Document:

EXHIBIT 10.1

 

LIMITED
LIABILITY COMPANY AGREEMENT

 

OF

 

EMAGINE
THE VAPE STORE, LLC

 

A
Delaware Limited Liability Company

 

THIS
LIMITED LIABILITY COMPANY AGREEMENT (the “Agreement”) is effective as of the 24th day of
November, 2014 (the “Effective Date”), by the Persons executing and delivering this Agreement as Members
and Manager.

 

ARTICLE
I

DEFINITIONS
AND CONSTRUCTION

 

Section
1.01 Definitions.

 

A.
The following terms used in the Agreement shall have the following meanings:

 

Act
shall mean the Delaware Limited Liability Company Act, Sections 18-101 through 18-1109 (or any corresponding provision
or provisions of any succeeding law), as amended from time to time.

 

Adjusted
Capital Account Deficit shall mean with respect to any Member, the deficit balance, if any, in such Member’s Capital
Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:

 

(i)
Credit to such Capital Account any amount which such Member is obligated to restore pursuant to Treasury Regulations §1.704-2(g)(1)
and 1.704-2(i)(5); and

 

(ii)
Debit to such Capital Account the items described in Treasury Regulations §1.704-1(b)(2)(ii)(d)(4), (5) and (6).

 

Affiliate
of another Person means: (a) any entity or individual that directly or indirectly controls or holds the power to vote
10% or more of the outstanding voting securities of the Person in question; (b) any Person 10% or more of whose voting securities
are directly or indirectly owned, controlled or held with power to vote, by such other Person; (c) any Person directly or indirectly
controlling, controlled by, or under common control with such other Person; (d) any officer, director or partner of such other
Person; and (e) if such other Person is an officer, director or partner, any company for which such Person acts in any such capacity.

 

Capital
Account as of any given date shall mean the Capital Contribution to the Company by a Member as adjusted up to such date
pursuant to Article VI.

 

    	 

    	 

    

 

Capital
Contribution shall mean any contribution to the capital of the Company in cash or property by a Member whenever made.

 

Certificate
of Formation shall mean the Certificate of Formation of the Company, filed in the office of the Secretary of State of
Delaware, as amended from time to time.

 

Code
shall mean the Internal Revenue Code of 1986, as amended, or corresponding provisions of subsequent superseding federal
revenue laws.

 

Company
shall refer to the Delaware limited liability company formed pursuant to this Agreement.

 

Company
Minimum Gain shall have the meaning set forth in Treasury Regulations §§1.704-2(b)(2) and 1.704-2(d) for “partnership
minimum gain”.

 

Dispose,
Disposing or Disposition shall mean a sale, assignment, transfer, gift, exchange, mortgage, pledge, granting
of a security interest or other disposition or encumbrance, or the acts thereof.

 

Economic
Interest shall mean a Member’s or Economic Interest Owner’s share of the Company’s Net Profits, Net
Losses and distributions of the Company’s assets pursuant to this Agreement and the Act but shall not include any right
to participate in the management or affairs of the Company, including the right to vote on, consent to or otherwise participate
in any decision of the Members.

 

Economic
Interest Owner shall mean the owner of an Economic Interest who is not a Member.

 

Fiscal
Year shall mean the period terminating on December 31 of each year during the term hereof or on such earlier date in any
year in which the Company shall be dissolved as provided herein.

 

Interest
shall mean a Member’s Economic Interest in the Company and the Member’s right to vote, receive reports and
conduct investigation of the Company’s business and affairs as provided in this Agreement and the Act.

 

Manager
shall mean the Person designated in Section 5.02 to manage and control the business of the Company. References to a Manager
in the singular or as him, her, it, itself, or other like references shall also, where the context so requires, be deemed to include
the plural or the masculine or feminine reference, as the case may be.

 

Member
shall mean each of the Persons whose offer for Membership Units has been accepted by the Company and has been admitted
as a Member and each Person who may hereafter become a Member.

 

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Member
Nonrecourse Debt shall have the meaning set forth in Treasury Regulations §1.704-2(b)(4)(ii) for “partner nonrecourse
debt”.

 

Member
Nonrecourse Debt Minimum Gain shall mean an amount, with respect to each Member Nonrecourse Debt, equal to the Company
Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance
with Treasury Regulations §1.704-2(i)(3).

 

Member
Nonrecourse Deductions shall have the meaning set forth in Treasury Regulations §§1.704-2(i)(1) and 1.704-2(i)(2)
for “partner nonrecourse deductions”.

 

Membership
Interest shall mean the ownership interest of a Member in the Company, including the right to any and all benefits to
which such Member may be entitled in accordance with this Agreement, and the obligations as provided in this Agreement and the
Act.

 

Membership
Units shall mean one or more units owned by a Member out of the 1,000,000 presently authorized Membership Units. Each
Membership Unit represents a percentage ownership in the Company and all the rights and obligations of a Member, computed by dividing
the number of Membership Units owned by a Member by the total number of issued and outstanding Membership Units.

 

Net
Cash from Operations for the Company shall mean the excess of cash receipts over cash disbursements, including the payment
of Company debt and establishment of Reserves as determined by the Manager, provided that: (i) cash receipts shall not include:
(a) contributions to capital; (b) loan proceeds or other funds used to pay for the repayment of existing debt and the acquisition
of capital assets or to maintain working capital; (c) insurance proceeds (other than from business interruption or rent loss insurance)
received on account of loss or damage to the Property and proceeds received on account of any condemnation or taking of all or
any part of the Company’s Property to the extent used or designated for use to repair, replace or restore the Property;
and (d) funds from Reserve accounts applied for the purpose of the Reserve but excluding those deemed surplus by the Manager;
and (ii) cash disbursements shall not include payments out of or charged against Reserve accounts.

 

Net
Profits and Net Losses shall mean the income, gain, loss, deductions and credits of the Company in the aggregate
or separately stated, as appropriate, as of the close of each Fiscal Year on the Company’s tax return filed for federal
income tax purposes.

 

Nonrecourse
Deductions shall have the meaning set forth in Treasury Regulations §1.704-2(b)(1).

 

Person
shall mean any individual or Entity, and the heirs, executors, administrators, legal representatives, successors and assigns
of such Person, where the context so permits.

 

Prime
Rate shall mean the rate of interest known as the “prime rate” as published from time to time by the Wall
Street Journal under the heading “Money Rates”, or any similar rate published by any successor, adjusted on a daily
basis, calculated on the basis of the number of days in the particular year with 12 months, each of which has the number of days
designated on the calendar applicable to the year in question.

 

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Reserves
shall mean funds set aside or amounts allocated to reserves which shall be maintained in amounts deemed reasonably sufficient
by the Manager for working capital, risks inherent in the operation of the Property and to pay taxes, insurance, debt service
or other costs or expenses incident to the ownership or operation of the Company’s business.

 

Sharing
Ratio shall mean the percentage that each Member’s number of Membership Units bears to all outstanding Membership
Units.

 

Treasury
Regulations shall include proposed, temporary and final regulations promulgated under the Code.

 

Unrecovered
Capital shall mean, with respect to a Member, the amount, determined for each day of a particular Fiscal Year, of its
Capital Contributions which have not been repaid.

 

Vape
Stores shall mean a retail shop which sells e-cigarettes, vapors, and additional paraphernalia related to such products.

 

B.
The following additional terms are defined in the following Sections of the Agreement:

 

	Defined
    Term	 	Section
	 	 	 
	Accepting
    Offeree	 	9.02(b)
	Agreement	 	page 1, Section
    1
	Confidential
    Information	 	4.05(a)
	Effective
    Date	 	page 1, Section
    1
	Firm	 	11.10
	Firm Offer	 	9.02(a)
	Indemnified
    Person	 	5.05(a)
	Member Loan	 	6.02(ii)
	Offer Notice	 	9.02(a)
	Offer Period	 	9.02(a)
	Offer Price	 	9.02(a)
	Offered
    Interest	 	9.02(a)
	Offeree	 	9.02(a)
	Proceeding	 	5.05(a)
	Purchase
    Offer	 	9.02(a)
	Purchaser	 	9.02(a)
	Regulatory
    Allocations	 	7.02(h)
	Seller	 	9.02(a)
	Tax Matters
    Partner	 	7.07

 

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Section
1.02 Construction. Whenever the context requires, the gender of all words used in this Agreement will include the masculine,
feminine and neuter. Wherever the singular number is used in this Agreement, and when required by the context, the same shall
include the plural and vice versa. Unless otherwise specified, all references to Articles and Sections refer to articles and sections
of this Agreement, and all references to Exhibits are to Exhibits attached hereto, each of which is made a part hereof for all
purposes. The captions contained herein are solely for the convenience of the parties and will not constitute a part of the substance,
intent or terms of this Agreement, nor will such captions be considered in the construction of this Agreement. To the extent not
otherwise provided in this Agreement, the rights, duties and relations of the Members and Manager will be controlled by the laws
of the State of Delaware, including the Act.

 

ARTICLE
II

FORMATION
OF COMPANY

 

Section
2.01 Formation. The Company has been organized as a Delaware limited liability company, and the Certificate of Formation has
been filed with the Delaware Secretary of State.

 

Section
2.02 Name. The name of the Company is Emagine the Vape Stores, LLC.

 

Section
2.03 Term. The Company shall continue in perpetuity unless earlier terminated in accordance with the terms of this Agreement.

