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Exhibit 10.2

 

 

 

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

 

	
Principal
Amount: $83,500.00

	
 Issue
Date: December 19, 2017

 

   12%
CONVERTIBLE NOTE

 

FOR VALUE RECEIVED, SINCERITY APPLIED MATERIALS
HOLDINGS CORP a Nevada corporation (“Borrower”
or “Company”), hereby promises to pay to the order
of
EMA FINANCIAL, LLC, a
Delaware limited liability company, or its registered assigns (the
“Holder”), on December 19, 2018, (subject to extension
as set forth below, the “Maturity Date”), the sum of
$83,500.00 as set forth herein, together with interest on the
unpaid principal balance hereof at the rate of twelve (12%) per
annum (the “Interest Rate”) from the date of issuance
hereof until this Note plus any and all amounts due hereunder are
paid in full, and any additional amounts set forth herein,
including without limitation any Additional Principal (as defined
herein). Interest shall be computed on the basis of a 365-day year
and the actual number of days elapsed. Any amount of principal or
interest on this Note which is not paid when due shall bear
interest at the rate of twenty-four (24%) per annum from the due
date thereof until the same is paid (“Default
Interest”). All payments due hereunder shall be made in
lawful money of the United States of America. All payments shall be
made at such address as the Holder shall hereafter give to the
Borrower by written notice made in accordance with the provisions
of this Note. Whenever any amount expressed to be due by the terms
of this Note is due on any day which is not a business day, the
same shall instead be due on the next succeeding day which is a
business day and, in the case of any interest payment date which is
not the date on which this Note is paid in full, the extension of
the due date thereof shall not be taken into account for purposes
of determining the amount of interest due on such date. As used in
this Note, the term “business day” shall mean any day
other than a Saturday, Sunday or a day on which commercial banks in
the city of New York, New York are authorized or required by law or
executive order to remain closed. Each capitalized term used
herein, and not otherwise defined, shall have the meaning ascribed
thereto in that certain Securities Purchase Agreement entered into
by and between the Company and Holder dated on or about the date
hereof, pursuant to which this Note was originally issued (the
“Purchase Agreement”). The Holder may, by written
notice to the Borrower at least five (5) days before the Maturity
Date (as may have been previously extended), extend the Maturity
Date to up to one (1) year following the date of the original
Maturity Date hereunder.

 

 

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This
Note is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of shareholders of the Borrower and
will not impose personal liability upon the holder
thereof.

 

The
following terms shall apply to this Note:

 

ARTICLE
I. CONVERSION RIGHTS

 

1.1. Conversion
Right. The Holder shall have the right, in its sole and
absolute discretion, at any time from time to time, to convert all
or any part of the outstanding amount due under this Note into
fully paid and non-assessable shares of Common Stock, as such
Common Stock exists on the Issue Date, or any shares of capital
stock or other securities of the Borrower into which such Common
Stock shall hereafter be changed or reclassified at the conversion
price (the “Conversion Price”) determined as provided
herein (a “Conversion”); provided, however, that in no event shall
the Holder be entitled to convert any portion of this Note in
excess of that portion of this Note upon conversion of which the
sum of (1) the number of shares of Common Stock beneficially owned
by the Holder and its affiliates (other than shares of Common Stock
which may be deemed beneficially owned through the ownership of the
unconverted portion of the Notes or the unexercised or unconverted
portion of any other security of the Borrower subject to a
limitation on conversion or exercise analogous to the limitations
contained herein) and (2) the number of shares of Common Stock
issuable upon the conversion of the portion of this Note with
respect to which the determination of this proviso is being made,
would result in beneficial ownership by the Holder and its
affiliates of more than 4.9% of the outstanding shares of Common
Stock. For purposes of the proviso to the immediately preceding
sentence, beneficial ownership shall be determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and Regulation 13D-G
thereunder, except as otherwise provided in clause (1) of such
proviso, provided, further, however, that the limitations
on conversion may be waived by the Holder upon, at the election of
the Holder, not less than 61 days’ prior notice to the
Borrower, and the provisions of the conversion limitation shall
continue to apply until such 61st day (or such later date, as
determined by the Holder, as may be specified in such notice of
waiver). The number of shares of Common Stock to be issued upon
each Conversion of this Note (“Conversion Shares”)
shall be determined by dividing the Conversion Amount (as defined
below) by the applicable Conversion Price then in effect on the
date specified in the notice of conversion, in the form attached
hereto as Exhibit A (the “Notice of Conversion”),
delivered to the Borrower by the Holder in accordance with Section
1.4 below; provided that the Notice of Conversion is submitted by
facsimile or e-mail (or by other means resulting in, or reasonably
expected to result in, notice) to the Borrower before 11:59 p.m.,
New York, New York time on such conversion date (the
“Conversion Date”). The term “Conversion
Amount” means, with respect to any Conversion of this Note,
the sum of (1) the principal amount of this Note to be converted in
such Conversion, plus (2) accrued and
unpaid interest, if any, on such principal amount being converted
at the interest rates provided in this Note to the Conversion Date,
plus (3) at
the Holder’s option, Default Interest, if any, on the amounts
referred to in the immediately preceding clauses (1) and/or
(2), plus (4) any
Additional Principal for such Conversion, plus (5) at the
Holder’s option, any amounts owed to the Holder pursuant to
Sections 1.2(c) and 1.4(g) hereof.

 

 

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1.2. Conversion
Price.

 

a) Calculation of Conversion
Price. The conversion price hereunder (the
“Conversion Price”) shall equal the lower of: (i) the
closing sale price of the Common Stock on the Principal Market on
the Trading Day immediately preceding the Closing Date, and (ii)
50% of either the lowest sale price for the Common Stock on the
Principal Market during the twenty five (25) consecutive Trading
Days including and immediately preceding the Conversion Date, or
the closing bid price, whichever is lower, provided, however, if the
Company’s share price at any time loses the bid (ex: 0.0001
on the ask with zero market makers on the bid on level 2), then the
Conversion Price may, in the Holder’s sole and absolute
discretion, be reduced to a fixed conversion price of 0.00001 (if
lower than the conversion price otherwise), and provided, that if on the date of
delivery of the Conversion Shares to the Holder, or any date
thereafter while Conversion Shares are held by the Holder, the
closing bid price per share of Common Stock on the Principal Market
on the Trading Day on which the Common Shares are traded is less
than the sale price per share of Common Stock on the Principal
Market on the Trading Day used to calculate the Conversion Price
hereunder, then such Conversion Price shall be automatically
reduced such that the Conversion Price shall be recalculated using
the new low closing bid price (“Adjusted Conversion
Price”) and shall replace the Conversion Price above, and
Holder shall be issued a number of additional shares such that the
aggregate number of shares Holder receives is based upon the
Adjusted Conversion Price, and provided, further, that the Conversion
Price shall be subject to Section 1.2(b) below. For the purpose of
clarity, any shares required to be issued as a result of an
Adjusted Conversion Price shall be deemed to be “Conversion
Shares” under this Note. If an
Event of Default under Section 3.9 of the Note has occurred,
Holder, in its sole discretion, may elect to use a Conversion Price
which shall equal the lower of: (i) the closing sale price of the
Common Stock on the Principal Market on the Trading Day immediately
preceding the Closing Date; (ii) 50% of either the lowest sale
price or the closing bid price, whichever is lower
for the Common Stock on the Principal
Market during any Trading Day in which the Event of Default has not
been cured. If such Common Stock is not traded on the OTCBB,
OTCQB, OTC Pink, NASDAQ or NYSE, then such sale price shall be the
sale price of such security on the principal securities exchange or
trading market where such security is listed or traded or, if no
sale price of such security is available in any of the foregoing
manners, the average of the closing bid prices of any market makers
for such security that are listed in the “pink sheets”
by the National Quotation Bureau, Inc. If such sale price cannot be
calculated for such security on such date in the manner provided
above, such price shall be the fair market value as mutually
determined by the Borrower and the Holder. If the Borrower’s
Common stock is chilled for deposit at DTC, becomes chilled at any
point while this Note remains outstanding or deposit or other
additional fees are payable due to a Yield Sign, Stop Sign or other
trading restrictions, or if the closing sale price at any time
falls below $1.00 (as appropriately and equitably adjusted for
stock splits, stock dividends, stock contributions and similar
events), then such 50% figure specified in clause 1.2(a)(ii) above
shall be reduced to 35%. In the event that the shares of the
Borrower’s Common Stock are not deliverable via DWAC
following the conversion of any amount hereunder, an additional 5%
discount will be attributed to the Conversion Price. Additionally,
the Borrower acknowledges that it will
take all reasonable steps necessary or appropriate, including
providing a board of directors resolution authorizing the issuance
of common stock to Holder. So long as the requested sale may be
made pursuant to Rule 144, the Company agrees to accept an opinion
of counsel to the Holder confirming the rights of the Holder to
sell shares of Common Stock issuable or issued to Holder on
conversion of this Note pursuant to Rule 144 as promulgated by the
SEC (“Rule 144”), as such Rule 144 may be in effect
from time to time, which opinion will be issued at the
Company’s expense and the conversion dollar amount will be
reduced by $750.00 to cover the cost of such legal opinion.
“Trading Day” shall mean any day on which the Common
Stock is tradable for any period on the OTC Pink, or on the
principal securities exchange or other securities market on which
the Common Stock is then being traded. Additionally, if the Company
ceases to be a reporting company pursuant to the 1934 Act or if the
Note cannot be converted into free trading shares after 181 days
from the issuance date, an additional 15% discount will be
attributed to the Conversion Price for any and all Conversions
submitted thereafter.

 

 

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b) If at any time the
Conversion Price as determined hereunder for any Conversion would
be less than the par value of the Common Stock, then the Conversion
Price hereunder shall equal such par value for such Conversion and
the Conversion Amount for such Conversion shall be increased to
include Additional Principal, where “Additional
Principal” means such additional amount to be added to the
Conversion Amount to the extent necessary to cause the number of
Conversion Shares issuable upon such Conversion to equal the same
number of Conversion Shares as would have been issued had the
Conversion Price not been subject to the minimum price set forth in
this Section 1.2(b).

