goig_ex1019





  Exhibit 10.19








SECURITIES PURCHASE AGREEMENT

 


THIS
SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made as of
May 19, 2021, by and among Charge Enterprises Inc., a Delaware
corporation (which was formerly known as Transworld Holdings, Inc.,
and prior to that as GoIP Global, Inc., a Colorado corporation)
(and together with all of its current and future, direct and/or
indirect, wholly owned and/or partially owned Subsidiaries,
collectively, the “Company”), and the Purchaser identified on the signature
pages hereto (including its successors and assigns, the
“Purchaser”).

 


RECITALS

 


A.           The
Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities
registration afforded by Section 4(a)(2) of the Securities Act (as
defined below), and/or Rule 506(b) of Regulation D
(“Regulation
D”) as promulgated by the United States Securities and
Exchange Commission under the Securities Act.

 


B.           The
Purchaser, wishes to purchase, and the Company wishes to sell at
closing, upon the terms and conditions stated in this Agreement,
the Securities (as defined herein), all in the amounts and for the
price set forth on Schedule 1
hereto.

 


C.           The
Company wishes to borrow from the Purchaser cash, all upon the
terms and subject to the conditions hereinafter set
forth.

 


D.           The
Company has agreed to secure performance of its obligations under
this Agreement and by pledging to the Purchaser (a) 100% of the
shares in NextRidge (as defined below) and a first ranking pledge
over all of NextRidge’s existing and future assets; and (b)
100% of the shares in PTGI (as defined below) and a first-lien on
PTGI.

 


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

 


                       



  ARTICLE
1


DEFINITIONS

 

1.1 Defined Terms. In addition to
terms defined elsewhere in this Agreement or in any supplement,
amendment or exhibit hereto, when used herein, the following terms
shall have the following meanings:

 

(a)  “Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 of the Securities Act, including, among others,
executive officers, directors, large stockholders, subsidiaries,
parent entities and sister companies.

 

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

 

(c) “Closing
Date” means the
Trading Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all
conditions precedent to the parties’ obligations hereunder
have been satisfied or waived, including (i) the Purchaser’s
obligations to pay the Purchase Price, and (ii) the Company’s
obligations to deliver the Securities.

 

(d) “Collateral”
shall have the meaning ascribed to such term as set forth in the
Security Agreement.

 

(e)  “Common Stock” means (i)
the Company’s common stock, par value $0.0001 per share, and
(ii) any capital stock into which such common stock shall have been
changed or any share capital resulting from a reclassification of
such common stock.

 

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

 



 

-1-







 





 

(g) “Contingent Obligation”
means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person
if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid
or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect
thereto.

 

(h)  “Conversion
Date” has the meaning set forth in the Convertible
Note.

 

(i) “Conversion Shares” means
all shares of Common Stock issuable upon conversion of any portion
of the Convertible Note (including, at the Purchaser’s
election pursuant to the conditions set forth in the Convertible
Note, accrued and unpaid interest thereon), but solely to the
extent and subject to any conditions set forth in the Convertible
Note.

 

(j) “Convertible Note” means
all of the Original Issue Discount Senior Secured Convertible
Promissory Notes due on the third anniversary of the Closing Date
that are owned by the Purchaser, which, subject to the terms and
conditions set forth in this Agreement, shall be purchased from the
Company pursuant to this Agreement, and any and all Convertible
Note(s) issued in exchange, transfer or replacement of the
Convertible Note(s); the form of the Convertible Note is annexed
hereto as Exhibit A.

 

(k) “COVID-19” means
SARS-CoV-2 or COVID-19, and any evolutions thereof or any other
epidemics, pandemics or disease outbreaks.

 

(l) “COVID-19 Action” means an
inaction or action by the Company, including the establishment of
any policy, procedure or protocol, in response to COVID-19 or any
COVID-19 Measures (i) that is consistent with the past practice of
the Company in response to COVID-19 prior to the date of this
Agreement (but only to the extent in compliance with applicable
Law), or (ii) that would, given the totality of the circumstances
under which the Company acted or did not act, be unreasonable for
Purchaser to withhold, condition or delay consent with respect to
such action or inaction (whether or not Purchaser has a consent
right with respect thereto).

 

(m) “COVID-19 Measures” means
any quarantine, “shelter in place,” “stay at
home,” workforce reduction, social distancing, shut down,
closure, sequester or any other Law, Governmental Order, Action,
directive, guidelines or recommendations by any Governmental
Authority in connection with or in response to COVID-19, including,
but not limited to, the Coronavirus Aid, Relief, and Economic
Security (CARES) Act.

 

(n) “Dollar(s)” and
“$”
means lawful money of the United States.

 

(o) “Effective Date” means the
date that the initial Registration Statement filed by the Company
pursuant to the Registration Rights Agreement is first declared
effective by the Commission.

 

(p) “Event of Default” shall
have the meaning set forth in the Notes and the
Warrant.

 

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

 

(r) “Exempt Issuance” means
the issuance of (a) shares of Common Stock or options to employees,
officers, consultants, advisors or directors of the Company in
consideration of services to the Company pursuant to any stock or
option plan duly adopted for such purpose by a majority of the
members of the Board of Directors or a majority of the members of a
committee of directors established for such purpose, (b) securities
upon the exercise or exchange of or conversion of any Securities
issued hereunder and/or other securities exercisable or
exchangeable for or convertible into shares of Common Stock issued
and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement
to increase the number of such securities or to decrease the
exercise, exchange or conversion price of such securities, (c)
Permitted Indebtedness incurred in accordance with Section 1.1(ee)
hereunder or (d) any securities issued to shareholders of
NextRidge in
accordance with the terms of the NextRidge Acquisition
Agreement.

 

(s) “GAAP” means generally
accepted accounting principles in the United States of America as
in effect from time to time.

 



 

-2-







 





 

(t) “Indebtedness” means, with
respect to any Person at any date, without duplication,
(a) all indebtedness of such Person for borrowed money,
(b) all obligations of such Person for the deferred purchase
price of property or services (but excluding trade payables
incurred in the ordinary course of business), (c) all
obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or the Purchaser under
such agreement in the event of default are limited to repossession
or sale of such property), (e) all capital lease obligations
of such Person, (f) all obligations of such Person, contingent
or otherwise, as an account party or applicant under acceptance,
letter of credit, surety bond or similar facilities, (g) all
obligations of such Person, contingent or otherwise, to purchase,
redeem, retire or otherwise acquire for value any capital stock of
such Person, (h) all obligations for any earn-out consideration,
(i) the liquidation value of preferred capital stock of such
Person, (j) all guarantee obligations of such Person in respect of
obligations of the kind referred to in clauses (a) through (i)
above, (k) all obligations of the kind referred to in
clauses (a) through (i) above secured by (or for which the
holder of such obligation has an existing right, contingent or
otherwise, to be secured by) any lien on property (including,
without limitation, accounts and contract rights) owned by such
Person, whether or not such Person has assumed or become liable for
the payment of such obligation and all obligations of such Person
in respect of hedge agreements; and (l) all Contingent Obligations
in respect to indebtedness or obligations of any Person of the kind
referred to in clauses (a)-(k) above. The Indebtedness of any
Person shall include, without duplication, the Indebtedness of any
other entity (including any partnership in which such Person is a
general partner) to the extent such Person is liable therefor as a
result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of
such Indebtedness expressly provide that such Person is not liable
therefor.

 

(u) “Investment” means any
investment (including, without limitation, any loan or advance) in
or to any Person, whether payment therefor is made in cash or
capital stock or other equity interests or otherwise, and whether
such Investment is by acquisition of capital stock or other equity
interests or Indebtedness, or by loan, advance, transfer of
property out of the ordinary course of business, capital
contribution, equity or profit sharing interest, extension of
credit on terms other than those normal in the ordinary course of
business or otherwise.

 

(v)  “Liens”
or “liens” means a lien,
mortgage, charge pledge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction, or other
clouds on title.

 

(w) “Liabilities” means all
direct or indirect liabilities, Indebtedness and obligations of any
kind of Company to the Purchaser, howsoever created, arising or
evidenced, whether now existing or hereafter arising (including
those acquired by assignment), absolute or contingent, due or to
become due, primary or secondary, joint or several, whether
existing or arising through discount, overdraft, purchase, direct
loan, participation, operation of law, or otherwise, including, but
not limited to, pursuant to the Notes, this Agreement and/or any of
the other Transaction Documents, all accrued but unpaid interest on
the Notes, the principal, any letter of credit, any standby letter
of credit, and/or outside attorneys’ and paralegals’
fees or charges relating to the preparation of the Transaction
Documents and the enforcement of the Purchaser’s rights,
remedies and powers under this Agreement, the Notes and/or the
other Transaction Documents.

 

(x) “Material Adverse Effect”
means a material adverse effect on (a) the business, assets,
property, operations, or condition (financial or otherwise) of the
Company, (b) the validity or enforceability of this Agreement
or any of the other Transaction Documents, (c) the rights or
remedies of the Purchaser hereunder or thereunder, or (d) the
ability of the Company to perform its obligations under any
Transaction Document. Notwithstanding anything to the contrary
contained in this Agreement, nothing herein shall prevent the
Company from taking or failing to take any COVID-19 Actions and (x)
no such COVID-19 Actions shall be deemed to violate or breach this
Agreement in any way or be deemed a Material Adverse Effect, (y)
all such COVID-19 Actions shall be deemed to constitute an action
taken in the ordinary course of business and (z) no such COVID-19
Actions shall serve as a basis for Purchaser to terminate this
Agreement or assert that any of the conditions to the 
applicable Closing contained herein have not been
satisfied.

 

(y) “May 2020 Financing” means
the Company’s financing which closed on May 8, 2020 involving
the sale and issuance of senior secured notes in an aggregate
principal amount of $3,000,000, warrants for the purchase of
an aggregate of 7,600,000 shares of
Common Stock and 7.5 shares of
series G convertible preferred stock to Affiliates of the
Purchaser for an aggregate purchase price of
$2,700,000.

 

(z) “NextRidge”
means NextRidge Inc., a New
York corporation.

 

(aa) “NextRidge
Acquisition Agreement” means that
certain Stock Acquisition Agreement, dated May 7, 2021, by and
among the Company, NextRidge and the shareholders of
NextRidge.

 

(bb) “Non-convertible
Note” means all of the Original Issue Discount Senior
Secured Non-convertible Promissory Notes due on the third
anniversary of the Closing Date that are owned by the Purchaser,
which, subject to the terms and conditions set forth in this
Agreement, shall be purchased from the Company pursuant to this
Agreement, and any and all Non-convertible Note(s) issued in
exchange, transfer or replacement of the Non-convertible Note(s);
the form of the Non-convertible Note is annexed hereto as
Exhibit B.

 

(cc) “Notes”
means all of the Convertible Notes and Non-convertible Notes
together.

 

(dd) “November
2020 Financing” means the Company’s financing
which closed on November 3, 2020 involving the sale and issuance of
senior secured notes in an aggregate principal amount of
$3,888,889, for an aggregate purchase price of
$3,500,000.

 



 

-3-







 





 

(ee)  “Permitted
Indebtedness” means (a) the indebtedness evidenced by
the Notes, (b) any indebtedness of the Company outstanding as of
the date of this Agreement, (c) lease obligations and purchase
money indebtedness incurred in connection with the acquisition of
capital assets and lease obligations with respect to newly acquired
or leased assets in the ordinary course of business, (d) any
indebtedness issued by the Company to any SBA-approved lender or
SBA-approved financial institution and (e) any indebtedness issued
by NextRidge or its subsidiaries either (i) upon consummation of
the transactions contemplated by the NextRidge Acquisition
Agreement, on or after the date hereof, provided such indebtedness
is non-recourse to the Company and its Subsidiaries (other than
NextRidge) or (ii) as existing lines of credit with Pioneer Bank
for factoring arrangements that do not exceed $4,000,000 for any
given month.

