SECURITIES
PURCHASE AGREEMENT


 


This
SECURITIES PURCHASE
AGREEMENT (the
“Agreement”), dated
as of
August 18,
2014, by
and between
AJA CANNAFACTURING,
INC. f/k/a
IDS INDUSTRIES,
INC.,
a Nevada
corporation, with
headquarters located
at 5333
Birch Street,
Lake Elsinore,
CA 92530 (the “Company”),
and KBM WORLDWIDE,
INC., a New
York corporation, with its address
at 80 Cuttermill Road,
Suite 410, Great Neck,
NY 11021 (the “Buyer”).


 


WHEREAS:


 


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


 


B.                 
Buyer
desires
to purchase
and the
Company desires
to issue and
sell, upon
the terms
and conditions
set forth
in this Agreement
an 8%
convertible note
of the
Company, in
the form
attached hereto
as Exhibit
A, in
the aggregate
principal amount
of $53,000.00 (together
with any note(s) issued in
replacement thereof or as
a dividend thereon or otherwise
with respect thereto
in accordance
with the
terms thereof,
the “Note”),
convertible into
shares of
common stock, $0.001 par
value per share,
of the Company (the “Common Stock”),
upon the terms and subject
to the limitations and conditions
set forth in such
Note.


 


C.                 
The
Buyer
wishes
to purchase,
upon the terms
and conditions
stated in
this Agreement,
such principal
amount of
Note as
is set
forth immediately
below its name
on the signature
pages hereto; and


 


NOW
THEREFORE,
the Company and
the Buyer
severally (and not
jointly) hereby
agree as
follows:


 


1.                  
Purchase and Sale
of Note.


 


a.                  
Purchase
of Note.
On the
Closing Date
(as defined
below), the
Company shall
issue and
sell to
the Buyer
and the
Buyer agrees
to purchase from
the Company such
principal amount
of Note as
is set
forth immediately
below the Buyer’s
name on the signature
pages hereto.




    	 



    	 



    

 


b.                  
Form
of Payment.
On the
Closing Date
(as defined
below), (i)
the Buyer
shall pay
the purchase
price for the
Note to
be issued
and sold
to it at
the Closing (as
defined below) (the
“Purchase Price”) by wire
transfer of immediately available funds
to the Company, in
accordance with
the Company’s
written wiring
instructions, against
delivery of the Note in the principal
amount equal to the Purchase
Price as is set
forth immediately below the Buyer’s
name on the signature pages
hereto, and (ii) the Company shall
deliver such duly executed
Note on behalf of
the Company, to the Buyer,
against delivery of such
Purchase Price.


 


c.                   
Closing Date.
Subject to
the satisfaction
(or written
waiver) of
the conditions
thereto set
forth in
Section 6
and Section
7 below,
the date
and time
of the issuance
and sale
of the Note
pursuant to this
Agreement (the
“Closing Date”) shall
be 12:00 noon,
Eastern Standard
Time on
or about
August 20,
2014, or such
other mutually
agreed upon
time. The closing
of the transactions contemplated
by this Agreement (the
“Closing”) shall occur on
the Closing Date at
such location as
may be agreed to by the parties.


 


2.                  
Buyer’s 
Representations  and
 Warranties.The
 Buyer 
represents  and
warrants to the Company
that:


 


a.                  
Investment
Purpose.
As of
the date hereof,
the Buyer
is purchasing
the Note
and the
shares of
Common Stock
issuable upon
conversion of
or otherwise
pursuant to
the Note
(including, without
limitation, such
additional shares
of Common Stock,
if any,
as are
issuable (i)
on account
of interest
on the Note,
(ii) as a
result of
the events
described in
Sections 1.3
and 1.4(g)
of the Note or (iii) in
payment of the Standard
Liquidated Damages
Amount (as
defined in
Section 2(f)
below) pursuant to
this Agreement,
such shares
of Common Stock being
collectively referred to herein
as the “Conversion
Shares” and, collectively with
the Note, the “Securities”)
for its own account and
not with a present view towards
the public sale or distribution thereof,
except pursuant
to sales registered or exempted
from registration under the 1933 Act;
provided, however, that
by making the representations herein, the Buyer
does not agree
to hold any of the Securities for any
minimum or other specific term
and reserves the right
to dispose of the Securities at any time
in accordance with or pursuant to a registration
statement or an exemption under
the 1933 Act.


 


b.                  
Accredited
Investor
Status.
The Buyer
is an
“accredited investor”
as that term
is defined in Rule
501(a) of Regulation D (an “Accredited
Investor”).


 


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




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d.                  
Information.
The
Buyer
and its
advisors, if
any, have
been, and
for so
long as
the Note remain
outstanding will
continue to
be, furnished
with all
materials relating
to the business,
finances and
operations of
the Company and
materials relating
to the offer
and sale
of the Securities
which have been
requested by
the Buyer
or its advisors.
The Buyer
and its advisors,
if any,
have been, and
for so
long as the Note
remain outstanding
will continue to
be, afforded
the opportunity to ask
questions of the
Company. Notwithstanding
the foregoing, the Company has
not disclosed to
the Buyer
any material
nonpublic information
and will
not disclose such information
unless such information
is disclosed to the public prior to or
promptly following such disclosure to
the Buyer. Neither such inquiries
nor any other due diligence investigation
conducted by
Buyer or any of
its advisors or representatives shall
modify, amend
or affect Buyer’s
right to rely on
the Company’s representations
and warranties
contained  in
Section 3 below.
The Buyer
understands that its investment
in the Securities involves a
significant degree of
risk. The
Buyer is not aware
of any facts
that may constitute
a breach of any of
the Company's representations
and warranties
made herein.


 


e.                   
Governmental
Review.
The
Buyer
understands that no United
States federal
or state
agency or any
other government
or governmental
agency has
passed upon or
made any recommendation
or endorsement of
the Securities.


 


f.                   
Transfer
or Re-sale.
The Buyer
understands that
(i) the
sale or
re- sale
of the Securities
has not been
and is
not being
registered under
the 1933 Act
or any
applicable state securities laws,
and the
Securities may not be
transferred unless (a) the
Securities are sold pursuant
to an effective
registration statement
under the 1933 Act, (b)
the Buyer shall have delivered
to the Company, at the cost
of the Buyer, an opinion of counsel that
shall be in form, substance
and scope customary for opinions of counsel
in comparable transactions to the effect
that the Securities to be sold or transferred
may be sold or transferred pursuant to an
exemption from such registration,
which opinion shall be accepted
by the Company, (c)
the Securities are sold or
transferred to an
“affiliate” (as
defined in Rule 144
promulgated under the 1933 Act
(or a successor rule)
(“Rule 144”)) of the Buyer
who agrees to sell
or otherwise transfer
the Securities
only in accordance
with this Section
2(f) and
who is
an Accredited
Investor, (d) the Securities
are sold pursuant to Rule 144, or (e)
the Securities are sold pursuant
to Regulation S under the 1933
Act (or a successor rule)
(“Regulation S”), and the
Buyer shall have
delivered to the Company, at
the cost of the Buyer, an
opinion of counsel that shall be in form,
substance and scope customary
for opinions of counsel in corporate
transactions, which opinion shall
be accepted by
the Company; (ii) any
sale of such Securities made in
reliance on Rule 144
may be
made only in
accordance with
the terms
of said Rule
and further,
if said Rule
is not applicable, any re-sale
of such Securities under circumstances
in which the seller (or
the person through whom
the sale is made) may be
deemed to be an
underwriter (as that term is defined
in the 1933 Act)
may require compliance
with some
other exemption under
the 1933 Act or
the rules and
regulations of
the SEC thereunder;
and (iii)
neither the Company
nor any other person
is under
any obligation to
register such
Securities under
the 1933 Act
or any state securities laws
or to comply with
the terms and conditions of any exemption thereunder
(in each
case). Notwithstanding the foregoing
or anything else contained
herein to the contrary, the Securities
may be pledged as
collateral in connection with a bona
fide margin account
or other lending
arrangement.




