Exhibit 10.1


 





Securities Purchase Agreement


 


This
Securities Purchase Agreement (this “Agreement”), dated as of May 25, 2016, is entered into by and between
CV Sciences, Inc., a Delaware corporation (“Company”), and Iliad
Research and Trading, L.P., a Utah limited partnership, its successors and/or assigns (“Investor”).


 


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


 


B.Investor desires
to purchase and Company desires to issue and sell, upon the terms and conditions set forth in this Agreement, a Secured Convertible
Promissory Note, in the form attached hereto as Exhibit A, in the original principal amount of $2,055,000.00 (the “Note”),
convertible into shares of common stock, $0.0001 par value per share, of Company (the “Common Stock”), upon
the terms and subject to the limitations and conditions set forth in such Note.


 


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


 


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


 


NOW, THEREFORE,
in consideration of the above recitals and other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Company and Investor hereby agree as follows:


 


1.                 
Purchase and Sale of Securities.


 


1.1.           
Purchase of Securities. Company shall issue and sell to Investor and Investor agrees to purchase from Company the
Note. In consideration thereof, Investor shall pay the Purchase Price (as defined below) to Company.


 


1.2.           
Form of Payment. On the Closing Date, Investor shall pay the Purchase Price to Company via wire transfer of immediately
available funds against delivery of the Note.


 


1.3.           
Closing Date. Subject to the satisfaction (or written waiver) of the conditions set forth in Section 5 and Section
6 below, the date of the issuance and sale of the Securities pursuant to this Agreement (the “Closing Date”)
shall be May 25, 2016, or such other mutually agreed upon date. The closing of the transactions contemplated by this Agreement
(the “Closing”) shall occur on the Closing Date by means of the exchange by email of .pdf documents, but shall
be deemed to have occurred at the offices of Hansen Black Anderson Ashcraft PLLC in Lehi, Utah.


 


1.4.           
Collateral for the Note. The Note shall be secured by the collateral set forth in that certain Security Agreement
attached hereto as Exhibit B (the “Security Agreement”).


 


1.5.           
Original Issue Discount; Transaction Expense Amount. The Note carries an original issue discount of $45,000.00 (the
“OID”). In addition, Company agrees to pay $10,000.00 to Investor to cover Investor’s legal fees, accounting
costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of the Securities
(the “Transaction Expense Amount”), all of which amount is included in the initial principal balance of the
Note. The “Purchase Price”, therefore, shall be $2,000,000.00, computed as follows: $2,055,000.00 initial principal
balance, less the OID, less the Transaction Expense Amount.


 


 






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2.                 
Investor’s Representations and Warranties. Investor represents and warrants to Company that: (i) this Agreement
has been duly and validly authorized; (ii) this Agreement constitutes a valid and binding agreement of Investor enforceable in
accordance with its terms; (iii) Investor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation
D of the 1933 Act; and (iv) Investor is acquiring the Securities for its own account, for investment only and not with a view towards,
or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under
the 1933 Act.


 


3.                  Company’s
Representations and Warranties. Company represents and warrants to Investor that: (i) Company is a corporation
duly organized, validly existing and in good standing under the laws of its state of incorporation and has the requisite
corporate power to own its properties and to carry on its business as now being conducted; (ii) Company is duly qualified as
a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted
or property owned by it makes such qualification necessary; (iii) Company has registered its Common Stock
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and is
obligated to file reports pursuant to Section 13 or Section 15(d) of the 1934 Act; (iv) each of the Transaction
Documents and the transactions contemplated hereby and thereby, have been duly and validly authorized by Company; (v) this
Agreement, the Note, the Security Agreement, and the other Transaction Documents have been duly executed and delivered by
Company and constitute the valid and binding obligations of Company enforceable in accordance with their terms; (vi) the
execution and delivery of the Transaction Documents by Company, the issuance of Securities in accordance with the terms
hereof, and the consummation by Company of the other transactions contemplated by the Transaction Documents do not and will
not conflict with or result in a breach by Company of any of the terms or provisions of, or constitute a default under (a)
Company’s formation documents or bylaws, each as currently in effect, (b) any indenture, mortgage, deed of trust, or
other material agreement or instrument to which Company is a party or by which it or any of its properties or assets are
bound, including any listing agreement for the Common Stock, or (c) any existing applicable law, rule, or regulation or any
applicable decree, judgment, or order of any court, United States federal or state regulatory body, administrative agency, or
other governmental body having jurisdiction over Company or any of Company’s properties or assets; (vii) no further
authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders or any lender of Company is required to be obtained by Company for the issuance of the
Securities to Investor; (viii) none of Company’s filings with the SEC contained, at the time they were filed, any
untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they were made, not misleading; (ix) Company has filed
all reports, schedules, forms, statements and other documents required to be filed by Company with the SEC under the 1934 Act
on a timely basis or has received a valid extension of such time of filing and has filed any such report, schedule, form,
statement or other document prior to the expiration of any such extension; (x) there is no action, suit, proceeding, inquiry
or investigation before or by any court, public board or body pending or, to the knowledge of Company, threatened against
or affecting Company before or by any governmental authority or non-governmental department, commission, board, bureau,
agency or instrumentality or any other person, wherein an unfavorable decision, ruling or finding would have a material
adverse effect on Company or which would adversely affect the validity or enforceability of, or the authority or ability of
Company to perform its obligations under, any of the Transaction Documents; (xi) Company has not consummated any financing
transaction that has not been disclosed in a periodic filing or current report with the SEC under the 1934 Act; (xii) Company
is not, nor has it been at any time in the previous twelve (12) months, a “Shell Company,” as such type of
“issuer” is described in Rule 144(i)(1) under the 1933 Act; (xiii) with respect to any commissions, placement
agent or finder’s fees or similar payments that will or would become due and owing by Company to any person or entity
as a result of this Agreement or the transactions contemplated hereby (“Broker Fees”), any such Broker
Fees will be made in full compliance with all applicable laws and regulations and only to a person or entity that is a
registered investment adviser or registered broker-dealer; (xiv) Investor shall have no obligation with respect to any Broker
Fees or with respect to any claims made by or on behalf of other persons for fees of a type contemplated in this subsection
that may be due in connection with the transactions contemplated hereby and Company shall indemnify and hold harmless each of
Investor, Investor’s employees, officers, directors, stockholders, members, managers, agents, and partners, and their
respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and
attorneys’ fees) and expenses suffered in respect of any such claimed or existing Broker Fees; provided, that Investor
shall not enter into any settlement, consent judgment or other disposition of any such claim without the prior written
consent of Company; (xv) when issued, the Conversion Shares will be duly authorized, validly issued, fully paid for and
non-assessable, free and clear of all liens, claims, charges and encumbrances; (xvi) neither Investor nor any of its
officers, directors, stockholders, members, managers, employees, agents or representatives has made any representations or
warranties to Company or any of its officers, directors, employees, agents or representatives except as expressly set forth
in the Transaction Documents and, in making its decision to enter into the transactions contemplated by the
Transaction Documents, Company is not relying on any representation, warranty, covenant or promise of Investor or its
officers, directors, members, managers, employees, agents or representatives other than as set forth in the Transaction
Documents; (xvii) Company acknowledges that the State of Utah has a reasonable relationship and sufficient contacts to the
transactions contemplated by the Transaction Documents and any dispute that may arise related thereto such that the laws and
venue of the State of Utah, as set forth more specifically in Section 10.3 below, shall be applicable to the Transaction
Documents and the transactions contemplated therein; and (xviii) Company has performed due diligence and background research
on Investor and its affiliates including, without limitation, John M. Fife, and, to its satisfaction, has made inquiries with
respect to all matters Company may consider relevant to the undertakings and relationships contemplated by the Transaction
Documents including, among other things, the following:


 






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http://investing.businessweek.com/research/stocks/people/person.asp?personId=7505107&ticker=UAHC;SEC
Civil Case No. 07-C-0347 (N.D. Ill.); SEC Civil Action No. 07-CV-347 (N.D. Ill.); and FINRA Case #2011029203701.
Company, being aware of the matters described in subsection (xviii) above, acknowledges and agrees that such matters, or any
similar matters, have no bearing on the transactions contemplated by the Transaction Documents and covenants and agrees it
will not use any such information as a defense to performance of its obligations under the Transaction Documents or in any
attempt to avoid, modify or reduce such obligations.