 

c) Without in any way
limiting the Holder’s right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree
that if delivery of the free trading shares of Common Stock
issuable upon conversion of this Note is not delivered by the
Deadline (as defined below) the Borrower shall pay to the Holder
$1,000.00 per day in cash, for each day beyond the Deadline that
the Borrower fails to deliver such Common Stock. Such cash amount
shall be paid to Holder by the fifth day of the month following the
month in which it has accrued or, at the option of the Holder,
shall be added to the principal amount of this Note, in which event
interest shall accrue thereon in accordance with the terms of this
Note and such additional principal amount shall be convertible into
Common Stock in accordance with the terms of this Note. The
Borrower agrees that the right to convert this Note is a valuable
right to the Holder. The damages resulting from a failure, attempt
to frustrate, or interference with such conversion right are
difficult if not impossible to quantify. Accordingly the parties
acknowledge that the liquidated damages provision contained in this
Section are justified.

 

1.3. Authorized
Shares. The Borrower covenants that the Borrower will at all
times while this Note is outstanding reserve from its authorized
and unissued Common Stock a sufficient number of shares, free from
preemptive rights, to provide for the issuance of Common Stock upon
the full conversion or adjustment of this Note. The Borrower is
required at all times to have authorized and reserved ten (10)
times the number of shares that is actually issuable upon full
conversion or adjustment of this Note (based on the Conversion
Price of the Notes in effect from time to time)(the “Reserved
Amount”). Initially, the Company will instruct the Transfer
Agent to reserve eight hundred thirty-five thousand (835,000)
shares of common stock in the name of the Holder for issuance upon
conversion hereof. The Borrower represents that upon issuance, such
shares will be duly and validly issued, fully paid and
non-assessable. In addition, if the Borrower shall issue any
securities or make any change to its capital structure which would
change the number of shares of Common Stock into which this Note
shall be convertible at the then current Conversion Price, the
Borrower shall at the same time make proper provision so that
thereafter there shall be a sufficient number of shares of Common
Stock authorized and reserved, free from preemptive rights, for
conversion of this Note in full. The Borrower (i) acknowledges that
it has irrevocably instructed its transfer agent to issue
certificates for the Common Stock issuable upon conversion of this
Note, and (ii) agrees that its issuance of this Note shall
constitute full authority to its officers and agents who are
charged with the duty of executing stock certificates to execute
and issue the necessary certificates for shares of Common Stock in
accordance with the terms and conditions of this Note.

 

If, at
any time the Borrower does not maintain the Reserved Amount it will
be considered an Event of Default under Section 3.2 of the
Note.

 

 

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1.4. Method
of Conversion.

 

a) Mechanics of Conversion.
Subject to Section 1.1, this Note may be converted by the Holder in
whole or in part at any time and from time to time after the Issue
Date, by submitting to the Borrower a Notice of Conversion (by
facsimile, e-mail or other reasonable means of communication
dispatched on the Conversion Date prior to 11:59 p.m., New York,
New York time).

 

b) Book Entry upon Conversion.
Notwithstanding anything to the contrary set forth herein, upon
conversion of this Note in accordance with the terms hereof, the
Holder shall not be required to physically surrender this Note to
the Borrower unless the entire unpaid principal amount of this Note
is so converted. The Holder and the Borrower shall maintain records
showing the principal amount so converted and the dates of such
conversions or shall use such other method, reasonably satisfactory
to the Holder and the Borrower, so as not to require physical
surrender of this Note upon each such conversion. In the event of
any dispute or discrepancy, such records of the Borrower
shall, prima facie, be controlling and
determinative in the absence of manifest error. Notwithstanding the
foregoing, if any portion of this Note is converted as aforesaid,
the Holder may not transfer this Note unless the Holder first
physically surrenders this Note to the Borrower, whereupon the
Borrower will forthwith issue and deliver upon the order of the
Holder a new Note of like tenor, registered as the Holder (upon
payment by the Holder of any applicable transfer taxes) may
request, representing in the aggregate the remaining unpaid
principal amount of this Note. The Holder and any assignee, by
acceptance of this Note, acknowledge and agree that, by reason of
the provisions of this paragraph, following conversion of a portion
of this Note, the unpaid and unconverted principal amount of this
Note represented by this Note may be less than the amount stated on
the face hereof.

 

c) Payment of Taxes. The Borrower
shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of
shares of Common Stock or other securities or property on
conversion of this Note in a name other than that of the Holder (or
in street name), and the Borrower shall not be required to issue or
deliver any such shares or other securities or property unless and
until the person or persons (other than the Holder or the custodian
in whose street name such shares are to be held for the
Holder’s account) requesting the issuance thereof shall have
paid to the Borrower the amount of any such tax or shall have
established to the satisfaction of the Borrower that such tax has
been paid.

 

d) Delivery of Common Stock upon
Conversion. Upon receipt by the Borrower from the
Holder of a facsimile transmission or e-mail (or other reasonable
means of communication) of a Notice of Conversion meeting the
requirements for conversion as provided in this Section 1.4 or upon
an event triggering the calculation of an Adjusted Conversion
Price, the Borrower shall issue and deliver or cause to be issued
and delivered to or upon the order of the Holder certificates for
the Common Stock issuable upon such conversion within three (3)
business days after such receipt or such an event (the
“Deadline”) (and, solely in the case of conversion of
the entire unpaid principal amount hereof, surrender of this Note)
in accordance with the terms hereof and the Purchase
Agreement.

 

 

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e) Obligation of Borrower to Deliver
Common Stock. Upon receipt by the Borrower of a duly and
properly executed Notice of Conversion or upon an event triggering
the calculation of an Adjusted Conversion Price, the Holder shall
be deemed to be the holder of record of the Common Stock issuable
upon such conversion or as a result of an Adjusted Conversion
Price, the outstanding principal amount and the amount of accrued
and unpaid interest on this Note shall be reduced to reflect such
conversion or adjustment, and, unless the Borrower defaults on its
obligations under this Article I, all rights with respect to the
portion of this Note being so converted shall forthwith terminate
except the right to receive the Common Stock or other securities,
cash or other assets, as herein provided, on such conversion. If
the Holder shall have given a Notice of Conversion as provided
herein or upon an event triggering the calculation of an Adjusted
Conversion Price, the Borrower’s obligation to issue and
deliver the certificates for Common Stock shall be absolute and
unconditional, irrespective of the absence of any action by the
Holder to enforce the same, any waiver or consent with respect to
any provision thereof, the recovery of any judgment against any
person or any action to enforce the same, any failure or delay in
the enforcement of any other obligation of the Borrower to the
holder of record, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the
Holder of any obligation to the Borrower, and irrespective of any
other circumstance which might otherwise limit such obligation of
the Borrower to the Holder in connection with such conversion. The
Conversion Date specified in the Notice of Conversion shall be the
Conversion Date so long as the Notice of Conversion is received by
the Borrower before 11:59 p.m., New York, New York time, on such
date.

 

f) Delivery of Common Stock by Electronic
Transfer. In lieu of delivering physical certificates
representing the Common Stock issuable upon conversion, provided
the Borrower is participating in the Depository Trust Company
(“DTC”) Fast Automated Securities Transfer
(“FAST”) program, upon request of the Holder and its
compliance with the provisions contained in Section 1.1 and in this
Section 1.4, the Borrower shall use its best efforts to cause its
transfer agent to electronically transmit the Common Stock issuable
upon conversion or upon an event triggering the calculation of an
Adjusted Conversion Price to the Holder by crediting the account of
Holder’s Prime Broker with DTC through its Deposit Withdrawal
Agent Commission (“DWAC”) system.

 

g) Failure to Deliver Common Stock Prior
to Deadline. Without in any way limiting the
Holder’s right to pursue other remedies, including actual
damages and/or equitable relief, the parties agree that if delivery
of the Common Stock issuable upon conversion or adjustment of this
Note is not delivered by the Deadline, the Borrower shall pay to
the Holder $1,000.00 per day in cash, for each day beyond the
Deadline that the Borrower fails to deliver such Common Stock to
the Holder. Such cash amount shall be paid to Holder by the fifth
day of the month following the month in which it has accrued or, at
the option of the Holder, shall be added to the principal amount of
this Note, in which event interest shall accrue thereon in
accordance with the terms of this Note and such additional
principal amount shall be convertible into Common Stock in
accordance with the terms of this Note. The Borrower agrees that
the right to convert and/or receive shares in the event of an
adjustment is a valuable right to the Holder. The damages resulting
from a failure, attempt to frustrate, or interference with such
conversion or adjustment right are difficult if not impossible to
qualify. Accordingly the parties acknowledge that the liquidated
damages provision contained in this Section 1.4(g) are
justified.

 

 

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h) The
Borrower acknowledges that it will take all reasonable steps
necessary or appropriate, including accepting an opinion of counsel
to Holder confirming the rights of Holder to sell shares of Common
Stock issued to Holder on conversion or adjustment of the Note
pursuant to Rule 144 as promulgated by the SEC (“Rule 144"),
as such Rule may be in effect from time to time. So long as the
requested sale may be made pursuant to Rule 144 the Borrower agrees
to accept an opinion of counsel to the Holder which opinion will be
issued at the Borrower’s expense.

 

i) Charges and
Expenses. Issuance of
Common Stock to Holder, or any of its assignees, upon the
conversion of this Note shall be made without charge to the Holder
for any issuance fee, transfer tax, legal opinion and related
charges, postage/mailing charge or any other expense with respect
to the issuance of such Common Stock. Company shall pay all
Transfer Agent fees incurred from the issuance of the Common Stock
to Holder, as well as any and all other fees and charges required
by the Transfer Agent as a condition to effectuate such
issuance. That notwithstanding, the Holder may in the interest
of securing issuance and/or delivery of Common Stock before the
Deadline, at any time from time to time, in its sole discretion
elect to pay any such fees or charges upfront, and Company
agrees that any such fees or charges as noted in this Section that
are paid by the Holder (whether from the Company’s delays,
outright refusal to pay, Holder’s interest in securing
issuance and/or delivery of Common Stock before the
Deadline, or otherwise), will be at Company’s
expense, and the conversion amount will automatically be
reduced by that dollar amount to cover the cost of the fees or
charges as noted in this Section.  