 

(ff) “Permitted
Lien” means the individual and collective reference to
the following: (a) Liens for taxes, assessments and other
governmental charges or levies not yet due or Liens for taxes,
assessments and other governmental charges or levies being
contested in good faith and by appropriate proceedings for which
adequate reserves (in the good faith judgment of the management of
the Company) have been established in accordance with GAAP; (b)
Liens imposed by law which were incurred in the ordinary course of
the Company’s business, such as carriers’,
warehousemen’s and mechanics’ Liens, statutory
landlords’ Liens, and other similar Liens arising in the
ordinary course of the Company’s business, and which (x) do
not individually or in the aggregate materially detract from the
value of such property or assets or materially impair the use
thereof in the operation of the business of the Company and its
consolidated Subsidiaries or (y) are being contested in good faith
by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the
property or asset subject to such Lien; (c) Liens incurred in
connection with Permitted Indebtedness thereunder; (d) pledges and
deposits made in the ordinary course of business in compliance with
workers’ compensation, unemployment insurance and other
social security laws or regulations; (e) Deposits to secure the
performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course
of business; (f) any Liens in favor of the Purchaser; and (g) Liens
securing Indebtedness of the type described in clause (e) of the
definition of Permitted Indebtedness, provided such Liens do not
extend to any Collateral.

 

(gg) “Person”
means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association,
corporation, institution, entity, party or government (whether
national, federal, state, county, city, municipal or otherwise
including, without limitation, any instrumentality, division,
agency, body or department thereof).

 

(hh)  “Principal
Market” means the principal Trading Market on which
the Common Stock is listed or quoted for trading on the date in
question.

 

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

 

(jj) “PTGI”
means PTGI International Carrier Services Inc., a Delaware
corporation.

 

(kk) “Purchase
Price” shall have the
meaning as set forth on 
Schedule 1 next to the heading
“Purchase Price,” in United States
Dollars.

 

(ll) “Registration
Rights Agreement” means the Registration Rights
Agreement, dated as of the Closing Date, by and between the Company
and the Purchaser as hereinafter amended and/or supplemented
altogether with all exhibits, schedules and annexes to such
Registration Rights Agreement, which Registration Rights Agreement
is annexed hereto as Exhibit E.

 

(mm)  “Registration
Statement” means a
registration statement meeting the requirements set forth in the
Registration Rights Agreement and covering the resale of the
Conversion
Shares issuable upon conversion of the Convertible Note and the
Warrant Shares issuable upon exercise of the Warrant as provided
for in the Registration Rights Agreement.

 

(nn)  “SEC”
or “Commission” means the
United States Securities and Exchange Commission.

 



 

-4-







 





 

(oo) “Securities”
means the Convertible Note and the Warrants
purchased pursuant to this Agreement and all Underlying Shares and
any securities of the Company issued to the Purchaser in
replacement, substitution and/or in connection with any exchange,
conversion, exercise and/or any other transaction involving all or
any of such securities of the Company.

 

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

 

(qq) “Security
Agreement” means the Amended and Restated Security
Agreement, dated on or about the date hereof, by and among the
Company, the Subsidiaries of the Company, and the Purchaser as
hereinafter amended and/or supplemented altogether with all
exhibits, schedules and annexes to such Security Agreement,
pursuant to which the Notes are secured by the Collateral, which
security interest in the Collateral shall be perfected by the
Purchaser’s UCC-1, filed with the Secretary of State of the
State of Delaware, to the extent perfectable by the filing of a
UCC-1 Financing Statement and such other documents and instruments
related thereto, which Security Agreement is annexed hereto as
Exhibit D.

 

(rr) “Senior
Secured Loan” means a loan with a face value of
$11,032,609 from the Purchaser to the Company with an original
issue discount of 8%, a fee of $150,000 payable to the Purchaser,
and a tenor of 18 months from the Closing Date, as set forth on
Schedule 2
hereto.

 

(ss) “Short
Sales” means all “short sales” as defined
in Rule 200 of Regulation SHO under the Exchange Act (but shall not
be deemed to include the location and/or reservation of borrowable
shares of Common Stock).

 

(tt) “SMRH”
means Sheppard, Mullin, Richter & Hampton LLP, with offices
located at 30 Rockefeller Plaza, 39th
Floor, New
York, New York 10112. “Subsidiary” means, with
respect to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock
or such other ownership interests having such power only by reason
of the happening of a contingency) to elect a majority of the board
of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. All of the Company’s
Subsidiaries are set forth on Schedule 3.1(a)
hereto.

 

(uu) “Subsidiary
Guaranty Agreement” means each Guaranty Agreement,
substantially in the form of annexed hereto as Exhibit F, between a Subsidiary
and the Purchaser, as amended, restated, supplemented or otherwise
modified from time to time.

 

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

 

(ww) “Trading
Market” means any of the following markets or
exchanges on which the Common Stock is listed or quoted for trading
on the date in question: the NYSE MKT, the Nasdaq Capital Market,
the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange, any market or quotation service of the OTC
Markets Group or the OTC Bulletin Board (or any successors to any
of the foregoing).

 

(xx) “Transaction
Documents” means, collectively, this Agreement, the
Notes, the Warrants, the Registration Rights Agreement, the
Security Agreement, each Subsidiary Guaranty Agreement, and all
financing statements (or comparable documents now or hereafter
filed in accordance with the UCC or other comparable or similar
laws, rules or regulations) in favor of the Purchaser as secured
parties perfecting all Liens the Purchaser have on the Collateral
(which security interests and Liens of the Purchaser shall be
senior to all Indebtedness of the Company), any control agreement
or similar agreement, and such other documents, instruments,
certificates, supplements, amendments, exhibits and schedules
required and/or attached pursuant to this Agreement and/or any of
the above documents, and/or any other document and/or instrument
related to the above agreements, documents and/or instruments, and
the transactions hereunder and/or thereunder and/or any other
agreement, documents or instruments required or contemplated
hereunder or thereunder, whether now existing or at any time
hereafter arising.

 

(yy) “Transfer
Agent” means Manhattan Transfer Registrar Co. the
current transfer agent of the Company, with a mailing address of
38B Sheep Pasture Road, Port Jefferson, NY 11777 and a phone number
of 631-928-7655,
and any successor transfer agent of the Company.

 



 

-5-







 





 

(zz) “UCC”
means the Uniform Commercial Code as in effect from time to time in
the State of New York; provided, however, that, in the event
that, by reason of mandatory provisions of law, any or all of the
attachment, perfection, priority, or remedies with respect to the
Purchaser’s Liens on any Collateral is governed by the
Uniform Commercial Code as enacted and in effect in a jurisdiction
other than the State of New York, the term “UCC” shall mean the
Uniform Commercial code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating
to such attachment, perfection, priority, or remedies.

 

(aa) “Underlying
Shares” means all Conversion Shares and Warrant
Shares.

 

(bb) “VWAP”
means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b)  if OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on OTCQB or OTCQX as
applicable, (c) if the Common Stock is not then listed or quoted
for trading on OTCQB or OTCQX and if prices for the Common Stock
are then reported in the “Pink Sheets” published by OTC
Markets, Inc. (or a similar organization or agency succeeding to
its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported, or (d) in all other
cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the Purchaser of a majority in interest of the Securities then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company.

 

(cc) “Warrants”
means, the Common Stock purchase warrants delivered to the
Purchasers at the Closing in accordance with Section 2.2(a) hereof,
which Warrants shall be exercisable immediately at an exercise
price of $4.00 per share of Common Stock and have a term of
exercise equal to three (3) years from the issuance date in the
form of Exhibit C
attached hereto.

 

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

 

1.2 Other Definitional
Provisions.

 

(a) Use of Defined Terms. Unless
otherwise specified therein, all terms defined in this Agreement
shall have the defined meanings when used in the other Transaction
Documents or any certificate or
other document made or delivered pursuant hereto or
thereto.

 

(b) Accounting Terms. As used
herein and in the other Transaction Documents, and any certificate
or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Company not defined in
Section 1.1
and accounting terms partly
defined in Section 1.1, to the extent not
defined, shall have the respective meanings given to them under
GAAP (provided that
all terms of an accounting or financial nature used herein shall be
construed, and all computations of amounts referred to herein shall
be made without giving effect to (i) any election under Accounting
Standards Codification 825-10-25 (previously referred to as
Statement of Financial Accounting Standards 159) (or any other
Accounting Standards Codification or Financial Accounting Standard
having a similar result or effect) to value any Indebtedness or
other liabilities of the Company at “fair value”, as
defined therein, and (ii) any treatment of Indebtedness in respect
of convertible debt instruments under Accounting Standards
Codification 470-20 (or any other Accounting Standards Codification
or Financial Accounting Standard having a similar result or effect)
to value any such Indebtedness in a reduced or bifurcated manner as
described therein, and such Indebtedness shall at all times be
valued at the full stated principal amount thereof).

 

(c) Construction. The words
“hereof”,
“herein” and
“hereunder” and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and section, schedule and exhibit references are to this
Agreement unless otherwise specified. The meanings given to terms
defined herein shall be equally applicable to both the singular and
plural forms of such
terms.

 

(d) UCC Terms. Terms used in this
Agreement that are defined in the UCC shall, unless the context
indicates otherwise or are
otherwise defined in this Agreement, have the meanings provided for
by the UCC.

 



 

-6-







 





 

ARTICLE
2 



PURCHASE
AND SALE

 

2.1 Closing.

 


(a)           
On the Closing Date, time being of the essence, subject to the
occurrence of other conditions set forth in Section 2.3 and upon
the terms and subject to the conditions set forth herein, the
Company agrees to sell, and the Purchaser agrees to purchase, the
Securities in such amounts as indicated on 
Schedule 1 hereto. The
Purchaser shall deliver to the Company, via wire transfer,
immediately available funds equal to the Purchase Price, and the
Company shall deliver to the Purchaser the Convertible Note and the
Warrant on the Closing Date, and the Company and the Purchaser
shall deliver the other items set forth in Section 2.2 deliverable
at the Closing. Upon satisfaction of the covenants and conditions
set forth in Sections 2.2 and 2.3, the Closing shall occur at the
offices of SMRH or such other location as the parties shall
mutually agree.

 


(b)           On
the Closing Date, time being of the essence, subject to the
occurrence of the other conditions set forth in Section 2.3 and
upon the terms and subject to the conditions set forth herein, the
Purchaser shall provide to the Company the Senior Secured Loan in
consideration for the Non-convertible Note in such amount as
indicated on Schedule
2 hereto. The Purchaser shall deliver to the Company, via
wire transfer, immediately available funds equal to the Senior
Secured Loan on the Closing Date, and the Company shall deliver to
the Purchaser the Non-convertible Note on the Closing Date, and the
Company and the Purchaser shall deliver the other items set forth
in Section 2.2 deliverable at the Closing Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and 2.3, the
Closing shall occur at the offices of SMRH or such other location
as the parties shall mutually agree.