 


4.                  Company
Covenants. Until all of Company’s obligations under all of the Transaction Documents are paid and performed
in full, or within the timeframes otherwise specifically set forth below, Company shall comply with the following covenants:
(i) so long as Investor beneficially owns any of the Securities and for at least twenty (20) Trading Days (as defined in
the Note) thereafter, Company shall timely file on the applicable deadline (or as timely extended in accordance with SEC
rules and regulations applicable to reporting deadline extensions) all reports required to be filed with the SEC pursuant
to Sections 13 or 15(d) of the 1934 Act, and shall take all reasonable action under its control to ensure that
adequate current public information with respect to Company, as required in accordance with Rule 144 of the 1933 Act, is
publicly available, and shall not terminate its status as an issuer required to file reports under the 1934 Act even if the
1934 Act or the rules and regulations thereunder would permit such termination; (ii) the Common Stock shall be listed or
quoted for trading on any of (a) NYSE, (b) NASDAQ, (c) OTCQX, or (d) OTCQB; (iii) when issued, the Conversion Shares shall be
duly authorized, validly issued, fully paid for and non-assessable, free and clear of all liens, claims, charges and
encumbrances; (iv) trading in Company’s Common Stock shall not be suspended, halted, chilled, frozen, reach zero bid or
otherwise cease on Company’s principal trading market for a period of more than five (5) consecutive days; (v) Company
shall not have at any given time any Variable Security Holders (as defined below), excluding Investor, without
Investor’s prior written consent, which consent may be granted or withheld in Investor’s sole and absolute
discretion; (vi) at Closing and on the first day of each calendar quarter for so long as the Note remains outstanding or on
any other date during which the Note is outstanding, as may be requested by Investor, the Chief Executive Officer of Company
shall provide to Investor a certificate in substantially the form attached hereto as Exhibit C
(the “Officer’s Certificate”) certifying in his personal capacity and in his capacity as Chief
Executive Officer of Company the number of Variable Security Holders of Company as of the date the applicable
Officer’s Certificate is executed, within five (5) days of such request; and (vii) if at any time the Common Stock
trades below $0.0005, Company shall, as soon as practicable but in no event longer than sixty (60) days thereafter, reduce
the par value of its Common Stock to $0.00001 or below. For purposes hereof, the term “Variable Security
Holder” means any holder of any Company securities that (A) have or may have conversion rights of any kind,
contingent, conditional or otherwise, in which the number of shares that may be issued pursuant to such conversion right
varies with the market price of the Common Stock, or (B) are or may become convertible into Common Stock (including without
limitation convertible debt, warrants or convertible preferred stock), with a conversion price that varies with the market
price of the Common Stock, even if such security only becomes convertible following an event of default, the passage of time,
or another trigger event or condition (each a “Variable Security Issuance”). For avoidance of doubt, the
issuance of shares of Common Stock under, pursuant to, in exchange for or in connection with any contract or instrument,
whether convertible or not, is deemed a Variable Security Issuance for purposes hereof if the number of shares of Common
Stock to be issued is based upon or related in any way to the market price of the Common Stock, including, but not limited
to, Common Stock issued in connection with a Section 3(a)(9) exchange, a Section 3(a)(10) settlement, or any other similar
settlement or exchange.


 


 






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As an additional covenant
in this Section 4, within ninety (90) days after the Closing Company shall terminate Securities Transfer Corporation as
its transfer agent and engage a transfer agent acceptable to Investor (the “Transfer Agent”) that, within such
ninety (90) day period, shall deliver to Investor a fully executed Irrevocable Letter of Instructions to Transfer Agent (the “TA
Letter”) substantially in the form attached hereto as Exhibit D acknowledged and agreed to in writing by the Transfer
Agent.


 


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


 


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


 


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


 


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


 


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


 


6.2.           
Company’s Chief Executive Officer shall have executed the Officer’s Certificate and delivered the same to Investor.


 


6.3.           
[intentionally omitted].


 


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


 


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


 


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


 


7.                 
Reservation of Shares. At all times during which the Note is convertible, Company will reserve from its authorized
and unissued Common Stock to provide for the issuance of Common Stock upon the full conversion of the Note at least three (3) times
the number of shares of Common Stock obtained by dividing the Outstanding Balance (as defined in the Note) by the Redemption Conversion
Price (as defined in the Note) (the “Share Reserve”), but in any event not less than 20,000,000 shares of Common
Stock shall be reserved at all times for such purpose (the “Transfer Agent Reserve”). Company further agrees
that it will cause the Transfer Agent to immediately add shares of Common Stock to the Transfer Agent Reserve in increments of
5,000,000 shares as and when requested by Investor in writing from time to time, provided that such incremental increases do not
cause the Transfer Agent Reserve to exceed the Share Reserve. In furtherance thereof, from and after the date hereof and until
such time that the Note has been paid in full, Company shall require the Transfer Agent to reserve for the purpose of issuance
of Conversion Shares under the Note, a number of shares of Common Stock equal to the Transfer Agent Reserve. Company shall further
require the Transfer Agent to hold such shares of Common Stock exclusively for the benefit of Investor and to issue such shares
to Investor promptly upon Investor’s delivery of a conversion notice under the Note. Finally, Company shall require the Transfer
Agent to issue shares of Common Stock pursuant to the Note to Investor out of its authorized and unissued shares, and not the Transfer
Agent Reserve, to the extent shares of Common Stock have been authorized, but not issued, and are not included in the Transfer
Agent Reserve. The Transfer Agent shall only issue shares out of the Transfer Agent Reserve to the extent there are no other authorized
shares available for issuance and then only with Investor’s written consent.


 


 






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8.                 
Terms of Future Financings. So long as the Note is outstanding, upon any issuance by Company of any security with
any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly
provided to Investor in the Transaction Documents, then Company shall notify Investor of such additional or more favorable term
and such term, at Investor’s option, shall become a part of the Transaction Documents. Additionally, if Company fails to
notify Investor of any such additional or more favorable term, but Investor becomes aware that Company has granted such a term
to any third party, Investor may notify Company of such additional or more favorable term and such term shall become a part of
the Transaction Documents retroactive to the date on which such term was granted to the applicable third party. The types of terms
contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms
addressing conversion discounts, conversion lookback periods, interest rates, original issue discounts, stock sale price, conversion
price per share, warrant coverage, warrant exercise price, and anti-dilution/conversion and exercise price resets. The foregoing
limitations and prohibitions do not apply to any securities issued, granted or awarded pursuant to Company’s Amended and
Restated 2013 Equity Incentive Plan or in compensation for services rendered to Company, or to any vendor or supplier in connection
with services or goods rendered or delivered, in any such case provided such issuances, grants or awards do not constitute a Variable
Security Issuance.


 


9.                 
No Shorting. For so long as the Note is outstanding, Investor will not directly or through an affiliate engage in
any open market Short Sales (as defined below) of the Common Stock; provided; however, that unless and until Company has
affirmatively demonstrated by the use of specific evidence that Investor is engaging in open market Short Sales, Investor shall
be assumed to be in compliance with the provisions of this Section 9 and Company shall remain fully obligated to fulfill all of
its obligations hereunder; and provided, further, that (a) Company shall under no circumstances be entitled to request or
demand that Investor either (i) provide trading or other records of Investor or of any party, or (ii) affirmatively demonstrate
that Investor or any other party has not engaged in any such Short Sales in breach of these provisions as a condition to Company’s
fulfillment of its obligations under this Agreement, (b) Company shall not assert Investor’s or any other party’s failure
to demonstrate such absence of such Short Sales or provide any trading or other records of Investor or any other party as all or
part of a defense to any breach of Company’s obligations under this Agreement, and (c) Company shall have no setoff right
with respect to any such Short Sales.  As used herein, “Short Sale” has the meaning provided in Rule 3b-3
under the Securities Exchange Act of 1934, as amended.