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g.                   
Legends.
The
Buyer understands that
the Note
and, until such time as
the Conversion
Shares have
been registered
under the 1933
Act may
be sold
pursuant to
Rule 144
or Regulation
S without
any restriction
as to
the number
of securities
as of
a particular
date that
can then
be immediately sold, the
Conversion Shares
may bear a restrictive
legend in substantially the following
form (and
a stop-transfer order may be placed
against transfer
of the certificates for
such Securities):


 


“NEITHER
THE ISSUANCE
AND SALE
OF THE SECURITIES
REPRESENTED BY
THIS CERTIFICATE
NOR THE
SECURITIES INTO
WHICH THESE
SECURITIES ARE
EXERCISABLE HAVE
BEEN REGISTERED
UNDER THE
SECURITIES ACT
OF 1933, AS
AMENDED, OR
APPLICABLE STATE
SECURITIES LAWS.
THE SECURITIES
MAY NOT
BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE
OF (A) AN EFFECTIVE
REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS
AMENDED, OR (B) AN
OPINION OF
COUNSEL (WHICH
COUNSEL SHALL
BE SELECTED
BY THE HOLDER),
IN A GENERALLY
ACCEPTABLE FORM,
THAT REGISTRATION IS NOT
REQUIRED UNDER SAID
ACT OR (II) UNLESS
SOLD PURSUANT TO
RULE 144 OR RULE 144A UNDER
SAID ACT.
NOTWITHSTANDING THE FOREGOING,
THE SECURITIES
MAY BE PLEDGED
IN CONNECTION WITH
A BONA FIDE
MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED
BY THE SECURITIES.”


 


The
legend set
forth above
shall be
removed and
the Company shall
issue a certificate
without such
legend to
the holder
of any
Security upon
which it
is stamped,
if, unless
otherwise required
by applicable
state securities
laws, (a) such
Security is registered
for sale under an effective
registration statement filed
under the 1933 Act or otherwise may be
sold pursuant to Rule 144
or Regulation S without
any restriction
as to
the number of securities as
of a particular date
that can
then be
immediately sold, or
(b) such holder
provides the
Company with an
opinion of counsel, in form, substance
and scope customary for opinions of counsel
in comparable transactions,
to the effect
that a
public sale
or transfer
of such
Security may be made
without registration
under the
1933 Act,
which opinion
shall be
accepted by the
Company so that the
sale or transfer is effected.
The Buyer agrees
to sell all Securities, including
those represented by a certificate(s)
from which the
legend has
been removed,
in compliance
with applicable
prospectus delivery requirements,
if any. In
the event that the Company does
not accept the opinion of counsel
provided by the Buyer
with respect
to the transfer
of Securities pursuant
to an
exemption from registration, such
as Rule 144 or Regulation S, at the Deadline,
it will be considered
an Event of
Default pursuant to Section 3.2 of the
Note.




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h.                  
Authorization;
Enforcement.
This
Agreement
has been
duly and
validly authorized.
This Agreement
has been
duly executed
and delivered
on behalf
of the Buyer,
and this
Agreement constitutes
a valid
and binding agreement
of the Buyer
enforceable in
accordance with its terms.


 


i.                    
Residency.
The Buyer
is a resident
of the
jurisdiction set
forth immediately
below the Buyer’s
name on the
signature pages hereto.


 


3.                  
Representations and
Warranties of the Company.
The Company represents and
warrants to the
Buyer that:


 


a.                  
Organization
and
Qualification.
The Company
and each
of its
Subsidiaries (as
defined below),
if any,
is a corporation
duly organized, validly
existing and
in good
standing under the laws
of the jurisdiction in
which it
is incorporated,
with full
power and authority (corporate
and other)
to own,
lease, use and
operate its
properties and to
carry on its business
as and where
now owned, leased, used,
operated and conducted.
Schedule 3(a) sets
forth a list of all of the Subsidiaries
of the Company and the jurisdiction in
which each
is incorporated. The
Company and
each of
its Subsidiaries
is duly qualified
as a foreign
corporation to do business and is in
good standing in every jurisdiction in which
its ownership or use of property or the nature of the business
conducted by
it makes
such qualification
necessary except where the failure
to be so qualified
or in good
standing would
not have a Material Adverse
Effect. “Material Adverse
Effect” means
any material
adverse effect
on the
business, operations, assets,
financial condition or prospects of the
Company or its Subsidiaries, if any,
taken as a
whole, or
on the transactions contemplated
hereby or by the agreements
or instruments to be
entered into in connection herewith.
“Subsidiaries” means
any corporation or
other organization,
whether incorporated
or unincorporated,
in which
the Company owns,
directly or indirectly, any
equity or other ownership interest.


 


b.                  
Authorization;
Enforcement.
(i)
The
Company has
all requisite
corporate power
and authority
to enter
into and perform
this Agreement,
the Note
and to
consummate the
transactions contemplated
hereby and
thereby and
to issue the
Securities, in
accordance with the terms hereof
and thereof, (ii) the execution
and delivery of this Agreement,
the Note by the Company and the consummation
by it of the transactions contemplated
hereby and thereby (including without
limitation, the issuance of the Note
and the issuance and reservation
for issuance of the Conversion
Shares issuable upon conversion
or exercise thereof) have
been duly authorized
by the Company’s
Board of Directors
and no further
consent or authorization of the
Company, its Board of Directors,
or its shareholders is required, (iii)
this Agreement has been duly
executed and delivered
by the Company by
its authorized representative,
and such
authorized representative is the
true and official
representative with
authority to sign this Agreement and
the other documents executed in connection
herewith and
bind the Company
accordingly, and
(iv) this
Agreement constitutes,
and upon execution
and delivery by the Company
of the Note, each of such instruments
will constitute, a legal,
valid and binding obligation
of the Company
enforceable against
the Company in
accordance with
its terms.




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c.                   
Capitalization.
As of
the date
hereof, the
authorized capital
stock of
the Company consists
of: (i)
500,000,000 shares
of Common
Stock, $0.001
par value
per share,
of which
121,184,334 shares
are issued
and outstanding;
and (ii)10,000,000
authorized shares
of Preferred
Stock, $0.001 par
value per share,
of which
no shares
are issued
and outstanding;
no shares
are reserved for
issuance pursuant to
the Company’s
stock option
plans, no shares are reserved
for issuance pursuant to securities
(other than the Note
and two (2)
prior convertible promissory notes in
favor of the
Buyer


 


(a)                
Prior
convertible
promissory note
in favor of
the Buyer
dated March
19, 2014 in
the amount of
$53,000.00 ;


 