 

2.2 Deliveries.

 

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

 


(i)           this
Agreement duly executed by the Company;

 


(ii)           a
Security Agreement providing the Purchaser with a lien on all of
the assets of the Company, duly executed by the
Company;

 


(iii)           a
Convertible Note registered in the name of the Purchaser with such
principal amount as set forth on Schedule 1;

 


(iv)           a
Non-convertible Note registered in the name of the Purchaser with
such principal amount as set forth on Schedule 2;

 


(v)           a
Warrant registered in the name of the Purchaser to purchase up to
1,870,000 shares of Common Stock, equal to 100% of the face value
of the Convertible Note, with an exercise price equal to $4.00 per
share of Common Stock, subject to adjustment therein;

 


(vi)           the
Registration Rights Agreement duly executed by the
Company;

 


(vii)           a
certificate, in the form acceptable to the Purchaser and its
counsel, executed by the secretary of the Company dated as of the
Closing Date, as to (i) the resolutions as adopted by the
Company’s board of directors relating to the transactions
contemplated by this Agreement in a form acceptable to the
Purchaser, (ii) Certificate of Incorporation or other similar
organizational document of the Company, and (iii) the Bylaws or
other similar organizational document of the Company, each as in
effect at the Closing;

 


(viii)        
a certificate for each Subsidiary of
the Company, in the form acceptable to the Purchaser and its
counsel, executed by the secretary of such Subsidiary dated as of
the Closing Date, as to (i) the resolutions as adopted by the
Subsidiary’s board of directors or other governing body
relating to the transactions contemplated by this Agreement in a
form acceptable to the Purchaser, (ii) Certificate of Incorporation
or other similar organizational document of such Subsidiary, and
(iii) the Bylaws or other similar organizational document of such
Subsidiary, each as in effect at the Closing;

 



 

-7-







 





 


(ix)           a
certificate, duly executed by the Chief Executive Officer of the
Company, dated as of the Closing Date, confirming compliance with
Section 2.3(a)(i) and (ii) below and as to such other matters as
may be reasonably requested by the Purchaser and its counsel in the
form acceptable to the Purchaser;

 


(x)           certificates
evidencing the good standing of the Company and each Company
Subsidiary in such entity’s jurisdiction of incorporation
issued by the Secretary of State (or comparable office) of such
jurisdiction of formation as of a date within five (5) days of the
Closing Date;

 


(xi)           an
opinion of counsel to the Company, in such form as reasonably
acceptable to the Purchaser;

 


(xii)           a
Subsidiary Guaranty Agreement for each Subsidiary of the Company;
and

 


(xiii)         
such other documents, instruments,
opinions or certificates relating to the transactions contemplated
by this Agreement as the Purchaser or its counsel may reasonably
request.

 


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

 


(i)           this
Agreement duly executed by the Purchaser;

 


(ii)         
the Purchase Price subject to the closing by wire
transfer;

 


(iii)        
the Security Agreement duly executed by the Purchaser;
and

 

(iv)        
the Registration Rights Agreement duly executed by
thePurchaser.

 

2.3 Conditions to Purchase the
Securities. Subject to the terms and conditions of this
Agreement, the Purchaser will at the Closing purchase from the
Company the Securities in the amounts and for the Purchase Price as
set forth on Schedule 1, provided the
following:

 

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

 


(i)           the
accuracy in all material respects (or, to the extent
representations or warranties are qualified by materiality or
Material Adverse Effect, in all respects) when made and on the date
of the Closing of the representations and warranties of the
Purchaser contained herein (unless as of a specific date therein in
which case they shall be accurate as of such date);

 


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

 


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

 


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

 





(v)           no
statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or
endorsed by any court or other federal, state, local or
other governmental authority of
competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by the Transaction
Documents.

 



 

-8-







 





 


(b)           The
obligations of the Purchaser hereunder in connection with the
Closing are subject to the following conditions being
met:

 


(i)           the
accuracy in all material respects (or, to the extent
representations or warranties are qualified by materiality or
Material Adverse Effect, in all respects) when made and on the date
of the Closing of the representations and warranties of the Company
contained herein (unless as of a specific date therein in which
case they shall be accurate as of such date);

 


(ii)           all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing shall have been performed in
all material respects;

 


(iii)           the
delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;

 


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

 


(v)           the
Company shall have obtained all governmental, regulatory and third
party consents and approvals, if any, necessary for the entry into
the Transaction Documents and the sale of the Securities;
and

 


(vi)           no
statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or
endorsed by any court or other federal, state, local or
other governmental authority of
competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by the Transaction
Documents.

 

2.4 Purchase Price and Payment of the
Purchase Price for the Securities. The Purchase Price for
the Securities to be purchased by the Purchaser at the Closing
shall be as set forth on Schedule 1 and shall be
paid at the Closing (less all of the Purchaser’s Expenses (as
defined below)) by the Purchaser by wire transfer of immediately
available funds to the Company in accordance with the
Company’s written wiring instructions, against delivery of
the Securities.

 


ARTICLE
3

 


REPRESENTATIONS
AND WARRANTIES; OTHER ITEMS

 

3.1 Representation and Warranties of the
Company. Except as set forth in
the Disclosure Schedules, which Disclosure Schedules shall be
deemed a part hereof and shall qualify any representation or
otherwise made herein to the extent of the disclosure contained in
the corresponding section of the Disclosure Schedules (but in no
event shall qualify any indemnity obligation of the Company
hereunder), the Company (which for purposes of this
Section 3.1
means the Company and all of its Subsidiaries) represents and
warrants to the Purchaser that on the Closing Date (unless as of a
specific date set forth below):

 

(a) Subsidiaries. All of the direct
and indirect subsidiaries of the Company and the locations thereof
are set forth on Schedule
3.1(a). The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and
clear of any Liens, and all of the issued and outstanding shares of
capital stock or other interests of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive
and similar rights to subscribe
for or purchase securities. Schedule 3.1(a) sets forth, as
of the Closing Date, the jurisdiction of organization and the
location of the Company’s and its subsidiaries’
executive offices and other places of business.

 

(b) Organization, Etc. The Company
and each of the Subsidiaries is duly organized, validly existing
and in good standing under the laws of the state of their
respective organization and are duly qualified and in good standing or has
applied for qualification as a foreign corporation authorized to do
business in each jurisdiction where, because of the nature of its
activities or properties, such qualification is required except
where the failure to be so qualified would not reasonably be
expected to have a Material Adverse Effect.

 



 

-9-







 





 

(c) Authorization: No Conflict. The
execution, delivery and performance of the Transaction Documents
and the transactions contemplated thereby by the Company,
including, but not limited to, the sale and issuance of the
Securities for the Purchase Price, the reservation for issuance of the Underlying
Shares required to be reserved pursuant to the terms of the
Convertible Note and the Warrant, and
the issuance of the Underlying Shares from which the Convertible
Note is convertible and the Warrant is exercisable (i) are
within the Company’s corporate powers, (ii) have been
duly authorized by all
necessary action by or on behalf of the Company (and/or its
stockholders to the extent required by law), (iii) have
received all necessary and/or required governmental, regulatory and
other approvals and consents (if any shall be required), (iv) do
not and shall not contravene or conflict in any material respect
with any provision of, or require any consents under (1) any law,
rule, regulation or ordinance, (2) the Company’s
organizational documents; and/or (3) any agreement, credit
facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected, and
(v) other than the Liens granted to the Purchaser pursuant to the
Transaction Documents, do not result in, or require, the creation
or imposition of any Lien and/or encumbrance on any of the
Company’s properties or revenues pursuant to any law, rule,
regulation or ordinance or otherwise.

 

(d) Validity and Binding Nature.
The Transaction Documents to which the Company is a party are the
legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization and other similar laws of general application
affecting the rights and remedies of creditors and by general
equitable principles (whether enforcement is sought by proceedings
in equity or at law).

 

(e) Title to Assets. The Company
and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them and good and marketable title in
all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear
of all Liens, except for (i) Liens as do not materially affect the
value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and
the Subsidiaries, (ii) Liens for the payment of federal, state or
other taxes, for which appropriate reserves have been made therefor
in accordance with GAAP and the payment of which is not delinquent,
and (iii) Permitted Liens. Any real property and facilities held
under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases with which the
Company and the Subsidiaries are in compliance.

 

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

 

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

 

(h) Licenses and
Permits. The Company possesses
all certificates, authorizations, consents, approvals, orders,
licenses and permits issued by the appropriate federal, state or
foreign regulatory authorities (collectively, the
“Permits”),
necessary to conduct its business as now conducted. All of such
Permits are valid and in full force and effect. There is no pending
or, to the Company’s knowledge, threatened action, suit,
proceeding or investigation that individually or in the aggregate
would reasonably be expected to lead to the revocation,
modification, termination, suspension or any other impairment of
the rights of the holder of any such Permit.

 

(i) Investment Company. The Company
is not (i) an “investment company” or a company
“controlled”, whether directly or indirectly, by an
“investment company”, within the meaning of the
Investment Company Act of 1940, as amended; or (ii) engaged principally, or as one of its
important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning
of Regulation U of the Board of Governors of the Federal Reserve
System).

 



 

-10-







 





 

(j) Absence of Defaults
and Conflicts.
The Company
is not (i) in violation of its charter, by-laws or similar
incorporation or organizational documents or (ii) in violation
or default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which
the Company is a party or by which it may be bound, or to which any
of the property or assets of the Company is subject
(collectively, “Agreements and
Instruments”). The execution,
delivery and performance of this Agreement and the consummation of
the transactions contemplated in this Agreement and the other
Transaction Documents, and compliance by the Company with its
obligations under this Agreement and the other Transaction
Documents, do not and will not, whether with or without the giving
of notice or passage of time or both, (w) conflict with or result
in a breach of any of the terms and provisions of, or constitute a
default or Repayment Event (as defined below) under, (x) result in
the creation or imposition of any lien, charge or encumbrance
(other than Permitted Liens) upon any property or assets of the
Company pursuant to, the Agreements and Instruments, (y) result in
any violation of the provisions of the charter, by-laws or similar
organizational documents of the Company, or (z) result in any
applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any of
its assets, properties or operations, except in the case of this
clause (z) for such conflicts, violations, breaches or defaults
which would not reasonably be expected to result in a Material
Adverse Effect on the Company. As used herein, a
“Repayment
Event”
means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness that is material to the operations
or financial results of the Company (or any person acting on such
holder’s behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by
the Company.

 

(k) Foreign Corrupt
Practices Act. Neither the Company
nor, to the Company’s knowledge, any of its affiliates,
directors, officers, employees, agents or other person acting on
behalf of the Company is aware of or has taken any action, directly
or indirectly, that would result in a material violation by such
person of the Foreign Corrupt Practices Act of 1977, as amended,
and the rules and regulations thereunder (the “FCPA”),
including, without limitation, making use of the mails or any means
or instrumentality of interstate commerce corruptly in furtherance
of an offer, payment, promise to pay or authorization of the
payment of money, or other property, gift, promise to give, or
authorization of the giving of anything of value to any
“foreign official” (as such term is defined in the
FCPA) or any foreign political party or official thereof or any
candidate for foreign political office, in contravention of the
FCPA and the Company and, to the Company’s knowledge, its
affiliates have conducted their businesses in material compliance
with the FCPA and have instituted and maintain policies and
procedures designed to ensure, and which are reasonably expected to
continue to ensure, continued compliance
therewith.

 

(l) Rule 506(d) Bad Actor Disqualification
Representations and Covenants.

 

(i) No Disqualification Events.
Neither the Company, nor any of its predecessors, affiliates, any
manager, executive officer, other officer of the Company
participating in the offering, any beneficial owner (as that term
is defined in Rule 13d-3 under the Exchange Act) of 20% or more of
the Company’s outstanding voting equity securities,
calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the Securities Act) connected
with the Company in any capacity as of the date of this Agreement
and on the Closing Date (each, a “Company Covered Person”
and, together, “Company Covered Persons”)
is subject to any of the “Bad Actor” disqualifications
described in Rule 506(d)(1)(i) to (viii) under the Securities Act
(a “Disqualification
Event”), except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine (A) the identity of each person that is a
Company Covered Person; and (B) whether any Company Covered
Person is subject to a Disqualification Event. The Company has
complied with its disclosure obligations under Rule 506(e) as set
forth on Schedule 3.1(l).