 


10.             
Miscellaneous. The provisions set forth in this Section 10 shall apply to this Agreement, as well as all other Transaction
Documents as if these terms were fully set forth therein; provided, however, that in the event there is a conflict between any
provision set forth in this Section 10 and any provision in any other Transaction Document, the provision in such other Transaction
Document shall govern.


 


10.1.       
Certain Capitalized Terms. To the extent any capitalized term used in any Transaction Document is defined in any
other Transaction Document (as noted therein), such capitalized term shall remain applicable in the Transaction Document in which
it is so used even if the other Transaction Document (wherein such term is defined) has been released, satisfied, or is otherwise
cancelled.


 


 






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10.2.       
Arbitration of Claims. The parties shall submit all Claims (as defined in Exhibit G) arising under this Agreement
or any other Transaction Document or any other agreement between the parties and their affiliates to binding arbitration pursuant
to the arbitration provisions set forth in Exhibit G attached hereto (the “Arbitration Provisions”).
The parties hereby acknowledge and agree that the Arbitration Provisions are unconditionally binding on the parties hereto and
are severable from all other provisions of this Agreement. By executing this Agreement, Company represents, warrants and covenants
that Company has reviewed the Arbitration Provisions carefully, consulted with legal counsel about such provisions (or waived its
right to do so), understands that the Arbitration Provisions are intended to allow for the expeditious and efficient resolution
of any dispute hereunder, agrees to the terms and limitations set forth in the Arbitration Provisions, and that Company will not
take a position contrary to the foregoing representations. Company acknowledges and agrees that Investor may rely upon the foregoing
representations and covenants of Company regarding the Arbitration Provisions.


 


10.3.       
Governing Law; Venue. This Agreement shall be construed and enforced in accordance with, and all questions concerning
the construction, validity, interpretation and performance of this Agreement shall be governed by, the internal laws of the State
of Utah, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other
jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Utah. Each party consents
to and expressly agrees that exclusive venue for arbitration of any dispute arising out of or relating to any Transaction Document
or the relationship of the parties or their affiliates shall be in Salt Lake County or Utah County, Utah. Without modifying the
parties obligations to resolve disputes hereunder pursuant to the Arbitration Provisions, for any litigation arising in connection
with any of the Transaction Documents (and notwithstanding the terms (specifically including any governing law and venue terms)
of any transfer agent services agreement or other agreement between the Transfer Agent and Company, such litigation specifically
includes, without limitation any action between or involving Company and the Transfer Agent under the TA Letter or otherwise related
to Investor in any way (specifically including, without limitation, any action where Company seeks to obtain an injunction, temporary
restraining order, or otherwise prohibit the Transfer Agent from issuing shares of Common Stock to Investor for any reason)), each
party hereto hereby (i) consents to and expressly submits to the exclusive personal jurisdiction of any state or federal court
sitting in Salt Lake County, Utah, (ii) expressly submits to the exclusive venue of any such court for the purposes hereof, (iii)
agrees to not bring any such action (specifically including, without limitation, any action where Company seeks to obtain an injunction,
temporary restraining order, or otherwise prohibit the Transfer Agent from issuing shares of Common Stock to Investor for any reason)
outside of any state or federal court sitting in Salt Lake County, Utah, and (iv) waives any claim of improper venue and any claim
or objection that such courts are an inconvenient forum or any other claim or objection to the bringing of any such proceeding
in such jurisdiction or to any claim that such venue of the suit, action or proceeding is improper. Finally, Company covenants
and agrees to name Investor as a party in interest in, and provide written notice to Investor in accordance with Section 10.13
below prior to bringing or filing, any action (including without limitation any filing or action against any person or entity that
is not a party to this Agreement, including without limitation the Transfer Agent) that is related in any way to the Transaction
Documents or any transaction contemplated herein or therein, including without limitation any action brought by Company to enjoin
or prevent the issuance of any shares of Common Stock to Investor by the Transfer Agent, and further agrees to name Investor as
a party to any such action. Company acknowledges that the governing law and venue provisions set forth in this Section 10.3 are
material terms to induce Investor to enter into the Transaction Documents and that but for Company’s agreements set forth
in this Section 10.3 Investor would not have entered into the Transaction Documents.


 


10.4.       
Specific Performance. Company acknowledges and agrees that irreparable damage would occur to Investor in the event
that Company fails to perform any provision of this Agreement or any of the other Transaction Documents in accordance with its
specific terms. It is accordingly agreed that Investor shall be entitled to an injunction or injunctions to prevent or cure breaches
of the provisions of this Agreement or such other Transaction Document and to enforce specifically the terms and provisions hereof
or thereof, this being in addition to any other remedy to which any Investor may be entitled under the Transaction Documents, at
law or in equity. For the avoidance of doubt, in the event Investor seeks to obtain an injunction against Company or specific performance
of any provision of any Transaction Document, such action shall not be a waiver of any right of Investor under any Transaction
Document, at law, or in equity, including without limitation its rights to arbitrate any Claim pursuant to the terms of the Transaction
Documents.


 


 






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10.5.       
Calculation Disputes. Notwithstanding the Arbitration Provisions, in the case of a dispute as to any determination
or arithmetic calculation under the Transaction Documents, including without limitation, calculating the Outstanding Balance, Lender
Conversion Price (as defined in the Note), Lender Conversion Shares (as defined in the Note), Redemption Conversion Price, Redemption
Conversion Shares (as defined in the Note), Conversion Factor (as defined in the Note), Market Price (as defined in the Note),
or VWAP (as defined in the Note) (each, a “Calculation”), Company or Investor (as the case may be) shall submit
any disputed Calculation via email or facsimile with confirmation of receipt (i) within two (2) Trading Days after receipt of the
applicable notice giving rise to such dispute to Company or Investor (as the case may be) or (ii) if no notice gave rise to such
dispute, at any time after Investor learned of the circumstances giving rise to such dispute. If Investor and Company are unable
to agree upon such Calculation within two (2) Trading Days of such disputed Calculation being submitted to Company or Investor
(as the case may be), then Investor shall, within two (2) Trading Days, submit via email or facsimile the disputed Calculation
to Unkar Systems Inc. (“Unkar Systems”). Company shall cause Unkar Systems to perform the Calculation and notify
Company and Investor of the results no later than ten (10) Trading Days from the time it receives such disputed Calculation. Unkar
Systems’ determination of the disputed Calculation shall be binding upon all parties absent demonstrable error. Unkar Systems’
fee for performing such Calculation shall be paid by the incorrect party, or if both parties are incorrect, by the party whose
Calculation is furthest from the correct Calculation as determined by Unkar Systems. In the event Company is the losing party,
no extension of the Delivery Date (as defined in the Note) shall be granted and Company shall incur all effects for failing to
deliver the applicable shares in a timely manner as set forth in the Transaction Documents. Notwithstanding the foregoing, Investor
may, in its sole discretion, designate an independent, reputable investment bank or accounting firm other than Unkar Systems to
resolve any such dispute and in such event, all references to “Unkar Systems” herein will be replaced with references
to such independent, reputable investment bank or accounting firm so designated by Investor.


 


10.6.       
Counterparts. Each Transaction Document may be executed in any number of counterparts, each of which shall be deemed
an original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of
another party’s executed counterpart of a Transaction Document (or such party’s signature page thereof) will be deemed
to be an executed original thereof.


