the Company’s common stock,
par value $.001 per share (the “Common Stock”). This letter shall serve as our irrevocable authorization and direction to you provided that you are the transfer agent of the Company at such time) to issue shares of Common Stock upon
conversion of the Preferred Shares (the “Conversion Shares”) and exercise of the Warrants (the “Warrant Shares”) to or upon the order of a Purchaser from time to time upon (i) surrender to you of a properly
completed and duly executed Conversion Notice or Exercise Notice, as the case may be, in the form attached hereto as Exhibit I and Exhibit II, respectively, (ii) in the case of the conversion of Preferred Shares, a copy of the certificates
(with the original certificates delivered to the Company) representing Preferred Shares being converted or, in the case of Warrants being exercised, a copy of the Warrants (with the original Warrants delivered to the Company) being exercised (or, in
each case, an indemnification undertaking with respect to such share certificates or the warrants in the case of their loss, theft or destruction), and (iii) delivery of a treasury order or other appropriate order duly executed by a duly
authorized officer of the Company. So long as you have previously received (x) written confirmation from counsel to the Company that a registration statement covering resales of the Conversion Shares or Warrant Shares, as applicable, has been
declared effective by the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”), and no subsequent notice by the Company or its counsel of the suspension or
termination of its effectiveness and (y) a copy of such registration statement, and if the Purchaser represents in writing that the Conversion Shares or the Warrant Shares, as the case may be, were sold pursuant to the Registration Statement,
then certificates representing the Conversion Shares and the Warrant Shares, as the case may be, shall not bear any legend restricting transfer of the Conversion Shares and the Warrant Shares, as the case may be, thereby and should not be subject to
any stop-transfer restriction. Provided, however, that if you have not previously received those items and representations listed above, then the certificates for the Conversion Shares and the Warrant Shares shall bear the following legend:

 “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES
ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS, OR ADVANCED GROWING SYSTEMS, INC. SHALL HAVE RECEIVED AN OPINION OF
ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.” 









 and, provided further, that the Company may from time to time notify you to place stop-transfer restrictions on the
certificates for the Conversion Shares and the Warrant Shares in the event a registration statement covering the Conversion Shares and the Warrant Shares is subject to amendment for events then current. 
 A form of written confirmation from counsel to the Company that a registration statement covering resales of the Conversion Shares and the Warrant Shares
has been declared effective by the SEC under the 1933 Act is attached hereto as Exhibit III. 
 Please be advised that the Purchasers are
relying upon this letter as an inducement to enter into the Purchase Agreement and, accordingly, each Purchaser is a third party beneficiary to these instructions. 
 Please execute this letter in the space indicated to acknowledge your agreement to act in accordance with these instructions. Should you have any questions concerning this matter, please contact me at ___________.

  

					
	Very truly yours,
	
	ADVANCED GROWING SYSTEMS, INC.
		
	By:	 	  
		 	Name:	 	  
		 	Title:	 	  


  

			
	ACKNOWLEDGED AND AGREED:
	
	[TRANSFER AGENT]
		
	By:	 	  
	Name:	 	  
	Title:	 	  
	Date:	 	  








 EXHIBIT I 
 ADVANCED GROWING SYSTEMS, INC. 
 CONVERSION NOTICE 
 Reference is made to the Certificate of Designation of the Relative Rights and Preferences of the Series A Preferred Stock of Advanced Growing Systems, Inc. (the
“Certificate of Designation”). In accordance with and pursuant to the Certificate of Designation, the undersigned hereby elects to convert the number of shares of Series A Preferred Stock, par value $.001 per share (the “Preferred
Shares”), of Advanced Growing Systems, Inc., a Nevada corporation (the “Company”), indicated below into shares of Common Stock, par value $.001 per share (the “Common Stock”), of the Company, by tendering the stock
certificate(s) representing the share(s) of Preferred Shares specified below as of the date specified below. 
  

					
	Date of Conversion:	  	  


					
		
	Number of Preferred Shares to be converted:	  	  


					
		
	Stock certificate no(s). of Preferred Shares to be converted:	  	  

 The Common Stock have been sold pursuant to the Registration Statement (as defined in the
Registration Rights Agreement): YES  ̈     NO  ̈ 
 Please confirm the following information: 
  

			
	Conversion Price:	  	  


			
		
	Number of shares of Common Stock to be issued:	  	  

 Number of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder on the Date of
Conversion: _________________________ 
 Please issue the Common Stock into which the Preferred Shares are being converted and, if applicable, any check
drawn on an account of the Company in the following name and to the following address: 
  

							
	 Issue to:
	  	  	  	
		  	  	  	
	Facsimile Number:	  	  	  	
	Authorization:	  	  	  	
		  	By:	  	  	  	
		  	Title:	  	  	  	
	Dated:	  		  		  	








 EXHIBIT II 
 FORM OF EXERCISE NOTICE 
 EXERCISE FORM 
 ADVANCED GROWING SYSTEMS, INC. 
 The undersigned _______________, pursuant to the provisions of the
within Warrant, hereby elects to purchase _____ shares of Common Stock of Advanced Growing Systems, Inc. covered by the within Warrant. 
  

									
					
	Dated:	 	  	 		 	Signature	 	  
					
		 		 		 	Address	 	  
		 		 		 		 	  

 Number of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder on the date of
Exercise: _________________________ 
 ASSIGNMENT 
 FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto __________________ the within Warrant and all rights evidenced thereby and does irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation. 
  