 

(ii) Other
Covered Persons. The Company is not aware of any person
(other than any Company Covered Person) who has been or will be
paid (directly or indirectly) remuneration in connection with the
purchase and sale of the Notes and the Warrant who is subject to a
Disqualification Event (each, an “Other Covered
Person”).

 

(iii) Reasonable
Notification Procedures. With respect to each Company
Covered Person, the Company has established procedures reasonably
designed to ensure that the Company receives notice from each such
Company Covered Person of (A) any Disqualification Event relating
to that Company Covered Person, and (B) any event that would, with
the passage of time, become a Disqualification Event relating to
that Company Covered Person; in each case occurring up to and
including the Closing Date.

 

(iv) Notice
of Disqualification Events. The Company will notify the
Purchaser immediately in writing upon becoming aware of (A) any
Disqualification Event relating to any Company Covered Person and
(B) any event that would, with the passage of time, become a
Disqualification Event relating to any Company Covered Person
and/or Other Covered Person.

 



 

-11-







 





 

(m) Accuracy of Information, etc.
No statement or information contained in this Agreement, any other
Transaction Document or any other document, certificate or
statement furnished to the Purchaser by or on behalf of the Company
in writing for use in connection with the transactions contemplated
by this Agreement and/or the other Transaction Documents contained,
as of the date such statement, information, document or certificate
was made or furnished, as the case may be, any untrue statement of
a material fact or omitted to state a material fact necessary to
make the statements contained herein or therein, taken as a whole,
not materially misleading. There is no fact known to the Company
that would reasonably be expected to materially affect the Company
that has not been expressly disclosed herein, in the other
Transaction Documents, or in any other documents, certificates and
written statements furnished to the Purchaser for use in connection
with the transactions contemplated hereby and by the other
Transaction Documents.

 

(n) Solvency.
Based on the consolidated financial condition of the Company as of
the Closing Date, after giving effect to the receipt by the Company
of the proceeds from the sale of the Securities hereunder: (i) the
fair saleable value of the Company’s assets exceeds the
amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature, (ii) the
Company’s assets do not constitute unreasonably small capital
to carry on its business as now conducted and as proposed to be
conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the
Company, consolidated and projected capital requirements and
capital availability thereof, and (iii) the current cash flow of
the Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all
amounts on or in respect of its liabilities when such amounts are
required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in
respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the
Closing Date. Schedule 3.1(n)
sets forth
as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. Neither the Company nor
any Subsidiary is in default with respect to any
Indebtedness.

 

(o) Transactions With
Affiliates and Employees. Except as set forth
on the financial statements included in Schedule 3.1(x), none of
the officers or directors of the Company or any Subsidiary and, to
the knowledge of the Company, none of the employees of the Company
or any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from
providing for the borrowing of money from or lending of money to,
or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $120,000 other than for: (i)
payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.

 

(p) Intellectual Property. The
Company has, or has rights to use, all patents, patent
applications, trademarks, trademark applications, service marks,
trade names, trade secrets, inventions, copyrights, licenses and
other intellectual property rights and similar rights as described
on Schedule 3.1(p)
that are material to the conduct of its business (collectively, the
“Intellectual
Property Rights”). The Company has not received a
notice (written or otherwise) that any material Intellectual
Property Right has expired, terminated or been abandoned, or is
expected to expire or terminate or be abandoned. The Company has
not received, since the Balance Sheet Date, a written notice of a
claim or otherwise has any knowledge that the Intellectual Property
Rights violate or infringe upon the rights of any Person, except as
would not have or reasonably be expected to have a Material Adverse
Effect. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property
Rights. The Company has taken commercially reasonable security
measures to protect the secrecy, confidentiality and value of all
of its intellectual property.

 

(q) USA Patriot Act. The Company is
in compliance, in all material respects, with (i) the Trading with
the Enemy Act, as amended, and each of the foreign assets control
regulations of the United States Treasury Department (31 C.F.R.,
Subtitle B, Chapter V, as amended) and any other enabling
legislation or executive order relating thereto, and (ii) the USA
Patriot Act (Title III of Pub. L. 107-56, signed into law on
October 26, 2001) (the “Act”). No part of the
proceeds of the Notes or Warrant will be used, directly or
indirectly, for any payments to any governmental official or
employee, political party, official of a political party, candidate
for political office, or anyone else acting in an official
capacity, in order to obtain, retain or direct business or obtain
any improper advantage, in violation of the United States Foreign
Corrupt Practices Act of 1977, as amended.

 

(r) Office of Foreign
Assets Control. Neither the
Company nor any Subsidiary nor, to the Company’s knowledge,
any director, officer, agent, joint venture employee or affiliate
of the Company or any Subsidiary is currently, or in the past 5
years, has been subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department
(“OFAC”).


 



 

-12-







 






 

(s) Filings, Consents and
Approvals. The Company is not
required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any
court or other federal, state, local or other governmental
authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction
Documents, other than: (i) the filings required pursuant to the
Registration Rights Agreement and the declaration of effectiveness
by the SEC of the Registration Statement, (ii) the notice and/or
application(s) to each applicable Trading Market for the issuance
and sale of the Securities and the listing of the Conversion Shares
and Warrant Shares for trading thereon in the time and manner
required thereby, and (iii) the filing of Form D with the
Commission and such filings as are required to be made under
applicable state securities laws (collectively, the
“Required
Approvals”).

 

(t) Authorization; Enforcement. All
corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization,
execution and delivery of the Transaction Documents and the
performance of all obligations of the Company under the Transaction
Documents and have been taken on or prior to the date hereof. Each
of the Transaction Documents has been duly executed by the Company
and, when delivered in accordance with the terms hereof and
thereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms, except: (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by general equitable principles regardless of whether such
enforcement is considered in a proceeding in equity or at law,
(iii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iv)
insofar as indemnification and contribution provisions may be
limited by applicable law.

 

(u) Valid Issuance of Securities.
The Convertible Note and Warrant have been duly authorized and,
when issued and paid for in accordance with this Agreement, will be
duly and validly issued, fully paid and nonassessable, free and
clear of all Liens and all restrictions on transfer other than
those expressly imposed by the federal securities laws and vest in
the Purchaser full and sole title and power to the Convertible Note
and Warrant purchased hereby by the Purchaser, free and clear of
all Liens, and restrictions on transfer other than those imposed by
the federal securities laws. All Conversion Shares, when issued
pursuant to conversion of the Convertible Note, and all Warrant
Shares, when issued pursuant to exercise of the Warrants, when
issued pursuant to this Agreement, will be duly and validly issued,
fully paid and nonassessable, will be free and clear of all Liens
and vest in the holder full and sole title and power to such
securities. The Company has reserved from its duly authorized
unissued Common Stock, the Required Minimum (as defined in the
Convertible Note), which Required Minimum shall be continuously
determined by the Company to ensure that the Required Minimum is in
reserve with the Transfer Agent at all times.

 

(v) Offering. The offer and sale of
the Convertible Note and the Warrant, when issued pursuant to this
Agreement, as contemplated by this Agreement, are exempt from the
registration requirements of the Securities Act, and the
qualification or registration requirements of state securities laws
or other applicable blue sky laws. Neither the Company nor any
authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such
exemptions.

 

(w) Capitalization and Voting
Rights. The capitalization of
the Company is as set forth on Schedule
3.1(w), which
Schedule
3.1(w) shall also include the
number of shares of Common Stock owned beneficially, and of record,
by Affiliates of the Company as of the date hereof. The
authorized capital stock of the Company and all securities of the
Company issued and outstanding are set forth on Schedule 3.1(w) as of the dates
reflected therein. All of the outstanding shares of Common Stock
and other securities of the Company have been duly authorized and
validly issued, and are fully paid and nonassessable. Except as set forth
on Schedule
3.1(w), no Person has any
right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as set forth on Schedule 3.1(w), there are no
agreements or arrangements under which the Company is obligated to
register the sale of any of the Company’s securities under
the Securities Act. Except as set forth on Schedule 3.1(w), no shares of
Common Stock and/or other securities of the Company are entitled to
preemptive rights and there are no outstanding debt securities and
no contracts, commitments, understandings, or arrangements by which
the Company is or may become bound to issue additional shares of
the capital stock and/or other securities of the Company or
options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, any shares of
capital stock of the Company other than those issued or granted in
the ordinary course of business pursuant to the Company’s
equity incentive and/or compensatory plans or arrangements. Except
for customary transfer restrictions contained in agreements entered
into by the Company to sell restricted securities and/or as set
forth on Schedule
3.1(w), 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 and/or other securities of the
Company. Except as set forth on Schedule 3.1(w), the offer and
sale of all capital stock, convertible or exchangeable securities,
rights, warrants, options and/or any other securities of the
Company, when any such securities of the Company were issued,
complied in all material respects with all applicable federal and
state securities laws, and no current and/or prior holder of any
securities of the Company has any right of rescission or damages or
any “put” or similar right with respect thereto. Except
as set forth on Schedule
3.1(w), there are no securities or instruments of the
Company containing anti-dilution or similar provisions that will be
triggered by the issuance and/or sale of the Securities and/or the
consummation of the transactions described herein or in any of the
other Transaction Documents.

 



 

-13-







 





 

(x) Shell Company Status; Financial
Statements. The Company has been an issuer subject to Rule
144(i) under the Securities Act. The unaudited financial statements
of the Company as of June 30, 2020 is included in Schedule 3.1(x) hereto. The
financial statements of the Company included on Schedule 3.1(x) have been
prepared in accordance with GAAP, except as may be otherwise
specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material
respects the financial position of the Company and its consolidated
Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject to
normal, immaterial, year-end audit adjustments. For purposes of
this Section 3.1, June 30, 2020 is referred to as the
“Balance Sheet
Date”.

 

(y) Material Changes; Undisclosed Events,
Liabilities or Developments. Since the Balance Sheet Date:
(i) there has been no event, occurrence or development that has had
or that could reasonably be expected to be materially adverse to
the Company, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent
with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or
disclosed in filings made with the Commission (if the Company is an
issuer required to file periodic reports under the Exchange Act),
(iii) the Company has not altered its method of accounting, (iv)
the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant
to existing Company stock option plans. Except for the issuance of
the Securities contemplated by this Agreement or as set forth on
Schedule
3.1(y), no
event, liability, fact, circumstance, occurrence or development has
occurred or exists or is reasonably expected to occur or exist with
respect to the Company or its Subsidiaries or their respective
businesses, properties, operations, assets or financial condition,
that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made
or deemed made that has not been publicly disclosed at least 1
Trading Day prior to the date that this representation is
made.

 

(z) Litigation.
Except as
set forth on Schedule 3.1(z), there is no action, suit, inquiry,
notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative
agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has
not been, and to the knowledge of the Company, there is not pending
or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the
Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or
the Securities Act.

 

(aa) Disclosure.
Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf
has provided any Purchaser or its respective agents or counsel with
any information that constitutes material, non-public information.
The Company understands that the Purchaser may rely on the
Transaction Documents, the information included therein, including,
but not limited to, the foregoing representation in purchasing the
Securities. All of the disclosure furnished by or on behalf of the
Company to the Purchaser in the Transaction Documents regarding,
among other matters relating to the Company, its business and the
transactions contemplated in the Transaction Documents, is true and
correct in all material respects as of the date made and does not
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made,
not misleading. The Company acknowledges and agrees that the
Purchaser does not make nor has made any representations or
warranties with respect to the transactions contemplated in the
Transaction Documents other than those specifically set forth in
Section 3.2
hereof.

 

(bb) No
Integrated Offering. Assuming the accuracy of the
representations and warranties set forth in Section 3.2, 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 issuance and/or sale of the
Securities to be integrated with prior offerings of securities by
the Company for purposes of (i) the Securities Act that would
require the registration of any such Securities and/or any other
securities of the Company under the Securities Act, or that would
invalidate the exemptions from registration relied upon by the
Company, or (ii) any stockholder-approval provisions of any Trading
Market on which any of the securities of the Company are listed,
eligible for quotation and/or designated.