 

Section
2.04 Agreement. This Agreement supersedes all previous and existing agreements with respect to the Company, all of which have
been terminated and are of no further force and effect.

 

Section
2.05 No Partnership. The Company has been formed under the Act, and except as provided in Section 7.06(a), the Members do
not intend to form a partnership under the statutory or common law of any jurisdiction. The Members do not intend to be partners
one to the other, or partners as to any third party. To the extent any Member, by word or action, represents to any Person that
any other Member is a partner or that the Company is a partnership, the Member making such wrongful representation shall be liable
to any other Member who incurs any personal liability by reason of such wrongful representation.

 

ARTICLE
III

BUSINESS
OF COMPANY

 

Section
3.01 Purpose. The Company has been organized to acquire, develop, operate and manage Vape Stores, or to be engaged in any
other businesses and investments as may be permitted by the laws of the State of Delaware with the consent of the Members.

 

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ARTICLE
IV

RIGHTS
AND OBLIGATIONS OF MEMBERS

 

Section
4.01 Limitations. Each Member’s liability shall be limited as set forth in this Agreement, the Act and other applicable
law. In view of the fact the Company is managed by a Manager and except for the actions described in Section 5.03, no Member (except
to the extent that the Member is a Manager) may participate in or interfere with the management of the business and affairs of
the Company.

 

Section
4.02 Members. The Company has one class of Members which are all listed on attached Exhibit A. No Member has received
its Membership Interest by reason of services contributed to the Company.

 

Section
4.03 Certificates. The Company will not issue certificates evidencing the ownership of a Membership Interest, nor will it
maintain a register of certificates.

 

Section
4.04 Meetings of Members. Any Member may give notice of a meeting of Members on not less than three business days’ notice.
Such meeting may be held in person, by telephone or other electronic means as the Member receiving notice shall elect within one
business day after receipt of notice.

 

Section
4.05 Duties of Members.

 

(a)
The Members may have access to information which the Company considers confidential and proprietary (“Confidential
Information”), including, without limitation, financial and operating information, methods of operation, trade secrets,
business data, business contacts and other information with respect to its operations. Each Member agrees to maintain in full
confidence and not use (except for Company purposes) or disclose to any Person any of the Confidential Information. A Member may
use or disclose the Confidential Information provided (i) the Company shall have given its prior written consent, (ii) a Member
can prove any such Confidential Information was disclosed to it on a non-confidential basis from a source other than the Company
(provided such source is not subject to any prohibition to disclosing such information) or (iii) disclosure of any Confidential
Information is required as a consequence of legal proceedings (as, for example, by oral questions or written interrogatories pursuant
to a court action).

 

(b)
Except as expressly provided in this Agreement, no Member has any duty or obligation (including fiduciary duties) to the Company
or any other Member solely by reason of acting in its capacity as a Member, except to refrain from any act or omission that constitutes
a bad faith violation of the implied contractual covenant of good faith and fair dealing. Without limiting the generality of the
foregoing, except as expressly provided in this Agreement, a Member (i) may have interests which compete with those of the Company
and other Members and may make decisions in its own interests, (ii) is not subject to the duties of care, good faith and fair
dealing, and (iii) under no circumstances will be considered a fiduciary with respect to any aspect of the business and affairs
of the Company or the other Members. To the maximum extent permitted under applicable law, the provisions of this Section 4.05(c)
replace, eliminate and otherwise supplant those duties (including fiduciary duties) that Members may otherwise have under applicable
law, including common law.

 

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Section
4.06 Cooperation. Each Member will promptly and in good faith provide to the Company upon request information necessary for
the Company to comply with applicable law, as, for example, Patriot Act and tax disclosures.

 

ARTICLE
V

RIGHTS
AND OBLIGATIONS OF THE MANAGER

 

Section
5.01 Management. The business and affairs of the Company will be managed by the Manager. The Manager will have the sole and
exclusive right to conduct, supervise and manage the business and affairs of the Company. Accordingly, except in those specific
instances where actions require the approval of all of the Members, the joinder or consent of any Member other than the Manager
shall not be required for the Manager to take any action for the Company. The Manager will have all the rights, power and authority
given it under the Act and other applicable law as well as under this Agreement.

 

Section
5.02 The Manager.

 

(a)
Vaporin, Inc. is the Manager of the Company under the Act, and by executing and delivering this Agreement, it agrees to perform
the duties of the Manager. Vaporin, Inc. shall also develop, operate and manage each Vape Store owned by the Company.

 

(b)
The Manager may appoint officers of the Company who shall exercise such powers and duties as may have been expressly delegated
to them in writing and who shall serve and continue in such offices for the term of the Company, unless sooner removed by the
Manager.

 

Section
5.03 Limitations on Authority of Manager. Notwithstanding the grant of authority to the Manager under this Article V, the
Manager may not authorize the Company to take any of following actions without the approval of all of the Members:

 

(i)
Causing or permitting the Company to extend credit to or to make any loans or become a surety, guarantor, endorser or accommodation
endorser for any Person;

 

(ii)
Distributing any cash or property of the Company, other than as provided in this Agreement, or reinvest the Company’s Net
Profits;

 

(iii)
Selling, exchanging, assigning, conveying, leasing and/or transferring all or substantially all of the Company’s assets;

 

(iv)
Executing and/or delivering any promissory notes, loan agreements and other instruments of indebtedness, mortgages, pledges, assignments
and other instruments of hypothecation;

 

(v)
Causing the Company to enter into a partnership or other venture, to merge, or to enter into any other form of reorganization,
either alone or with another business entity;

 

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(vi)
Amending the Certificate of Formation;

 

(vii)
Permitting the Company to redeem or repurchase a Member’s Interest or any portion thereof except as provided in this Agreement;

 

(viii)
Appointing any directors, officers or managers of the Company or any subsidiary;

 

(ix)
Any of: (i) filing of a petition against the Company or any subsidiary for a proceeding under any bankruptcy, insolvency, reorganization,
or similar act; (ii) filing of any consent to any such proceeding against the Company or any subsidiary; (iii) any decision to
contest or not to contest such proceeding against the Company or any subsidiary; (iv) making a general assignment of Company or
subsidiary property for the benefit of creditors; (v) appointing, or acquiescing in the appointment of, a custodian or receiver
for the Company or any subsidiary; or (vi) taking any action and/or making any determination with respect to any of the foregoing
proceedings other than those which are purely routine and non-substantive;

 

(x)
Converting the Company into another form of business entity;

 

(xi)
Pledging, mortgaging, hypothecating or encumbering any assets of the Company;

 

(xii)
Admitting another Person as a Member (except as provided by this Agreement);

 

(xiii)
Entering into, amending or renewing any contract between the Company or a subsidiary, on the one hand, and any Member or Affiliate
of any Member, on the other hand;

 

(xiv)
The execution and delivery of any contract or agreement by or on behalf of the Company or any subsidiary (or the amendment or
modification thereof) other than contracts that involve payments in the aggregate of not more than $100,000; or

 

(xv)
The amendment, modification or revocation of any Major Decision previously approved in accordance with this Agreement.

 

Section
5.04 Limitations on Duties of Manager.

 

(a)
The Manager shall not be required to manage the Company as its sole and exclusive function, and it may have other business interests
and engage in activities in addition to those relating to the Company. Neither the Company nor any Member shall have any right,
by virtue of this Agreement, to share or participate in such other investments or activities of the Manager or to the income or
proceeds derived therefrom.

 

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(b)
Except as expressly provided in this Agreement or applicable Delaware law, neither the Manager nor any of its Affiliates has any
duty (including fiduciary duties) to the Company or any other Member solely by reason of the Manager acting in such capacity,
except to refrain from any act or omission that constitutes a bad faith violation of the implied contractual covenant of good
faith and fair dealing. Without limiting the generality of the foregoing, except as expressly provided in this Agreement, (i)
such Persons may have interests which compete with those of the Company and the other Members and may make decisions in their
own interests, and (ii) such Persons under no circumstances will be considered a fiduciary with respect to any aspect of the business
and affairs of the Company or its Members. To the maximum extent permitted under applicable law, the provisions of this Section
5.04 Section(b) replace, eliminate and otherwise supplant those duties that such Persons otherwise have under applicable law,
including common law. Whenever the Manager is empowered to take or make a decision, it is entitled to consider, favor and further
such interests and factors as it desires, including its own or its Affiliates’ interests, and it has no duty or obligation
to consider, favor or further any other interest of the Company or any of its Members.

 

Section
5.05 Indemnity of the Manager.

 

(a)
Subject to the limitations and conditions provided in this Section 5.05, each Person (an “Indemnified Person”)
who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative, with respect to the Company (any, a
“Proceeding”), or any appeal in such a Proceeding or any inquiry or investigation that could lead to
such a Proceeding, by reason of the fact that it was a Manager or officer of the Company or is or was an Affiliate of or is or
was serving as a manager, director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of
the Manager, shall be indemnified by the Company against judgments, penalties (including excise and similar taxes), punitive damages,
fines, settlements and reasonable costs and expenses (including, without limitation, attorneys’ fees) actually incurred
by such Indemnified Person in connection with such Proceeding. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption
that the Indemnified Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal action or proceeding, that the Indemnified Person had reasonable
cause to believe that his conduct was unlawful. A Person shall not be indemnified by the Company unless such Person acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the best interest of the Company and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

 

(b)
Indemnification under this Section 5.05 shall continue as to an Indemnified Person who has ceased to serve in the capacity which
initially entitled such Indemnified Person to indemnity hereunder. The rights granted pursuant to this Section 5.05 shall be deemed
contract rights, and no amendment, modification or repeal of this Section 5.05 shall have the effect of limiting or denying any
such rights with respect to actions taken or Proceedings arising prior to any such amendment, modification or repeal.