(b)                
Prior convertible
promissory note
in favor of
the Buyer
dated May
20, 2014 in
the amount
of $53,000.00; an
aggregate total
of for
which 115,000,000
shares of
Common Stock are presently reserved
for both prior notes referenced
above; and exercisable for,
or convertible into or exchangeable
for shares of Common Stock
and 60,000,000 shares
are reserved
for issuance
upon conversion
of the Note.
All of such
outstanding shares of
capital stock
are, or
upon issuance
will be,
duly authorized, validly issued,
fully paid and
non-assessable. No shares
of capital stock of
the Company are
subject to preemptive rights
or any other
similar rights
of the shareholders of the Company
or any liens
or encumbrances imposed through
the actions or failure
to act of the Company.
As of the effective
date of this Agreement,
(i) there
are no outstanding
options, warrants,
scrip, rights
to subscribe for,
puts, calls,
rights of first refusal,
agreements, understandings, claims
or other
commitments or rights of any
character whatsoever relating
to, or securities or rights convertible
into or exchangeable for any shares
of capital stock of the Company or any
of its Subsidiaries, or arrangements
by which the Company or
any of its Subsidiaries is or may
become bound to issue additional shares
of capital stock of the Company or
any of its Subsidiaries, (ii)
there are no agreements
or arrangements under which
the Company or any
of its Subsidiaries is obligated
to register the sale of any
of its or their securities under
the 1933 Act and (iii)
there are no anti-
dilution or price
adjustment provisions
contained in
any security issued
by the Company
(or in any agreement
providing rights
to security
holders) that will
be triggered by
the issuance of the Note
or the Conversion
Shares. The
Company has furnished to the Buyer
true and correct
copies of the Company’s
Certificate of Incorporation
as in
effect on
the date hereof (“Certificate
of Incorporation”), the Company’s
By-laws, as in effect
on the date hereof (the “By-laws”),
and the terms of all
securities convertible into or exercisable
for Common Stock of the Company and
the material rights
of the holders thereof
in respect
thereto. The
Company shall provide the Buyer
with a written
update of this representation
signed by the Company’s
Chief Executive on
behalf of the
Company as of the
Closing Date.


 


d.                  
Issuance
of Shares.
The Conversion
Shares are
duly authorized
and reserved
for issuance
and, upon
conversion of
the Note
in accordance
with its
respective terms,
will be
validly issued, fully
paid and
non-assessable, and
free from
all taxes,
liens, claims
and encumbrances with
respect to the issue thereof and
shall not be subject to preemptive
rights or other similar
rights of shareholders
of the Company and will
not impose personal
liability upon the holder thereof.




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e.                   
Acknowledgment
of
Dilution.
The Company
understands and
acknowledges the
potentially dilutive effect
to the Common
Stock upon
the issuance
of the Conversion
Shares upon
conversion of
the Note. The Company further
acknowledges that
its obligation to issue Conversion
Shares upon conversion of
the Note in accordance
with this Agreement,
the Note is absolute and
unconditional regardless of
the dilutive effect that such
issuance may have
on the ownership interests of
other shareholders of the
Company.


 


f.                   
No
Conflicts.
The
execution,
delivery
and performance
of this Agreement,
the Note by
the Company and
the consummation by
the Company of
the transactions
contemplated hereby
and thereby
(including, without
limitation, the issuance
and reservation
for issuance of the Conversion
Shares) will
not (i)
conflict with
or result
in a violation
of any provision of the Certificate
of Incorporation or By-laws,
or (ii) violate or conflict
with, or result
in a breach
of any provision of,
or constitute a default (or
an event
which with
notice or lapse of time or both could
become a default) under,
or give to others
any rights
of termination, amendment, acceleration
or cancellation of, any
agreement, indenture, patent, patent
license or instrument
to which
the Company or any
of its Subsidiaries
is a party, or
(iii) result
in a violation of any
law, rule, regulation, order,
judgment or decree (including
federal and state
securities laws
and regulations
and regulations
of any self-regulatory
organizations to
which the Company or
its securities are subject) applicable
to the Company or any of
its Subsidiaries or by which
any property or asset of the Company or
any of its Subsidiaries is bound or affected
(except for such conflicts,
defaults, terminations, amendments,
accelerations, cancellations and
violations as would
not, individually or in the aggregate,
have a Material Adverse Effect).
Neither the
Company nor any
of its Subsidiaries
is in violation
of its Certificate
of Incorporation, By-laws or other
organizational documents
and neither the Company nor any
of its Subsidiaries is
in default
(and no
event has
occurred which
with notice
or lapse of time or both could
put the Company or any of its Subsidiaries
in default) under, and
neither the Company nor any of its Subsidiaries
has taken
any action or failed to take any
action that would
give to others
any rights of termination,
amendment, acceleration or cancellation
of, any agreement,
indenture or instrument
to which
the Company or any
of its Subsidiaries
is a party or by
which any
property or assets of the Company or any
of its Subsidiaries is bound or affected, except
for possible defaults as
would not,
individually or in the aggregate,
have a Material Adverse Effect.
The businesses of the Company
and its Subsidiaries, if any,
are not being conducted, and
shall not be conducted
so long as
the Buyer owns any
of the Securities, in
violation of any
law, ordinance or regulation
of any governmental entity.
Except as specifically
contemplated by this Agreement
and as
required under the 1933
Act and
any applicable
state securities
laws, the Company is not required
to obtain
any consent, authorization
or order of, or make
any filing or registration
with, any court,
governmental agency,
regulatory agency,
self regulatory organization or stock
market or any third party in order
for it to execute, deliver
or perform any of its obligations under
this




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Agreement,
the Note in
accordance with
the terms hereof
or thereof
or to
issue and
sell the Note
in accordance
with the
terms hereof
and to
issue the Conversion
Shares upon
conversion of
the Note.
All consents, authorizations,
orders, filings and
registrations which the Company is required
to obtain pursuant to the preceding
sentence have been obtained or effected
on or prior to the date
hereof. The Company
is not in violation of the listing requirements
of the Over-the- Counter
Bulletin Board (the
“OTCBB”) and does not reasonably
anticipate that the Common
Stock will
be delisted by
the OTCBB
in the foreseeable
future. The Company and
its Subsidiaries are unaware of
any facts or circumstances
which might give
rise to any of
the foregoing.


 


g.                   
SEC
Documents;
Financial
Statements.
The Company
has timely filed
all reports,
schedules, forms,
statements and
other documents
required to
be filed
by it with
the SEC
pursuant to
the reporting
requirements of
the Securities
Exchange Act
of 1934, as
amended (the “1934 Act”)
(all of the foregoing filed prior to
the date hereof and
all exhibits included therein
and financial statements
and schedules
thereto and documents (other
than exhibits to such documents)
incorporated by reference therein,
being hereinafter referred to herein
as the “SEC Documents”).
Upon written request
the Company will deliver to the Buyer true
and complete
copies of the
SEC Documents,
except for
such exhibits
and incorporated
documents. As
of their respective dates,
the SEC Documents
complied in all
material respects
with the requirements of the 1934 Act
and the rules and regulations
of the SEC promulgated thereunder
applicable to the SEC Documents,
and none of the SEC Documents,
at the time they were
filed with the SEC,
contained any untrue
statement of a material fact or omitted
to state a material fact
required to
be stated therein
or necessary in order
to make the statements
therein, in light
of the circumstances under which
they were made,
not misleading. None
of the statements made in any
such SEC Documents
is, or has been, required to be amended
or updated under applicable
law (except
for such
statements as
have been amended
or updated
in subsequent filings
prior the date hereof). As
of their respective dates,
the financial statements
of the Company included in the SEC
Documents complied as
to form in all
material respects with
applicable accounting requirements
and the published
rules and
regulations of the SEC
with respect
thereto. Such
financial statements
have been prepared
in accordance with
United States
generally accepted accounting principles,
consistently applied, during the
periods involved and
fairly present in
all material
respects the consolidated
financial position
of the Company and its
consolidated Subsidiaries as
of the dates thereof
and the consolidated results of
their operations and
cash flows for
the periods then ended
(subject, in the case
of unaudited
statements, to normal year-end
audit adjustments). Except
as set forth
in the financial statements of the Company
included in
the SEC
Documents, the
Company has no
liabilities, contingent
or otherwise,
other than (i)
liabilities incurred in the ordinary
course of business subsequent to May
31, 2014, and (ii) obligations
under contracts
and commitments
incurred in
the ordinary course of business
and not required
under generally
accepted accounting
principles to
be reflected in
such financial
statements, which, individually
or in the aggregate, are not material
to the financial condition or operating
results of the Company. The Company is
subject to the reporting requirements
of the 1934 Act.