 

(cc) Insurance.
The Company
is insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are prudent
and customary in the business in which it is engaged; the Company
has not been refused any coverage sought or applied for; and the
Company does not have any reason to believe that it will not be
able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its
business.

 



 

-14-







 





 

(dd) Regulation
M Compliance. The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold,
bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase
any other securities of the Company.

 

(ee) Registration
Rights. Except as set forth
on Schedule
3.1(ee), no Person has any
right to cause the Company to effect the registration under the
Securities Act of any securities of the Company or any
Subsidiaries. The Company shall not effectuate
any

 

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

 

(gg) Dilutive
Effect. The Company understands and acknowledges that the
number of Underlying Shares issuable upon conversion of the
Convertible Note and exercise of the Warrant, pursuant to the terms
thereof, will increase in certain circumstances. The Company
further acknowledges that its obligations to issue Underlying
Shares pursuant to the terms of the Convertible Note and Warrant in
accordance with this Agreement, the Convertible Note and Warrant is
absolute and unconditional regardless of the dilutive effect that
any such issuances may have on the percentage ownership interests
of other stockholders of the Company.

 

(hh) Application
of Takeover Protections; Rights Agreement.  The Company
and its board of directors have taken all necessary action, if any,
in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provisions under
the Company’s certificate of incorporation, as amended, or
the laws of the jurisdiction of its formation that are or could
become applicable to the Purchaser as a result of the transactions
contemplated by this Agreement and/or the other Transaction
Documents, including, without limitation, the Company’s
issuance of the Securities and the Purchaser’s ownership of
the Securities. The Company has not adopted a stockholder rights
plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the
Company.

 

(ii) Manipulation
of Price. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any
action designed to cause or to result, or that could reasonably be
expected to cause or result, in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale
or resale of any of the Securities, (ii) sold, bid for, purchased,
or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other
securities of the Company.

 

(jj) DTC
Eligible. The Common Stock is DTC eligible and DTC has not
placed a “freeze” or a “chill” on the
Common Stock and the Company has no reason to believe that DTC has
any intention to make the Common Stock not DTC eligible, or place a
“freeze” or “chill” on the Common Stock. No
federal or state regulatory authority has indicated that it will
prohibit the listing of the Company’s securities based upon
its prior business in the cannabis or cannabis-related markets nor
will the Purchaser be prohibited from depositing, clearing or
settling the Securities, including through the DTC or
otherwise, on account of the Company’s prior business in the
cannabis or cannabis-related markets.

 

(kk) Listing
and Maintenance Requirements. The Company has not, in the 12 months preceding
the date hereof, received notice from any Trading Market on which
the Common Stock is or has been listed or quoted to the effect that
the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Common Stock is
eligible for quotation on the Principal Market and the Company has
no reason to believe that the Principal Market has any intention of
delisting or no longer quoting the Common Stock from the Principal
Market. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations
of the Trading Market. All Underlying Shares have been
approved, if so required, for listing or quotation on the Trading
Market, subject only to notice of issuance.

 



 

-15-







 





 

(ll) No
General Solicitation.  Neither the Company, nor any of
its affiliates, nor, to the knowledge of the Company, any Person
acting on its behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the
Securities. 

 

(mm) Acknowledgment
Regarding the Purchaser’s Purchase of Securities.
 The Company acknowledges and agrees that the Purchaser is
acting solely in the capacity of an arm’s length purchaser
with respect to the other Transaction Documents and the
transactions contemplated hereby and thereby and that the Purchaser
is not (i) an officer or director of the Company, (ii) an
Affiliate of the Company or (iii) to the knowledge of the
Company, a “beneficial owner” of more than 10% of the
shares of Common Stock (as defined for purposes of Rule 13d-3
of the Exchange Act).  The Company further acknowledges that
the Purchaser is not acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and
thereby, and any advice given by the Purchaser or any of its
representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is
merely incidental to the Purchaser’s purchase of the
Securities.  The Company further represents to the Purchaser
that the Company’s decision to enter into the Transaction
Documents has been based solely on the independent evaluation by
the Company and its representatives.

 

(nn) Off-Balance
Sheet Arrangements.  There is no transaction,
arrangement, or other relationship between the Company and an
unconsolidated or other off-balance sheet entity that is required
to be disclosed by the Company in its Exchange Act filings and is
not so disclosed.

 

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

 

(pp) Anti-Money
Laundering, Anti-Bribery and Anti-Corruption;
Sanctions.

 

(i) Neither the Company
nor, any of its Subsidiaries or Affiliates or any director or
officer of any of them is an individual or entity currently, or has
not in the past 5 years been, subject to any Sanctions or is on any
Sanctions List.

 

(ii) Each
of the Company, any of its Subsidiaries and Affiliates and their
respective directors, officers, employees and, to the knowledge of
the Company, agents and any other person or entity acting on behalf
of the Company, has complied with the Money Laundering,
Anti-Corruption and Anti-Bribery Laws, in each case as applicable
to them, and no action, suit or proceeding by or before any court
or any arbitrator or any governmental agency, authority or body
involving the Company and any of its Subsidiaries or their
respective directors or officers and, to the knowledge of the
Company, the employees, agents, or representatives of each of them,
is pending or threatened with respect to Money Laundering,
Anti-Corruption and Anti-Bribery Laws.

 

(iii) Neither
the Company nor any of its Subsidiaries nor their respective
directors or officers, nor, to the knowledge of the Company, the
employees or agents of any of them has:

 




A.

used any corporate
funds (nor will it use any proceeds from the Notes and Warrants)
for any unlawful contribution, gift, entertainment or unlawful
expense relating to political activity;





 




B.

taken any action in
furtherance of an unlawful offer, payment, promise to pay, or
authorization or approval of the payment or giving of money,
property, gifts or (anything else of value, directly or indirectly,
to any “government official” (including any officer or
employee of a government or government owned or controlled entity
or of a public international organization, or any person acting in
an official capacity for or on behalf of any of the foregoing, or
any political party or party official or candidate for public
office) or made any other bribe, rebate, payoff, influence payment
or kickback intended to improperly influence official action or
secure an improper advantage;





 




C.

nor will it use any
proceeds from the Notes and Warrants in furtherance of any such
unlawful payment or violation of Sanctions or Money Laundering,
Anti-Corruption and Anti-Bribery Laws.





 

(iv) The
Company and each Subsidiary will promote and ensure compliance with
Money Laundering, Anti-Corruption and Anti-Bribery Laws in all
jurisdictions where they operate and with the representations and
warranties contained herein.

 



 

-16-







 





 

(v) As used in this
Section 3.1(pp):

 




A.

 “Money
Laundering, Anti-Corruption and Anti-Bribery Laws”
means money laundering and anti- corruption statutes of all
jurisdictions (including, the Foreign Corrupt Practices Act of
1977, the OECD Convention on Bribery of Foreign Public Officials in
International Business Transactions, and any similar national or
local law or regulation in the United Kingdom or elsewhere where
the Company and each other Subsidiary conducts business), the rules
and regulations thereunder and any related or similar rules,
regulations or guidelines, issued, administered or enforced by any
governmental agency or any such jurisdiction.





 




B.

“Sanctions” means any laws
or regulations or restrictive measures relating to economic or
financial sanctions or trade embargoes imposed, administered or
enforced from time to time by a Sanctions Authority.





 




C.

 “Sanctions
Authority” means (i) the United Nations Security
Council; (ii) the United States government; (iii) the European
Union; (iv) the United Kingdom government; (v) the respective
governmental institutions and agencies of any of the foregoing,
including without limitation, OFAC, the United States Department of
State and Department of Commerce, and Her Majesty's Treasury; and
(vi) any other governmental institution or agency with
responsibility for imposing, administering or enforcing Sanctions
with jurisdiction over the Company or any of its subsidiaries
(together, “Sanctions
Authorities”).





 




D.

 “Sanctions
List” means the Specially Designated Nationals and
Blocked Persons List maintained by OFAC, the Denied Persons List
maintained by the U.S. Department of Commerce, the Consolidated
List of Financial Sanctions Targets maintained by Her Majesty's
Treasury, or any other list issued or maintained by any Sanctions
Authority of persons subject to Sanctions (including investment or
related restrictions), each as amended, supplemented or substituted
from time to time.





 

(qq) Environmental
Laws. The Company and its
Subsidiaries, to the best of the Company’s knowledge, (i) are
in compliance with all federal, state, local and foreign laws
relating to pollution or protection of human health or the
environment (including ambient air, surface water, groundwater,
land surface or subsurface strata), including laws relating to
emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous
Materials”) into the
environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands, or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or
regulations, issued, entered, promulgated or approved thereunder
(“Environmental
Laws”); (ii) have
received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses; and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where in each
clause (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.

 

(rr) Seniority.
As of the Closing Date, (i) all Indebtedness, other than the Notes
and the indebtedness issued to Affiliates of the Purchaser in the
May 2020 Financing and November 2020 Financing, are subordinated to
the Notes and the indebtedness issued to Affiliates of the
Purchaser in the May 2020 Financing and the November 2020
Financing, and (ii) no Indebtedness or other claim against the
Company is senior to or pari passu with the Notes or indebtedness
issued to Affiliates of the Purchaser in the May 2020 Financing and
November 2020 Financing in right of payment (except that the Notes
and the indebtedness issued to Affiliates of the Purchaser in the
May 2020 Financing and November 2020 Financing are pari passu with
each other), whether with respect to interest or upon liquidation
or dissolution, or otherwise, other than indebtedness secured by
purchase money security interests (which is senior only as to
underlying assets covered thereby) and capital lease obligations
(which is senior only as to the property covered
thereby).

 



 

-17-







 





 

3.2 Representation and Warranties of the
Purchaser. The Purchaser, severally and not jointly, hereby
represents and warrants as of the date hereof and as of the Closing
Date to the Company as follows:

 

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

 

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

 

(c) Purchaser
Status. At the time the
Purchaser was offered the Securities, it was, and as of the date
hereof it is an “accredited investor” as defined in
Rule 501(a) under the Securities Act.

 

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

 

(e)  General
Solicitation. The Purchaser is not,
to the Purchaser’s knowledge, purchasing the Securities as a
result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general
advertisement.

 

(f) Access to
Information. The Purchaser
acknowledges that it has had the opportunity to review the
Transaction Documents (including all exhibits and schedules
thereto) and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and
conditions of the offering of the Securities and the merits and
risks of investing in the Securities; (ii) access to information
about the Company and its financial condition, results of
operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense
that is necessary to make an informed investment decision with
respect to the investment. 

 

(g) Certain Transactions and
Confidentiality. The Purchaser has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to
any understanding with the Purchaser, executed any purchases or
sales, including Short Sales, of the securities of the Company
during the period commencing as of the time that the Purchaser
first received a term sheet (written or oral) from the Company or
any other Person representing the Company setting forth the
material terms of the transactions contemplated hereunder and
ending immediately prior to the execution hereof. Notwithstanding
the foregoing, if the Purchaser is a multi-managed investment
vehicle, whereby separate portfolio managers manage separate
portions of the Purchaser’s assets and the portfolio managers
have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of the Purchaser’s
assets, the representation set forth above shall only apply with
respect to the portion of assets managed by the portfolio manager
that made the investment decision to purchase the Securities
covered by this Agreement. Other than to other Persons party to
this Agreement or to the Purchaser's representatives, including,
without limitation, its officers, directors, partners, legal and
other advisors, employees, agents and Affiliates, the Purchaser has
maintained the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms
of this transaction).