 

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(c)
The right to indemnification conferred by this Section 5.05 shall include the right to an advancement of expenses or reimbursement
by the Company for the reasonable expenses incurred in advance of the final disposition of the Proceeding.

 

Section
5.06 Compensation and Expenses. The Manager will not receive any compensation except it shall be promptly reimbursed by the
Company for all reasonable out-of-pocket expenses paid on behalf of the Company.

 

Section
5.07 Third Party Reliance. Any Person dealing with the Company or its Manager may rely upon a certificate signed by
the Manager, or any officer of the Company, as to (i) the existence or non-existence of any fact or facts which constitute a condition
precedent to acts by the Manager; (ii) the Persons who are authorized to execute and deliver any instrument or document on behalf
of the Company; or (iii) any act or failure to act by the Company or as to any other matter whatsoever involving the Company or
any Member.

 

Section
5.08 Resignation. The Manager may resign at any time by giving written notice to the Members. Such resignation shall take
effect at the time expressed in the Manager’s notice of resignation, which time may not be sooner than 60 days after the
date of such notice. In no event may such resignation require the acceptance by the Members. In this event, the Members with the
approval of all of the Members will designate a replacement Manager.

 

Section
5.09 Specific Duties. Notwithstanding to the contrary, the Manager will:

 

(i)
Conduct, supervise and manage the business and affairs of the Company, take all actions it deems necessary or appropriate to conduct
the Company Business and will conduct the affairs of the Company in good faith.

 

(ii)
Maintain the books and records of the Company in accordance with accounting methods for federal income tax purposes and otherwise
in accordance with generally accepted accounting principles and procedures applied in a consistent manner, which books and records
shall reflect all Company transactions and shall be appropriate and adequate for the Company Business.

 

(iii)
Have prepared and delivered to the Members within 20 days after the end of each fiscal quarter and 60 days after the end of each
Fiscal Year a balance sheet of the Company as of the last day of the applicable period, a statement of profit and loss for the
Company for such period, and a statement of cash flows for such period. The quarterly reports may be unaudited but shall be reviewed
by a registered independent public accounting firm selected by the Manager and the annual report shall be audited by such firm.
All financial statements shall be prepared in accordance with accordance with generally accepted accounting principals consistently
applied, or such other accounting principals applicable to United States issuers which file sorts with the Securities and Exchange
Commission under Section 13 of the Securities Exchange Act of 1934.

 

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ARTICLE
VI

COMPANY
CAPITAL

 

Section
6.01 Members’ Initial Capital Contributions. Each of the Members has contributed to the Company certain cash Capital
Contributions indicated on attached Exhibit A.

 

Section
6.02 Additional Capital. If the Company should require capital for any reason in addition to any money provided pursuant to
Section 6.01 hereof, the Manager shall have the sole power and authority to select one or more of the following alternatives:

 

(i)
to borrow the needed funds from independent sources on such terms as the Manager deems appropriate under the circumstances, including,
without limitation, through a private offering of debt securities. The Members agree that loans made under that certain Secured
Line of Credit Agreement by and among the Company, [names of lenders] dated as of November __, 2014 shall be approved by the Members;
or

 

(ii)
to accept from any Member a loan of the required funds, which loan shall be on such terms and conditions as the Manager may deem
appropriate under the circumstances but may not accrue interest at a rate per annum greater than Prime Rate plus 5% (a “Member
Loan”), which would be treated as a debt of the Company and not as a Capital Contribution.

 

Section
6.03 Additional Membership Interests.

 

(a)
If the Members agree and the Manager has determined to raise additional capital by having the Company recapitalized or create
an additional class of membership, the provisions of this Section 6.03 will apply.

 

(b)
The Company shall be authorized to issue additional Membership Interests (denominated by series, if deemed advisable by the Manager)
and in additional classes of Members having such relative rights, powers, duties, privileges, economic benefits, voting interests
and other characteristics as the Manager may deem advisable, including, without limitation, rights, powers and/or preferences
senior or superior in any respect to those rights, powers and preferences granted to then-existing Members. Without limiting the
generality of the foregoing, the Manager is authorized to cause the Company to fix and determine:

 

(i)
The Membership Units to be allocated to each series and the number of Membership Units to be authorized and issued to any new
class of membership;

 

(ii)
The rate and time at which distributions on any class or series shall be paid, whether the distribution shall be cumulative and
the participating or other special rights, if any, with respect to distributions;

 

(iii)
The voting powers, full or limited, if any, of any class or series;

 

(iv)
Whether the Membership Interests in any class or series shall be redeemable and, if so, the price(s) at which, and the terms and
conditions on which, such Membership Interests may be redeemed and the terms and amount of any sinking fund or purchase fund,
if any, for the purchase or redemption of Membership Interests in such class or series;

 

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(v)
The amount(s) payable upon the Membership Interests of any class or series in the event of voluntary or involuntarily liquidation,
dissolution, or winding up of the Company;

 

(vi)
The terms upon which the holder of any Membership Interest in a class or series may convert its Membership Interest into any other
class or series; and

 

(vii)
The price or other consideration for which the Membership Interests of such class or series shall be issued.

 

(c)
The Company shall not issue any additional Membership Interests pursuant to this Section 6.03 unless it shall have first offered
to sell such Membership Interests to all of the Members pursuant to this Section 6.03 (c).

 

(e)
In each instance in which the Company has issued Membership Interests pursuant to this Section 6.03, the Manager will cause the
Agreement to be amended designating the new information applicable by reason of such action (such as reflecting a new class and
setting forth the terms applicable to such class), which action will not require the approval of any of the other Members.

 

ARTICLE
VII

INCOME
TAXES

 

Section
7.01 Allocations of Net Profits and Net Losses.

 

(a)
After giving effect to the special allocations set forth in Section 7.02 hereof, Net Profits for any Fiscal Year will be allocated
to the Members in accordance with the following order:

 

(i)
first, to the Members in the reverse order of the allocation of Net Losses and in the same ratio as originally made within each
level of priority under Section 7.01(b) until the cumulative Net Profits allocated to them pursuant to this Section 7.01(a) for
the current and all prior Fiscal Years are equal to the cumulative Net Losses allocated to them pursuant to Section 7.01(b) hereof
for all prior Fiscal Years; and

 

(ii)
the balance, if any, to the Members in accordance with their Sharing Ratios.

 

(b)
After giving effect to the special allocations set forth in Section 7.02 hereof, Net Losses for any Fiscal Year will be allocated
in accordance with the following order, subject to the limitation in Section 7.01(c) below:

 

(i)
first, to the Members in proportion to the amount of and until the cumulative Net Losses allocated to them pursuant to this SubSection
(i) for the current and all prior Fiscal Years are equal to the cumulative Net Profits, if any, allocated pursuant to Section
7.01(a) for all prior Fiscal Years;

 

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(ii)
second, among the Members in portion to and to the extent of the positive balance in their Capital Accounts; and

 

(iii)
the balance, if any, to the Members in accordance with their Sharing Ratios.

 

(c)
The Net Losses allocated to the Members pursuant to Section 7.01(b) will not exceed the maximum amount of Net Losses that can
be so allocated without causing any of the Members to have an Adjusted Capital Account Deficit at the end of any such Fiscal Year.
The limitations set forth in this Section 7.01(c) will be applied so as to allocate the maximum permissible Losses to the Members
under Treasury Regulations §1.704-1(b)(2)(ii)(d).

 

Section
7.02 Special Allocations. The following special allocations will be made in the following order:

 

(a)
(Minimum Gain Chargeback) Notwithstanding any other provision of this Article VII, if there is a net decrease in Company
Minimum Gain during any Fiscal Year, each Member will be specially allocated items of Company income and gain for such year (and,
if necessary, subsequent years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain determined
in accordance with Treasury Regulations §1.704-2(g)(2). Allocations pursuant to the previous sentence will be made in proportion
to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated will be determined
in accordance with Treasury Regulations §§1.704-2(f)(6) and 1.704-2(j)(2). This Subsection (a) is intended to comply
with the minimum gain chargeback requirement in §1.704-2(f) of the Treasury Regulations and will be interpreted consistently
therewith.

 

(b)
(Member Nonrecourse Debt Minimum Gain Chargeback) Except as otherwise provided in Treasury Regulation §1.704-2(i)(4),
notwithstanding any other provision of this Article VII, if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable
to a Member Nonrecourse Debt during any Fiscal Year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable
to such Member Nonrecourse Debt, determined in accordance with Treasury Regulations §1.704-2(i)(5), will be specially allocated
items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Member’s
share of the net decrease in Member Nonrecourse Debt Minimum Gain determined in accordance with Treasury Regulations §1.704-2(i)(4).
Allocations pursuant to the previous sentence will be made in proportion to the respective amounts required to be allocated to
each Member pursuant thereto. The items to be so allocated will be determined in accordance with Treasury Regulations §§1.704-2(i)(4)
and 1.704-2(j)(2) of the Treasury Regulations. This Section 7.02(b) is intended to comply with the minimum gain chargeback requirement
in §1.704-2(i)(4) of the Treasury Regulations and will be interpreted consistently therewith.