 


10.7.       
Document Imaging. Investor shall be entitled, in its sole discretion, to image or make copies of all or any selection
of the agreements, instruments, documents, and items and records governing, arising from or relating to any of Company’s
loans, including, without limitation, this Agreement and the other Transaction Documents, and Investor may destroy or archive the
paper originals.   The parties hereto (i) waive any right to insist or require that Investor produce paper originals,
(ii) agree that such images shall be accorded the same force and effect as the paper originals, (iii) agree that Investor is entitled
to use such images in lieu of destroyed or archived originals for any purpose, including as admissible evidence in any demand,
presentment or other proceedings, and (iv) further agree that any executed facsimile (faxed), scanned, emailed, or other imaged
copy of this Agreement or any other Transaction Document shall be deemed to be of the same force and effect as the original manually
executed document.


 


10.8.       
Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect
the interpretation of, this Agreement.


 


10.9.       
Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall
be deemed modified to conform to such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision hereof.


 


10.10.   
Entire Agreement. This Agreement, together with the other Transaction Documents, contains the entire understanding
of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein,
neither Company nor Investor makes any representation, warranty, covenant or undertaking with respect to such matters. For the
avoidance of doubt, all prior term sheets or other documents between Company and Investor, or any affiliate thereof, related to
the transactions contemplated by the Transaction Documents (collectively, “Prior Agreements”), that may have
been entered into between Company and Investor, or any affiliate thereof, are hereby null and void and deemed to be replaced in
their entirety by the Transaction Documents. To the extent there is a conflict between any term set forth in any Prior Agreement
and the term(s) of the Transaction Documents, the Transaction Documents shall govern.


 


 






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10.11.   
No Reliance. Company acknowledges and agrees that neither Investor nor any of its officers, directors, members, managers,
representatives or agents has made any representations or warranties to Company or any of its officers, directors, representatives,
agents or employees except as expressly set forth in the Transaction Documents and, in making its decision to enter into the transactions
contemplated by the Transaction Documents, Company is not relying on any representation, warranty, covenant or promise of Investor
or its officers, directors, members, managers, agents or representatives other than as set forth in the Transaction Documents.


 


10.12.   
Amendments. The prior written consent of both parties hereto shall be required for any change or amendment to this
Agreement.


 


10.13.   
Notices. Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein)
and shall be deemed effectively given on the earliest of: (i) the date delivered, if delivered by personal delivery as against
written receipt therefor or by email to an executive officer, or by facsimile (with successful transmission confirmation), (ii)
the earlier of the date delivered or the third Trading Day after deposit, postage prepaid, in the United States Postal Service
by certified mail, or (iii) the earlier of the date delivered or the third Trading Day after mailing by express courier, with delivery
costs and fees prepaid, in each case, addressed to each of the other parties thereunto entitled at the following addresses (or
at such other addresses as such party may designate by five (5) calendar days’ advance written notice similarly given to
each of the other parties hereto):


 


If to Company:


 


CV Sciences, Inc.


Attn: Michael Mona,
Jr.


2688 South Rainbow
Boulevard, Suite B


Las Vegas, Nevada 89146


 


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


 


Procopio Cory Hargreaves & Savitch LLP


Attn: John Cleary


12544 High Bluff Drive, Suite 300


San Diego, CA 92130


 


If to Investor:


 


Iliad Research and Trading, L.P.


Attn: John Fife


303 East Wacker Drive, Suite 1040


Chicago, Illinois 60601


 


 






    	 	8	 



     

    

 


 


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


 


Hansen Black Anderson Ashcraft PLLC


Attn: Jonathan Hansen


3051 West Maple Loop Drive, Suite 325


Lehi, Utah 84043


 


10.14.   
Successors and Assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or
to be performed by Investor hereunder may be assigned by Investor to a third party, including its financing sources, in whole or
in part, without the need to obtain Company’s consent thereto. Company may not assign its rights or obligations under this
Agreement or delegate its duties hereunder without the prior written consent of Investor.


 


10.15.   
Survival. The representations and warranties of Company and the agreements and covenants set forth in this Agreement
shall survive the Closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of Investor. Company
agrees to indemnify and hold harmless Investor and all its officers, directors, employees, attorneys, and agents for loss or damage
arising as a result of or related to any breach or alleged breach by Company of any of its representations, warranties and covenants
set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as
they are incurred.


 


10.16.   
Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and
things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions
contemplated hereby.


 


10.17.   
Investor’s Rights and Remedies Cumulative; Liquidated Damages. All rights, remedies, and powers conferred in
this Agreement and the Transaction Documents are cumulative and not exclusive of any other rights or remedies, and shall be in
addition to every other right, power, and remedy that Investor may have, whether specifically granted in this Agreement or any
other Transaction Document, or existing at law, in equity, or by statute, and any and all such rights and remedies may be exercised
from time to time and as often and in such order as Investor may deem expedient. The parties acknowledge and agree that upon Company’s
failure to comply with the provisions of the Transaction Documents, Investor’s damages would be uncertain and difficult (if
not impossible) to accurately estimate because of the parties’ inability to predict future interest rates and future share
prices, Investor’s increased risk, and the uncertainty of the availability of a suitable substitute investment opportunity
for Investor, among other reasons. Accordingly, any fees, charges, and default interest due under the Note and the other Transaction
Documents are intended by the parties to be, and shall be deemed, liquidated damages (under Company’s and Investor’s
expectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding period
under Rule 144 under the 1933 Act). The parties agree that such liquidated damages are a reasonable estimate of Investor’s
actual damages and not a penalty, and shall not be deemed in any way to limit any other right or remedy Investor may have hereunder,
at law or in equity. The parties acknowledge and agree that under the circumstances existing at the time this Agreement is entered
into, such liquidated damages are fair and reasonable and are not penalties. All fees, charges, and default interest provided for
in the Transaction Documents are agreed to by the parties to be based upon the obligations and the risks assumed by the parties
as of the Closing Date and are consistent with investments of this type. The liquidated damages provisions of the Transaction Documents
shall not limit or preclude a party from pursuing any other remedy available at law or in equity; provided, however, that
the liquidated damages provided for in the Transaction Documents are intended to be in lieu of actual damages.


 


10.18.   
Ownership Limitation. Notwithstanding anything to the contrary contained in this Agreement or the other Transaction
Documents, if at any time Investor shall or would be issued shares of Common Stock under any of the Transaction Documents, but
such issuance would cause Investor (together with its affiliates) to beneficially own a number of shares exceeding the Maximum
Percentage (as defined in the Note), then Company must not issue to Investor the shares that would cause Investor to exceed the
Maximum Percentage. The shares of Common Stock issuable to Investor that would cause the Maximum Percentage to be exceeded are
referred to herein as the “Ownership Limitation Shares”. Company will reserve the Ownership Limitation Shares
for the exclusive benefit of Investor. From time to time, Investor may notify Company in writing of the number of the Ownership
Limitation Shares that may be issued to Investor without causing Investor to exceed the Maximum Percentage. Upon receipt of such
notice, Company shall be unconditionally obligated to immediately issue such designated shares to Investor, with a corresponding
reduction in the number of the Ownership Limitation Shares. For purposes of this Section, beneficial ownership of Common Stock
will be determined under Section 13(d) of the 1934 Act.


 


 






    	 	9	 



     

    

 


10.19.   
Attorneys’ Fees and Cost of Collection. In the event of any arbitration or action at law or in equity to enforce
or interpret the terms of this Agreement or any of the other Transaction Documents, the parties agree that the party who is awarded
the most money (which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees,
or other charges awarded to any party) shall be deemed the prevailing party for all purposes and shall therefore be entitled to
an additional award of the full amount of the attorneys’ fees, deposition costs, and expenses paid by such prevailing party
in connection with arbitration or litigation without reduction or apportionment based upon the individual claims or defenses giving
rise to the fees and expenses. Nothing herein shall restrict or impair an arbitrator’s or a court’s power to award
fees and expenses for frivolous or bad faith pleading. If (i) the Note is placed in the hands of an attorney for collection
or enforcement prior to commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal
proceeding, or Investor otherwise takes action to collect amounts due under the Note or to enforce the provisions of the Note;
or (ii) there occurs any bankruptcy, reorganization, receivership of Company or other proceedings affecting Company’s
creditors’ rights and involving a claim under the Note; then Company shall pay the costs incurred by Investor for such collection,
enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without
limitation, attorneys’ fees, expenses, deposition costs, and disbursements.