 



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

 



 

-18-







 





 

  ARTICLE
4


OTHER
AGREEMENTS OF THE PARTIES

 

4.1 Transfer
Restrictions.

 

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

 

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

 


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


  


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


 

(c) Certificates
evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof):
(i) when they have been
sold while a registration
statement (including the Registration Statement) covering the
resale of such security is effective under the Securities Act, (ii)
following any sale of such Underlying Shares pursuant to Rule 144,
(iii) if such Underlying Shares are eligible for sale under Rule
144 and a sale or transfer will be taking place prior to the
Company’s next periodic report becomes due under the Exchange
Act or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue a legal
opinion to the Transfer Agent promptly after the Effective Date or
at such time as such legend is no longer required under this
Section 4.1(c) if required by the Transfer Agent to effect the
removal of the legend hereunder, or if requested by the Purchaser.
If any portion of the Convertible Note is converted at a time when
there is an effective registration statement to cover any sale of
the Underlying Shares, or if such Underlying Shares have been sold
under Rule 144 and the Company is then in compliance with the
current public information required under Rule 144, or if the
Underlying Shares may be sold under Rule 144 without the
requirement for the Company to be in compliance with the current
public information required under Rule 144 as to such Underlying
Shares and without volume or manner-of-sale restrictions provided
the conditions of Rule 144(i)(2) have been satisfied and a sale of
such shares will be taking place prior to the Company’s next
annual or quarterly report becoming due under its reporting
obligations under the Exchange Act or if such legend is not
otherwise required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued
by the staff of the Commission) then such Underlying Shares shall
be issued free of all legends. The Company agrees that following
the Effective Date or at such time as such legend is no longer
required under this Section 4.1(c), it will, no later than the
earlier of (i) three (3) Trading Days and (ii) the number of
Trading Days comprising the Standard Settlement Period (as defined
below) following the delivery by the Purchaser to the Company or
the Transfer Agent of certificate(s) representing the Underlying
Shares, as applicable, issued with a restrictive legend (such date,
the “Legend Removal
Date”), deliver or
cause to be delivered to the Purchaser a certificate representing
such shares that is free from all restrictive and other legends.
The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on
transfer set forth in this Section 4. Certificates for Underlying
Shares subject to legend removal hereunder shall be transmitted by
the Transfer Agent to the Purchaser by crediting the account of the
Purchaser’s prime broker with the Depository Trust Company
System as directed by the Purchaser. As used herein,
“Standard Settlement
Period” means the
standard settlement period, expressed in a number of Trading Days,
on the Company’s primary Trading Market with respect to the
Common Stock as in effect on the date of delivery of a certificate
representing the Underlying Shares, as applicable, issued with a
restrictive legend.


 



 

-19-







 






 

(d) In
addition to the Purchaser’s other available remedies, the
Company shall pay to the Purchaser, in cash, the greater of (i) as
partial liquidated damages and not as a penalty, for each $1,000 of
Underlying Shares (based on the VWAP of the Common Stock on the
date such Securities are submitted to the Transfer Agent) delivered
for removal of the restrictive legend and subject to Section
4.1(c), $5 per Trading Day (increasing to $10 per Trading Day five
(5) Trading Days after such damages have begun to accrue) for each
Trading Day after the Legend Removal Date until such certificate is
delivered without a legend and (ii) if the Company fails to (x)
issue and deliver (or cause to be delivered) to the Purchaser by
the Legend Removal Date a certificate representing the Securities
so delivered to the Company by the Purchaser that is free from all
restrictive and other legends or (y) if after the Legend Removal
Date the Purchaser purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Purchaser of all or any portion of the number of shares
of Common Stock, or a sale of a number of shares of Common Stock
equal to all or any portion of the number of shares of Common Stock
that the Purchaser anticipated receiving from the Company without
any restrictive legend, then, an amount equal to the excess of the
Purchaser’s total purchase price (including brokerage
commissions and other out-of-pocket expenses, if any) for the
shares of Common Stock so purchased (including brokerage
commissions and other out-of-pocket expenses, if any) (the
“Buy-In
Price”) over the
product of (A) such number of Conversion Shares, as applicable,
that the Company was required to deliver to the Purchaser by the
Legend Removal Date multiplied by (B) the lowest closing sale price
of the Common Stock on any Trading Day during the period commencing
on the date of the delivery by the Purchaser to the Company of the
applicable Underlying Shares and ending on the date of such
delivery and payment under this clause (ii).


 

4.2 Furnishing of
Information. Beginning on the
Closing Date, the Company shall use commercially reasonable efforts
to comply with the Pink Basic Disclosure Guidelines which set forth
the disclosure obligations that make up the “Alternative
Reporting Standard” for OTC Pink companies as such
obligations are published by the OTC Markets Group, Inc. In
addition, the Company shall file a Registration Statement on Form
8-A as soon as practicable, but in no event no later than five (5)
Trading Days, after the effective date of first registration
statement filed by the Company that is declared effective by the
SEC which registers securities held by the Purchaser or any of its
Affiliates. If after the date hereof the Company becomes
subject to the rules and regulations of the Exchange Act and as
long as the Purchaser
owns Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the
date hereof pursuant to the Exchange Act. As long as the Purchaser
owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the
Purchaser and make publicly available in accordance with Rule
144(c) such information as is required for the Purchaser to sell
the Securities, including without limitation, under Rule 144. In
addition, the Company shall file with Commission current
“Form 10 information”, as defined in Rule 144(i)(3), as
soon as practicable after the date the Company becomes subject to
the rules and regulations of the Exchange Act, reflecting its
status as an entity that is no longer an issuer described in Rule
144(i)(1)(i). The Company further covenants that it will take such
further action as any holder of Securities may reasonably request,
to the extent required from time to time to enable such Person to
sell such Securities without registration under the Securities Act,
including without limitation, within the requirements of the
exemption provided by Rule 144.

 

4.3 Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Securities in a manner that would require
the registration under the Securities Act of the sale of the
Securities or that would be integrated with the offer or sale of
the Securities for purposes of the rules and regulations of any
Trading Market such that it would require shareholder approval
prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent
transaction.

 

4.4 Securities
Laws Disclosure; Publicity. The
Company shall by 9:00am on the 2nd
Trading Day after the date of this
Agreement, issue a press release disclosing the material terms of
the transactions contemplated hereby, which press release shall
have been approved by the Purchaser prior to its release (which
approval shall not unreasonably be withheld or delayed). From and
after the issuance of such press release, the Company represents to
the Purchaser that it shall have publicly disclosed all material,
non-public information delivered to the Purchaser by the Company or
any of its Subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents. In addition, effective
upon the issuance of such press release, the Company acknowledges
and agrees that any and all confidentiality or similar obligations
under any agreement, whether written or oral, between the Company,
any of its Subsidiaries or any of their respective officers,
directors, agents, employees or Affiliates on the one hand, and the
Purchaser or any of its Affiliates on the other hand, shall
terminate. The Company and the Purchaser shall consult with each
other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor the
Purchaser shall issue any such press release nor otherwise make any
such public statement without the prior consent of the Company,
with respect to any press release of the Purchaser, or without the
prior consent of the Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld or
delayed, except if such disclosure is required by law, in which
case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication.
Notwithstanding the foregoing, the Company shall not, without the
prior written consent of the Purchaser, (a) use the name of the
Purchaser, “Arena Investors LP,” “Arena
Management Company LLC,” “Arena Finance Company
LLC,” “Arena” or any other derivative thereof
(each, a “Trade
Name”) in any press
releases or other public disclosures (including in any filing with
the Commission or any regulatory agency or Trading Market),
offering documents, sales materials, brochures or similar publicity
or promotional materials, or for promotional purposes, whether
orally or in writing, except (x) as required by federal
securities law and the rules and regulations promulgated thereunder
in connection with the filing of final Transaction Documents, any
disclosure required pursuant to any reports required to be
filed by the Company pursuant to the Exchange Act after the date
hereof or the Registration Statement
with the Commission, (y) to the extent such disclosure is
required by law or Trading Market regulations, including
the
“Alternative Reporting Standard” required by OTC
Markets, in which case the
Company shall provide the Purchaser with prior notice of such
disclosure permitted under this clause (y), or (z) as required
under Delaware General Corporation Law or (b) represent that an
investment in the Company or any product or any service provided by
the Company has been approved or endorsed by the Purchaser.
Following any such written consent, which shall not be
unreasonably withheld or delayed, the Company shall provide the Purchaser with a
copy of such written or other materials using the Trade Name if
requested by the Purchaser. The Purchaser shall be deemed to
have provided prior written consent of the disclosure of the
Purchaser’s name to other stockholders and investors in the
Company, and to potential investors in the Company (that to the
extent such information has not already been publicly disclosed,
have been informed of the confidential nature thereof) that in the
course of their due diligence require disclosure of the identity of
the existing investors in the Company.

 



 

-20-







 





 

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

 

4.6 Non-Public
Information.    Except
with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, which shall
be disclosed pursuant to Section 4.4, the Company covenants
and agrees that neither it, nor any other Person acting on its
behalf will provide the Purchaser or its agents or counsel with any
information that constitutes, or the Company reasonably believes
constitutes, material non-public information, unless
prior thereto the Purchaser shall have consented to the receipt of
such information and agreed with the Company to keep such
information confidential. The Company understands and confirms that
the Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the Company. To the extent
that the Company delivers any material, non-public information to the
Purchaser without the Purchaser’s consent, the Company hereby
covenants and agrees that the Purchaser shall not have any duty of
confidentiality to the Company, any of its Subsidiaries, or any of
their respective officers, directors, agents, employees or
Affiliates, or a duty to the Company, any of its Subsidiaries or
any of their respective officers, directors, agents, employees or
Affiliates not to trade on the basis of, such material,
non-public information, provided
that the Purchaser shall remain subject to applicable law. To the
extent that any notice provided pursuant to any Transaction
Document constitutes, or contains, material, non-public information regarding
the Company or any Subsidiaries, the Company shall simultaneously
file such notice with the Commission pursuant to a Current Report
on Form 8-K or if not subject
to the reporting requirements under the Commission, file a press
release. The Company understands
and confirms that the Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the
Company.

 

4.7 Use of
Proceeds. Subject to the terms
and conditions set forth on Schedule 4.7
attached
hereto, the Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes and shall not use
such proceeds: (a) for the satisfaction of any portion of the
Company’s debt (other than payment of trade payables in the
ordinary course of the Company’s business and prior
practices), (b) for the redemption of any Common Stock or Common
Stock Equivalents, (c) for the settlement of any outstanding
litigation or (d) in violation of FCPA, OFAC regulations or
Money Laundering, Anti-Corruption and Anti-Bribery Laws.
Notwithstanding anything to the contrary in the Transaction
Documents or otherwise, neither the Company nor its Subsidiaries
may use any portion of the Purchase Price or any other
proceeds from the Purchaser or any of its Affiliates (including the
proceeds from the sale of the senior secured notes issued to
Affiliates of the Purchaser in the May 2020 Financing and November
2020 Financing) to pay any liquidated damages, penalties, fees or
other amounts due and payable to the Purchaser or its Affiliates
under the Transaction Documents, the transaction documents relating
to the May 2020 Financing, November 2020 Financing or otherwise
without the express advance written consent of the
Purchaser.