 

(c)
(Qualified Income Offset) In the event any Member unexpectedly receives any adjustments, allocations or distributions described
in Treasury Regulations §1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6), items of Company income
and gain will be specially allocated to each such Member in an amount and manner sufficient to eliminate, to the extent required
by the Treasury Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible, provided that an allocation
pursuant to this Section 7.02(c) will be made only if and to the extent that such Member would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Article VII have been tentatively made as if this Section 7.02(c) were
not in this Agreement.

 

    	13

    	 

    

 

(d)
(Gross Income Allocation) In the event that any Member has a deficit Capital Account at the end of any Fiscal Year which
is in excess of the sum of (i) the amount such Member is obligated to restore pursuant to any provision of this Agreement, and
(ii) the amount such Member is deemed to be obligated to restore pursuant to Treasury Regulations §1.704-2(g)(1) and 1.704-2(i)(5),
such Member will be specially allocated items of Company income and gain in the amount of such excess as quickly as possible,
provided that an allocation pursuant to this Subsection (d) will be made only if and to the extent that such Member would have
a deficit Capital Account in excess of such sum after all other allocations provided for in this Article VII have been tentatively
made as if Section 7.02 (b) hereof and this Section 7.02 (d) were not in this Agreement.

 

(e)
(Section 754 Adjustments) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code §734(b)
or Code §743(b) is required, pursuant to Treasury Regulations §§1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4),
to be taken into account in determining Capital Accounts as a result of a distribution to a Member in complete liquidation of
such Member’s interest in the Company, the amount of such adjustment to the Capital Accounts will be treated as an item
of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or
loss will be specially allocated to the Members in accordance with their interests in the Company in the event Treasury Regulations
§1.704-1(b)(2)(iv)(m)(2) applies or to the Member to whom such distribution was made in the event Treasury Regulations §1.704-1(b)(2)(iv)(m)(4)
applies.

 

(f)
(Nonrecourse Deductions) Nonrecourse Deductions for any Fiscal Year or other period will be specially allocated to the
Members in accordance with the Sharing Ratios.

 

(g)
(Member Nonrecourse Deductions) Member Nonrecourse Deductions for any Fiscal Year or other period will be allocated to
the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions
are attributable in accordance with Treasury Regulations §1.704-2(i)(1).

 

(h)
(Curative Allocations) The allocations set forth in Section 7.01(a), Section 7.01(b), Section 7.02 (a), (b), (c), (d),
(e), (f) and (g) hereof (Regulatory Allocations) are intended to comply with certain requirements of the Regulations.
It is the intent of the Members that, to the extent possible, all Regulatory Allocations will be offset either with other Regulatory
Allocations or with special allocations of other items of Company income, gain, loss or deduction pursuant to this Section 7.02
(h). Therefore, notwithstanding any other provision of this Article VII (other than the Regulatory Allocations), the Manager will
make such offsetting special allocations of Company income, gain, loss or deduction in whatever manner it determines appropriate
so that, after such offsetting allocations are made, each Member’s Capital Account balance is, to the extent possible, equal
to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of this Agreement and all
Company items were allocated pursuant to Sections 7.02(a) and (b)(i). In exercising its discretion under this Section 7.02 (h),
the Manager will take into account future Regulatory Allocations under Sections 7.02(a) and (b) that, although not yet made, are
likely to offset other Regulatory Allocations previously made under Sections 7.02(f) and (g).

 

    	14

    	 

    

 

Section
7.03 Allocation of Net Profits and Net Losses Upon Transfer or Change in Membership Interests. It is agreed that if all or
a portion of a Member’s Membership Interest is transferred or adjusted as permitted herein, Net Profits and Net Losses for
the Fiscal Year of the transfer shall be allocated between the transferor and the transferee based upon the number of days in
said Fiscal Year each owned such Membership Interest, without regard to the dates upon which income was received or expenses were
incurred during said Fiscal Year, except as otherwise required by the provisions of Code Section 706 and Treasury Regulations
promulgated thereunder.

 

Section
7.04 Contributed Property. Notwithstanding anything contained herein to the contrary, if a Member contributes property to
the Company having a fair market value that differs from its adjusted basis at the time of contribution, then items of income,
gain, loss and deduction with respect to the property shall be allocated among the Members so as to take account of the variation
between the adjusted tax basis of the property to the Company and its fair market value at the time of contribution, in the manner
prescribed in Code Section 704(c) and the Treasury Regulations promulgated thereunder.

 

Section
7.05 Returns. The Manager will cause to be prepared by the Company’s accountants and filed in a timely manner all necessary
federal, state and other tax returns for the Company, and the elections described in Section 7.06 hereof. The Manager will furnish
to each Member a copy of each such return, together with any schedules or other information which each Member may require in connection
with such Member’s own tax affairs.

 

Section
7.06 Tax Elections. The Company will make the following tax elections:

 

(a)
To be treated as a partnership for federal income tax purposes;

 

(b)
To adopt the calendar year as the Company’s tax and Fiscal Year;

 

(c)
To adopt the accrual method of accounting and to keep the Company’s books and records on the income-tax method;

 

(d)
If a distribution of Company property as described in Section 734 of the Code should occur or if a transfer of a Membership Interest
as described in Section 743 of the Code should occur, on request by notice from any Member, to elect, pursuant to Section 754
of the Code, if such election has not been previously made, to adjust the basis of Company property; provided that the Manager
may require the Member(s) (or its or their successor) requesting such election to reimburse the Company for any additional expense
incurred as a result of such election; and

 

(e)
Any other election that the Manager may deem appropriate and in the best interests of the Company.

 

    	15

    	 

    

 

Section
7.07 Tax Matters Partner. The Manager is the tax matters partner(as defined in Code Section 6231) who will be authorized and
required to represent the Company (at the Company’s expense) in connection with all examinations of the Company’s
affairs by tax authorities, including, without limitation, administrative and judicial proceedings, and to expend Company funds
for professional services and costs associated therewith. The Members agree to cooperate with each other and to do, or refrain
from doing, any and all things reasonably required to conduct such proceedings. The Tax Matters Partner will ensure that each
Member, if it has so requested, is made a notice partner within the meaning of Section 6223 of the Code.

 

Section
7.08 Capital Accounts.

 

(a)
A separate Capital Account will be maintained for each Member. Each Member’s Capital Account will be increased by (i) the
amount of money contributed by such Member to the Company; (ii) the fair market value of the property contributed by such Member
to the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take subject
to under Code Section 752); (iii) allocations to such Member of Net Profits; and (iv) allocations to such Member of income described
in Code Section 705(a)(1)(B). Each Member’s Capital Account will be decreased by (A) the amount of money distributed to
such Member by the Company; (B) the fair market value of property distributed to such Member by the Company (net of liabilities
secured by such distributed property that such Member is considered to assume or take subject to under Code Section 752); (C)
allocations to such Member of expenditures described in Code Section 705(a)(2)(B); and (D) allocations to such Member of Net Losses.

 

(b)
In connection with a Capital Contribution of money or other property (other than a de minimis amount) by a new or existing Member
or Economic Interest Owner as consideration for an Economic Interest or Membership Interest, or in connection with the liquidation
of the Company or a distribution of money or other property (other than a de minimis amount) by the Company to a retiring Member
or Economic Interest Owner (as consideration for an Economic Interest or Membership Interest), the Capital Accounts of the Members
shall be adjusted to reflect a revaluation of Company property (including intangible assets) in accordance with Treasury Regulation
Section 1.704-1(b)(2)(iv)(f). If, under Section 1.704-1(b)(2)(iv)(f) of the Treasury Regulations, Company property that has been
revalued is properly reflected in the Capital Accounts and on the books of the Company at a book value that differs from the adjusted
tax basis of such property, then depreciation, amortization and gain or loss with respect to such property shall be shared among
the Members in a manner that takes account of the variation between the adjusted tax basis of such property and the book value,
in the same manner as variations between the adjusted tax basis and fair market value of property contributed to the Company are
taken into account in determining the Members’ shares of tax items under Code Section 704(c).

 

(c)
In the event of a permitted sale or exchange of a Membership Interest in the Company, the Capital Account of the transferor shall
become the Capital Account of the transferee to the extent it relates to the transferred Membership Interest in accordance with
Section 1.704-1(b)(2)(iv) of the Treasury Regulations.

 

    	16

    	 

    

 

(d)
The manner in which Capital Accounts are to be maintained pursuant to this Section 6.04 is intended to comply with the requirements
of Code Section 704(b) and the Treasury Regulations promulgated thereunder. If the Company determines that the manner in which
Capital Accounts are to be maintained pursuant to the preceding provisions of this Section 6.04 should be modified in order to
comply with Code Section 704(b) and the Treasury Regulations, then notwithstanding anything to the contrary contained in the preceding
provisions of this Section 6.04, the method in which Capital Accounts are maintained shall be so modified; provided, however,
that any change in the manner of maintaining Capital Accounts shall not materially alter the economic agreement between or among
the Members as set forth in this Agreement.