 


10.20.   
Waiver. No waiver of any provision of this Agreement shall be effective unless it is in the form of a writing signed
by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any
other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing
waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in
writing.


 


10.21.   
Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS
SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT,
ANY OTHER TRANSACTION DOCUMENT, OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL
RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY
HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.


 


10.22.   
Time is of the Essence. Time is expressly made of the essence with respect to each and every provision of this Agreement
and the other Transaction Documents.


 


10.23.   
Voluntary Agreement. Company has carefully read this Agreement and each of the other Transaction Documents and has
asked any questions needed for Company to understand the terms, consequences and binding effect of this Agreement and each of the
other Transaction Documents and fully understand them. Company has had the opportunity to seek the advice of an attorney of Company’s
choosing, or has waived the right to do so, and is executing this Agreement and each of the other Transaction Documents voluntarily
and without any duress or undue influence by Investor or anyone else.


 


[Remainder of page intentionally left
blank; signature page follows]


 


 


 




    	 	10	 



     

    


IN WITNESS WHEREOF,
the undersigned Investor and Company have caused this Agreement to be duly executed as of the date first above written.


 








SUBSCRIPTION AMOUNT:


 


	Principal Amount of Note:	$2,055,000.00
	 	 
	Purchase Price:	$2,000,000.00


 


 





 





 





 


	 	INVESTOR:
	 	 
	 	Iliad
Research and Trading, L.P.
	 	 
	 	By: Iliad Management, LLC, its General Partner
	 	 
	 	By:    Fife Trading, Inc., its Manager
	 	 
	 	 
	 	By: _____________________
	 	      John M. Fife, President 
	 	 
	 	 
	 	 
	 	COMPANY:
	 	 
	 	CV Sciences, Inc.
	 	 
	 	 
	 	By: _____________________
	 	Printed Name:  ________________
	 	Title: _________________


 







 


 




    	 	11	 



     

    


 


 


ATTACHED EXHIBITS:


 


 


		Exhibit	A                 
Note






		Exhibit	B                  
Security Agreement






		Exhibit	C                  
Officer’s Certificate






		Exhibit	D                 
Irrevocable Transfer Agent Instructions






		Exhibit	E                  
Secretary’s Certificate






		Exhibit	F                   
Share Issuance Resolution






		Exhibit	G                 
Arbitration Provisions



 


 


 


 


 


 


 


 


 


 


 


 




    	 	12	 



     

    


Exhibit
G


 


ARBITRATION PROVISIONS


 


1.Dispute Resolution. For purposes
of this Exhibit G, the term “Claims” means any disputes, claims, demands, causes of action, requests
for injunctive relief, requests for specific performance, liabilities, damages, losses, or controversies whatsoever arising from,
related to, or connected with the transactions contemplated in the Transaction Documents and any communications between the parties
related thereto, including without limitation any claims of mutual mistake, mistake, fraud, misrepresentation, failure of formation,
failure of consideration, promissory estoppel, unconscionability, failure of condition precedent, rescission, and any statutory
claims, tort claims, contract claims, or claims to void, invalidate or terminate the Agreement (or these Arbitration Provisions
(defined below)) or any of the other Transaction Documents. The term “Claims” specifically excludes a dispute over
Calculations. The parties to the Agreement (the “parties”) hereby agree that the arbitration provisions set
forth in this Exhibit G (“Arbitration Provisions”) are binding on each of them. As a result, any attempt
to rescind the Agreement (or these Arbitration Provisions) or declare the Agreement (or these Arbitration Provisions) or any other
Transaction Document invalid or unenforceable for any reason is subject to these Arbitration Provisions. These Arbitration Provisions
shall also survive any termination or expiration of the Agreement. Any capitalized term not defined in these Arbitration Provisions
shall have the meaning set forth in the Agreement.


 


2.Arbitration. Except as otherwise
provided herein, all Claims must be submitted to arbitration (“Arbitration”) to be conducted exclusively in
Salt Lake County or Utah County, Utah and pursuant to the terms set forth in these Arbitration Provisions. Subject to the arbitration
appeal right provided for in Paragraph 5 below (the “Appeal Right”), the parties agree that the award of the
arbitrator rendered pursuant to Paragraph 4 below (the “Arbitration Award”) shall be (a) final and binding upon
the parties, (b) the sole and exclusive remedy between them regarding any Claims, counterclaims, issues, or accountings presented
or pleaded to the arbitrator, and (c) promptly payable in United States dollars free of any tax, deduction or offset (with respect
to monetary awards). Subject to the Appeal Right, any costs or fees, including without limitation attorneys’ fees, incurred
in connection with or incident to enforcing the Arbitration Award shall, to the maximum extent permitted by law, be charged against
the party resisting such enforcement. The Arbitration Award shall include default interest (as defined or otherwise provided for
in the Note (“Default Interest”)) (with respect to monetary awards) at the rate specified in the Note for Default
Interest both before and after the Arbitration Award. Judgment upon the Arbitration Award will be entered and enforced by any state
or federal court sitting in Salt Lake County, Utah.


 


3.The Arbitration Act. The parties
hereby incorporate herein the provisions and procedures set forth in the Utah Uniform Arbitration Act, U.C.A. § 78B-11-101
et seq. (as amended or superseded from time to time, the “Arbitration Act”). Notwithstanding the foregoing,
pursuant to, and to the maximum extent permitted by, Section 105 of the Arbitration Act, in the event of conflict or variation
between the terms of these Arbitration Provisions and the provisions of the Arbitration Act, the terms of these Arbitration Provisions
shall control and the parties hereby waive or otherwise agree to vary the effect of all requirements of the Arbitration Act that
may conflict with or vary from these Arbitration Provisions.


 


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


 


4.1Initiation
of Arbitration. Pursuant to Section 110 of the Arbitration Act, the parties agree that a party may initiate Arbitration by
giving written notice to the other party (“Arbitration Notice”) in the same manner that notice is permitted
under Section 10.13 of the Agreement; provided, however, that the Arbitration Notice may not be given by email or fax. Arbitration
will be deemed initiated as of the date that the Arbitration Notice is deemed delivered to such other party under Section 10.13
of the Agreement (the “Service Date”). After the Service Date, information may be delivered, and notices may
be given, by email or fax pursuant to Section 10.13 of the Agreement or any other method permitted thereunder. The Arbitration
Notice must describe the nature of the controversy, the remedies sought, and the election to commence Arbitration proceedings.
All Claims in the Arbitration Notice must be pleaded consistent with the Utah Rules of Civil Procedure.


 


 






    	 	Arbitration Provisions, Page 1	 



     

    

 


4.2Selection
and Payment of Arbitrator.


 


(a) Within ten
(10) calendar days after the Service Date, Investor shall select and submit to Company the names of three (3) arbitrators that
are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com) (such three
(3) designated persons hereunder are referred to herein as the “Proposed Arbitrators”). For the avoidance of
doubt, each Proposed Arbitrator must be qualified as a “neutral” with Utah ADR Services. Within five (5) calendar days
after Investor has submitted to Company the names of the Proposed Arbitrators, Company must select, by written notice to Investor,
one (1) of the Proposed Arbitrators to act as the arbitrator for the parties under these Arbitration Provisions. If Company fails
to select one of the Proposed Arbitrators in writing within such 5-day period, then Investor may select the arbitrator from the
Proposed Arbitrators by providing written notice of such selection to Company.


 


(b) If Investor
fails to submit to Company the Proposed Arbitrators within ten (10) calendar days after the Service Date pursuant to subparagraph
(a) above, then Company may at any time prior to Investor so designating the Proposed Arbitrators, identify the names of three
(3) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Service by written notice to
Investor. Investor may then, within five (5) calendar days after Company has submitted notice of its Proposed Arbitrators to Investor,
select, by written notice to Company, one (1) of the Proposed Arbitrators to act as the arbitrator for the parties under these
Arbitration Provisions. If Investor fails to select in writing and within such 5-day period one (1) of the three (3) Proposed Arbitrators
selected by Company, then Company may select the arbitrator from its three (3) previously selected Proposed Arbitrators by providing
written notice of such selection to Investor.