    	8



    	 



    

 


h.                  
Absence
of
Certain
Changes.
Since
May 31,
2014, there
has been no
material adverse
change and
no material
adverse development
in the assets,
liabilities, business,
properties, operations,
financial condition,
results of
operations, prospects
or 1934 Act
reporting status
of the Company
or any of
its Subsidiaries.


 


i.                    
Absence
of Litigation.
There is
no action,
suit, claim,
proceeding, inquiry or
investigation before
or by any
court, public board,
government agency,
self-regulatory organization
or body pending
or, to
the knowledge
of the Company
or any of
its Subsidiaries, threatened
against or affecting the Company or any of its Subsidiaries,
or their officers or directors
in their capacity as such, that
could have a Material Adverse
Effect. Schedule 3(i) contains a complete
list and summary description
of any pending or, to the knowledge
of the Company, threatened proceeding
against or affecting the Company or
any of its Subsidiaries,
without regard to whether
it would have a Material
Adverse Effect. The Company and
its Subsidiaries are unaware of any
facts or circumstances which
might give rise
to any of the foregoing.


 


j.                    
Patents,
Copyrights,
etc. The
Company and each
of  its Subsidiaries
owns or
possesses the
requisite licenses
or rights
to use
all patents,
patent applications,
patent rights,
inventions, know-how,
trade secrets,
trademarks, trademark
applications, service
marks, service
names, trade names
and copyrights
(“Intellectual Property”)
necessary to enable it to conduct its business
as now operated (and,
as presently contemplated to be
operated in
the future); there
is no claim
or action by any person
pertaining to, or proceeding
pending, or to the Company’s
knowledge threatened, which challenges
the right of the Company or of a Subsidiary with
respect to any Intellectual
Property necessary
to enable it to conduct its business
as now operated
(and, as
presently contemplated to
be operated in
the future); to the best
of the Company’s knowledge, the
Company’s or its Subsidiaries’
current and intended
products, services
and processes
do not infringe
on any Intellectual
Property or other rights
held by any person; and the Company is unaware
of any facts or circumstances
which might give
rise to any of the foregoing. The Company
and each of its Subsidiaries
have taken reasonable security measures
to protect the secrecy, confidentiality
and value of
their Intellectual Property.


 


k.                  
No
Materially Adverse
Contracts, Etc.
Neither the
Company nor any
of its Subsidiaries
is subject
to any
charter, corporate
or other legal
restriction, or
any judgment,
decree, order,
rule or regulation
which in the judgment
of the Company’s officers
has or is expected in
the future to have a Material
Adverse Effect.
Neither the Company nor any of
its Subsidiaries
is a party to any
contract or agreement which
in the judgment of the Company’s
officers has or is expected to have
a Material Adverse Effect.


 


l.                    
Tax
Status.
The Company and each
of its Subsidiaries
has made
or filed
all federal,
state and
foreign income
and all
other tax
returns, reports
and declarations
required by
any jurisdiction to which
it is subject (unless and only
to the extent that
the Company and
each of
its Subsidiaries
has set
aside on
its books provisions
reasonably adequate for
the payment of
all unpaid
and unreported
taxes) and has
paid all
taxes and
other governmental




    	9



    	 



    

 


assessments
and charges
that are
material in
amount, shown
or determined
to be due
on such
returns, reports
and declarations,
except those
being contested
in good
faith and
has set
aside on
its books provisions
reasonably adequate
for the
payment of
all 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 know of no basis for any
such claim. The Company has
not executed a waiver with
respect to
the statute
of limitations
relating to
the assessment
or collection
of any foreign,
federal, state
or local tax. None
of the Company’s
tax returns
is presently being
audited by any taxing authority.


 


m.                
Certain
Transactions.
Except
for
arm’s
length
transactions
pursuant
to which
the Company or
any of
its Subsidiaries
makes payments
in the ordinary
course of business
upon terms
no less
favorable than
the Company or
any of
its Subsidiaries
could obtain
from third parties
and other than
the grant of stock options disclosed
on Schedule 3(c), none of
the officers, directors,
or employees
of the Company is
presently a party to
any transaction
with the Company or any
of its Subsidiaries (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, or otherwise
requiring payments
to or from any officer,
director or
such employee
or, to the knowledge of the Company,
any corporation, partnership,
trust or other entity
in which any officer,
director, or any
such employee has a substantial interest
or is an officer, director,
trustee or partner.


 


n.                  
Disclosure. All
information relating
to or concerning
the Company or
any of its
Subsidiaries set
forth in
this Agreement
and provided
to the
Buyer pursuant
to Section
2(d) hereof
and otherwise
in connection with
the transactions contemplated
hereby is true
and correct in all
material respects and
the Company has not omitted to state
any material fact necessary in order
to make the statements made
herein or therein,
in light of the circumstances under
which they were made,
not misleading. No
event or circumstance has
occurred or exists with respect
to the Company or any of its Subsidiaries
or its or their business,
properties, prospects,
operations or financial
conditions, which,
under applicable
law, rule
or regulation, requires
public disclosure or announcement by
the Company but which has not been so
publicly announced or disclosed
(assuming for this purpose that
the Company’s reports filed
under the 1934
Act are being
incorporated into
an effective
registration statement
filed by
the Company under the 1933 Act).


 


o.                  
Acknowledgment
Regarding Buyer’
Purchase of
Securities.
The Company
acknowledges and
agrees that
the Buyer
is acting solely
in the capacity
of arm’s
length purchasers
with respect
to this Agreement
and the
transactions contemplated
hereby. The
Company further acknowledges
that the Buyer is not acting
as a financial advisor
or fiduciary of the Company (or
in any similar
capacity) with
respect to this Agreement and
the transactions contemplated hereby
and any statement made by the Buyer
or any of its respective representatives
or agents in connection with this Agreement
and the transactions contemplated




    	10



    	 



    

 


hereby
is not advice
or a
recommendation and
is merely incidental
to the Buyer’
purchase of
the Securities.
The Company
further represents
to the Buyer
that the
Company’s decision
to enter
into this Agreement has
been based
solely on the independent
evaluation of
the Company and its representatives.


 


p.                  
No
Integrated
Offering.
Neither
the Company,
nor any of
its affiliates,
nor any
person acting
on its or
their behalf,
has directly
or indirectly
made any
offers or sales in any
security or solicited any
offers to buy any
security under circumstances that would
require registration under
the 1933 Act of the issuance
of the Securities to the Buyer. The issuance
of the Securities to the Buyer will
not be integrated with any other
issuance of the Company’s securities
(past, current or future)
for purposes of any
shareholder approval provisions
applicable to the Company or
its securities.


 


q.                  
No
Brokers.
The Company
has taken
no action
which would
give rise
to any
claim by
any person
for brokerage
commissions, transaction
fees or
similar payments
relating to this Agreement
or the transactions contemplated
hereby.


 


r.                    
Permits; Compliance.
The Company and
each of its Subsidiaries
is in possession
of all
franchises, grants,
authorizations, licenses,
permits, easements,
variances, exemptions,
consents, certificates,
approvals and
orders necessary
to own,
lease and
operate its
properties and
to carry on its
business as
it is now being
conducted (collectively,
the “Company Permits”), and
there is no action pending or, to the
knowledge of the Company, threatened
regarding suspension
or cancellation of any of the Company
Permits. Neither the Company
nor any of its Subsidiaries is
in conflict with,
or in default
or violation
of, any of
the Company Permits, except
for any such
conflicts, defaults
or violations which,
individually or in the aggregate,
would not
reasonably be expected
to have a Material
Adverse Effect. Since
May 31, 2014, neither the Company
nor any of its Subsidiaries has
received any
notification with respect
to possible conflicts, defaults or violations
of applicable laws, except
for notices relating to possible conflicts,
defaults or violations, which
conflicts, defaults or violations would
not have a Material Adverse
Effect.