									
					
	Dated:	 	  	 		 	Signature	 	  
					
		 		 		 	Address	 	  
		 		 		 		 	  

 PARTIAL ASSIGNMENT 
 FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto __________________ the right to purchase _________ shares of Warrant Stock evidenced by the within Warrant together with all rights
therein, and does irrevocably constitute and appoint ___________________, attorney, to transfer that part of the said Warrant on the books of the within named corporation. 
  

									
					
	Dated:	 	  	 		 	Signature	 	  
					
		 		 		 	Address	 	  
		 		 		 		 	  

 FOR USE BY THE ISSUER ONLY: 
 This Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day of ___________, _____, shares of Common Stock issued therefor in the name of _______________, Warrant No. W-_____ issued for ____ shares
of Common Stock in the name of _______________. 







 EXHIBIT III 
 FORM OF NOTICE OF EFFECTIVENESS 
 OF REGISTRATION STATEMENT 
 [Name and address of Transfer Agent] 
 Attn: _____________ 
  

	 	Re:	Advanced Growing Systems, Inc. 

 Ladies and Gentlemen:

 We are counsel to Advanced Growing Systems, Inc., a Nevada corporation (the “Company”), and have represented the Company
in connection with that certain Series A Convertible Preferred Stock Purchase Agreement (the “Purchase Agreement”), dated as of May 3, 2007, by and among the Company and the purchasers named therein (collectively, the
“Purchasers”) pursuant to which the Company issued to the Purchasers shares of its Series A Convertible Preferred Stock, par value $.001 per share, (the “Preferred Shares”) and warrants (the
“Warrants”) to purchase shares of the Company’s common stock, par value $.001 per share (the “Common Stock”). Pursuant to the Purchase Agreement, the Company has also entered into a Registration Rights
Agreement with the Purchasers (the “Registration Rights Agreement”), dated as of May 3, 2007, pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration
Rights Agreement), including the shares of Common Stock issuable upon conversion of the Preferred Shares and exercise of the Warrants, under the Securities Act of 1933, as amended (the “1933 Act”). In connection with the
Company’s obligations under the Registration Rights Agreement, on ________________, 2007, the Company filed a Registration Statement on Form SB-2 (File No. 333-________) (the “Registration Statement”) with the Securities
and Exchange Commission (the “SEC”) relating to the resale of the Registrable Securities which names each of the present Purchasers as a selling stockholder thereunder. 
 In connection with the foregoing, we advise you that a member of the SEC’s staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop
order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and accordingly, the Registrable Securities are available for resale under the 1933 Act pursuant to the
Registration Statement. 
  

			
	Very truly yours,
	
	[COMPANY COUNSEL]
		
	By:	 	  


  

	cc:	[LIST NAMES OF PURCHASERS] 








 EXHIBIT H to the 
 SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 
 ADVANCED GROWING SYSTEMS, INC.

 FORM OF OPINION OF COUNSEL 
 1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada and has the requisite corporate power to own, lease and operate its properties and assets, and to carry on its
business as presently conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification
necessary. 
 2. The Company has the requisite corporate power and authority to enter into and perform its obligations under the Transaction
Documents and to issue the Preferred Stock, the Warrants and the Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants. The execution, delivery and performance of each of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action and no further consent or authorization of the Company or its Board of Directors or stockholders is required.
Each of the Transaction Documents have been duly executed and delivered, and the Preferred Stock and the Warrants have been duly executed, issued and delivered by the Company and each of the Transaction Documents constitutes a legal, valid and
binding obligation of the Company enforceable against the Company in accordance with its respective terms. The Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants are not subject to any preemptive rights under
the Articles of Incorporation or the Bylaws. 
 3. The Preferred Stock and the Warrants have been duly authorized and, when delivered against
payment in full as provided in the Purchase Agreement, will be validly issued, fully paid and nonassessable. The shares of Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants, have been duly authorized and
reserved for issuance, and, when delivered upon conversion or against payment in full as provided in the Certificate of Designation and the Warrants, as applicable, will be validly issued, fully paid and nonassessable. 
 4. The execution, delivery and performance of and compliance with the terms of the Transaction Documents and the issuance of the Preferred Stock, the
Warrants and the Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants do not (i) violate any provision of the Articles of Incorporation or Bylaws, (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company is a party, (iii) create or impose a lien, charge or encumbrance on any property of the Company under any agreement or any commitment to which the Company is a party or by which the
Company is bound or by which any of its respective properties or assets are bound, or (iv) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment, injunction or decree (including Federal and
state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected, except, in all cases other than violations pursuant to clauses (i) and (iv) above, for such conflicts,
default, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect. 
 5. No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of the Company is required under Federal, state or local law, rule or regulation in
connection with the valid execution and delivery of the Transaction Documents, or the offer, sale or issuance of the Preferred Stock, the Warrants or the Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants other
than the Certificate of Designation and the Registration Statement. 









 6. There is no action, suit, claim, investigation or proceeding pending or threatened against the Company
which questions the validity of this Agreement or the transactions contemplated hereby or any action taken or to be taken pursuant hereto or thereto. There is no action, suit, claim, investigation or proceeding pending, or to our knowledge,
threatened, against or involving the Company or any of its properties or assets and which, if adversely determined, is reasonably likely to result in a Material Adverse Effect. There are no outstanding orders, judgments, injunctions, awards or
decrees of any court, arbitrator or governmental or regulatory body against the Company or any officers or directors of the Company in their capacities as such. 
 7. The offer, issuance and sale of the Preferred Stock and the Warrants and the offer, issuance and sale of the shares of Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants
pursuant to the Purchase Agreement, the Certificate of Designation and the Warrants, as applicable, are exempt from the registration requirements of the Securities Act. 
 8. The Company is not, and as a result of and immediately upon Closing will not be, an “investment company” or a company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended. 
 Very truly yours,