 

1.5. Restricted
Securities. The shares of Common Stock issuable upon
conversion or adjustment of this Note may not be sold or
transferred unless (i) such shares are sold pursuant to an
effective registration statement under the Act or (ii) the Borrower
or its transfer agent shall have been furnished with an opinion of
counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to
the effect that the shares to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration or
(iii) such shares are sold or transferred pursuant to Rule 144
under the Act (or a successor rule) (“Rule 144”) or
(iv) such shares are transferred to an “affiliate” (as
defined in Rule 144) of the Borrower who agrees to sell or
otherwise transfer the shares only in accordance with this Section
1.5 and who is an Accredited Investor (as defined in the Purchase
Agreement). Any legend set forth on any stock certificate
evidencing any Conversion Shares shall be removed and the Borrower
shall issue to the Holder a new certificate therefore free of any
transfer legend if (i) the Borrower or its transfer agent shall
have received an opinion of counsel
  form,  substance  and  scope  customary  for
opinions of counsel in  comparable transactions, to the
effect that a  public sale or  transfer of such
Common Stock may be made without registration under the Act, which
opinion shall be reasonably acceptable to the  Company,
or (ii) in the case of the Common Stock issued or issuable upon
conversion of this Note, such security is registered for sale by
the Holder under an effective registration statement filed under
the Act or otherwise may be sold pursuant to Rule 144 without any
restriction as to the number of securities as of a particular date
that can then be immediately sold.

 

 

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1.6. Effect
of Certain Events.

 

a) Effect of Merger, Consolidation,
Etc. At the option of the Holder, the sale, conveyance or
disposition of all or substantially all of the assets of the
Borrower, the effectuation by the Borrower of a transaction or
series of related transactions in which more than 50% of the voting
power of the Borrower is disposed of, or the consolidation, merger
or other business combination of the Borrower with or into any
other Person (as defined below) or Persons when the Borrower is not
the survivor shall either: (i) be deemed to be an Event of Default
(as defined in Article III) pursuant to which the Borrower shall be
required to pay to the Holder upon the consummation of and as a
condition to such transaction an amount equal to the Default Amount
(as defined in Article III) or (ii) be treated pursuant to Section
1.6(b) hereof. “Person” shall mean any individual,
corporation, limited liability company, partnership, association,
trust or other entity or organization.

 

b) Adjustment Due to Merger,
Consolidation, Etc. If, at any time when this Note is issued
and outstanding and prior to conversion of all of the Notes, there
shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a
result of which shares of Common Stock of the Borrower shall be
changed into the same or a different number of shares of another
class or classes of stock or securities of the Borrower or another
entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Borrower other than in
connection with a plan of complete liquidation of the Borrower,
then the Holder of this Note shall thereafter have the right to
receive upon conversion of this Note, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the Holder would have been
entitled to receive in such transaction had this Note been
converted in full immediately prior to such transaction (without
regard to any limitations on conversion set forth herein), and in
any such case appropriate provisions shall be made with respect to
the rights and interests of the Holder of this Note to the end that
the provisions hereof (including, without limitation, provisions
for adjustment of the Conversion Price and of the number of shares
issuable upon conversion of the Note) shall thereafter be
applicable, as nearly as may be practicable in relation to any
securities or assets thereafter deliverable upon the conversion
hereof. The Borrower shall not affect any transaction described in
this Section 1.6(b) unless (a) it first gives, to the extent
practicable, thirty (30) days prior written notice (but in any
event at least fifteen (15) days prior written notice) of the
record date of the special meeting of shareholders to approve, or
if there is no such record date, the consummation of, such merger,
consolidation, exchange of shares, recapitalization, reorganization
or other similar event or sale of assets (during which time, for
clarification, the Holder shall be entitled to convert this Note)
and (b) the resulting successor or acquiring entity assumes by
written instrument the obligations of this Section 1.6(b). The
above provisions shall similarly apply to successive
consolidations, mergers, sales, transfers or share
exchanges.

 

 

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c) Adjustment Due to Distribution.
If the Borrower shall declare or make any distribution of its
assets (or rights to acquire its assets) to holders of Common Stock
as a dividend, stock repurchase, by way of return of capital or
otherwise (including any dividend or distribution to the
Borrower’s shareholders in cash or shares (or rights to
acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a “Distribution”), then the Holder of this
Note shall be entitled, upon any conversion of this Note after the
date of record for determining shareholders entitled to such
Distribution, to receive the amount of such assets which would have
been payable to the Holder with respect to the shares of Common
Stock issuable upon such conversion had such Holder been the holder
of such shares of Common Stock on the record date for the
determination of shareholders entitled to such Distribution. Such
assets shall be held in escrow by the Company pending any such
conversion

 

d) Purchase Rights. If, at any
time when any Notes are issued and outstanding, the Borrower issues
any convertible securities or rights to purchase stock, warrants,
securities or other property (the “Purchase Rights”)
pro rata to the record holders of any class of Common Stock, then
the Holder of this Note will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights
which such Holder could have acquired if such Holder had held the
number of shares of Common Stock acquirable upon complete
conversion of this Note (without regard to any limitations on
conversion contained herein) immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase
Rights or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.

 

e) Stock Dividends and Stock
Splits. If the Company, at any time while this Note is
outstanding: (A) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on
shares of Common Stock or any securities convertible into or
exercisable for Common Stock; (B) subdivides outstanding shares of
Common Stock into a larger number of shares; (C) combines
(including by way of a reverse stock split) outstanding shares of
Common Stock into a smaller number of shares; or (D) issues, in the
event of a reclassification of shares of the Common Stock, any
shares of capital stock of the Company, then the Conversion Price
(and each sale or bid price used in determining the Conversion
Price) shall be multiplied by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding
immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after
such event. Any adjustment made pursuant to this Section shall
become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.

 

f) Notice of Adjustments. Upon the
occurrence of each adjustment or readjustment of the Conversion
Price as a result of the events described in this Section 1.6, the
Borrower, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to the Holder a certificate
setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The
Borrower shall, upon the written request at any time of the Holder,
furnish to such Holder a like certificate setting forth (i) such
adjustment or readjustment, (ii) the Conversion Price at the time
in effect and (iii) the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time
would be received upon conversion of the Note.

 

 

-9-

 

 

1.7. Revocation.
If any Conversion Shares are not received by the Deadline, the
Holder may revoke the applicable Conversion pursuant to which such
Conversion Shares were issuable. This Note shall remain convertible
after the Maturity Date hereof until this Note is repaid or
converted in full.

 

1.8. Prepayment.
Notwithstanding anything to the contrary contained in this Note,
subject to the terms of this Section, at any time during the period
beginning on the Issue Date and ending on the date which is six (6)
months following the Issue Date (“Prepayment Termination
Date”), Borrower shall have the right, exercisable on not
less than five (5) Trading Days prior written notice to the Holder
of this Note, to prepay the outstanding balance on this Note
(principal and accrued interest), in full, in accordance with this
Section. Any notice of prepayment hereunder (an “Optional
Prepayment Notice”) shall be delivered to the Holder of the
Note at its registered addresses and shall state: (1) that the
Borrower is exercising its right to prepay the Note, and (2) the
date of prepayment which shall be not more than ten (10) Trading
Days from the date of the Optional Prepayment Notice. On the date
fixed for prepayment (the “Optional Prepayment Date”),
the Borrower shall make payment of the Optional Prepayment Amount
(as defined below) to or upon the order of the Holder as specified
by the Holder in writing to the Borrower at least one (1) business
day prior to the Optional Prepayment Date.  If the Borrower
exercises its right to prepay the Note, the Borrower shall make
payment to the Holder of an amount in cash (the “Optional
Prepayment Amount”) equal to the Prepayment Factor (as
defined below), multiplied by the sum of: (w) the then outstanding
principal amount of this Note plus (x) accrued and unpaid
interest on the unpaid principal amount of this Note to the
Optional Prepayment Date plus (y) Default Interest,
if any, on the amounts referred to in clauses (w) and
(x) plus (z) any amounts owed to
the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the
Borrower delivers an Optional Prepayment Notice and fails to pay
the Optional Prepayment Amount due to the Holder of the Note within
two (2) business days following the Optional Prepayment Date, the
Borrower shall forever forfeit its right to prepay the Note
pursuant to this Section. After the Prepayment Termination Date,
the Borrower shall have no right to prepay this Note. For purposes
hereof, the “Prepayment Factor” shall equal one hundred
and fifty percent (150%), provided that such Prepayment factor
shall equal one hundred and thirty five percent (135%) if the
Optional Prepayment Date occurs on or before the date which is
ninety (90) days following the Issue Date hereof.

 

ARTICLE
II. CERTAIN COVENANTS

 

2.1. Distributions
on Capital Stock. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not without the
Holder’s written consent (a) pay, declare or set apart for
such payment, any dividend or other distribution (whether in cash,
property or other securities) on shares of capital stock other than
dividends on shares of Common Stock solely in the form of
additional shares of Common Stock or (b) directly or indirectly or
through any subsidiary make any other payment or distribution in
respect of its capital stock except for distributions pursuant to
any shareholders’ rights plan which is approved by a majority
of the Borrower’s disinterested directors.

 

 

-10-

 

 

2.2. Restriction
on Stock Repurchases. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not without the
Holder’s written consent redeem, repurchase or otherwise
acquire (whether for cash or in exchange for property or other
securities or otherwise) in any one transaction or series of
related transactions any shares of capital stock of the Borrower or
any warrants, rights or options to purchase or acquire any such
shares.

 

2.3. Borrowings;
Liens. Notwithstanding section 4(l) of the Purchase
Agreement, so long as the Borrower shall have any obligation under
this Note, the Borrower shall not (i) create, incur, assume
guarantee, endorse, contingently agree to purchase or otherwise
become liable upon the obligation of any person, firm, partnership,
joint venture or corporation, except by the endorsement of
negotiable instruments for deposit or collection, or suffer to
exist any liability for borrowed money, except (a) borrowings in
existence or committed on the date hereof and of which the Borrower
has informed Holder in writing prior to the date hereof, or (b)
indebtedness to trade creditors or financial institutions incurred
in the ordinary course of business, or (ii) enter into, create or
incur any liens, claims or encumbrances of any kind, on or with
respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits
therefrom, securing any indebtedness occurring after the date
hereof.

 

2.4. Sale
of Assets. So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder’s
written consent, sell, lease or otherwise dispose of any
significant portion of its assets outside the ordinary course of
business. Any consent to the disposition of any assets may be
conditioned on a specified use of the proceeds of
disposition.