 


s.                   
Environmental Matters.


 


(i)                  
There
are,
to the Company’s
knowledge, with
respect to
the Company or
any of
its Subsidiaries
or any predecessor
of the Company,
no past
or present
violations of
Environmental Laws
(as defined
below), releases
of any
material into
the environment, actions, activities,
circumstances, conditions,
events, incidents, or contractual
obligations which may
give rise to any common
law environmental liability or any
liability under the Comprehensive Environmental
Response, Compensation and
Liability Act of 1980 or similar
federal, state, local
or foreign laws and neither the Company
nor any of its Subsidiaries has
received any
notice with
respect to
any of the foregoing,
nor is any action
pending or,
to the Company’s knowledge,
threatened in connection with
any of the foregoing. The
term “Environmental Laws”
means all federal,
state, local or foreign
laws relating to pollution or




    	11



    	 



    

 


protection
of human health
or the environment
(including, without
limitation, ambient
 air,
surface water,
groundwater, land
surface or
subsurface strata),
including, without
limitation, 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.


 


(ii)                
Other
than
those that
are or
were stored,
used or
disposed of in
compliance with
applicable law,
no Hazardous
Materials are
contained on
or about
any real
property currently owned,
leased or
used by
the Company or
any of
its Subsidiaries,
and no Hazardous
Materials were
released on
or about any real
property previously owned, leased
or used by
the Company or any of
its Subsidiaries
during the period
the property was owned,
leased or used by
the Company or any
of its Subsidiaries,
except in the normal course
of the Company’s or
any of its Subsidiaries’
business.


 


(iii)               
There are
no underground
storage tanks
on or under
any real
property owned,
leased or
used by
the Company or
any of
its Subsidiaries
that are
not in compliance
with applicable law.


 


t.                    
Title
to Property.
The Company and
its Subsidiaries
have good
and marketable
title in fee
simple to all
real property
and good
and marketable
title to all
personal property owned by them
which is material to the business
of the Company and its Subsidiaries,
in each case free and
clear of all liens, encumbrances
and defects except
such as are described
in Schedule 3(t) or such as
would not have a Material
Adverse Effect. Any real
property and facilities held under
lease by the Company and its Subsidiaries
are held by them under
valid, subsisting and enforceable leases
with such exceptions as
would not have a Material
Adverse Effect.


u.                  
Insurance.
The Company
and each
of its Subsidiaries
are insured by
insurers of
recognized financial
responsibility against
such losses
and risks
and in
such amounts
as management
of the Company believes
to be prudent
and customary
in the businesses in which the Company
and its Subsidiaries are
engaged. Neither the Company nor any
such Subsidiary has any reason to believe
that it will not be able
to renew its existing insurance
coverage as and when
such coverage expires or to obtain
similar coverage from similar
insurers as
may be necessary
to continue its business at
a cost that would
not have a Material Adverse Effect.
Upon written
request the Company will provide
to the Buyer
true and correct
copies of all policies
relating to directors’
and officers’
liability coverage, errors
and omissions coverage,
and commercial general
liability coverage.




    	12



    	 



    

 


v.                  
Internal
Accounting
Controls.
The Company
and each
of its
Subsidiaries maintain
a system
of internal
accounting controls
sufficient, in
the judgment
of the Company’s
board of
directors, to
provide reasonable
assurance that
(i) transactions
are executed
in accordance
with management’s
general or
specific authorizations,
(ii) transactions are
recorded as
necessary to permit
preparation of
financial statements
in conformity with
generally accepted accounting principles
and to maintain asset
accountability, (iii) access to assets
is permitted only in accordance
with management’s
general or specific
authorization and (iv) the recorded
accountability for assets is compared
with the existing
assets at reasonable
intervals and appropriate
action is taken with respect
to any differences.


 


w.                 
Foreign
Corrupt
Practices.
Neither
the Company,
nor any
of its Subsidiaries,
nor any
director, officer,
agent, employee
or other
person acting
on behalf of
the Company or
any Subsidiary
has, in the course of his actions for,
or on behalf of, the Company, used
any corporate
funds for
any unlawful
contribution, gift,
entertainment or
other unlawful expenses
relating to political activity; made
any direct or indirect unlawful
payment to any foreign
or domestic government official
or employee from corporate
funds; violated or is in violation
of any provision of the U.S.
Foreign Corrupt
Practices Act
of 1977, as
amended, or made
any bribe,
rebate, payoff,
influence payment,
kickback or other
unlawful payment to
any foreign or
domestic government official
or employee.


 


x.                  
Solvency.
The Company
(after giving
effect to
the transactions
contemplated by
this Agreement)
is solvent
(i.e., its
assets have
a fair market
value in
excess of the amount
required to pay its probable liabilities
on its existing debts as
they become absolute and
matured) and currently the Company has
no information that would
lead it to reasonably conclude
that the Company
would not,
after giving effect
to the transaction
contemplated by
this Agreement, have the ability to, nor does it intend
to take any action
that would impair its ability to, pay
its debts from time
to time incurred in connection therewith
as such debts
mature. The
Company did not receive a qualified opinion
from its auditors with
respect to its most recent
fiscal year
end and,
after giving
effect to
the transactions
contemplated by
this Agreement,
does not anticipate or know of
any basis upon which its auditors might
issue a qualified opinion in respect
of its current fiscal
year.


 


y.                  
No Investment
Company.
The Company
is not, and
upon the issuance
and sale
of the Securities
as contemplated
by this Agreement
will not
be an
“investment company”
required to
be registered
under the Investment
Company Act
of 1940 (an
“Investment Company”).
The Company is not controlled by
an Investment Company.


 


z.                   
Breach
of Representations
and Warranties
by the
Company.
If the
Company breaches
any of
the representations
or warranties
set forth
in this
Section 3,
and in
addition to any other remedies
available to the Buyer pursuant to this
Agreement, it will be considered
an Event of
default under Section 3.4 of the
Note.




    	13



    	 



    

 


4.                  
COVENANTS.


 


a.                  
Best
Efforts.
The parties
shall use
their best
efforts to
satisfy timely each
of the conditions
described in Section
6 and 7 of this Agreement.


 


b.                  
Form
D;
Blue
Sky
Laws.
The
Company agrees
to file
a Form
D with
respect to
the Securities
as required
under Regulation
D and
to provide a
copy thereof
to the Buyer
promptly after
such filing.
The Company shall,
on or before
the Closing Date, take such action
as the Company shall reasonably determine
is necessary to qualify the Securities
for sale to the Buyer at
the applicable closing pursuant to
this Agreement under applicable
securities or “blue sky”
laws of the states of the United
States (or to obtain
an exemption from
such qualification),
and shall provide
evidence of any such
action so taken
to the Buyer on or prior to the
Closing Date.


 


c.                   
Use
of Proceeds.
The Company shall
use the proceeds
for general
working capital purposes.