 


(c) If a Proposed
Arbitrator chosen to serve as arbitrator declines or is otherwise unable to serve as arbitrator, then the party that selected such
Proposed Arbitrator may select one (1) of the other three (3) Proposed Arbitrators within three (3) calendar days of the date the
chosen Proposed Arbitrator declines or notifies the parties he or she is unable to serve as arbitrator. If all three (3) Proposed
Arbitrators decline or are otherwise unable to serve as arbitrator, then the arbitrator selection process shall begin again in
accordance with this Paragraph 4.2.


 


(d) The date that
the Proposed Arbitrator selected pursuant to this Paragraph 4.2 agrees in writing (including via email) delivered to both parties
to serve as the arbitrator hereunder is referred to herein as the “Arbitration Commencement Date”. If an arbitrator
resigns or is unable to act during the Arbitration, a replacement arbitrator shall be chosen in accordance with this Paragraph
4.2 to continue the Arbitration. If Utah ADR Services ceases to exist or to provide a list of neutrals, then the arbitrator shall
be selected under the then prevailing rules of the American Arbitration Association.


 


(e) Subject to
Paragraph 4.10 below, the cost of the arbitrator must be paid equally by both parties. Subject to Paragraph 4.10 below, if one
party refuses or fails to pay its portion of the arbitrator fee, then the other party can advance such unpaid amount (subject to
the accrual of Default Interest thereupon), with such amount being added to or subtracted from, as applicable, the Arbitration
Award.


 


4.3Applicability
of Certain Utah Rules. The parties agree that the Arbitration shall be conducted generally in accordance with the Utah Rules
of Civil Procedure and the Utah Rules of Evidence. More specifically, the Utah Rules of Civil Procedure shall apply, without limitation,
to the filing of any pleadings, motions or memoranda, the conducting of discovery, and the taking of any depositions. The Utah
Rules of Evidence shall apply to any hearings, whether telephonic or in person, held by the arbitrator. Notwithstanding the foregoing,
it is the parties’ intent that the incorporation of such rules will in no event supersede these Arbitration Provisions. In
the event of any conflict between the Utah Rules of Civil Procedure or the Utah Rules of Evidence and these Arbitration Provisions,
these Arbitration Provisions shall control.


 


4.4Answer and
Default. An answer and any counterclaims to the Arbitration Notice shall be required to be delivered to the party initiating
the Arbitration within twenty (20) calendar days after the Arbitration Commencement Date. If an answer is not delivered by the
required deadline, the arbitrator must provide written notice to the defaulting party stating that the arbitrator will enter a
default award against such party if such party does not file an answer within five (5) calendar days of receipt of such notice.
If an answer is not filed within the five (5) day extension period, the arbitrator must render a default award, consistent with
the relief requested in the Arbitration Notice, against a party that fails to submit an answer within such time period.


 


4.5Related
Litigation. The party that delivers the Arbitration Notice to the other party shall have the option to also commence concurrent
legal proceedings with any state or federal court sitting in Salt Lake County, Utah (“Litigation Proceedings”),
subject to the following: (a) the complaint in the Litigation Proceedings is to be substantially similar to the claims set forth
in the Arbitration Notice, provided that an additional cause of action to compel arbitration will also be included therein, (b)
so long as the other party files an answer to the complaint in the Litigation Proceedings and an answer to the Arbitration Notice,
the Litigation Proceedings will be stayed pending an Arbitration Award (or Appeal Panel Award (defined below), as applicable) hereunder,
(c) if the other party fails to file an answer in the Litigation Proceedings or an answer in the Arbitration proceedings, then
the party initiating Arbitration shall be entitled to a default judgment consistent with the relief requested, to be entered in
the Litigation Proceedings, and (d) any legal or procedural issue arising under the Arbitration Act that requires a decision of
a court of competent jurisdiction may be determined in the Litigation Proceedings. Any award of the arbitrator (or of the Appeal
Panel (defined below)) may be entered in such Litigation Proceedings pursuant to the Arbitration Act.


 


 






    	 	Arbitration Provisions, Page 2	 



     

    

 


4.6Discovery.
Pursuant to Section 118(8) of the Arbitration Act, the parties agree that discovery shall be conducted as follows:


 


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


 


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


 


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


 


(b) No party shall
be allowed (i) more than fifteen (15) interrogatories (including discrete subparts), (ii) more than fifteen (15) requests for admission
(including discrete subparts), (iii) more than ten (10) document requests (including discrete subparts), or (iv) more than three
(3) depositions (excluding expert depositions) for a maximum of seven (7) hours per deposition. The costs associated with depositions
will be borne by the party taking the deposition. The party defending the deposition will submit a notice to the party taking the
deposition of the estimated attorneys’ fees that such party expects to incur in connection with defending the deposition.
If the party defending the deposition fails to submit an estimate of attorneys’ fees within five (5) calendar days of its
receipt of a deposition notice, then such party shall be deemed to have waived its right to the estimated attorneys’ fees.
The party taking the deposition must pay the party defending the deposition the estimated attorneys’ fees prior to taking
the deposition, unless such obligation is deemed to be waived as set forth in the immediately preceding sentence. If the party
taking the deposition believes that the estimated attorneys’ fees are unreasonable, such party may submit the issue to the
arbitrator for a decision. All depositions will be taken in Utah.


 


(c) All discovery
requests (including document production requests included in deposition notices) must be submitted in writing to the arbitrator
and the other party. The party submitting the written discovery requests must include with such discovery requests a detailed explanation
of how the proposed discovery requests satisfy the requirements of these Arbitration Provisions and the Utah Rules of Civil Procedure.
The receiving party will then be allowed, within five (5) calendar days of receiving the proposed discovery requests, to submit
to the arbitrator an estimate of the attorneys’ fees and costs associated with responding to such written discovery requests
and a written challenge to each applicable discovery request. After receipt of an estimate of attorneys’ fees and costs and/or
challenge(s) to one or more discovery requests, consistent with subparagraph (c) above, the arbitrator will within three (3) calendar
days make a finding as to the likely attorneys’ fees and costs associated with responding to the discovery requests and issue
an order that (i) requires the requesting party to prepay the attorneys’ fees and costs associated with responding to the
discovery requests, and (ii) requires the responding party to respond to the discovery requests as limited by the arbitrator within
twenty-five (25) calendar days of the arbitrator’s finding with respect to such discovery requests. If a party entitled to
submit an estimate of attorneys’ fees and costs and/or a challenge to discovery requests fails to do so within such 5-day
period, the arbitrator will make a finding that (A) there are no attorneys’ fees or costs associated with responding to such
discovery requests, and (B) the responding party must respond to such discovery requests (as may be limited by the arbitrator)
within twenty-five (25) calendar days of the arbitrator’s finding with respect to such discovery requests. Any party submitting
any written discovery requests, including without limitation interrogatories, requests for production subpoenas to a party or a
third party, or requests for admissions, must prepay the estimated attorneys’ fees and costs, before the responding party
has any obligation to produce or respond to the same, unless such obligation is deemed waived as set forth above.


 


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


 


(e) Each party
may submit expert reports (and rebuttals thereto), provided that such reports must be submitted within sixty (60) days of the Arbitration
Commencement Date. Each party will be allowed a maximum of two (2) experts. Expert reports must contain the following: (i) a complete
statement of all opinions the expert will offer at trial and the basis and reasons for them; (ii) the expert’s name and qualifications,
including a list of all the expert’s publications within the preceding ten (10) years, and a list of any other cases in which
the expert has testified at trial or in a deposition or prepared a report within the preceding ten (10) years; and (iii) the compensation
to be paid for the expert’s report and testimony. The parties are entitled to depose any other party’s expert witness
one (1) time for no more than four (4) hours. An expert may not testify in a party’s case-in-chief concerning any matter
not fairly disclosed in the expert report.