 

ARTICLE
VIII

DISTRIBUTIONS

 

Section
8.01 Net Cash from Operations. Except in the event of a liquidation of the Company, Net Cash from Operations, if any, shall
be distributed to its Members no less frequently than calendar quarterly in the following order of priority:

 

(i)
First, in discharge of Member Loans, in reverse chronological order with the most recent Member Loan being discharged first, first
in payment of accrued interest and then in payment of unpaid principal;

 

(ii)
Second, in payment of Unrecovered Capital, pro rata among the Members so that the Unrecovered Capital due them is discharged
simultaneously and proportionately; and

 

(iii)
Thereafter, to the Members, pro rata, in accordance with their respective Sharing Ratios.

 

Section
8.02 Liquidating Distributions. Upon the dissolution and liquidation of the Company, the proceeds of the liquidation and any
other assets of the Company shall be distributed to its Members in the following order of priority:

 

(i)
First, in payment to creditors of the Company, including Members who are creditors, in the order of priority provided by law;

 

(ii)
Second, in discharge of Member Loans, in reverse chronological order with the most recent Member Loan being discharged first,
first in payment of accrued interest and then in payment of unpaid principal;

 

(iii)
Third, in payment of Unrecovered Capital, pro rata among the Members so that the Unrecovered Capital due them is discharged
simultaneously and proportionately;

 

(iv)
Fourth, in payment to the Members in accordance with their positive Capital Account balances, until such Capital Account balances
have been reduced to zero; and

 

    	17

    	 

    

 

(v)
Thereafter, to the Members, pro rata, in accordance with their respective Sharing Ratios.

 

Section
8.03 Creditors. The provisions of this Article VIII are not intended to be for the benefit of any creditor or other Person
(other than a Member in its capacity as Member) to whom any debts, liabilities or obligations are owed by (who otherwise has any
claim against) the Company or any of the Members, and no such creditor or other Person shall obtain any right under any such provision
or shall by reason of any such provision make any claim in respect of any debt, liability, obligation or claim against the Company
or any of the Members.

 

ARTICLE
IX

DISPOSITIONS
OF INTERESTS

 

Section
9.01 Prohibition. No Member may Dispose of its Membership Interest, nor may any direct or indirect interest in a Member be
Disposed of unless such Disposition shall have received the approval of the other Member. Further, if a Disposition is made, including
by operation of law, without the approval of the other Member, (i) such transferee will have no right to participate in the management
of the business and affairs of the Company or to become a Member and have only the Economic Interest in such Membership Interest
and only be entitled to receive the share of Net Profits, Net Losses and distributions as may be attributable to such transferred
Membership Interest, and (ii) the transferring Member and transferee will, jointly and severally, indemnify and hold harmless
the Company and other Members from and against all costs, claims and actions incurred by or asserted against them as a consequence
of such unapproved transfer.

 

Section
9.02. Effect of Transfer.

 

(a)
As a condition to the Company recognizing the effectiveness of any transfer permitted hereunder, the Manager shall require the
transferring Member or the transferee, as the case may be, to execute, acknowledge and deliver such instruments of transfer, assignment
and assumption and such other certificates, representations and documents, and to perform all such other acts which the Manager
may deem necessary or desirable to:

 

(1)
verify the transfer;

 

(2)
confirm that the Person desiring to acquire a Membership Interest, or to be admitted as a Member, has accepted, assumed and agreed
to be subject and bound by all of the terms, obligations and conditions of this Agreement (whether or not such Person is to be
admitted as a new Member);

 

(3)
maintain the status of the Company as a partnership; and

 

(4)
assure compliance with any applicable state and federal laws, including, but not limited to, securities laws and regulations.

 

    	18

    	 

    

 

(b)
Any transfer of a Membership Interest or admission of a Member in compliance with this Article IX shall be deemed effective as
of the last day of the calendar month in which the Members’ consent thereto was given. The transferring Member agrees, upon
request of the Manager, to execute such certificates or other documents and to perform such other acts as may be reasonably requested
by the Manager from time to time in connection with such transfer. The transferring Member will indemnify the Manager and remaining
Members against any and all claims, actions and expenses (including, without limitation, tax liabilities or loss of tax benefits)
arising directly or indirectly as a result of any transfer or purported transfer in violation of this Article IX.

 

ARTICLE
X

DISSOLUTION
AND TERMINATION

 

Section
10.01 Dissolution. The Company shall be dissolved upon the approval of all of the Members. The Company shall not be dissolved
upon the death, incompetency, retirement, resignation, expulsion, dissolution or bankruptcy of a Member.

 

Section
10.02 Winding Up, Liquidation and Distribution of Assets.

 

(a)
Upon dissolution, an accounting shall be made by the Company’s independent accountants of the accounts of the Company and
of the Company’s assets, liabilities and operations, from the date of the last previous accounting until the date of dissolution.
The Manager shall promptly proceed to wind up the affairs of the Company.

 

(b)
If the Company is dissolved and its affairs are to be wound up, the Manager is directed:

 

(1)
to sell or otherwise liquidate such of the Company’s assets as may be required to discharge all liabilities of the Company,
and establish such Reserves as may be reasonably necessary to provide for contingent liabilities of the Company (for purposes
of determining the Capital Accounts of the Members, the amounts of such Reserves shall be deemed to be an expense of the Company);

 

(2)
to allocate any net Profits or net Losses resulting from such sales to the Capital Accounts in accordance with Article VII hereof;
and

 

(3)
to distribute the remaining assets in accordance with the priorities expressed in Section 8.02 hereof.

 

Such
distributions shall be made either in cash or in kind, as determined by the Manager, with any assets distributed in kind being
valued for this purpose at their fair market value as determined by the Manager. Any such distributions in respect of Capital
Accounts must be made in accordance with the time requirements set forth in Section 1.704-1(b)(2)(ii)(b)(2) of the Treasury Regulations.
The Company may offset damages for breach of this Agreement by a Member whose interest is liquidated (either upon the withdrawal
of the Member or the liquidation of the Company) against the amount otherwise distributable to such Member.

 

    	19

    	 

    

 

(c)
Notwithstanding anything to the contrary in this Agreement, upon a liquidation within the meaning of Section 1.704-1(b)(2)(ii)(g)
of the Treasury Regulations, if any Member has a deficit Capital Account (after giving effect to all contributions, distributions,
allocations and other Capital Account adjustments for all taxable years, including the year during which such liquidation occurs),
such Member shall have no obligation to make any Capital Contribution, and the negative balance of such Member’s Capital
Account shall not be considered a debt owed by such Member to the Company or to any other Person for any purpose whatsoever.

 

(d)
Upon completion of the winding up, liquidation and distribution of the assets, the Company shall be deemed terminated.

 

(e)
The Manager shall comply with all requirements of applicable law pertaining to the winding up of the affairs of the Company and
the final distribution of its assets.

 

Section
10.03 Return of Contribution Nonrecourse to Other Members. Except as provided by law or as expressly provided in this Agreement,
upon dissolution, each Member shall look solely to the assets of the Company for the return of its Capital Contribution. If the
Company property remaining after the payment or discharge of the debts and liabilities of the Company is insufficient to return
the cash contribution of one or more Members, such Member or Members shall have no recourse against the Company or any other Member.

 

ARTICLE
XI 

MISCELLANEOUS
PROVISIONS

 

Section
11.01 Notices. Any notice, demand, or communication required or permitted to be given by any provision of this Agreement to
be effective must be in writing and delivered personally to the party by email or by overnight courier service, such as Federal
Express, addressed to the Member’s and/or Company’s address, as appropriate, which is set forth in this Agreement.
Except as otherwise provided herein, any such notice shall be deemed to have been received on the date of hand-delivery, and on
the date of the addressee’s receipt if by email or overnight courier service.

 

Section
11.02 Waiver of Action for Partition. Each Member and Economic Interest Owner irrevocably waives during the term of the Company
any right that it may have to maintain any action for the partition with respect to the property of the Company.

 

Section
11.03 Amendments. Except as otherwise provided herein, this Agreement may not be amended except upon the approval of all of
the Members.

 

Section
11.04 Further Assurances. Each Member hereby agrees to execute such other and further statements of interest and holdings,
designations and other instruments necessary to comply with any laws, rules or regulations.

 

    	20

    	 

    

 

Section
11.05 Waivers. No party’s undertakings or agreements contained in this Agreement shall be deemed to have been waived
unless such waiver is made by an instrument in writing signed by an authorized representative of such Member. Failure of a party
to insist on strict compliance with the provisions of this Agreement shall not constitute waiver of that party’s right to
demand later compliance with the same or other provisions of this Agreement. A waiver of a breach of this Agreement will not constitute
a waiver of the provision itself or of any subsequent breach, or of any other provision of this Agreement.

 

Section
11.06 Rights and Remedies Cumulative. The rights and remedies provided by this Agreement are cumulative, and the use of any
one right or remedy by any party shall not preclude or waive the right to use any other remedy. Said rights and remedies are given
in addition to any other legal rights the parties may have.

 

Section
11.07 Severability. If any provision of this Agreement or the application thereof to any Person or circumstance shall be invalid,
illegal or unenforceable to any extent, the remainder of this Agreement and the application thereof shall not be affected and
shall be enforceable to the fullest extent permitted by law.

 

Section
11.08 Heirs, Successors and Assigns. Each and all of the covenants, terms, provisions and agreements herein contained shall
be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Agreement, their respective
heirs, legal representatives, successors and assigns.

 

Section
11.09 Counterparts, Signatures. This Agreement may be executed in counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument. Any signature on this Agreement delivered by telephonic or electronic
facsimile transmission will be deemed to be the delivery of an original signature.