 


d.                  
Right
of First
Refusal.
Unless it
shall have
first delivered
to the Buyer,
at least
seventy two (72)
hours prior
to the closing
of such
Future Offering
(as defined
herein), written
notice describing the proposed
Future Offering
(“ROFR Notice”),
including the terms
and conditions
thereof, identity
of the proposed purchaser
and proposed
definitive documentation to be
entered into in connection therewith,
and providing the Buyer
an option during the seventy two
(72) hour period following delivery of such
notice to purchase the securities
being offered in the Future
Offering on the same
terms as contemplated
by such Future
Offering (the
limitations referred
to in this sentence
and the preceding
sentence are collectively referred
to as the “Right
of First Refusal”) (and
subject to the exceptions
described below),
the Company will not conduct any
equity (or debt with an
equity component) financing in an amount
less than
$100,000 (“Future Offering(s)”)
during the period
beginning on the Closing
Date and ending six (6)
months following the Closing Date.
Notwithstanding anything contained
herein to the contrary, the Company
shall not consummate any Future
Offering with an investor,
or an affiliate of such
investor (collectively “Prospective
Investor”), identified on an
ROFR Notice whereby the Buyer
exercised its
Right of
First Refusal
for a
period of
forty (45) days
following such exercise;
and any
subsequent offer by a Prospective
Investor is subject to this Section 4(d)
and the Right of First
Refusal. In the event the terms
and conditions of a proposed
Future Offering are amended in any respect
after delivery of
the notice to the Buyer concerning
the proposed Future
Offering, the
Company shall deliver
a new
notice to
the Buyer describing
the amended terms and conditions
of the proposed Future Offering
and the Buyer thereafter
shall have an
option during the seventy two (72)
hour period following delivery of such
new notice to purchase
its pro
rata share
of the securities
being offered
on the same
terms as
contemplated by
such proposed
Future Offering,
as amended.
The foregoing
sentence shall
apply to successive
amendments to
the terms and
conditions of any
proposed Future
Offering. The Right
of First Refusal
shall not
apply to any transaction
involving (i) issuances
of securities
in a firm
commitment underwritten public offering
(excluding a continuous offering pursuant
to Rule 415 under the 1933 Act) or (ii)
issuances of securities as
consideration for a merger,
consolidation or purchase of assets,
or in
connection with
any strategic partnership
or joint venture (the primary
purpose of which is not to raise
equity capital), or in connection
with the disposition or acquisition of
a business,
product or
license by
the Company. The
Right of
First Refusal
also shall not apply to the issuance
of securities upon exercise or conversion
of the Company’s options, warrants
or other convertible securities
outstanding as of the
date hereof
or to the grant of additional
options or warrants,
or the issuance
of additional
securities, under
any Company stock
option or restricted stock plan
approved by the shareholders of
the Company.




    	14



    	 



    

 


 


e.                   
Expenses.
At the
Closing, the
Company shall
reimburse Buyer
for expenses
incurred by
them in connection
with the
negotiation, preparation,
execution, delivery
and performance
of this Agreement
and the
other agreements
to be executed
in connection herewith
(“Documents”), including,
without limitation, reasonable
attorneys’ and consultants’
fees and expenses,
transfer agent fees, fees
for stock quotation services,
fees relating to any amendments
or modifications of the Documents
or any consents or waivers
of provisions in
the Documents, fees for
the preparation of opinions of counsel,
escrow fees, and
costs of restructuring the transactions
contemplated by the Documents.
When possible, the Company must pay these
fees directly,
otherwise the Company must make
immediate payment
for reimbursement to the Buyer
for all fees and
expenses immediately upon written notice
by the Buyer or the submission of an
invoice by the Buyer. The
Company’s obligation with
respect to this transaction is to reimburse
Buyer’ expenses shall be
$3,000.


 


f.                   
Financial
Information.
Upon
written
request
the Company agrees
to send
or make
available the
following reports
to the Buyer
until the Buyer
transfers, assigns,
or sells
all of the Securities:
(i) within ten
(10) days after
the filing with
the SEC, a copy of its Annual
Report on
Form 10-K
its Quarterly Reports
on Form
10-Q and
any Current
Reports on Form
8-K; (ii)
within one (1)
day after release,
copies of
all press
releases issued
by the Company or any
of its Subsidiaries; and (iii)
contemporaneously with the making
available or giving to the shareholders
of the Company, copies of any notices or other
information the Company makes
available or gives to such
shareholders.


 


g.                   
[INTENTIONALLY
DELETED]


 


h.                  
Listing.
The Company
shall promptly
secure the listing
of the Conversion
Shares upon each
national securities exchange
or automated quotation system,
if any, upon
which shares
of Common Stock
are then
listed (subject
to official
notice of
issuance) and,
so long as
the Buyer
owns any of the
Securities, shall maintain,
so long as
any other shares
of Common Stock shall be so listed,
such listing of all
Conversion Shares from
time to time issuable upon conversion
of the Note. The Company will
obtain and, so long as
the Buyer owns
any of the Securities, maintain
the listing and trading of
its Common Stock on the OTCBB or any
equivalent replacement exchange, the
Nasdaq National Market
(“Nasdaq”), the Nasdaq SmallCap
Market (“Nasdaq
SmallCap”), the
New York
Stock Exchange
(“NYSE”), or
the American Stock Exchange
(“AMEX”) and will
comply in all respects
with the Company’s reporting,
filing and other
obligations under the bylaws
or rules of the Financial
Industry




    	15



    	 



    

 


Regulatory
Authority (“FINRA”)
and such
exchanges, as
applicable. The
Company shall promptly
provide to the
Buyer copies
of any notices
it receives
from the
OTCBB and
any other
exchanges or
quotation systems
on which
the Common Stock
is then
listed regarding
the continued eligibility
of the
Common Stock for listing on such
exchanges and quotation systems.


 


i.                    
Corporate
Existence.
So long as
the Buyer
beneficially owns any
Note, the
Company shall
maintain its
corporate existence
and shall
not sell all
or substantially all
of the Company’s assets, except
in the event of a merger or consolidation
or sale of all or substantially all
of the Company’s
assets, where
the surviving
or successor
entity in such transaction
(i) assumes the Company’s
obligations hereunder and
under the agreements and instruments
entered into in connection herewith
and (ii) is a publicly traded corporation
whose Common Stock is
listed for trading on the OTCBB,
Nasdaq, Nasdaq
SmallCap, NYSE or AMEX.


 


j.                    
No
Integration.
The
Company shall
not make
any offers
or sales
of any
security (other than
the Securities)
under circumstances
that would
require registration
of the Securities
being offered
or sold hereunder
under the 1933
Act or
cause the offering
of the Securities to be integrated
with any
other offering of
securities by the
Company for the
purpose of any stockholder
approval provision applicable
to the Company or
its securities.


 


k.                  
Breach
of Covenants.
If the
Company breaches
any of
the covenants
set forth
in this Section
4, and
in addition
to any other
remedies available
to the Buyer
pursuant to
this Agreement,
it will
be considered an
event of default
under Section
3.4 of
the Note.


 


l.                    
Failure
to Comply
with the
1934 Act.
So long as
the Buyer
beneficially owns
the Note, the
Company shall comply
with the
reporting requirements
of the 1934
Act; and the Company shall
continue to
be subject to
the reporting requirements
of the 1934 Act.


 


m.                
Trading
Activities.
Neither
the Buyer
nor its affiliates
has an
open short
position in the common stock of
the Company and
the Buyer agree that it shall
not, and that
it will
cause its
affiliates not
to, engage
in any
short sales
of or hedging
transactions with
respect to the
common stock of the
Company.