 

2.5. Advances
and Loans. So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder’s
written consent, lend money, give credit or make advances to any
person, firm, joint venture or corporation, including, without
limitation, officers, directors, employees, subsidiaries and
affiliates of the Borrower, except loans, credits or advances in
existence or committed on the date hereof and which the Borrower
has informed Holder in writing prior to the date
hereof.

 

2.6. Charter.
So long as the Borrower shall have any obligations under this Note,
the Borrower shall not amend its charter documents, including
without limitation its certificate of incorporation and bylaws, in
any manner that materially and adversely affects any rights of the
Holder.

 

2.7. Transfer
Agent. The Borrower shall not change its transfer agent
without the prior written consent of the Holder. Any resignation by
the transfer agent without a replacement transfer agent consented
to by the Holder prior to such replacement taking effect shall
constitute an Event of Default hereunder.

 

ARTICLE
III. EVENTS OF DEFAULT

 

Any one
or more of the following events which shall occur and/or be
continuing shall constitute an event of default (each, an
“Event of Default”):

 

 

-11-

 

 

3.1. Failure
to Pay Principal or Interest. The Borrower fails to pay
the principal hereof or interest thereon when due on this Note,
whether at maturity, upon acceleration or otherwise.

 

3.2. Conversion
and the Shares. The Borrower fails to issue shares of
Common Stock to the Holder (or announces or threatens in writing
that it will not honor its obligation to do so at any time
following the execution hereof or) upon exercise by the Holder of
the conversion rights of the Holder in accordance with the terms of
this Note, fails to transfer or cause its transfer agent to
transfer (issue) (electronically or in certificated form) any
certificate for shares of Common Stock issued to the Holder upon
conversion of or otherwise pursuant to this Note as and when
required by this Note, the Borrower directs its transfer agent not
to transfer or delays, impairs, and/or hinders its transfer agent
in transferring (or issuing) (electronically or in certificated
form) any certificate for shares of Common Stock to be issued to
the Holder upon conversion of or otherwise pursuant to this Note as
and when required by this Note, or fails to remove (or directs its
transfer agent not to remove or impairs, delays, and/or hinders its
transfer agent from removing) any restrictive legend (or to
withdraw any stop transfer instructions in respect thereof) on any
certificate for any shares of Common Stock issued to the Holder
upon conversion of or otherwise pursuant to this Note as and when
required by this Note (or makes any written announcement, statement
or threat that it does not intend to honor the obligations
described in this paragraph) and any such failure shall continue
uncured (or any written announcement, statement or threat not to
honor its obligations shall not be rescinded in writing) for five
(5) business days after the Holder shall have delivered a Notice of
Conversion. It is an obligation of the Borrower to remain current
in its obligations to its transfer agent. It shall be an event of
default of this Note, if a conversion of this Note is delayed,
hindered or frustrated due to a balance owed by the Borrower to its
transfer agent. If at the option of the Holder, the Holder advances
any funds to the Borrower’s transfer agent in order to
process a conversion, such advanced funds shall be paid by the
Borrower to the Holder within forty eight (48) hours of a demand
from the Holder.

 

3.3. Breach
of Covenants. The Borrower breaches any material covenant or
other material term or condition contained in this Note and any
collateral documents including but not limited to the Purchase
Agreement and such breach continues for a period of three (3) days
after written notice (via email) thereof to the Borrower from the
Holder.

 

3.4. Breach
of Representations and Warranties. Any representation or
warranty of the Borrower made herein or in any agreement, statement
or certificate given in writing pursuant hereto or in connection
herewith (including, without limitation, the Purchase Agreement),
shall be false or misleading in any material respect when made and
the breach of which has (or with the passage of time will have) a
material adverse effect on the rights of the Holder with respect to
this Note or the Purchase Agreement.

 

3.5. Receiver
or Trustee. The Borrower or any subsidiary of the Borrower
shall make an assignment for the benefit of creditors, or apply for
or consent to the appointment of a receiver or trustee for it or
for a substantial part of its property or business, or such a
receiver or trustee shall otherwise be appointed.

 

3.6. Judgments.
Any money judgment, writ or similar process shall be entered or
filed against the Borrower or any subsidiary of the Borrower or any
of its property or other assets for more than $50,000.00, and shall
remain unvacated, unbonded or unstayed for a period of twenty (20)
days unless otherwise consented to by the Holder, which consent
will not be unreasonably withheld.

 

 

-12-

 

 

3.7. Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings
or other proceedings, voluntary or involuntary, for relief under
any bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Borrower or any subsidiary of the
Borrower.

 

3.8. Delisting
of Common Stock. The Borrower shall fail to maintain the
listing of the Common Stock on at least one of the OTCBB, or OTCQB,
OTC Pink or an equivalent replacement exchange, NASDAQ, the NYSE or
AMEX.

 

3.9. Failure
to Comply with the Exchange Act. The Borrower shall fail to
comply in any material respect with the reporting requirements of
the Exchange Act; and/or the Borrower shall cease to be subject to
the reporting requirements of the Exchange Act.

 

3.10. Liquidation.  Any
dissolution, liquidation, or winding up of Borrower or any
substantial portion of its business.

 

3.11. Cessation
of Operations.  Any cessation of operations by
Borrower or Borrower admits it is otherwise generally unable to pay
its debts as such debts become due, provided, however, that any
disclosure of the Borrower’s ability to continue as a
“going concern” shall not be an admission that the
Borrower cannot pay its debts as they become due.

 

3.12. Maintenance
of Assets.  The failure by Borrower, during the
term of this Note, to maintain any material intellectual property
rights, personal, real property or other assets which are necessary
to conduct its business (whether now or in the
future).

 

3.13. Financial
Statement Restatement.  The restatement of any
financial statements filed by the Borrower with the SEC for any
date or period from two years prior to the Issue Date of this Note
and until this Note is no longer outstanding, if the result of such
restatement would, by comparison to the unrestated financial
statement, have constituted a material adverse effect on the rights
of the Holder with respect to this Note or the Purchase
Agreement.

 

3.14. Reverse
Splits. The Borrower effectuates a reverse split of its
Common Stock without twenty (20) days prior written notice to the
Holder.

 

3.15. Replacement
of Transfer Agent. In the event that the Borrower proposes
to replace its transfer agent, the Borrower fails to provide, prior
to the effective date of such replacement, a fully executed
Irrevocable Transfer Agent Instructions in a form as initially
delivered pursuant to the Purchase Agreement (including but not
limited to the provision to irrevocably reserve shares of Common
Stock in the Reserved Amount) signed by the successor transfer
agent to Borrower and the Borrower.

 

3.16. Cross-Default.
Notwithstanding anything to the contrary contained in this Note or
the other related or companion documents, a breach or default by
the Borrower of any covenant or other term or condition contained
in any of the Other Agreements, after the passage of all applicable
notice and cure or grace periods, shall, at the option of the
Holder, be considered a default under this Note and the Other
Agreements, in which event the Holder shall be entitled (but in no
event required) to apply all rights and remedies of the Holder
under the terms of this Note and the Other Agreements by reason of
a default under said Other Agreement or
hereunder. “Other Agreements” means, collectively,
all agreements and instruments between, among or by: (1) the
Borrower, and, or for the benefit of, (2) the Holder and any
affiliate of the Holder, including, without limitation, promissory
notes; provided, however, the term “Other Agreements”
shall not include the related or companion documents to this Note.
Each of the loan transactions will be cross-defaulted with each
other loan transaction and with all other existing and future debt
of Borrower to the Holder.

 

 

-13-

 

 

Upon
the occurrence and during the continuation of any Event of Default
specified in Section 3.1 (solely with respect to failure to pay the
principal hereof or interest thereon when due at the Maturity
Date), the Note shall become immediately due and payable and the
Borrower shall pay to the Holder, in full satisfaction of its
obligations hereunder, an amount equal to the Default Sum (as
defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF
ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL
BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO
THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN
AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN);
MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the
continuation of any Event of Default specified in Sections 3.1
(solely with respect to failure to pay the principal hereof or
interest thereon when due on this Note upon a Trading Market
Prepayment Event pursuant to Section 1.7 or upon acceleration),
3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, 3.17, 3.18 and/or
3. 15 exercisable through the delivery of written notice to the
Borrower by such Holders (the “Default Notice”), and
upon the occurrence of an Event of Default specified in the
remaining sections of Articles III (other than failure to pay the
principal hereof or interest thereon at the Maturity Date specified
in Section 3,1 hereof), the Note shall become immediately due and
payable and the Borrower shall pay to the Holder, in full
satisfaction of its obligations hereunder, an amount equal to the
greater of (i) 150% times the sum of (w) the then
outstanding principal amount of this Note plus (x) accrued and
unpaid interest on the unpaid principal amount of this Note to the
date of payment (the “Mandatory Prepayment
Date”) plus (y) Default Interest,
if any, on the amounts referred to in clauses (w) and/or
(x) plus (z) any amounts owed
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then
outstanding principal amount of this Note to the date of
payment plus the amounts referred
to in clauses (x), (y) and (z) shall collectively be known as the
“Default Sum”) or (ii) the “parity value”
of the Default Sum to be prepaid, where parity value means (a) the
highest number of shares of Common Stock issuable upon conversion
of or otherwise pursuant to such Default Sum in accordance with
Article I, treating the Trading Day immediately preceding the
Mandatory Prepayment Date as the “Conversion Date” for
purposes of determining the lowest applicable Conversion Price,
unless the Default Event arises as a result of a breach in respect
of a specific Conversion Date in which case such Conversion Date
shall be the Conversion Date), multiplied by (b) the
highest Closing Price for the Common Stock during the period
beginning on the date of first occurrence of the Event of Default
and ending one day prior to the Mandatory Prepayment Date (the
“Default Amount”) and all other amounts payable
hereunder shall immediately become due and payable, all without
demand, presentment or notice, all of which hereby are expressly
waived, together with all costs, including, without limitation,
legal fees and expenses, of collection, and the Holder shall be
entitled to exercise all other rights and remedies available at law
or in equity.