 

4.8 Indemnification of
Purchaser.    Subject
to the provisions of this Section 4.8, the Company will
indemnify and hold the Purchaser and its respective directors,
officers, shareholders, members, partners, employees and agents
(and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or
any other title), each Person who controls the Purchaser (within
the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers,
shareholders, agents, members, partners or employees (and any other
Persons with a functionally equivalent role of a Person holding
such titles notwithstanding a lack of such title or any other
title) of such controlling persons (each, a
“Purchaser
Party”) harmless from
any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, as incurred, arising
out of or relating to (i) any untrue or alleged untrue
statement of a material fact contained in any registration
statement filed by the Company, any prospectus or any form of
prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the
case of any prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, except to
the extent, but only to the extent, that such untrue statements or
omissions are based solely upon information regarding such
Purchaser Party furnished in writing to the Company by such
Purchaser Party expressly for use therein, or (ii) any
violation or alleged violation by the Company of the Securities
Act, the Exchange Act or any state securities law, or any rule or
regulation thereunder in connection therewith. If any action shall
be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser
Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of
its own choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
Purchaser Party except to the extent that (x) the employment
thereof has been specifically authorized by the Company in writing,
(y) the Company has failed after a reasonable period of time
to assume such defense and to employ counsel or (z) in such
action there is, in the reasonable opinion of counsel, a material
conflict on any material issue between the position of the Company
and the position of such Purchaser Party, in which case the Company
shall be responsible for the reasonable fees and expenses of no
more than one such separate counsel. The Company will not be liable
to any Purchaser Party under this Agreement (1) for any
settlement by a Purchaser Party effected without the
Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (2) to the extent, but
only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by such
Purchaser Party in this Agreement or in the other Transaction
Documents. The indemnification required by this Section 4.8
shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are
received or are incurred. The indemnity agreements contained herein
shall be in addition to any cause of action or similar right of any
Purchaser Party against the Company or others and any liabilities
the Company may be subject to pursuant to law.

 

4.9 Reservation of Common
Stock. As of the date
hereof, the Company has reserved and the Company shall continue to
reserve and keep available at all times, free of preemptive rights,
a sufficient number of shares of Common Stock equal to the Required
Minimum (as defined in the Convertible Note) for the purpose of
enabling the Company to issue the Underlying Shares and any other
shares that may be issuable pursuant to the Convertible Note and
Warrant. If, on any date, the number of authorized but
unissued (and otherwise unreserved) shares of Common Stock is less
than the Required Minimum on such date, then the Board of Directors
shall use commercially reasonable efforts to amend the
Company’s certificate or articles of incorporation to
increase the number of authorized but unissued shares of Common
Stock to at least the Required Minimum at such time, as soon as
possible and in any event not later than the 75th day after such
date

 



 

-21-







 





 

4.10 Listing
of Common Stock. The Company hereby
agrees to use reasonable best efforts to maintain the listing or
quotation of the Common Stock on the Trading Market on which it is
currently listed, and concurrently with the Closing, the Company
shall apply to list or quote all of the Underlying Shares on such
Trading Market and promptly secure the listing of all of the
Underlying Shares on such Trading Market. The Company further
agrees, if the Company applies to have the Common Stock traded on
any other Trading Market (including in accordance with Section
4.23), it will then include in such application all of the
Underlying Shares, and will take such other action as is necessary
to cause all of the Underlying Shares to be listed or quoted on
such other Trading Market as promptly as possible. The Company will
then take all action reasonably necessary to continue the listing
and trading of its Common Stock on such Trading Market and will
comply in all respects with the Company’s reporting, filing
and other obligations under the bylaws or rules of the Trading
Market. The Company agrees to maintain the eligibility of the
Common Stock for electronic transfer through the Depository Trust
Company or another established clearing corporation, including,
without limitation, by timely payment of fees to the Depository
Trust Company or such other established clearing corporation in
connection with such electronic transfer.

 

4.11 Certain
Transactions and Confidentiality. The Purchaser
covenants that neither it nor any Affiliate acting on its behalf or
pursuant to any understanding with it will execute any purchases or
sales, including Short Sales of any of the Company’s
securities during the period commencing with the execution of this
Agreement and ending at such time that the transactions
contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in
Section 4.4.  The Purchaser covenants that until such
time as the transactions contemplated by this Agreement are
publicly disclosed by the Company pursuant to the initial press
release as described in Section 4.4, such Purchaser will
maintain the confidentiality of the existence and terms of this
transaction and the information included in the Disclosure
Schedules. Notwithstanding the foregoing and notwithstanding
anything contained in this Agreement to the contrary, the Company
expressly acknowledges and agrees that (i) no Purchaser makes
any representation, warranty or covenant hereby that it will not
engage in effecting transactions in any securities of the Company
after the time that the transactions contemplated by this Agreement
are first publicly announced, (ii) no Purchaser shall be restricted
or prohibited from effecting any transactions in any securities of
the Company in accordance with applicable securities laws from and
after the time that the transactions contemplated by this Agreement
are first publicly announced pursuant to the initial press release
as described in Section 4.4, (iii) the Purchaser has
not been asked by the Company to agree, nor has the Purchaser
agreed, to desist from purchasing or selling Securities which have
been issued under the terms of this Agreement, the Convertible Note
or any other Transaction Document, or “derivative”
securities based on securities issued by the Company or to hold the
Securities for any specified term, (iv)  the Purchaser shall
not be deemed to have any affiliation with or control over any
arm’s length counter-party in any “derivative”
transaction, (v) the Purchaser may engage in hedging
activities, other than Short Sales at various times during the
period that the Securities are outstanding,  and (vi) no
Purchaser shall have any duty of confidentiality or duty not to
trade in the securities of the Company to the Company or its
Subsidiaries after the issuance of the initial press
release.  Except as contemplated above, Company
acknowledges that such aforementioned hedging activities do not
constitute a breach of any of the Transaction
Documents.

 

4.12 Conversion
Procedures. The form of Notice of
Conversion in the Convertible Note sets forth the totality of the
procedures required of the Purchaser in order to convert the
Convertible Note. No additional legal opinion, other information or
instructions shall be required of the Purchaser to convert the
Convertible Note. Without limiting the preceding sentences,
no ink-original
Notice of
Conversion shall be required, nor shall any medallion guarantee (or
other type of guarantee or notarization) of any Notice of
Conversion form be required in order to covert the Convertible
Note. The Company shall honor conversions of the Convertible Note
and shall deliver the Underlying Shares in accordance with the
terms, conditions and time periods set forth in the Transaction
Documents.

 

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

 

4.14 Maintenance
of Property. So long as the Notes and Warrant remain
outstanding, the Company shall use its commercially reasonable
efforts to keep all of its property, which is necessary or useful
to the conduct of its business, in good working order and
condition, ordinary wear and tear excepted.

 

4.15 Preservation
of Corporate Existence. So long as the Notes and Warrant
remain outstanding, the Company shall preserve and maintain its
corporate existence, rights, privileges and franchises in the
jurisdiction of its incorporation, and qualify and remain
qualified, as a foreign corporation in each jurisdiction in which
such qualification is necessary in view of its business or
operations and where the failure to qualify or remain qualified
would reasonably be expected to have a Material Adverse
Effect.

 

4.16 DTC
Program. At all times that the Securities are outstanding,
the Company will employ as the transfer agent for the Common Stock
and Conversion Shares a participant in the Depository Trust Company
Automated Securities Transfer Program and cause the Common Stock to
be transferable pursuant to such program.

 



 

-22-







 





 

4.17 Subsequent
Equity Sales. From the date hereof until such time as
the
Purchaser no longer holds the Convertible Note and the Warrant, the
Company shall be prohibited from effecting or entering into an
agreement to effect any issuance by the Company or any of its
Subsidiaries of Common Stock or Common Stock Equivalents (or a
combination of units thereof) involving a Variable Rate
Transaction. “Variable Rate
Transaction” means a transaction which is not
Permitted Indebtedness and in which the Company (i) issues or sells
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 price,
exercise price 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, or effects a transaction
under, any agreement, including, but not limited to, an equity line
of credit, whereby the Company may issue securities at a future
determined price. The foregoing restrictions shall not include any
agreement for an at-the-market offering. The Purchaser shall be
entitled to obtain injunctive relief against the Company to
preclude any such issuance, which remedy shall be in addition to
any right to collect damages. From the date hereof until ninety
(90) days after the effectiveness of the Registration Statement,
the Company shall be prohibited from effecting any registration
statement, or amendment or supplement thereto, with the Commission,
other than a prospectus filed with the Commission pursuant to Rule
424(b) in connection with the Registration Statement.

 

4.18 Transfer
Agent Instructions. The Company shall issue irrevocable
instructions to the Transfer Agent in a form acceptable to the
Purchaser (the “Irrevocable Transfer Agent
Instructions”) to issue certificates or credit shares
via DWAC or otherwise to the applicable balance accounts at The
Depository Trust Company (“DTC”), registered in the
name of the Purchaser or its respective nominee(s), for the
Underlying Shares in such amounts as specified from time to time by
the Purchaser to the Company upon conversion of the Convertible
Note or exercise of the Warrant. The Company represents and
warrants that no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section will be given by the
Company to its Transfer Agent with respect to the Securities, and
that the Securities shall otherwise be freely transferable on the
books and records of the Company, as applicable, to the extent
provided in this Agreement and the other Transaction Documents. In
the event that such sale, assignment or transfer involves
Conversion Shares sold, assigned or transferred pursuant to an
effective registration statement or in compliance with Rule 144,
the transfer agent shall issue such shares to such Buyer, assignee
or transferee (as the case may be) without any restrictive legend
in accordance with Section 4.1. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable
harm to Purchaser. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section
will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section,
that Purchaser 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. The Company shall cause its counsel to
issue the legal opinion referred to in the Irrevocable Transfer
Agent Instructions to the Company’s transfer agent from and
after the Applicable Date. Any fees (with respect to the transfer
agent, counsel to the Company or otherwise) associated with the
issuance of such opinion or the removal of any legends on any of
the Securities shall be borne by the Company. “Applicable Date” means
the first date on which all of the Underlying Shares are eligible
to be resold by the Purchaser pursuant to Rule 144 or an effective
registration statement is in effect.

 

4.19 Public
Information. At any time during the period commencing from
the six (6) month anniversary of the Closing Date and ending at
such time that all of the Securities, may be sold without the
requirement for the Company to be in compliance with Rule 144(c)(1)
and otherwise without restriction or limitation pursuant to Rule
144, if the Company shall fail for any reason to satisfy the
current public information requirement under Rule 144(c) (a
“Public Information
Failure”) then, in addition to the Purchaser’s
other available remedies, the Company shall pay to the Purchaser,
in cash, as partial liquidated damages and not as a penalty, by
reason of any such delay in or reduction of its ability to sell the
Securities, an amount in cash equal to two percent (2.0%) of the
aggregate Purchase Price of the
Purchaser’s Securities on the day of a Public Information
Failure and on every thirtieth (30th) day (pro rated for
periods totaling less than thirty days) thereafter until the
earlier of (a) the date such Public Information Failure is cured
and (b) such time that such public information is no longer
required for the Purchaser to transfer the Underlying Shares
pursuant to Rule 144. The payments to which the Purchaser
shall be entitled pursuant to this Section 4.19 are referred to
herein as “Public
Information Failure Payments.” Public Information
Failure Payments shall
be paid on the earlier of (i) the last day of the calendar month
during which such Public Information Failure Payments are incurred and (ii) the
third (3rd) Business Day after
the event or failure giving rise to the Public Information
Failure Payments is
cured. If an Event (as defined in the Registration Rights
Agreement) is occurring at the time of a Public Information
Failure, and the Company is (x) then obligated to pay, and (y)
timely pays the Purchaser partial liquidated damages under Section
2(d) of the Registration Rights Agreement for the period occurring
simultaneous with the applicable Public Information Failure (such
payments, the “Simultaneous Registration Rights
Partial Liquidated Damages”) and (z) has timely paid
the Purchaser all previously accrued partial liquidated damages
under Section 2(d) of the Registration Rights Agreement, the
Company may deduct the amounts paid in connection with such
Simultaneous Registration Rights Partial Liquidated Damages from
such Public Information Failure Payments due for such simultaneous
Public Information Failure. In the event the Company fails to make
Public Information Failure Payments in a timely manner, such
Public Information Failure Payments shall bear interest at
the rate of 1.5% per month (prorated for partial months) until paid
in full. Nothing herein shall limit such Purchaser’s right to
pursue actual damages for the Public Information Failure, and
the
Purchaser shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.