 

Section
11.10 Counsel for the Company. Nason, Yeager, Gerson, White & Lioce, P.A. (the “Firm”) is counsel for the
Company in respect of its formation, including the preparation of this Agreement, and has included this Section 11.10 as a disclosure
to the Members other than Vaporin, Inc. The Firm has is presently representing Vaporin, Inc. In a number of capacities and other
companies in which some of the large shareholders of Vaporin, Inc. have interests, direct or indirect. Accordingly, there is the
potential of conflict in the Firm representing Vaporin. Vapor Corp. has had the opportunity to retain independent counsel to represent
it in connection with this Agreement and consents to the Firm representing the Company.

 

 

 

See
Next Page For Signatures

 

    	21

    	 

    

 

IN
WITNESS WHEREOF, the undersigned have executed this Agreement on the Effective Date.

 

	MANAGER:	 	MEMBERS:
	 	 	 	 	 
	VAPORIN,
    INC.	 	VAPORIN,
    INC.
	 	 	 	 	 
	By:	/s/
    Scott Frohman	 	By:	/s/
    Scott Frohman
	 	Scott Frohman,
    Chief Executive Officer	 	 	Scott Frohman,
    Chief Executive Officer
	 	 	 	 	 
	 	 	 	VAPOR
    CORP.
	 	 	 	 	 
	 	 	 	By:	/s/
    Jeffrey E. Holman
	 	 	 	 	Jeffrey E. Holman,
    as its
	 	 	 	 	Chief Executive
    Officer

 

    	22

    	 

    

 

SCHEDULE
OF MEMBERS

 

	Member’s Name and

    Contact Information	 	Unrecovered Capital	 	 	Membership

    Units	 	 	Sharing

    Ratios	 
	 	 	 	 	 	 	 	 	 	 
	Vaporin, Inc.	 	$	10.00	 	 	 	500,000	 	 	 	50	%
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Vapor Corp.	 	$	10.00	 	 	 	500,000	 	 	 	50	%
	 	 	 	 	 	 	 	 	 	 	 	 	 
	TOTALS	 	$	20.00	 	 	 	1,000,000	 	 	 	100.0	%

 

Exhibit
AEXHIBIT 10.1

 

PURCHASE AGREEMENT

 

This Purchase Agreement (this “Agreement”), dated as of December 18, 2014, is by and among LTC Properties, Inc., a Maryland corporation (the “Company”), and each Investment Adviser listed under the heading “Investment Advisers” on the signature pages hereto (each, an “Investment Adviser”) who is entering into this Agreement on behalf of itself (as to paragraph 4 of this Agreement) and those purchasers which are a fund or individual or other investment advisory client of such Investment Adviser listed under its respective name on Schedule A (each, a “Purchaser,” and, collectively, the “Purchasers”).

 

WHEREAS, the Purchasers desire to purchase from the Company (or their Investment Advisers desire to purchase on their behalf from the Company), and the Company desires to issue and sell to the Purchasers up to an aggregate of 600,000 shares (such number of shares actually sold pursuant to this Agreement, the “Securities”) of the Company’s Common Stock, par value $0.01 per share (the “Common Stock”), with the number of Securities acquired by each Purchaser set forth opposite the name of such Purchaser on Schedule A.

 

NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties hereto agree as follows:

 

1.                                      Purchase and Sale.  Subject to the terms and conditions hereof, the Investment Advisers (on behalf of Purchasers) hereby severally and not jointly agree to purchase from the Company, and the Company agrees to issue and sell to the several Purchasers, the number of Securities set forth next to such Purchaser’s name on Schedule A, at a price per share of $41.50 for an aggregate purchase amount in an amount as set forth on Schedule B hereof (the “Purchase Price”) at the Closing (as defined below).

 

2.                                      Representations and Warranties of Purchaser.  Each Purchaser represents and warrants with respect to itself that:

 

(a)                                 Due Authorization.  Such Purchaser has full power and authority to enter into this Agreement and is duly authorized to purchase the Securities in the amount set forth opposite its name on Schedule A.  This Agreement has been duly authorized by such Purchaser and duly executed and delivered by or on behalf of such Purchaser.  This Agreement constitutes a legal, valid and binding agreement of such Purchaser, enforceable against such Purchaser in accordance with its terms except as may be limited by (i) the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights or remedies of creditors or (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or at law and the discretion of the court before which any proceeding therefor may be brought (the “Enforceability Exceptions”).

 

(b)                                 Base Prospectus and Prospectus Supplement. Such Purchaser has received a copy of the Company’s Base Prospectus dated July 19, 2013 (as defined below).

 

 

(c)                                  Ownership of Excess Shares of Capital Stock.  For U.S. income tax purposes, as of the date hereof and after giving effect to the transaction contemplated hereby, such Purchaser, together with its subsidiaries and affiliates, does not own directly or indirectly more than 9.8% in number of shares or value, whichever is more restrictive, of the issued and outstanding capital stock of the Company.  Purchaser expressly acknowledges that the provisions of the Company’s Articles of Incorporation, as amended or supplemented and restated (the “Charter”), contain limitations on the Purchaser’s ownership of the Company’s capital stock, which, among other things, prohibit the direct or indirect ownership by Purchaser (together with its subsidiaries and affiliates) of more than 9.8% in number of shares or value, whichever is more restrictive, of the Company’s outstanding capital stock and, in the event the shares of capital stock acquired by Purchaser pursuant to this Agreement or otherwise exceed such limits, give the Company certain repurchase rights on the terms set forth in the Company’s Charter and result in the conversion of certain shares of capital stock held by the Purchaser into excess stock which will be held for the benefit of a charitable beneficiary on the terms set forth in the Company’s Charter.

 

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

 

(a)                                 The Company meets the requirements for use of Form S-3 under the Securities Act of 1933, as amended (the “Act”) and has prepared and filed with the Securities and Exchange Commission (the “SEC”) an automatic shelf registration statement (File Number 333-190048) relating to securities, including the Securities, on Form S-3, including a related Base Prospectus, for registration under the Act of the offering and sale of certain securities, including the Securities. Such Registration Statement (as defined below), including any amendments thereto filed prior to the date hereof, became effective immediately upon filing with the SEC and no stop order suspending the effectiveness of the Registration Statement or any part thereof has been issued or is in effect and no proceeding for that purpose has been initiated or threatened by the SEC, and no notice of objection of the SEC to the use of the Registration Statement or any post-effective amendment thereto pursuant to Rule 401(g)(1) under the Act has been received by the Company. The Company has paid the required SEC filing fees relating to the Securities. The Company will file with the SEC the Prospectus Supplement relating to the Securities in accordance with Rule 424(b).  As filed and as delivered to KeyBanc Capital Markets Inc., in its capacity as placement agent (“Placement Agent”), the Prospectus will contain all information required by the Act and the rules thereunder.  No order preventing or suspending the use of the Registration Statement or any Issuer Free Writing Prospectus has been issued by the SEC. The Registration Statement, at the date hereof meets the requirements set forth in Rule 415(a)(1)(x). The initial effective date of the Registration Statement was not earlier than the date three years before the date hereof.  (A) At the time of filing the Registration Statement on July 19, 2013, (B) at the time of the most recent amendment thereto for the purposes of complying with Section 10(a)(3) of the Act (whether such amendment was by post-effective amendment, incorporated report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or form of prospectus) and (C) at the time the Company or any person acting on its 

 

2

 

behalf (within the meaning, for this clause only, of Rule 163(c) of the Act) made any offer relating to the Securities in reliance on the exemption of Rule 163 of the Act, the Company was and is a “well-known seasoned issuer” as defined in Rule 405 of the Act (“Rule 405”), and was not and is not an “ineligible issuer” as defined in Rule 405.  The Registration Statement is an “automatic shelf registration statement,” as defined in Rule 405, and the Securities, since their registration on the Registration Statement, have been and remain eligible for registration by the Company on a Rule 405 “automatic shelf registration statement.”  The Company has not received from the Commission any notice pursuant to Rule 401(g)(2) of the Act objecting to the use of the automatic shelf registration statement form.

 

“Registration Statement” shall mean the registration statement referred to above, including exhibits and financial statements, schedules and any prospectus supplement relating to the Securities that is filed with the SEC pursuant to Rule 424(b) and deemed part of such registration statement pursuant to Rule 430B, as amended at the date hereof and, in the event any post-effective amendment thereto becomes effective, shall also mean such registration statement as so amended.  “Base Prospectus” shall mean the base prospectus referred to above contained in the Registration Statement at the date hereof.  “Prospectus Supplement” shall mean the prospectus supplement relating to the Securities that shall be filed pursuant to Rule 424(b).  “Prospectus” shall mean the Base Prospectus, as supplemented by the Prospectus Supplement relating to the Securities.  Any reference herein to the Registration Statement, the Base Prospectus, the Prospectus Supplement or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Exchange Act, on or before the effective date of the Registration Statement or the issue date of the Base Prospectus, the Prospectus Supplement or the Prospectus, as the case may be; and any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement, the Base Prospectus, the Prospectus Supplement or the Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the effective date of the Registration Statement or the issue date of the Base Prospectus, the Prospectus Supplement or the Prospectus, as the case may be, deemed to be incorporated therein by reference.