 

If the
Borrower fails to pay the Default Amount within five (5) business
days of written notice that such amount is due and payable, then
the Holder shall have the right at any time, so long as the
Borrower remains in default (and so long and to the extent that
there are sufficient authorized shares), to require the Borrower,
upon written notice, to immediately issue, in lieu of the Default
Amount, the number of shares of Common Stock of the Borrower equal
to the Default Amount divided by the Conversion Price then in
effect. The Holder may still convert any amounts due hereunder,
including without limitation the Default Sum, until such time as
this Note has been repaid in full.

 

 

-14-

 

 

3.17.
Inside Information.
The Borrower or its officers, directors, and/or affiliates attempt
to transmit, convey, disclose, or any actual transmittal,
conveyance, or disclosure by the Borrower or its officers,
directors, and/or affiliates of, material non-public information
concerning the Borrower, to the Holder or its successors and
assigns, which is not immediately cured by Borrower’s filing
of a Form 8-K pursuant to Regulation FD on that same
date.

 

3.18
Bid Price. The
Borrower shall lose the “bid” price for its Common
Stock ($0.0001 on the “Ask” with zero market makers on
the “Bid” per Level 2) and/or a market (including the
OTC Pink, OTCQB or an equivalent replacement
exchange).

 

ARTICLE
IV. MISCELLANEOUS

 

4.1. Failure
or Indulgence Not Waiver. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or
privileges. All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies
otherwise available.

 

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

 

4.3. Amendments.
This Note and any provision hereof may only be amended by an
instrument in writing signed by the Borrower and the Holder. The
term “Note” and all reference thereto, as used
throughout this instrument, shall mean this instrument (and the
other Notes issued pursuant to the Purchase Agreement) as
originally executed, or if later amended or supplemented, then as
so amended or supplemented.

 

4.4. Assignability.
This Note shall be binding upon the Borrower and its successors and
assigns, and shall inure to be the benefit of the Holder and its
successors and assigns. Each transferee of this Note must be an
“accredited investor” (as defined in Rule 501(a) of the
1933 Act). Notwithstanding anything in this Note to the contrary,
this Note may be pledged as collateral in connection with
a bona fide margin account or other lending
arrangement.

 

 

-15-

 

 

4.5. Cost
of Collection. If default is made in the payment of this
Note, the Borrower shall pay the Holder hereof costs of collection,
including reasonable attorneys’ fees.

 

4.6. Governing
Law. This Note shall
be governed by and construed in accordance with the laws of the
State of Nevada without regard to conflicts of laws principles that
would result in the application of the substantive laws of another
jurisdiction.  Any action brought by either party against
the other concerning the transactions contemplated by this
Agreement must be brought only in the civil or state courts of New
York or in the federal courts located in the State and county of
New York.  Both parties and the individual signing this
Agreement on behalf of the Borrower agree to submit to the
jurisdiction of such courts.  The prevailing party shall
be entitled to recover from the other party its reasonable
attorney’s fees and costs.  In the event that any
provision of this Note is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or unenforceability of
any other provision of this Note. Nothing contained herein shall be
deemed or operate to preclude the Holder from bringing suit or
taking other legal action against the Borrower in any other
jurisdiction to collect on the Borrower’s obligations to
Holder, to realize on any collateral or any other security for such
obligations, or to enforce a judgment or other decision in favor of
the Holder.  This Note shall be
deemed an unconditional obligation of Borrower for the payment of
money and, without limitation to any other remedies of Holder, may
be enforced against Borrower by summary proceeding pursuant to New
York Civil Procedure Law and Rules Section 3213 or any similar rule
or statute in the jurisdiction where enforcement is
sought.  For purposes of such rule or statute, any other
document or agreement to which Holder and Borrower are parties or
which Borrower delivered to Holder, which may be convenient or
necessary to determine Holder’s rights hereunder or
Borrower’s obligations to Holder are deemed a part of this
Note, whether or not such other document or agreement was delivered
together herewith or was executed apart from this
Note.

 

4.7. Certain
Amounts. Whenever pursuant to this Note the Borrower is
required to pay an amount in excess of the outstanding principal
amount (or the portion thereof required to be paid at that time)
plus accrued and unpaid interest plus Default Interest on such
interest, the Borrower and the Holder agree that the actual damages
to the Holder from the receipt of cash payment on this Note may be
difficult to determine and the amount to be so paid by the Borrower
represents stipulated damages and not a penalty and is intended to
compensate the Holder in part for loss of the opportunity to
convert this Note and to earn a return from the sale of shares of
Common Stock acquired upon conversion of this Note at a price in
excess of the price paid for such shares pursuant to this Note. The
Borrower and the Holder hereby agree that such amount of stipulated
damages is not plainly disproportionate to the possible loss to the
Holder from the receipt of a cash payment without the opportunity
to convert this Note into shares of Common Stock.

 

 

-16-

 

 

4.8. Disclosure.
Upon receipt or delivery by the Company of any notice in accordance
with the terms of this Note, unless the Company has in good faith
determined that the matters relating to such notice do not
constitute material, non-public information relating to the Company
or any of its Subsidiaries, the Company shall within one (1)
Trading Day after any such receipt or delivery, publicly disclose
such material, non-public information on a Current Report on Form
8-K or otherwise. In the event that the Company believes that a
notice contains material, non-public information relating to the
Company or any of its Subsidiaries, the Company so shall indicate
to such Holder contemporaneously with delivery of such notice, and
in the absence of any such indication, the Holder shall be allowed
to presume that all matters relating to such notice do not
constitute material, non-public information relating to the Company
or its Subsidiaries.

 

4.9. Notice
of Corporate Events. Except as otherwise provided below, the
Holder of this Note shall have no rights as a Holder of Common
Stock unless and only to the extent that it converts this Note into
Common Stock. The Borrower shall provide the Holder with prior
notification of any meeting of the Borrower’s shareholders
(and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Borrower of a
record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend or
other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation,
reclassification or recapitalization) any share of any class or any
other securities or property, or to receive any other right, or for
the purpose of determining shareholders who are entitled to vote in
connection with any proposed sale, lease or conveyance of all or
substantially all of the assets of the Borrower or any proposed
liquidation, dissolution or winding up of the Borrower, the
Borrower shall mail a notice to the Holder, at least twenty (20)
days prior to the record date specified therein (or thirty (30)
days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such record is to
be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and
character of such dividend, distribution, right or other event to
the extent known at such time. The Borrower shall make a public
announcement of any event requiring notification to the Holder
hereunder substantially simultaneously with the notification to the
Holder in accordance with the terms of this Section
4.9.

 

4.10. Remedies.
The Borrower acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transaction contemplated hereby.
Accordingly, the Borrower acknowledges that the remedy at law for a
breach of its obligations under this Note will be inadequate and
agrees, in the event of a breach or threatened breach by the
Borrower of the provisions of this Note, that the Holder shall be
entitled, in addition to all other available remedies at law or in
equity, and in addition to the penalties assessable herein, to an
injunction or injunctions restraining, preventing or curing any
breach of this Note and to enforce specifically the terms and
provisions thereof, without the necessity of showing economic loss
and without any bond or other security being required.

 

4.11. Usury.
This Note shall be subject to the anti-usury limitations contained
in the Purchase Agreement.

 

 

-17-

 

 

IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by its duly authorized officer as of the Issue Date first set
forth above.

 

 

SINCERITY APPLIED MATERIALS HOLDINGS CORP

 

 

	

By:

	

 /s/
Zhang Yiwen

	
 

	
 

	

Name:
Zhang Yiwen

	
 

	
 

	

Title:
CEO

	
 

 

 

 

 

 

 

 

 

 

 

EXHIBIT
A

NOTICE
OF CONVERSION

 

The
undersigned hereby elects to convert principal under the 12%
Convertible Note of SINCERITY APPLIED MATERIALS HOLDINGS CORP., a
Nevada corporation (the Company”), into shares of
common stock (the “Common Stock”), of the
Company according to the conditions hereof, as of the date written
below. If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if
any.

By the
delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Common Stock
does not exceed the amounts specified under Section 1.1 of this
Note, as determined in accordance with Section 13(d) of the
Exchange Act.

The
undersigned agrees to comply with the prospectus delivery
requirements under the applicable securities laws in connection
with any transfer of the aforesaid shares of Common Stock pursuant
to any prospectus.

Conversion
calculations:

	
 

	

Issue
Date of Note: 

Date to
Effect Conversion: 

 

Conversion
Price: 

 

Principal Amount of
Note to be Converted: 

Less
applicable fees under the Note: 

Amount
of Note to be Converted: 

 

Interest Accrued on
Account

of
Conversion at Issue: 

 

Additional
Principal on Account of Conversion

Pursuant to Section
1.2(b) of the Note: 

 

Number
of shares of Common Stock
to be issued: 

Remaining Balance
of Note*: 

 

Signature:                                                                                     

 

Name: 

 

Address
for Delivery of Common Stock Certificates: 

 

 

 

Or

 

DWAC
Instructions:

Broker
No:     

Account
No:

 

*Sum
provided does not include accrued interestBlueprint

 

Exhibit
10.3

 

 

 

 

REGISTRATION RIGHTS AGREEMENT

 

 

This
Registration Rights Agreement (this “Agreement”) is made and
entered into as of December 19, 2017, SINCERITY APPLIED MATERIALS
HOLDINGS CORP., a Nevada corporation (the “Company”) and each of the
purchasers signatory hereto (each such purchaser, a
“Purchaser” and,
collectively, the “Purchasers”).

 

               This
Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof, between the Company and each Purchaser
(the “Purchase
Agreement”).

 

               The
Company and each Purchaser hereby agrees as follows:

 

        1.                       

Definitions

 

               Capitalized
terms used and not otherwise defined herein that are defined in the
Purchase Agreement shall have the meanings given such terms in the
Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:

 

“Advice” shall have the
meaning set forth in Section 6(d).

 

“Commission” means the
United States Securities and Exchange Commission.

 

“Effectiveness Date”
means, with respect to the Initial Registration Statement required
to be filed hereunder, the 180th calendar day
following the Closing Date, and with respect to any additional
Registration Statements which may be required pursuant to Section
2(c) or Section 3(c), the 60th calendar day
following the date on which an additional Registration Statement is
required to be filed hereunder; provided, if such Effectiveness
Date falls on a day that is not a Trading Day, then the
Effectiveness Date shall be the next succeeding Trading Day, and
provided further, that in the event that the applicable
Registration Statement is subject to a full review by the
Commission, then such date shall be extended by 30
days.