 


 






    	 	Arbitration Provisions, Page 3	 



     

    

 


4.6Dispositive
Motions. Each party shall have the right to submit dispositive motions pursuant Rule 12 or Rule 56 of the Utah Rules of Civil
Procedure (a “Dispositive Motion”). The party submitting the Dispositive Motion may, but is not required to,
deliver to the arbitrator and to the other party a memorandum in support (the “Memorandum in Support”) of the
Dispositive Motion. Within seven (7) calendar days of delivery of the Memorandum in Support, the other party shall deliver to the
arbitrator and to the other party a memorandum in opposition to the Memorandum in Support (the “Memorandum in Opposition”).
Within seven (7) calendar days of delivery of the Memorandum in Opposition, as applicable, the party that submitted the Memorandum
in Support shall deliver to the arbitrator and to the other party a reply memorandum to the Memorandum in Opposition (“Reply
Memorandum”). If the applicable party shall fail to deliver the Memorandum in Opposition as required above, or if the
other party fails to deliver the Reply Memorandum as required above, then the applicable party shall lose its right to so deliver
the same, and the Dispositive Motion shall proceed regardless.


 


4.7Confidentiality.
All information disclosed by either party (or such party’s agents) during the Arbitration process (including without limitation
information disclosed during the discovery process or any Appeal (defined below)) shall be considered confidential in nature. Each
party agrees not to disclose any confidential information received from the other party (or its agents) during the Arbitration
process (including without limitation during the discovery process or any Appeal) unless (a) prior to or after the time of disclosure
such information becomes public knowledge or part of the public domain, not as a result of any inaction or action of the receiving
party or its agents, (b) such information is required by a court order, subpoena or similar legal duress to be disclosed if such
receiving party has notified the other party thereof in writing and given it a reasonable opportunity to obtain a protective order
from a court of competent jurisdiction prior to disclosure, or (c) such information is disclosed to the receiving party’s
agents, representatives and legal counsel on a need to know basis who each agree in writing not to disclose such information to
any third party. Pursuant to Section 118(5) of the Arbitration Act, the arbitrator is hereby authorized and directed to issue a
protective order to prevent the disclosure of privileged information and confidential information upon the written request of either
party.


 


4.8Authorization;
Timing; Scheduling Order. Subject to all other portions of these Arbitration Provisions, the parties hereby authorize and direct
the arbitrator to take such actions and make such rulings as may be necessary to carry out the parties’ intent for the Arbitration
proceedings to be efficient and expeditious. Pursuant to Section 120 of the Arbitration Act, the parties hereby agree that an Arbitration
Award must be made within one hundred twenty (120) calendar days after the Arbitration Commencement Date. The arbitrator is hereby
authorized and directed to hold a scheduling conference within ten (10) calendar days after the Arbitration Commencement Date in
order to establish a scheduling order with various binding deadlines for discovery, expert testimony, and the submission of documents
by the parties to enable the arbitrator to render a decision prior to the end of such 120-day period.


 


4.9Relief.
The arbitrator shall have the right to award or include in the Arbitration Award (or in a preliminary ruling) any relief which
the arbitrator deems proper under the circumstances, including, without limitation, specific performance and injunctive relief,
provided that the arbitrator may not award exemplary or punitive damages.


 


4.10Fees and
Costs. As part of the Arbitration Award, the arbitrator is hereby directed to require the losing party (the party being awarded
the least amount of money by the arbitrator, which, for the avoidance of doubt, shall be determined without regard to any statutory
fines, penalties, fees, or other charges awarded to any party) to (a) pay the full amount of any unpaid costs and fees of the Arbitration,
and (b) reimburse the prevailing party for all reasonable attorneys’ fees, arbitrator costs and fees, deposition costs, other
discovery costs, and other expenses, costs or fees paid or otherwise incurred by the prevailing party in connection with the Arbitration.


 


5.Arbitration Appeal.


 


5.1Initiation
of Appeal. Following the entry of the Arbitration Award, either party (the “Appellant”) shall have a period
of thirty (30) calendar days in which to notify the other party (the “Appellee”), in writing, that the Appellant
elects to appeal (the “Appeal”) the Arbitration Award (such notice, an “Appeal Notice”) to
a panel of arbitrators as provided in Paragraph 5.2 below. The date the Appellant delivers an Appeal Notice to the Appellee is
referred to herein as the “Appeal Date”. The Appeal Notice must be delivered to the Appellee in accordance with
the provisions of Paragraph 4.1 above with respect to delivery of an Arbitration Notice. In addition, together with delivery of
the Appeal Notice to the Appellee, the Appellant must also pay for (and provide proof of such payment to the Appellee together
with delivery of the Appeal Notice) a bond in the amount of 110% of the sum the Appellant owes to the Appellee as a result of the
Arbitration Award the Appellant is appealing. In the event an Appellant delivers an Appeal Notice to the Appellee (together with
proof of payment of the applicable bond) in compliance with the provisions of this Paragraph 5.1, the Appeal will occur as a matter
of right and, except as specifically set forth herein, will not be further conditioned. In the event a party does not deliver an
Appeal Notice (along with proof of payment of the applicable bond) to the other party within the deadline prescribed in this Paragraph
5.1, such party shall lose its right to appeal the Arbitration Award. If no party delivers an Appeal Notice (along with proof of
payment of the applicable bond) to the other party within the deadline described in this Paragraph 5.1, the Arbitration Award shall
be final. The parties acknowledge and agree that any Appeal shall be deemed part of the parties’ agreement to arbitrate for
purposes of these Arbitration Provisions and the Arbitration Act.


 


 






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5.2Selection
and Payment of Appeal Panel. In the event an Appellant delivers an Appeal Notice to the Appellee (together with proof of payment
of the applicable bond) in compliance with the provisions of Paragraph 5.1 above, the Appeal will be heard by a three (3) person
arbitration panel (the “Appeal Panel”).


 


(a) Within
ten (10) calendar days after the Appeal Date, the Appellee shall select and submit to the Appellant the names of five (5) arbitrators
that are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com) (such
five (5) designated persons hereunder are referred to herein as the “Proposed Appeal Arbitrators”). For the
avoidance of doubt, each Proposed Appeal Arbitrator must be qualified as a “neutral” with Utah ADR Services, and shall
not be the arbitrator who rendered the Arbitration Award being appealed (the “Original Arbitrator”). Within
five (5) calendar days after the Appellee has submitted to the Appellant the names of the Proposed Appeal Arbitrators, the Appellant
must select, by written notice to the Appellee, three (3) of the Proposed Appeal Arbitrators to act as the members of the Appeal
Panel. If the Appellant fails to select three (3) of the Proposed Appeal Arbitrators in writing within such 5-day period, then
the Appellee may select such three (3) arbitrators from the Proposed Appeal Arbitrators by providing written notice of such selection
to the Appellant.


 


(b) If the
Appellee fails to submit to the Appellant the names of the Proposed Appeal Arbitrators within ten (10) calendar days after the
Appeal Date pursuant to subparagraph (a) above, then the Appellant may at any time prior to the Appellee so designating the Proposed
Appeal Arbitrators, identify the names of five (5) arbitrators that are designated as “neutrals” or qualified arbitrators
by Utah ADR Service (none of whom may be the Original Arbitrator) by written notice to the Appellee. The Appellee may then, within
five (5) calendar days after the Appellant has submitted notice of its selected arbitrators to the Appellee, select, by written
notice to the Appellant, three (3) of such selected arbitrators to serve on the Appeal Panel. If the Appellee fails to select in
writing within such 5-day period three (3) of the arbitrators selected by the Appellant to serve as the members of the Appeal Panel,
then the Appellant may select the three (3) members of the Appeal Panel from the Appellant’s list of five (5) arbitrators
by providing written notice of such selection to the Appellee.