 

(b)                                 Since the date as of which information is given in the Registration Statement and the Prospectus, except as otherwise stated therein, (i) there has been no material adverse change or any development which could reasonably be expected to give rise to a prospective material adverse change in or affecting the condition, financial or otherwise, or in the earnings, business affairs or, to the Company’s knowledge, business prospects of the Company and the subsidiaries of the Company, if any (the “Subsidiaries”), considered as one enterprise, whether or not arising in the ordinary course of business, (ii) there have been no transactions entered into by the Company or any of its Subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its Subsidiaries considered as one enterprise, and (iii) other than regular quarterly dividends, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its shares of equity securities.  The Registration Statement complies in all material respects with the applicable requirements of the Act and the 

 

3

 

Exchange Act and the respective rules thereunder (including the filing of any required exhibits thereto) and does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and on the date of any filing pursuant to Rule 424(b), on the date hereof and at all times during which a prospectus is required by the Act to be delivered (whether physically or through compliance with Rule 172 or any similar rule) in connection with any offer or sale of Securities, the Prospectus (together with any supplement thereto) has complied and complies on the date hereof in all material respects with the applicable requirements of the Act and the Exchange Act and the respective rules thereunder (the “Regulations”) (including the filing of any required exhibits thereto) and does not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  The statements in the Prospectus and any document that is incorporated by reference therein under the headings “Risk Factors—The Health Care Industry is Heavily Regulated by the Government,” “Risk Factors—Provisions in Our Articles of Incorporation May Limit Ownership of Shares of Our Capital Stock,” “General Description of the Offered Securities,” “Description of Debt Securities,” “Description of Our Common Stock,” “Description of Our Preferred Stock,” “Restrictions on Ownership and Transfer,” “Certain Provisions of Maryland Law and of Our Charter and Bylaws,” “Business—Government Regulation,” “Business—Healthcare Reform and Other Legislative Developments” and “Business—Taxation of Our Company” insofar as such statements summarize legal matters, agreements, documents or proceedings discussed therein, are accurate summaries or descriptions thereof in all material respects.

 

(c)                                  The Company has been duly organized as a corporation and is validly existing and in good standing under the laws of the State of Maryland.  Each of the Subsidiaries of the Company has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of organization.  Each of the Company and its Subsidiaries has the required power and authority to own and lease its properties and to conduct its business as described in the Prospectus; and each of the Company and its Subsidiaries is duly qualified to transact business in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify would not have a material adverse effect on the condition, financial or otherwise, or the earnings, business affairs or, to the Company’s knowledge, business prospects of the Company and its Subsidiaries considered as one enterprise.

 

(d)                                 As of the date hereof, the authorized capital stock of the Company consists of 60,000,000 shares of Common Stock, par value $0.01 per share of which 34,880,392 shares of Common Stock were outstanding as of the date hereof (without giving effect to any Securities issued or to be issued as contemplated by this Agreement), and 15,000,000 shares of preferred stock, par value $0.01 per share (the “Preferred Stock”, and together with the Common Stock, the “Securities”), of which 2,000,000 shares have been designated as 8.5% Series C Cumulative Convertible Preferred Stock, par value $0.01 per share, $19.25 liquidation value per share of which 2,000,000 shares are issued and 

 

4

 

outstanding shares (the “Series C Preferred Stock”).  The issued and outstanding shares of the Company have been duly authorized and validly issued and are fully paid and non-assessable; the Securities have been duly authorized, and when issued in accordance with the terms of the Company’s Charter and delivered as contemplated hereby, will be validly issued, fully paid and non-assessable and will be listed, subject to notice of issuance, on the New York Stock Exchange, effective as of the Closing; the Common Stock and the Series C Preferred Stock of the Company conform to all statements relating thereto contained in the Prospectus; and the issuance of the Securities is not subject to preemptive or other similar rights.

 

(e)                                  Neither the Company nor any of its Subsidiaries is in violation of its organizational documents or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any material contract, indenture, mortgage, loan agreement, note, lease or other instrument or agreement to which the Company or any of its Subsidiaries is a party or by which it or any of them are bound, or to which any of the property or assets of the Company or any of its Subsidiaries is subject except where such violation or default would not have a material adverse effect on the condition, financial or otherwise, or the earnings, business affairs or, to the Company’s knowledge, business prospects of the Company and its Subsidiaries considered as one enterprise; and the execution, delivery and performance of this Agreement, and the issuance and delivery of the Securities and the consummation of the transactions contemplated herein have been duly authorized by all necessary action and will not conflict with or constitute a material breach of, or material default under, or result in the creation or imposition of any lien, charge or encumbrance upon any material property or assets of the Company or any of its Subsidiaries pursuant to, any material contract, indenture, mortgage, loan agreement, note, lease or other instrument or agreement to which the Company or any of its Subsidiaries is a party or by which it or any of them are bound, or to which any of the property or assets of the Company or any of its Subsidiaries is subject, nor will any such action result in any violation of the provisions of the Charter of the Company, as amended and supplemented, by-laws or other organizational documents of the Company or any of its Subsidiaries or any law, administrative regulation or administrative or court decree applicable to the Company.

 

(f)                                   Commencing with its taxable year ending December 31, 1992, the Company has been organized and operated in conformity with the requirements for qualification and taxation as a “real estate investment trust” under the Internal Revenue Code of 1986, as amended (the “Code”), and its proposed method of operation, as described in the Charter or Bylaws of the Company, the Registration Statement and the Prospectus, will enable the Company to continue to meet the requirements for qualification and taxation as a “real estate investment trust” under the Code.

 

(g)                                  The Company is not required to be registered under the Investment Company Act of 1940, as amended.

 

(h)                                 No legal or governmental proceedings are pending to which the Company or any of its Subsidiaries is a party or to which the property of the Company or any 

 

5

 

of its Subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not described therein, and no such proceedings have been threatened against the Company or any of its Subsidiaries or with respect to any of their respective properties that are required to be described in the Registration Statement or the Prospectus and are not described therein.

 

(i)                                     No authorization, approval or consent of any court or United States federal or state governmental authority or agency is necessary in connection with the sale of the Securities as contemplated hereunder, except such as may be required under the Act or the Regulations or state securities laws or real estate syndication laws.

 

(j)                                    The Company and its Subsidiaries possess such certificates, authorities or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct the business now conducted by them, except where the failure to possess such certificates, authority or permits would not have a material adverse effect on the condition, financial or otherwise, or the earnings, business affairs or, to the Company’s knowledge, business prospects of the Company and its Subsidiaries considered as one enterprise.  Neither the Company nor any of its Subsidiaries has received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would materially and adversely affect the condition, financial or otherwise, or the earnings, business affairs or, to the Company’s knowledge, business prospects of the Company and its Subsidiaries considered as one enterprise, nor, to the knowledge of the Company, are any such proceedings threatened or contemplated.

 

(k)                                 The Company has full power and authority to enter into this Agreement, and this Agreement has been duly authorized, executed and delivered by the Company and constitutes a legal, valid and binding agreement of the Company, enforceable against the Company in accordance with its terms except as may be limited by (i) the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights or remedies of creditors or (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or at law and the discretion of the court before which any proceeding therefor may be brought.

 

(l)                                     As of the dates set forth therein or incorporated by reference, the Company or its Subsidiaries had good and marketable title or valid leasehold interest to all of the properties and assets reflected in the audited financial statements contained in the Prospectus, subject to no lien, mortgage, pledge or encumbrance of any kind except (i) those reflected in such financial statements, (ii) as are otherwise described in the Prospectus, (iii) as do not materially adversely affect the value of such property or interests or interfere with the use made or proposed to be made of such property or interests by the Company and each of its Subsidiaries or (iv) those which constitute customary provisions of mortgage loans secured by the Company’s properties creating obligations of the Company with respect to proceeds of the properties, environmental liabilities and other customary protections for the mortgagees.

 

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(m)                             The Company and its Subsidiaries, and to the Company’s knowledge, each tenant and each mortgagee, are (i) in compliance with any and all applicable federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received and are in compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) have not received notice of any actual or potential liability under any Environmental Laws, except where such non-compliance with Environmental Laws, failure to receive required permits, licenses or other approvals, or liability would not, individually or in the aggregate, have a material adverse effect on the condition, financial or otherwise, or the earnings, business affairs or, to the Company’s knowledge, business prospects of the Company and its Subsidiaries considered as one enterprise.  Neither the Company nor any of the Subsidiaries has been named as a “potentially responsible party” under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended.  To the Company’s knowledge, there have been no and are no (i) aboveground or underground storage tanks; (ii) polychlorinated biphenyls (“PCBs”) or PCB-containing equipment; (iii) asbestos or asbestos containing materials; (iv) lead based paints; (v) mold or other airborne contaminants; or (vi) dry-cleaning facilities in, on, under or about any property owned by the Company or any of its Subsidiaries.  Neither the issuance, sale and delivery of the Securities nor the application of the proceeds thereof by the Company as described in the Prospectus will cause the Company to violate or be in violation of Regulation T, U or X of the Board of Governors of the Federal Reserve System or any other regulation of such Board of Governors.

 

(n)                                 Any certificate signed by any officer of the Company and delivered to the Placement Agent or to counsel for the Placement Agent shall be deemed a representation and warranty by the Company to the Placement Agent as to the matters covered thereby.

 

(o)                                 Neither the issuance, sale and delivery of the Securities nor the application of the proceeds thereof by the Company as described in the Prospectus will cause the Company to violate or be in violation of Regulation T, U or X of the Board of Governors of the Federal Reserve System or any other regulation of such Board of Governors.