 

“Effectiveness Period”
shall have the meaning set forth in Section 2(a).

 

“Event” shall have the
meaning set forth in Section 2(b).

 

“Event Date” shall have
the meaning set forth in Section 2(b).

 

“Filing Date” means the
30th
calendar day following the date hereof.

 

 

 

-1-

 

 

“Holder” or
“Holders” means the holder
or holders, as the case may be, from time to time of Registrable
Securities.

 

“Indemnified Party” shall
have the meaning set forth in Section 5(c).

 

“Indemnifying Party” shall
have the meaning set forth in Section 5(c).

 

“Losses” shall have the
meaning set forth in Section 5(a).

 

“Plan of Distribution”
shall have the meaning set forth in Section 2(a).

 

“Prospectus” means the
prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated by
the Commission pursuant to the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable Securities
covered by a Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments,
and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.

 

“Registrable Securities”
means (i) seven times the number of shares of Common Stock that is
actually issuable or issued upon full conversion of the Note
(without regard to any conversion or exercise limitations therein),
(ii) any additional shares of Common Stock issuable in connection
with any anti-dilution provisions in the Purchase Agreement, Note
and (iii) any securities issued or issuable upon any stock split,
dividend or other distribution, recapitalization or similar event
with respect to the foregoing.

 

“Registration Statement”
means the registration statement required to be filed hereunder and
any additional registration statements contemplated by Section
3(c), including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including
pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by
reference in such registration statement.

 

 “Rule
415” means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended or
interpreted from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.

 

“Rule 424” means Rule 424
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.

 

 

-2-

 

 

“SEC Guidance” means (i)
any publicly-available written or oral guidance, comments,
requirements or requests of the Commission staff and (ii) the
Securities Act.

 

“Trading Day” means the
hours of 9:00 a.m. (Eastern Time) through 5:00 p.m. (Eastern Time)
of a day other than a Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required
to be closed.

 

2.                       

Company Registration

 

(a) On or prior to each
Filing Date, the Company shall prepare and file with the Commission
a Registration Statement covering the resale of all Registrable
Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form
S-1 or, if the Company is so eligible, on Form S-3 (except if the
Company is not then eligible to register for resale the Registrable
Securities on Form S-1 or Form S-3, as the case may be, in which
case such registration shall be on another appropriate form in
accordance herewith) and shall contain substantially the
“Plan of
Distribution” attached hereto as Annex A. Subject to the terms
of this Agreement, the Company shall use its reasonable best
efforts to cause a Registration Statement to be declared effective
under the Securities Act as promptly as possible after the filing
thereof, but in any event prior to the applicable Effectiveness
Date, and shall use its reasonable best efforts to keep such
Registration Statement continuously effective under the Securities
Act until all Registrable Securities covered by such Registration
Statement have been sold, or may be sold without volume
restrictions, notice or manner of sale requirements pursuant to
Rule 144, including without limitation 144(i), as determined by the
counsel to the Company pursuant to a written opinion letter to such
effect, addressed and reasonably acceptable to the Transfer Agent
and the affected Holders that such securities may be sold without
registration and may be issued without legends thereon (the
“Effectiveness
Period”). The Company shall telephonically request
effectiveness of a Registration Statement as of 5:00 p.m. New York
City time on a Trading Day. The Company shall immediately notify
the Holders via facsimile or by e-mail of the effectiveness of a
Registration Statement on the same Trading Day that the Company
telephonically confirms effectiveness with the Commission, which
shall be the date requested for effectiveness of such Registration
Statement. The Company shall, by 9:30 a.m. New York City time on
the Trading Day after the effective date of such Registration
Statement, file a final Prospectus with the Commission as required
by Rule 424. Failure to so notify the Holder within 1 Trading Day
of such notification of effectiveness or failure to file a final
Prospectus as foresaid shall be deemed an Event under Section
2(b).

 

 

-3-

 

 

(b) If: (i) the
Registration Statement is not filed on or prior to its Filing Date
(if the Company files the Registration Statement without affording
the Holders the opportunity to review and comment on the same as
required by Section 3(a) herein, the Company shall be deemed to
have not satisfied this clause (i)), or (ii) the Company fails to
file with the Commission a request for acceleration of a
Registration Statement in accordance with Rule 461 promulgated by
the Commission pursuant to the Securities Act, within five Trading
Days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that such
Registration Statement will not be “reviewed” or will
not be subject to further review, or (iii) prior to the effective
date of a Registration Statement, the Company fails to file a
pre-effective amendment and otherwise respond in writing to
comments made by the Commission in respect of such Registration
Statement within 15 calendar days after the receipt of comments by
or notice from the Commission that such amendment is required in
order for such Registration Statement to be declared effective, or
(iv) as to, in the aggregate among all Holders on a pro-rata basis
based on their purchase of the Securities pursuant to the Purchase
Agreement, a Registration Statement registering for resale all of
the Registrable Securities is not declared effective by the
Commission by the Effectiveness Date of the Registration Statement,
or (v) all of the Registrable Securities are not registered for
resale pursuant to one or more effective Registration Statements on
or before the Effectiveness Date (except as may be limited by the
Commission pursuant to its authority with respect to “Rule
415”), or (vi) after the effective date of a Registration
Statement, such Registration Statement ceases for any reason to
remain continuously effective as to all Registrable Securities
included in such Registration Statement, or the Holders are
otherwise not permitted to utilize the Prospectus therein to resell
such Registrable Securities, for more than 10 consecutive calendar
days or more than an aggregate of 20 calendar days (which need not
be consecutive calendar days) during any 12-month period (any such
failure or breach being referred to as an “Event”, and for purposes
of clause (i), (iv) and (v) the date on which such Event occurs,
and for purpose of clause (ii) the date on which such five Trading
Day period is exceeded, and for purpose of clause (iii) the date
which such 10 calendar day period is exceeded, and for purpose of
clause (vi) the date on which such 10 or 20 calendar day period, as
applicable, is exceeded being referred to as “Event Date”), then, in
addition to any other rights the Holders may have hereunder or
under applicable law, on each such Event Date and on each monthly
anniversary of each such Event Date (if the applicable Event shall
not have been cured by such date) until the applicable Event is
cured, the Company shall pay to each Holder an amount in cash, as
partial liquidated damages and not as a penalty, equal to 1.5% of
the aggregate purchase price paid by such Holder pursuant to the
Purchase Agreement for any unregistered Registrable Securities then
held by such Holder, up to a maximum of 24% of the Purchase Price
of such Purchaser’s Notes. The partial liquidated damages
pursuant to the terms hereof shall apply on a daily pro rata basis
for any portion of a month prior to the cure of an Event.
Notwithstanding the foregoing, the Company shall not be required to
make any payments pursuant to this Section if an Event occurred at
such time that all Registrable Securities are eligible for resale
pursuant to Rule 144 (without volume restrictions or current public
information requirements) promulgated by the Commission pursuant to
the Securities Act; provided, further, that the Company shall
not be required to make any payments pursuant to this Section with
respect to any Registrable Securities the Company is unable to
register due to limits imposed by the SEC Guidance on Rule 415
under the Securities Act.

 

 

-4-

 

 

(c) Notwithstanding the
registration obligations set forth in this Section, if the
Commission informs the Company that all of the Registrable
Securities cannot, as a result of the application of Rule 415, be
registered for resale as a secondary offering on a single
registration statement, the Company agrees to promptly inform each
of the Holders thereof and use its commercially reasonable efforts
to file amendments to the Registration Statement as required by the
Commission, covering the maximum number of Registrable Securities
permitted to be registered by the Commission, on Form S-3 or such
other form available to register for resale the Registrable
Securities as a secondary offering; provided, however, that prior to filing
such amendment, the Company shall be obligated to use diligent
efforts to advocate with the Commission for the registration of all
of the Registrable Securities in accordance with the SEC Guidance,
including without limitation, Compliance and Disclosure
Interpretation 612.09.

 

(d) Notwithstanding any
other provision of this Agreement, if the Commission or any SEC
Guidance sets forth a limitation on the number of Registrable
Securities permitted to be registered on a particular Registration
Statement as a secondary offering (and notwithstanding that the
Company used diligent efforts to advocate with the Commission for
the registration of all or a greater portion of Registrable
Securities), unless otherwise directed in writing by a Holder as to
its Registrable Securities, the number of Registrable Securities to
be registered on such Registration Statement will be reduced by
Registrable Securities represented by Conversion Shares, as defined
in the Note (applied, in the case that some Conversion Shares may
be registered, to the Holders on a pro rata basis based on the
total number of unregistered Conversion Shares held by such
Holders. In the event of a cutback hereunder, the Company shall
give the Holder at least 5 Trading Days prior written notice along
with the calculations as to such Holder’s
allotment.

 

(e) In
the event of a cutback hereunder, the Company shall give the Holder
at least five (5) Trading Days prior written notice along with the
calculations as to such Holder’s allotment. In the event the
Company amends the Initial Registration Statement in accordance
with the foregoing, the Company will use its reasonable best
efforts to file with the Commission, as promptly as allowed by the
Commission or SEC Guidance provided to the Company or to
registrants of securities in general, one or more registration
statements on Form S-3 or such other form available to register for
resale those Registrable Securities that were not registered for
resale on the Initial Registration Statement, as
amended.

 

3.            

Registration
Procedures.

 

               In
connection with the Company’s registration obligations
hereunder, the Company shall:

 

 

-5-

 

 

(a) Not less than 5
Trading Days prior to the filing of each Registration Statement and
not less than one Trading Day prior to the filing of any related
Prospectus or any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated
therein by reference), the Company shall (i) furnish to each Holder
copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by
reference) will be subject to the review of such Holders and (ii)
cause its officers and directors, counsel and independent certified
public accountants to respond to such inquiries as shall be
necessary, in the reasonable opinion of respective counsel to each
Holder, to conduct a reasonable investigation within the meaning of
the Securities Act. The Company shall not file a Registration
Statement or any such Prospectus or any amendments or supplements
thereto to which the Holders of a majority of the Registrable
Securities shall reasonably object in good faith, provided that the
Company is notified of such objection in writing no later than 5
Trading Days after the Holders have been so furnished copies of a
Registration Statement or 1 Trading Day after the Holders have been
so furnished copies of any related Prospectus or amendments or
supplements thereto. No selling stockholders other than the
Purchaser, and no securities other than those held by the Purchase,
shall be included in and covered by the Registration Statement
without the prior written consent of the Purchaser, which shall not
be unreasonably withheld.