 

4.20 Exercise
Procedures. The form of Notice of Exercise included in the
Warrants sets forth the totality of the procedures required of the
Purchaser in order to exercise the Warrants. No additional legal
opinion, other information or instructions shall be required of the
Purchasers to exercise their Warrants. Without limiting the
preceding sentences, no ink-original Notice of Exercise shall be
required, nor shall any medallion guarantee (or other type of
guarantee or notarization) of any Notice of Exercise form be
required in order to exercise the Warrants. The Company shall honor
exercises of the Warrants and shall deliver Warrant Shares in
accordance with the terms, conditions and time periods set forth in
the Transaction Documents.

 



 

-23-







 





 

4.21 Litigation.
For as long as the Notes and Warrants are outstanding, the Company
shall promptly, to the extent not prohibited by law, give the
Purchaser notice in writing of any Action before or by any
court,
arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign)
affecting the Company, any Subsidiary, any director and/or officer
including but not limited to, any Action involving a claim of
violation of or liability under federal or state securities laws, a
claim of breach of fiduciary duty or any investigation by a
governmental or administrative agency or regulatory authority
(federal, state county, local or foreign). Any such
information provided to the Purchaser
shall comply with the requirements of Section 4.6
above.

 

4.22 Access
to Records. The Company shall provide the Purchaser
and/or any of its duly authorized representatives, attorneys or
accountants access to any and all bank records at the premises of
the Company where such records are kept, such access being afforded
without charge, but only during normal business hours. Any such
information provided to the Purchaser
shall comply with the requirements of Section 4.6
above.

 

4.23 OTC
Markets; National Securities Exchange.  

 

(a) As
soon as reasonably practicable after the Closing, the Company shall
use its reasonable best efforts to meet the eligibility
requirements for listing its shares of Common Stock on the OTCQB or
OTCQX and upon meeting such requirements, the Company shall
promptly take all necessary and appropriate actions to quote its
shares of Common Stock on such over-the-counter
market.

 

(b) As soon as reasonably
practicable after the Company meets the qualitative and
quantitative listing standards for listing on a national securities
exchange, the Company shall use reasonable best efforts to
take all necessary and appropriate actions to list its shares of
Common Stock for trading on such national securities
exchange.

 

4.24 Post-Closing
Actions. The
Company shall and shall cause each of its relevant Subsidiaries to
execute and deliver the documents and complete the tasks set forth
in this Section as soon as reasonably practicable and in each case
no later than the time limit specified in this Section or such
longer time as the Purchaser may agree in its sole
discretion:

 

(a) Any Person acquired
by the Company, or that otherwise becomes a Subsidiary of the
Company, on or after the date of this Agreement shall enter into a
Subsidiary Guaranty Agreement and be joined to the Security
Agreement as a debtor not later than one (1) calendar day after the
consummation of such acquisition by the Company or the date the
Person otherwise becomes a Subsidiary of the Company;
and

 

(b) The Company shall
consummate the acquisition of NextRidge contemplated by the
NextRidge Acquisition Agreement within fourteen (14) calendar days
following the Closing Date. If the acquisition of NextRidge is not
consummated within the time limit specified herein, it will
constitute an Event of Default.

 

4.25 Future
Financings. Except
for Permitted Indebtedness and for so long as Liabilities are
outstanding, neither the Company, nor any of its Subsidiaries,
shall enter into, create, incur, assume, guarantee or suffer
to exist any Indebtedness. Despite the foregoing prohibition and
for so long as Liabilities are outstanding, if at any time the
Company or any of its Subsidiaries issues or incurs any
Indebtedness other than Permitted Indebtedness, in addition to the
Purchaser’s other available remedies, the Company shall pay
to the Purchaser, in cash, as partial liquidated damages and not as
a penalty, on each date of any such issuance or incurrence of
Indebtedness, $30,000. Any such Indebtedness shall be expressly
subordinated to the Notes and the convertible promissory notes
issued to Affiliates of the Purchaser in the May 2020 Financing,
and the holders of such Indebtedness shall not be granted any
registration rights, nor shall the Company register, or cause to be
registered, with the SEC or any state securities commission the
notes or other debt instruments representing such Indebtedness or
any equity securities issuable in connection with such
Indebtedness. In addition, all entry into future Permitted
Indebtedness shall be subject to a subordination and intercreditor
agreements in form satisfactory to the Purchaser, with the
exception of the existing lines of credit with Pioneer Bank for
factoring arrangements that do not exceed $4,000,000 for any given
month..12

 ___________________________________

 

  




 



 

-24-







 





 


ARTICLE
5

 


MISCELLANEOUS

 

5.1 Fees and Expenses. Except as
expressly set forth below and in the Transaction Documents to the
contrary, each party shall pay the reasonable, documented fees and
expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance
of this Agreement. The Company shall pay all Transfer Agent fees
(including, without limitation, any fees required for same-day
processing of any instruction letter delivered by the Company and
any exercise notice delivered by the Purchaser),
stamp taxes and other taxes and duties levied in connection with
the delivery of any Securities to the Purchaser. Notwithstanding
the foregoing, the Company agrees to pay all direct and indirect
costs and expenses of the Purchaser related to the negotiation, due
diligence, preparation, closing, and all other items regarding or
related to this Agreement and the other Transaction Documents and
all of the transactions contemplated herein and/or therein,
including, but not limited to, the legal fees and expenses of the
Purchaser’s legal counsel (collectively, the
“Purchaser’s
Expenses”), all of which will be deducted and paid on
Closing Date.

 

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

 

5.3 Notices. Any and all notices or
other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given
and effective on the earliest of: (a) the date of transmission, if
such notice or communication is delivered via facsimile or email
attachment at the facsimile number or email address as set forth on
the signature pages attached hereto at or prior to 5:30 p.m. (New
York City time) on a Business Day, (b) the next Business Day after
the date of transmission, if such notice or communication is
delivered via facsimile or email attachment at the facsimile number
or email address as set forth on the signature pages attached
hereto on a day that is not a Business Day or later than 5:30 p.m.
(New York City time) on any Business Day, (c) the second
(2nd)
Business Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (d) upon actual
receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set
forth on the signature pages attached hereto.

 

5.4 Amendments; Waivers. No
provision of this Agreement may be waived, modified, supplemented
or amended except in a written instrument signed, in the case of an
amendment, by the Company and the Purchaser or, in the case of a
waiver, by the party against whom enforcement of any such waived
provision is sought. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any
subsequent default or a waiver of any other provision, condition or
requirement 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. Any amendment effected in accordance with
accordance with this Section 5.4 shall be binding upon the
Purchaser and holder of Securities and the Company.

 

5.5 Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company may
not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser then holding the
outstanding Notes and Warrant (other than by merger). Purchaser may
assign any or all of its rights under this Agreement to any Person
to whom Purchaser assigns or transfers any Securities in compliance
with the Transaction Documents, provided that such transferee
agrees in writing to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that
apply to the “Purchaser,” and provided further that (i)
such transferee is an “accredited investor” within the
meaning of Rule 501 under the Securities Act and (ii) such
transferee is not a direct competitor of the Company or any
Subsidiary.

 

5.6 No Third-Party Beneficiaries.
This Agreement is intended for the benefit of the parties hereto
and their respective successors and permitted assigns and is not
for the benefit of, nor may any provision hereof be enforced by,
any other Person.

 



 

-25-







 





 

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

 

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

 

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

 

5.10 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired, or invalidated, as long as the essential terms and
conditions of the Notes and Warrant for each party remain valid,
binding, and enforceable. The parties shall use their commercially
reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or
restriction.

 

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

 

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

 

5.13 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of
the Purchaser and the Company will be entitled to specific
performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert
in any Action for specific performance of any such obligation the
defense that a remedy at law would be adequate.

 

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

 



 

-26-







 





 

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

 

5.16 Liquidated
Damages. The Company’s
obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of
the Company and shall not terminate until all unpaid partial
liquidated damages and other amounts have been paid notwithstanding
the fact that the instrument or security pursuant to which such
partial liquidated damages or other amounts are due and payable
shall have been canceled.

 

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

 

5.18 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto.

 

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

 



(Signature Pages Follow)

 






	
 

	
	
 


	
 

	
 

	
 







 

-27-








 






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

 


 


	


CHARGE ENTERPRISES, INC.


 


 

	

Address
for Notice:


 


125
Park Avenue, 25th Floor


New
York, NY 10017


 


	

By:__________________________________________


 Name:
Andrew Fox


 Title:
Chief Executive Officer


 


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

	

Email:
a@charge.us


	

 


Sheppard,
Mullin, Richter & Hampton LLP


30
Rockefeller Plaza, 39th Floor


New
York, NY 10112


Attn:
Richard A. Friedman and Stephen A. Cohen


Email:
rafriedman@sheppardmullin.com,
scohen@sheppardmullin.com


 


 

	
 







 


 


 


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

 


SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

 




	





 

	
	
 


	
 

	
 

	
 







 

-28-








 






PURCHASER
SIGNATURE PAGES TO GOIG SECURITIES PURCHASE AGREEMENT

 


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

 


Name of
Purchaser: __________________________________

 


Signature of Authorized Signatory of
Purchaser: __________________________________

 


Name of
Authorized Signatory:
__________________________________

 


Title
of Authorized Signatory:
__________________________________

 


Email
Address of Authorized Signatory:
__________________________________

 


Facsimile Number of
Authorized Signatory:
__________________________________

 


Address
for Notice to Purchaser:

 


 

 


 

 


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

 


 

 


 

 


FEIN
Number: __________________________________

 


 

 


 

 




	





 

	
	
 


	
 

	
 

	
 







 

-29-








 







EXHIBIT A

 



Form of Convertible Note

 


 

 


 




	





 

	
	
 


	
 

	
 

	
 







 

-30-








 






 



EXHIBIT B

 



Form of Non-convertible Note

 


 

 


 




	





 

	
	
 


	
 

	
 

	
 







 

-31-








 






 



EXHIBIT C

 



Form of Warrant

 


 

 




	





 

	
	
 


	
 

	
 

	
 







 

-32-








 







EXHIBIT D

 



Form of Amended and Restated Security Agreement

 


 

 




	





 

	
	
 


	
 

	
 

	
 







 

-33-








 







EXHIBIT E

 



Form of Registration Rights Agreement



EXHIBIT F


 



Form of Subsidiary Guaranty Agreement

 


 




	





 

	
	
 


	
 

	
 

	
 







 

-34-








 






 



Schedule 1

 



Purchase Price; Securities Purchased


 


 


 



Tranche 1


	

Name
ofPurchaser


 

	

Purchase
Price


 

	

Aggregate
Principal Amount of Convertible Notes being


Purchased


 

	

 


 


 


 


Number
of Warrants


to be
Issued


	

[
]

	

[
]

	

$[
]

	

[
]


	
 

	
 

	
 

	
 


	


TOTAL

	


$[5,000,000.00]

	


$[5,610,000.00]

	


1,870,000







 


 

 



Schedule 2

 



Senior Secured Loan


 

 


 

 



Tranche 2

 


	

Name
ofPurchaser


 

	

Purchase
Price


 

	

Aggregate
Principal Amount of Non-convertible Notes being


Purchased


 


	

[
]

	

[
]

	

$[
]


	
 

	
 

	
 


	


TOTAL

	


$[10,000,000.00]

	


$[11,032,609.00]







 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 




	





 

	
	
 


	
 

	
 

	
 







 

-35-