 


(c) If a selected
Proposed Appeal Arbitrator declines or is otherwise unable to serve, then the party that selected such Proposed Appeal Arbitrator
may select one (1) of the other five (5) designated Proposed Appeal Arbitrators within three (3) calendar days of the date a chosen
Proposed Appeal Arbitrator declines or notifies the parties he or she is unable to serve as an arbitrator. If at least three (3)
of the five (5) designated Proposed Appeal Arbitrators decline or are otherwise unable to serve, then the Proposed Appeal Arbitrator
selection process shall begin again in accordance with this Paragraph 5.2; provided, however, that any Proposed Appeal Arbitrators
who have already agreed to serve shall remain on the Appeal Panel.


 


(d)The date
that all three (3) Proposed Appeal Arbitrators selected pursuant to this Paragraph 5.2 agree in writing (including via email) delivered
to both the Appellant and the Appellee to serve as members of the Appeal Panel hereunder is referred to herein as the “Appeal
Commencement Date”. No later than five (5) calendar days after the Appeal Commencement Date, the Appellee shall designate
in writing (including via email) to the Appellant and the Appeal Panel the name of one (1) of the three (3) members of the Appeal
Panel to serve as the lead arbitrator in the Appeal proceedings. Each member of the Appeal Panel shall be deemed an arbitrator
for purposes of these Arbitration Provisions and the Arbitration Act, provided that, in conducting the Appeal, the Appeal Panel
may only act or make determinations upon the approval or vote of no less than the majority vote of its members, as announced or
communicated by the lead arbitrator on the Appeal Panel. If an arbitrator on the Appeal Panel
ceases or is unable to act during the Appeal proceedings, a replacement arbitrator shall be chosen in accordance with Paragraph
5.2 above to continue the Appeal as a member of the Appeal Panel. If Utah ADR Services ceases to exist or to provide a list
of neutrals, then the arbitrators for the Appeal Panel shall be selected under the then prevailing rules of the American Arbitration
Association.


 


(e) Subject
to Paragraph 5.7 below, the cost of the Appeal Panel must be paid entirely by the Appellant.


 


5.3Appeal Procedure. The
Appeal will be deemed an appeal of the entire Arbitration Award. In conducting the Appeal, the Appeal Panel shall conduct a de
novo review of all Claims described or otherwise set forth in the Arbitration Notice. Subject to the foregoing and all other provisions
of this Paragraph 5, the Appeal Panel shall conduct the Appeal in a manner the Appeal Panel considers appropriate for a fair and
expeditious disposition of the Appeal, may hold one or more hearings and permit oral argument, and may review all previous evidence
and discovery, together with all briefs, pleadings and other documents filed with the Original Arbitrator (as well as any documents
filed with the Appeal Panel pursuant to Paragraph 5.4(a) below). Notwithstanding the foregoing, in connection with the Appeal,
the Appeal Panel shall not permit the parties to conduct any additional discovery or raise any new Claims to be arbitrated, shall
not permit new witnesses or affidavits, and shall not base any of its findings or determinations on the Original Arbitrator’s
findings or the Arbitration Award.


 


 






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5.4Timing. 


 


(a)Within seven
(7) calendar days of the Appeal Commencement Date, the Appellant (i) shall deliver or cause to be delivered to the Appeal Panel
copies of the Appeal Notice, all discovery conducted in connection with the Arbitration, and all briefs, pleadings and other documents
filed with the Original Arbitrator (which material Appellee shall have the right to review and supplement if necessary), and (ii)
may, but is not required to, deliver to the Appeal Panel and to the Appellee a Memorandum in Support of the Appellant’s arguments
concerning or position with respect to all Claims, counterclaims, issues, or accountings presented or pleaded in the Arbitration.
Within seven (7) calendar days of the Appellant’s delivery of the Memorandum in Support, as applicable, the Appellee shall
deliver to the Appeal Panel and to the Appellant a Memorandum in Opposition to the Memorandum in Support. Within seven (7) calendar
days of the Appellee’s delivery of the Memorandum in Opposition, as applicable, the Appellant shall deliver to the Appeal
Panel and to the Appellee a Reply Memorandum to the Memorandum in Opposition. If the Appellant shall fail to substantially comply
with the requirements of clause (i) of this subparagraph (a), the Appellant shall lose its right to appeal the Arbitration Award,
and the Arbitration Award shall be final. If the Appellee shall fail to deliver the Memorandum in Opposition as required above,
or if the Appellant shall fail to deliver the Reply Memorandum as required above, then the Appellee or the Appellant, as the case
may be, shall lose its right to so deliver the same, and the Appeal shall proceed regardless.


 


(b) Subject to subparagraph
(a) above, the parties hereby agree that the Appeal must be heard by the Appeal Panel within thirty (30) calendar days of the Appeal
Commencement Date, and that the Appeal Panel must render its decision within thirty (30) calendar days after the Appeal is heard
(and in no event later than sixty (60) calendar days after the Appeal Commencement Date).


 


5.5Appeal Panel Award. The
Appeal Panel shall issue its decision (the “Appeal Panel Award”) through the lead arbitrator on the Appeal Panel.
Notwithstanding any other provision contained herein, the Appeal Panel Award shall (a) supersede in its entirety and make of no
further force or effect the Arbitration Award (provided that any protective orders issued by the Original Arbitrator shall remain
in full force and effect), (b) be final and binding upon the parties, with no further rights of appeal, (c) be the sole and exclusive
remedy between the parties regarding any Claims, counterclaims, issues, or accountings presented or pleaded in the Arbitration,
and (d) be promptly payable in United States dollars free of any tax, deduction or offset (with respect to monetary awards). Any
costs or fees, including without limitation attorneys’ fees, incurred in connection with or incident to enforcing the Appeal
Panel Award shall, to the maximum extent permitted by law, be charged against the party resisting such enforcement. The Appeal
Panel Award shall include Default Interest (with respect to monetary awards) at the rate specified in the Note for Default Interest
both before and after the Arbitration Award. Judgment upon the Appeal Panel Award will be entered and enforced by a state or federal
court sitting in Salt Lake County, Utah.


 


5.6Relief. The Appeal Panel
shall have the right to award or include in the Appeal Panel Award any relief which the Appeal Panel deems proper under the circumstances,
including, without limitation, specific performance and injunctive relief, provided that the Appeal Panel may not award exemplary
or punitive damages.


 


5.7Fees and Costs. As part
of the Appeal Panel Award, the Appeal Panel is hereby directed to require the losing party (the party being awarded the least amount
of money by the arbitrator, which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties,
fees, or other charges awarded to any party) to (a) pay the full amount of any unpaid costs and fees of the Arbitration and the
Appeal Panel, and (b) reimburse the prevailing party (the party being awarded the most amount of money by the Appeal Panel, which,
for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or other charges awarded
to any party) the reasonable attorneys’ fees, arbitrator and Appeal Panel costs and fees, deposition costs, other discovery
costs, and other expenses, costs or fees paid or otherwise incurred by the prevailing party in connection with the Arbitration
(including without limitation in connection with the Appeal).


 


6. Miscellaneous.


 


6.1Severability.
If any part of these Arbitration Provisions is found to violate or be illegal under applicable law, then such provision shall
be modified to the minimum extent necessary to make such provision enforceable under applicable law, and the remainder of the Arbitration
Provisions shall remain unaffected and in full force and effect.


 


 






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6.2Governing
Law. These Arbitration Provisions shall be governed by the laws of the State of Utah without regard to the conflict of laws
principles therein.


 


6.3Interpretation.
The headings of these Arbitration Provisions are for convenience of reference only and shall not form part of, or affect the interpretation
of, these Arbitration Provisions.


 


6.4Waiver.
No waiver of any provision of these Arbitration Provisions shall be effective unless it is in the form of a writing signed by the
party granting the waiver.


 


6.5Time is
of the Essence. Time is expressly made of the essence with respect to each and every provision of these Arbitration Provisions.


 


 


 


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