 

(b) (i) Prepare and
file with the Commission such amendments, including post-effective
amendments, to a Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep a Registration
Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement (subject to the
terms of this Agreement), and, as so supplemented or amended, to be
filed pursuant to Rule 424; (iii) respond as promptly as reasonably
possible to any comments received from the Commission with respect
to a Registration Statement or any amendment thereto and provide as
promptly as reasonably possible to the Holders true and complete
copies of all correspondence from and to the Commission relating to
a Registration Statement (provided that the Company may excise any
information contained therein which would constitute material
non-public information as to any Holder which has not executed a
confidentiality agreement with the Company); and (iv) comply in all
material respects with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all Registrable
Securities covered by a Registration Statement during the
applicable period in accordance (subject to the terms of this
Agreement) with the intended methods of disposition by the Holders
thereof set forth in such Registration Statement as so amended or
in such Prospectus as so supplemented.

 

(c) If during the
Effectiveness Period, the number of Registrable Securities at any
time exceeds 100% of the number of shares of Common Stock then
registered in a Registration Statement, then the Company shall file
as soon as reasonably practicable, but in any case prior to the
applicable Filing Date, an additional Registration Statement
covering the resale by the Holders of not less than the number of
such Registrable Securities.

 

 

-6-

 

 

(d) Notify the Holders
of Registrable Securities to be sold (which notice shall, pursuant
to clauses (iii) through (vi) hereof, be accompanied by an
instruction to suspend the use of the Prospectus until the
requisite changes have been made) as promptly as reasonably
possible (and, in the case of (i)(A) below, not less than one
Trading Day prior to such filing) and (if requested by any such
Person) confirm such notice in writing no later than one Trading
Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to a Registration Statement
is proposed to be filed; (B) when the Commission notifies the
Company whether there will be a “review” of such
Registration Statement and whenever the Commission comments in
writing on such Registration Statement; and (C) with respect to a
Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or
any other federal or state governmental authority for amendments or
supplements to a Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission or
any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement covering
any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) of the receipt by the Company of
any notification with respect to the suspension of the
qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose; (v)
of the occurrence of any event or passage of time that makes the
financial statements included in a Registration Statement
ineligible for inclusion therein or any statement made in a
Registration Statement or Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to a Registration
Statement, Prospectus or other documents so that, in the case of a
Registration Statement or the Prospectus, as the case may be, it
will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading; and (vi) of the occurrence or
existence of any pending corporate development with respect to the
Company that the Company believes may be material and that, in the
determination of the Company, makes it not in the best interest of
the Company to allow continued availability of a Registration
Statement or Prospectus, provided that any and all of such
information shall remain confidential to each Holder until such
information otherwise becomes public, unless disclosure by a Holder
is required by law; provided, further, that notwithstanding
each Holder’s agreement to keep such information
confidential, each such Holder makes no acknowledgement that any
such information is material, non-public information.

 

(e) Use its best
efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any order stopping or suspending the
effectiveness of a Registration Statement, or (ii) any suspension
of the qualification (or exemption from qualification) of any of
the Registrable Securities for sale in any jurisdiction, at the
earliest practicable moment.

 

(f) Furnish to each
Holder, without charge, at least one conformed copy of each such
Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference to the extent
requested by such Person, and all exhibits to the extent requested
by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such
documents with the Commission; provided, that any such item which
is available on the EDGAR system need not be furnished in physical
form.

 

 

-7-

 

 

(g) Subject to the
terms of this Agreement, the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of
the selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment
or supplement thereto, except after the giving of any notice
pursuant to Section 3(d).

 

(h)  The Company
shall cooperate with any broker-dealer through which a Holder
proposes to resell its Registrable Securities in effecting a filing
with the FINRA Corporate Financing Department pursuant to FINRA
Rule 5110, as requested by any such Holder, and the Company shall
pay the filing fee required by such filing within 2 Business Days
of written request therefor.

 

(i) Prior to any resale
of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the
selling Holders in connection with the registration or
qualification (or exemption from the Registration or qualification)
of such Registrable Securities for the resale by the Holder under
the securities or Blue Sky laws of such jurisdictions within the
United States as any Holder reasonably requests in writing, to keep
each registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and to do any and all
other acts or things reasonably necessary to enable the disposition
in such jurisdictions of the Registrable Securities covered by each
Registration Statement; provided, that the Company shall not be
required to qualify generally to do business in any jurisdiction
where it is not then so qualified, subject the Company to any
material tax in any such jurisdiction where it is not then so
subject or file a general consent to service of process in any such
jurisdiction.

 

(j) If requested by a
Holder, cooperate with such Holders to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the
extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holder may
request.

 

(k) Upon
the occurrence of any event contemplated by Section 3(d), as
promptly as reasonably possible under the circumstances taking into
account the Company’s good faith assessment of any adverse
consequences to the Company and its stockholders of the premature
disclosure of such event, prepare a supplement or amendment,
including a post-effective amendment, to a Registration Statement
or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered,
neither a Registration Statement nor such Prospectus will contain
an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading. If
the Company notifies the Holders in accordance with clauses (iii)
through (vi) of Section 3(d) above to suspend the use of any
Prospectus until the requisite changes to such Prospectus have been
made, then the Holders shall suspend use of such Prospectus. The
Company will use its best efforts to ensure that the use of the
Prospectus may be resumed as promptly as is practicable. The
Company shall be entitled to exercise its right under this Section
3(k) to suspend the availability of a Registration Statement and
Prospectus, subject to the payment of partial liquidated damages
otherwise required pursuant to Section 2(b), for a period not to
exceed 60 calendar days (which need not be consecutive days) in any
12 month period.

 

 

-8-

 

 

(l) Comply with all
applicable rules and regulations of the Commission.

 

(m) The Company may
require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially
owned by such Holder and, if required by the Commission, the
natural persons thereof that have voting and dispositive control
over the shares. During any periods that the Company is unable to
meet its obligations hereunder with respect to the registration of
the Registrable Securities solely because any Holder fails to
furnish such information within three Trading Days of the
Company’s request, any liquidated damages that are accruing
at such time as to such Holder only shall be tolled and any Event
that may otherwise occur solely because of such delay shall be
suspended as to such Holder only, until such information is
delivered to the Company.

 

3.

Registration Expenses. All fees
and expenses incident to the performance of or compliance with this
Agreement by the Company shall be borne by the Company whether or
not any Registrable Securities are sold pursuant to a Registration
Statement. The Holder may withhold and offset the balance of such
amount from the payment of its Purchase Price (as defined in the
Purchase Agreement) at the closing of the transaction described in
the Purchase Agreement. The fees and expenses referred to in the
foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees
and expenses of the Company’s counsel and auditors and up to
$2,500 of fees and expenses of a single counsel for the Holders)
(A) with respect to filings made with the Commission, (B) with
respect to filings required to be made with any Trading Market on
which the Common Stock is then listed for trading, (C) in
compliance with applicable state securities or Blue Sky laws
reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in
connection with Blue Sky qualifications or exemptions of the
Registrable Securities) and (D) if not previously paid by the
Company in connection with an Issuer Filing, with respect to any
filing that may be required to be made by any broker through which
a Holder intends to make sales of Registrable Securities with the
FINRA pursuant to Rule 5110, so long as the broker is receiving no
more than a customary brokerage commission in connection with such
sale, (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities),
(iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company, (v) Securities Act
liability insurance, if the Company so desires such insurance, and
(vi) fees and expenses of all other Persons retained by the Company
in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be
responsible for all of its internal expenses incurred in connection
with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting
duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder. In no
event shall the Company be responsible for any broker or similar
commissions of any Holder or, except to the extent provided for in
the Transaction Documents, any legal fees or other costs of the
Holders.

 

 

-9-

 

 

5.            

Indemnification.

 

(a) Indemnification by the Company.
The Company shall, notwithstanding any termination of this
Agreement, indemnify and hold harmless each Holder, the officers,
directors, members, partners, agents, brokers (including brokers
who offer and sell Registrable Securities as principal as a result
of a pledge or any failure to perform under a margin call of Common
Stock), investment advisors and employees (and any other Persons
with a functionally equivalent role of a Person holding such
titles, notwithstanding a lack of such title or any other title) of
each of them, each Person who controls any such Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, members, shareholders,
partners, agents and employees (and any other Persons with a
functionally equivalent role of a Person holding such titles,
notwithstanding a lack of such title or any other title) of each
such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation,
reasonable attorneys’ fees) and expenses (collectively,
“Losses”), as incurred,
arising out of or relating to (1) any untrue or alleged untrue
statement of a material fact contained in a Registration Statement,
any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or supplement
thereto, in light of the circumstances under which they were made)
not misleading or (2) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act or any state
securities law, or any rule or regulation thereunder, in connection
with the performance of its obligations under this Agreement,
except to the extent, but only to the extent, that (i) such untrue
statements or omissions are based solely upon information regarding
such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information
relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in a
Registration Statement, such Prospectus or in any amendment or
supplement thereto (it being understood that the Holder has
approved Annex A hereto for this purpose) or (ii) in the case of an
occurrence of an event of the type specified in Section
3(d)(iii)-(vi), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing
that the Prospectus is outdated or defective and prior to the
receipt by such Holder of the Advice contemplated in Section 6(d).
The Company shall notify the Holders promptly of the institution,
threat or assertion of any Proceeding arising from or in connection
with the transactions contemplated by this Agreement of which the
Company is aware.

 

 

-10-

 

 

(b) Indemnification by Holders.
Each Holder shall, severally and not jointly, indemnify and hold
harmless the Company, its directors, officers, agents and
employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable
law, from and against all Losses, as incurred, to the extent
arising out of or based solely upon: (x) such Holder’s
failure to comply with the prospectus delivery requirements of the
Securities Act or (y) any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, any
Prospectus, or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not
misleading (i) to the extent, but only to the extent, that such
untrue statement or omission is contained in any information so
furnished in writing by such Holder to the Company specifically for
inclusion in such Registration Statement or such Prospectus or (ii)
to the extent that such information relates to such Holder’s
proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly
for use in a Registration Statement (it being understood that the
Holder has approved Annex A hereto for this purpose), such
Prospectus or in any amendment or supplement thereto or (ii) in the
case of an occurrence of an event of the type specified in Section
3(d)(iii)-(vi), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing
that the Prospectus is outdated or defective and prior to the
receipt by such Holder of the Advice contemplated in Section 6(d).
In no event shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.