5.                  
Transfer
Agent
Instructions.
The
Company shall
issue irrevocable
instructions to
its transfer
agent to
issue certificates,
registered in
the name of
the Buyer
or its nominee,
for the
Conversion Shares
in such
amounts as
specified from
time to
time by
the Buyer to the Company upon conversion
of the Note in accordance with
the terms thereof (the
“Irrevocable Transfer Agent
Instructions”). In the
event that
the Borrower
proposes to
replace its transfer agent,
the Borrower shall provide,
prior to the effective date of
such replacement, a fully
executed Irrevocable
Transfer Agent
Instructions in a form
as initially delivered pursuant to the
Purchase Agreement (including
but not limited to the provision to irrevocably
reserve shares


 




    	16



    	 



    

 


of
Common Stock
in the Reserved
Amount) signed
by the
successor transfer
agent to Borrower
and the
Borrower. Prior
to registration
of the Conversion
Shares under
the 1933 Act
or the date
on which
the Conversion
Shares may
be sold pursuant
to Rule 144
without any
restriction as
to the number
of Securities
as of
a particular
date that
can then
be immediately sold,
all such
certificates shall bear
the restrictive legend specified in Section
2(g) of this Agreement.
The Company warrants that:
(i) no instruction
other than
the Irrevocable
Transfer Agent
Instructions referred to in this
Section 5, and stop transfer
instructions to give effect
to Section 2(f) hereof
(in the case
of the Conversion Shares,
prior to registration
of the Conversion Shares
under the 1933 Act
or the date on which
the Conversion Shares
may be sold pursuant
to Rule 144 without any restriction
as to the number of Securities as
of a particular date that can then
be immediately sold), will
be given by
the Company to its transfer
agent and
that the Securities shall
otherwise be freely transferable
on the books and records
of the Company as and
to the extent provided in this
Agreement and the Note;
(ii) it will not direct
its transfer agent not to transfer or
delay, impair, and/or
hinder its transfer agent
in transferring (or issuing)(electronically
or in certificated form) any
certificate for
Conversion Shares to be issued
to the Buyer upon conversion of or otherwise
pursuant to the Note as
and when required
by the Note and
this Agreement; and (iii)
it will not fail to remove
(or directs its transfer
agent not to remove or impairs, delays,
and/or hinders its transfer
agent from removing)
any restrictive legend
(or to withdraw any
stop transfer instructions in
respect thereof)
on any certificate
for any
Conversion Shares
issued to
the Buyer upon conversion
of or otherwise pursuant to
the Note as
and when
required by the Note and
this Agreement. Nothing in
this Section shall
affect in
any way the Buyer’s
obligations and
agreement set forth
in Section 2(g) hereof to comply with
all applicable prospectus
delivery requirements, if any, upon re-sale
of the Securities. If the Buyer
provides the Company, at the cost
of the Buyer, with (i)
an opinion of counsel in form, substance
and scope customary for opinions
in comparable transactions,
to the effect that
a public sale or transfer of such
Securities may be made
without registration
under the 1933 Act and
such sale or
transfer is effected
or (ii) the Buyer
provides reasonable assurances that
the Securities can be sold pursuant
to Rule 144, the Company shall
permit the transfer,
and, in the
case of
the Conversion Shares,
promptly instruct its transfer
agent to issue one or more certificates,
free from restrictive legend,
in such name
and in such denominations as specified
by the Buyer. The
Company acknowledges that
a breach by it of its obligations
hereunder will cause
irreparable harm to the
Buyer, by vitiating the intent
and purpose of
the transactions contemplated hereby.
Accordingly, the Company acknowledges
that the remedy at
law for
a breach
of its obligations under
this Section 5 may be inadequate
and agrees, in the event
of a breach or threatened
breach by the Company of the provisions
of this Section,
that the
Buyer shall
be entitled,
in addition to
all other
available remedies, to an
injunction restraining any
breach and requiring
immediate transfer, without
the necessity of showing economic loss
and without any bond or
other security being required.




    	17



    	 



    

 





6.                  
Conditions to
the Company’s
Obligation to
Sell.
The obligation
of the Company
hereunder to issue
and sell
the Note to
the Buyer
at the
Closing is subject
to the satisfaction,
at or
before the
Closing Date of each
of the following
conditions thereto,
provided that these conditions
are for the Company’s sole benefit
and may be waived by the Company at
any time in its sole discretion:


 


a.                  
The Buyer
shall
have
executed
this Agreement
and delivered
the same to the Company.


 


b.                  
The
Buyer
shall have
delivered the Purchase
Price in accordance
with Section 1(b)
above.


 


c.                   
The
representations
and warranties
of the Buyer
shall be
true and
correct in
all material
respects as
of the date
when made
and as
of the Closing
Date as
though made
at that
time (except for
representations and
warranties that
speak as
of a specific
date), and the Buyer
shall have performed,
satisfied and complied
in all material respects
with the covenants,
agreements and
conditions required
by this Agreement
to be performed,
satisfied or complied
with by the Buyer at
or prior to the
Closing Date.


 


d.                  
No litigation,
statute,
rule,
regulation,
executive
order,
decree,
ruling or
injunction shall
have been
enacted, entered,
promulgated or
endorsed by
or in any
court or
governmental authority
of competent
jurisdiction or
any self-regulatory
organization having
authority over the matters contemplated
hereby which prohibits the consummation
of any of the transactions contemplated
by this Agreement.


 


7.                  
Conditions to
The Buyer’s
Obligation to
Purchase.
The obligation
of the Buyer
hereunder to purchase
the Note
at the
Closing is subject
to the satisfaction,
at or
before the
Closing Date
of each
of the
following conditions,
provided that
these conditions
are for
the Buyer’s sole
benefit and may be
waived by the Buyer
at any time
in its sole discretion:


 


a.                  
The Company
shall have
executed this
Agreement and
delivered


 


b.                 
The Company
shall have
delivered to
the Buyer
the duly executed
Note (in such denominations as
the Buyer shall request) in accordance
with Section 1(b) above.


 


c.                  
The Irrevocable
Transfer
Agent
Instructions, in
form and substance satisfactory
to a majority-in-interest of the
Buyer, shall
have been delivered
to and acknowledged
in writing by
the Company’s Transfer Agent.


 


d.                 
The representations
and
warranties
of the Company
shall be
true and
correct in
all material
respects as
of the date
when made
and as
of the
Closing Date
as though
made at
such time (except
for representations
and warranties
that speak
as of
a specific




    	18



    	 



    

 


date)
and the
Company shall have
performed, satisfied
and complied
in all
material respects
with the
covenants, agreements
and conditions
required by
this Agreement
to be performed,
satisfied or
complied with
by the
Company at
or prior
to the Closing Date.
 The
Buyer shall
have received
a certificate
or certificates, executed
by the chief
executive officer
of the Company, dated
as of the Closing Date, to the foregoing
effect and as
to such other matters
as may be reasonably requested by
the Buyer including, but not limited
to certificates with respect
to the Company’s Certificate of
Incorporation, By-laws and
Board of Directors’ resolutions
relating to the transactions contemplated
hereby.


 


e.                  
No litigation,
statute,
rule,
regulation,
executive
order,
decree,
ruling or
injunction shall
have been
enacted, entered,
promulgated or
endorsed by
or in any
court or
governmental authority
of competent
jurisdiction or
any self-regulatory
organization having
authority over the matters contemplated
hereby which prohibits the consummation
of any of the transactions contemplated
by this Agreement.


 


f.                  
No event
shall
have
occurred
which
could
reasonably be
expected to
have a
Material Adverse
Effect on
the Company including
but not limited
to a change
in the 1934
Act reporting
status of
the Company or
the failure
of the Company
to be timely
in its 1934
Act reporting obligations.


 


g.                 
The Conversion
Shares
shall have
been authorized for
quotation on
the OTCBB
and trading
in the Common
Stock on
the OTCBB
shall not
have been
suspended by
the SEC or the
OTCBB.