 

(p)                                 The statements set forth in the Base Prospectus under the caption “Description of Common Stock” in so far as such statements purport to summarize provisions of laws or documents referred to therein, are correct in all material respects and fairly present the information required to be presented therein.

 

(q)                                 There is no contract, agreement, indenture or other document to which the Company or any of its Subsidiaries is a party required to be filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 or any subsequent Exchange Act filings prior to the date hereof that has not been so filed as required.

 

(r)                                    The financial statements and schedules of the Company, including the notes thereto, included or incorporated by reference in the Prospectus and the Registration 

 

7

 

Statement present fairly in all material respects the financial condition, results of operations and cash flows of the Company as of the dates and for the periods indicated, comply as to form in all material respects with the applicable accounting requirements of the Act and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as otherwise noted therein).  The summary financial data set forth under the caption “Selected Financial Data” incorporated by reference in the Prospectus and Registration Statement fairly present, on the basis stated therein, the information included therein.  There are no financial statements (historical or pro forma) that are required to be included or incorporated by reference in the Prospectus and the Registration Statement that are not included or incorporated by reference as required.

 

(s)                                   The Company and each of its Subsidiaries has filed all foreign, federal, state and local tax returns that are required to be filed or has requested extensions thereof, except in any case in which the failure so to file would not reasonably be expected to have a material adverse effect on the condition, financial or otherwise, or the earnings, business affairs or, to the Company’s knowledge, business prospects of the Company and its Subsidiaries considered as one enterprise, and has paid all taxes required to be paid by it and any other assessment, fine or penalty levied against it, to the extent that any of the foregoing is due and payable, except for any such tax, assessment, fine or penalty that is currently being contested in good faith or as would not reasonably be expected to have a material adverse effect on the condition, financial or otherwise, or the earnings, business affairs or, to the Company’s knowledge, business prospects of the Company and its Subsidiaries considered as one enterprise.

 

(t)                                    The Company and its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (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 existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  Since the date of the Company’s most recent audited balance sheet, there has been (i) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (ii) no change in the Company’s internal control over financial reporting that has materially and adversely affected, or is reasonably likely to materially and adversely affect, the Company’s internal control over financial reporting.

 

4.                                      Representation and Warranties of the Investment Advisers.  To induce the Company to enter into this Agreement, each of the Investment Advisers hereby represents and warrants that:

 

(a)                                 It is an investment adviser duly registered with the SEC under the Investment Advisers Act of 1940, as amended.

 

8

 

(b)                                 It has been duly authorized to act as investment adviser on behalf of each Purchaser on whose behalf it is signing this Agreement (as identified under the name of such Investment Adviser on Schedule A hereto) and has the sole authority to make the investment decision to purchase Securities hereunder on behalf of such Purchaser.  An investment in the Securities is a suitable investment for each Purchaser.

 

(c)                                  It has the power and authority to enter into and execute this Agreement on behalf of each of the Purchasers listed under its name on Schedule A hereto.

 

(d)                                 This Agreement has been duly authorized, executed and delivered by it and, assuming it has been duly authorized, executed and delivered by the Company, constitutes a legal, valid and binding agreement of such Investment Adviser, enforceable against it in accordance with its terms except as may be limited by the Enforceability Exceptions.

 

(e)                                  It has received a copy of the Company’s Base Prospectus dated July 19, 2013.

 

5.                                      Conditions to Obligations of the Parties.

 

(a)                                 The Purchasers’ several obligation to purchase the Securities shall be subject to the following conditions having been met:

 

(i)                  the representations and warranties set forth in Section 3 of this Agreement shall be true and correct with the same force and effect as though expressly made at and as of the Closing, and

 

(ii)               the conditions to Closing described in the Placement Agent Agreement, by and between the Company and the Placement Agent, dated as of the date hereof, shall have been satisfied.

 

(b)                                 The Company’s obligation to issue and sell the Securities shall be subject to the following condition having been met:

 

(i)                  the representations and warranties set forth in Sections 2 and 4 of this Agreement shall be true and correct with the same force and effect as though expressly made at and as of the Closing.

 

(ii)               the Company shall have received payment in full for the Purchase Price for the Securities by federal wire of immediately available funds, not less than the aggregate of $24,900,000 prior to the payment of fees and expenses.

 

6.                                      Closing.  Provided that the conditions set forth in Section 5 hereto and the last sentence of this Section 6 have been met or waived at such time, the transactions contemplated hereby shall be consummated on December 23, 2014, or at such other time and date as the parties hereto shall agree (each such time and date of payment and delivery being herein called the “Closing”).

 

9

 

7.                                      Covenants.  The Company hereby covenants and agrees that subject to all Purchasers consummating the purchase of the Securities at the Closing, the Company will use the proceeds of the offering contemplated hereby in the manner to be set forth under the caption “Use of Proceeds” in the Prospectus Supplement.

 

8.                                      Termination.  This Agreement may be terminated, and the transactions contemplated hereby may be abandoned, by written notice promptly given to the other parties hereto, at any time prior to the Closing by the Company, on the one hand, or if the Closing shall not have occurred on or prior to January 1, 2015 by any Purchaser on the other; provided that the Company or such Purchaser, as the case may be, shall not be entitled to terminate this Agreement pursuant to this Section 8 if the failure of Closing to occur on or prior to such dates results primarily from such party itself having materially breached any representation, warranty or covenant contained in this Agreement.

 

9.                                      Notices.  Except as otherwise herein provided, all statements, requests, notices and agreements shall be in writing and, if to the Purchasers, shall be sufficient in all respects if delivered or sent by facsimile to (216) 689-0845 or by certified mail to KeyBanc Capital Markets Inc., 127 Public Square, Cleveland, Ohio 44114, Attention: David Gruber, and, if to the Company, shall be sufficient in all respects if delivered or sent to the Company by facsimile to (805) 981-8663 or by certified mail to the Company at 2829 Townsgate Road, Suite 350, Westlake Village, CA 91361, Attention: Wendy Simpson

 

10.                               Governing Law.  This Agreement shall be construed in accordance with and governed by the substantive laws of the State of New York, without regard to conflict of laws principles. The Purchasers, the Placement Agent and the Company hereby irrevocable and unconditionally submit to the jurisdiction of any court of the State of New York or any federal court sitting in the State of New York for purposes of any suit, action or other proceeding arising out of this Agreement (and the parties agree not to commence any action, suit or proceedings relating thereto except in such courts) and agree that service of any process, summons, notice or document delivered by hand or sent by U.S. registered mail to the parties’ respective address set forth above shall be effective for service of process for any action, suit or proceeding brought against such party in any such court. The parties hereby irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or any of the transactions contemplated hereby in the courts of the State of New York or any federal court sitting in the State of New York. THE PARTIES WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY SUCH DISPUTE.

 

11.                               Entire Agreement.  This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only in a writing that is executed by each of the parties hereto.

 

12.                               Counterparts.  This Agreement may be executed in separate counterparts, each of which shall be deemed an original, and all of which together shall be deemed to constitute one and the same instrument.  Executed counterparts may be delivered by facsimile.

 

13.                               Construction.  When used herein, the phrase “to the knowledge of” the Company or “known to” the Company or any similar phrase means the actual knowledge of the 

 

10

 

Chief Executive Officer, Chief Financial Officer or Chief Operating Officer of the Company and includes the knowledge that such officers would have obtained of the matter represented after reasonable due and diligent inquiry of those employees of the Company whom such officers reasonably believe would have actual knowledge of the matters represented.

 

14.                               Free Writing Prospectus Legend.  The Company has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the Company has filed with the SEC for more complete information about the Company and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the Company or KeyBanc Capital Markets Inc. will arrange to send you the prospectus if you request it by calling 1-800-859-1783, or by writing to:  KeyBanc Capital Markets Inc., Attention: Prospectus Delivery Department, 127 Public Square, 4th Floor, Cleveland, Ohio 44114.

 

[Signature Pages Follow]

 

11

 

IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement to be executed and delivered as of the date first above written.

 

 

	
 
    	
 
    	
LTC Properties, Inc.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
  By:
    	
/s/ Wendy L. Simpson
    
	
 
    	
 
    	
 
    	
Name: Wendy L. Simpson
    
	
 
    	
 
    	
 
    	
Title:  Chairman, Chief   Executive Officer and President
    

 

 

	
 
    	
INVESTMENT ADVISERS
    
	
 
    	
 
    
	
 
    	
RREEF   America LLC on behalf of itself (solely with respect to paragraph 4) and each   Purchaser set forth under its name on Schedule A
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Joe Fisher
    
	
 
    	
 
    	
Name: Joe Fisher
    
	
 
    	
 
    	
Title: Portfolio Manager
    

 

 

SCHEDULE A

 

	
NAME OF INVESTMENT ADVISER
    	
 
    	
NUMBER OF SHARES
    
	
 
    	
 
    	
 
    
	
RREEF America LLC
    	
 
    	
600,000
    
	
 
    	
 
    	
 
    
	
CLIENTS
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
[NAME]
    	
 
    	
[                       ]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
TOTAL:
    	
 
    	
[                      ]
    

 

 

SCHEDULE B

 

Aggregate Purchase Amount

 

	
600,000 shares
    	
 
    	
$
    	
24,900,000

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