 

(c) Conduct of Indemnification
Proceedings. If any Proceeding shall be brought or asserted
against any Person entitled to indemnity hereunder (an
“Indemnified
Party”), such Indemnified Party shall promptly notify
the Person from whom indemnity is sought (the “Indemnifying Party”) in
writing, and the Indemnifying Party shall have the right to assume
the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees
and expenses incurred in connection with defense thereof; provided,
that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have prejudiced the
Indemnifying Party.

 

 

-11-

 

 

               An
Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party or Parties unless: (1) the Indemnifying
Party has agreed in writing to pay such fees and expenses; (2) the
Indemnifying Party shall have failed promptly to assume the defense
of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and
counsel to the Indemnified Party shall reasonably believe that a
material conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party
notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense
of the Indemnified Party and the reasonable fees and expenses of no
more than one separate counsel shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for
any settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld or
delayed. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a
party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.

 

               Subject
to the terms of this Agreement, all reasonable fees and expenses of
the Indemnified Party (including reasonable fees and expenses to
the extent incurred in connection with investigating or preparing
to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred,
within ten Trading Days of written notice thereof to the
Indemnifying Party; provided, that the Indemnified Party shall
promptly reimburse the Indemnifying Party for that portion of such
fees and expenses applicable to such actions for which such
Indemnified Party is judicially determined to be not entitled to
indemnification hereunder.

 

(d) Contribution. If the
indemnification under Section 5(a) or 5(b) is unavailable to an
Indemnified Party or insufficient to hold an Indemnified Party
harmless for any Losses, then each Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party,
in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party and Indemnified Party in connection with
the actions, statements or omissions that resulted in such Losses
as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Party
shall be determined by reference to, among other things, whether
any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information
supplied by, such Indemnifying Party or Indemnified Party, and the
parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any
Losses shall be deemed to include, subject to the limitations set
forth in this Agreement, any reasonable attorneys’ or other
fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for
such fees or expenses if the indemnification provided for in this
Section was available to such party in accordance with its
terms.

 

 

-12-

 

 

              The
parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not
take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of
this Section 5(d), no Holder shall be required to contribute, in
the aggregate, any amount in excess of the amount by which the net
proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount
of any damages that such Holder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or
alleged omission.

 

The
indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.

 

        6.                       
Miscellaneous.

 

(a) Remedies. In the event of a
breach by the Company or by a Holder of any of their respective
obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery
of damages, shall be entitled to specific performance of its rights
under this Agreement. The Company and each Holder agree that
monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such
breach, it shall not assert or shall waive the defense that a
remedy at law would be adequate.

 

(b) Compliance. Each Holder
covenants and agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to a
Registration Statement.

 

(c) Discontinued Disposition. By
its acquisition of Registrable Securities, each Holder agrees that,
upon receipt of a notice from the Company of the occurrence of any
event of the kind described in Section 3(d)(iii) through (vi), such
Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until it is advised in
writing (the “Advice”) by the Company
that the use of the applicable Prospectus (as it may have been
supplemented or amended) may be resumed. The Company will use its
best efforts to ensure that the use of the Prospectus may be
resumed as promptly as is practicable. The Company agrees and
acknowledges that any periods during which the Holder is required
to discontinue the disposition of the Registrable Securities
hereunder shall be subject to the provisions of Section
2(b).

 

 

-13-

 

 

(d) Amendments and Waivers. The
provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and waivers
or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the
Company and the Holders of at least 67% of the then outstanding
Registrable Securities (including, for this purpose any Registrable
Securities issuable upon exercise or conversion of any Security).
If a Registration Statement does not register all of the
Registrable Securities pursuant to a waiver or amendment done in
compliance with the previous sentence, then the number of
Registrable Securities to be registered for each Holder shall be
reduced pro rata among all Holders and each Holder shall have the
right to designate which of its Registrable Securities shall be
omitted from such Registration Statement. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof
with respect to a matter that relates exclusively to the rights of
a Holder or some Holders and that does not directly or indirectly
affect the rights of other Holders may be given by such Holder or
Holders of all of the Registrable Securities to which such waiver
or consent relates; provided, however, that the provisions of
this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the first sentence of this
Section 6(d).

 

(e) Notices. Any and all notices or
other communications or deliveries required or permitted to be
provided hereunder shall be delivered as set forth in the Purchase
Agreement.

 

(f) Successors and Assigns. This
Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of each of the parties and shall
inure to the benefit of each Holder. The Company may not assign
(except by merger) its rights or obligations hereunder without the
prior written consent of all of the Holders of the then outstanding
Registrable Securities. Each Holder may assign their respective
rights hereunder in the manner and to the Persons as permitted
under the Purchase Agreement.

 

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

 

(h) Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Agreement shall be determined in accordance
with the provisions of the Purchase Agreement.

 

(i) Cumulative Remedies. The
remedies provided herein are cumulative and not exclusive of any
other remedies provided by law.

 

 

-14-

 

 

(j) Severability. If any term,
provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.

 

(k) Headings. The headings in this
Agreement are for convenience only, do not constitute a part of the
Agreement and shall not be deemed to limit or affect any of the
provisions hereof.

 

(l) Independent Nature of Holders’
Obligations and Rights. The obligations of each Holder
hereunder are several and not joint with the obligations of any
other Holder hereunder, and no Holder shall be responsible in any
way for the performance of the obligations of any other Holder
hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any
Holder pursuant hereto or thereto, shall be deemed to constitute
the Holders as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such obligations
or the transactions contemplated by this Agreement. Each Holder
shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it
shall not be necessary for any other Holder to be joined as an
additional party in any proceeding for such purpose.

 

 

********************

 

 

 

-15-

 

 

               IN
WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

 

 

 

	

SINCERITY APPLIED MATERIALS HOLDINGS CORP.

 

 

	

By:
/s/ Zhang
Yiwen

Name:
Zhang Yiwen

Title:
CEO

	
 

 

 

 

 

 

	

EMA FINANCIAL, LLC

 

 

	

By:
/s/ Jamie
Beitler

     Name:
Jamie Beitler

     Title:
Authorized Signatory

 

 

 

 

 

 

 

Annex A

 

Plan of Distribution

 

Each
Selling Stockholder (the “Selling Stockholders”) of
the common stock and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of
their shares of common stock on the Nasdaq Stock Market or any
other stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. A Selling Stockholder may use any one
or more of the following methods when selling shares:

 

●

ordinary brokerage
transactions and transactions in which the broker-dealer solicits
purchasers;

 

●

block trades in
which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;

 

●

purchases by a
broker-dealer as principal and resale by the broker-dealer for its
account;

 

●

an exchange
distribution in accordance with the rules of the applicable
exchange;

 

●

privately
negotiated transactions;

 

●

settlement of short
sales entered into after the effective date of the registration
statement of which this prospectus is a part;

 

●

broker-dealers may
agree with the Selling Stockholders to sell a specified number of
such shares at a stipulated price per share;

 

●

through the writing
or settlement of options or other hedging transactions, whether
through an options exchange or otherwise;

 

●

a combination of
any such methods of sale; or

 

●

any other method
permitted pursuant to applicable law.

 

The
Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the “Securities Act”), if
available, rather than under this prospectus.

 

 

 

 

Broker-dealers
engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated, but, except as set forth in
a supplement to this Prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in
compliance with FINRA NASD Rule 2440; and in the case of a
principal transaction a markup or markdown in compliance with NASD
IM-2440.

 

In
connection with the sale of the common stock or interests therein,
the Selling Stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn
engage in short sales of the common stock in the course of hedging
the positions they assume. The Selling Stockholders may also sell
shares of the common stock short and deliver these securities to
close out their short positions, or loan or pledge the common stock
to broker-dealers that in turn may sell these securities. The
Selling Stockholders may also enter into option or other
transactions with broker-dealers or other financial institutions or
the creation of one or more derivative securities which require the
delivery to such broker-dealer or other financial institution of
shares offered by this prospectus, which shares such broker-dealer
or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).

 

The
Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be
“underwriters” within the meaning of the Securities Act
in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
Each Selling Stockholder has informed the Company that it does not
have any written or oral agreement or understanding, directly or
indirectly, with any person to distribute the Common Stock. In no
event shall any broker-dealer receive fees, commissions and markups
which, in the aggregate, would exceed eight percent
(8%).

 

The
Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the shares. The Company
has agreed to indemnify the Selling Stockholders against certain
losses, claims, damages and liabilities, including liabilities
under the Securities Act.

 

Because
Selling Stockholders may be deemed to be “underwriters”
within the meaning of the Securities Act, they will be subject to
the prospectus delivery requirements of the Securities Act
including Rule 172 thereunder. In addition, any securities covered
by this prospectus which qualify for sale pursuant to Rule 144
under the Securities Act may be sold under Rule 144 rather than
under this prospectus. There is no underwriter or coordinating
broker acting in connection with the proposed sale of the resale
shares by the Selling Stockholders.

 

 

 

 

We agreed to keep this prospectus
effective until the earlier of (i) the date on which the shares may
be resold by the Selling Stockholders without registration and
without regard to any volume limitations by reason of Rule 144
under the Securities Act or any other rule of similar effect or
(ii) all of the shares have been sold pursuant to this prospectus
or Rule 144 under the Securities Act or any other rule of similar
effect. The resale shares will be sold only through registered or
licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares
may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied
with.

 

Under
applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale shares may not
simultaneously engage in market making activities with respect to
the common stock for the applicable restricted period, as defined
in Regulation M, prior to the commencement of the distribution. In
addition, the Selling Stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of
purchases and sales of shares of the common stock by the Selling
Stockholders or any other person. We will make copies of this
prospectus available to the Selling Stockholders and have informed
them of the need to deliver a copy of this prospectus to each
purchaser at or prior to the time of the sale (including by
compliance with Rule 172 under the Securities Act).

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