 


h.                 
The Buyer
shall have
received an
officer’s certificate
described in
Section 3(c) above, dated
as of the
Closing Date.


 


 


8.                  
Governing Law;
Miscellaneous.


 


a.                  
Governing
Law.
This
Agreement
shall
be governed
by and
construed in
accordance with
the laws
of the
State of New
York without
regard to
principles of
conflicts of laws.
Any action brought by
either party against the other concerning
the transactions contemplated by
this Agreement
shall be brought
only in the state
courts of New York
or in the federal courts located in the
state and county of Nassau. The
parties to this Agreement hereby
irrevocably waive any
objection to jurisdiction
and venue of any
action instituted hereunder
and shall
not assert
any defense based
on lack of jurisdiction or venue
or based upon forum non conveniens.
The Company and Buyer
waive trial by
jury. The prevailing party shall
be entitled to recover from
the other party its reasonable attorney's
fees and costs.
In the event that any
provision of this Agreement
or any other
agreement delivered in
connection herewith 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 with
such statute
or rule of
law. Any
such provision which
may




    	19



    	 



    

 


prove
invalid or
unenforceable under
any law shall
not affect
the validity or
enforceability of
any other
provision of
any agreement.
Each party hereby
irrevocably waives
personal service
of process
and consents
to process
being served in
any suit, action or
proceeding in connection
with this
Agreement or
any other Transaction
Document 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.


 


b.                  
Counterparts.
This
Agreement
may be
executed in one
or more
counterparts, each
of which shall
be deemed
an original
but all
of which
shall constitute
one and
the same
agreement and
shall become
effective when
counterparts have
been signed
by each
party and delivered to the
other party.


 


c.                   
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.


 


d.                  
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 with 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.


 


e.                   
Entire
Agreement;
Amendments.
This
Agreement
and the
instruments referenced
herein contain
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 the Company nor
the Buyer makes any representation, warranty,
covenant or undertaking with respect
to such
matters. No
provision of this Agreement
may be waived
or amended
other than by an
instrument in writing signed by the
majority in interest of the
Buyer.


 


f.                   
Notices.
All notices,
demands, requests,
consents, approvals,
and other
communications required
or permitted
hereunder shall
be in
writing and,
unless otherwise
specified herein,
shall be
(i) personally
served, (ii)
deposited in
the mail, registered
or certified,
return receipt requested,
postage prepaid,
(iii) delivered
by reputable air courier
service with charges prepaid,
or (iv) transmitted
by hand delivery,
telegram, or facsimile, addressed as
set forth below
or to
such other
address as
such party shall
have specified
most recently by written
notice. Any
notice or other communication required
or permitted to be given hereunder shall
be deemed effective
(a) upon hand delivery or delivery by
facsimile, with accurate
confirmation generated by
the transmitting facsimile machine,
at the address or number
designated below (if delivered
on a business day during normal
business hours where such notice
is to be received), or
the first business day
following such delivery (if
delivered other than
on a business day
during




    	20



    	 



    

 


normal
business hours
where such
notice is to
be received)
or (b)
on the second
business day
following the
date of
mailing by
express courier
service, fully prepaid,
addressed  to 
such address,
or upon actual
receipt of such
mailing, whichever shall
first occur. The
addresses for such
communications shall be:


 


If
to the Company, to:


 


AJA CANNAFACTURING,
INC f/k/a
IDS INDUSTRIES,
INC.


5333 Birch
Street


Lake
Elsinore, CA 92530


Attn:
SCOTT PLANTINGA, Chief Executive Officer



facsimile:
[enter fax number]


 


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


[enter name
of law firm]


Attn:
[attorney name]



[enter
address line 1] 


[enter
city, state, zip]


facsimile:
[enter fax number]



 


If
to the Buyer:


 


KBM
WORLDWIDE, INC.


80 Cuttermill
Road – Suite 410



Great
Neck, NY  11021


Attn:
Seth Kramer, President



e-mail:
info@kwbmlaw.com


 


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


Naidich
Wurman Birnbaum & Maday
LLP


Attn:
Bernard S. Feldman, Esq.



facsimile:
516-466-3555


e-mail:
dyork@nwbmlaw.com


 


Each
party shall provide
notice to the other party
of any
change in address.


 


g.                   
Successors
and
Assigns.
This
Agreement
shall
be binding
upon and
inure to
the benefit
of the parties
and their
successors and
assigns. Neither
the Company nor the
Buyer shall
assign this
Agreement or
any rights
or obligations
hereunder without
the prior written
consent of the other. Notwithstanding
the foregoing, subject to Section 2(f),
the Buyer




    	21



    	 



    

 


may
assign its
rights hereunder
to any
person that purchases
Securities in
a private
transaction from
the Buyer
or to
any of
its “affiliates,”
as that
term is
defined under
the 1934 Act,
without the
consent of the Company.


 


h.                  
Third
Party Beneficiaries.
This Agreement
is intended for
the benefit
of the parties
hereto and
their respective
permitted successors
and assigns,
and is
not for
the benefit of, nor
may any
provision hereof be
enforced by, any
other person.


 


i.                    
Survival.
The
representations
and warranties
of the 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 the Buyer. The Company
agrees to indemnify and hold harmless
the Buyer and all
their officers, directors,
employees and agents for loss or damage
arising as a result of or related
to any breach or alleged breach
by the 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.


 


j.                    
Publicity.
The Company,
and the
Buyer shall
have the
right to
review a
reasonable period
of time before
issuance of
any press
releases, SEC,
OTCBB or
FINRA filings,
or any
other public statements
with respect
to the transactions
contemplated hereby; provided,
however, that the Company shall be entitled,
without the prior approval
of the Buyer, to make any
press release or SEC, OTCBB
(or other applicable trading
market) or FINRA filings
with respect to such
transactions as is required by
applicable law and
regulations (although
the Buyer
shall be consulted
by the Company in
connection with
any such press release
prior to its release and
shall be provided with
a copy thereof and be given
an opportunity to comment thereon).


 


k.                  
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.


 


l.                    
No
Strict
Construction.
The
language
used
in this Agreement
will be
deemed to
be the language
chosen by
the parties
to express
their mutual
intent, and
no rules
of strict construction
will be applied against
any party.


 


m.                
Remedies.
The Company
acknowledges that
a breach
by it
of its obligations
hereunder will
cause irreparable harm to the
Buyer by vitiating
the intent and purpose
of the transaction
contemplated hereby. Accordingly,
the Company acknowledges
that the remedy at
law for
a breach of
its obligations
under this
Agreement will
be inadequate
and agrees,
in the event of a breach or threatened
breach by the Company of the provisions
of this Agreement, that the Buyer
shall be entitled, in addition to all
other available remedies
at law or




    	22



    	 



    

 


in
equity, and
in addition to
the penalties
assessable herein,
to an
injunction or injunctions
restraining, preventing
or curing
any breach
of this
Agreement and
to enforce
specifically the terms
and provisions
hereof, without
the necessity
of showing economic
loss and
without any
bond or other security being required.


 


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


 


AJA CANNAFACTURING,
INC. f/k/a
IDS INDUSTRIES, INC.


 


By: /s/
Scott Plantinga


SCOTT PLANTINGA


Chief Executive
Officer


 


 


KBM
WORLDWIDE, INC.


 


By:
/s/ Seth Kramer


Name:
Seth Kramer


Title:
President


80 Cuttermill
Road – Suite 410



Great
Neck, NY. 11021


 


 


	AGGREGATE SUBSCRIPTION AMOUNT:	
	Aggregate Principal Amount of Note:	$53,000.00
	Aggregate Purchase Price:	$53,000.00
	
        Tranche
        #3 K-1266 (AJAC)

        August 18,
2014 
	


 



    	23