Document:

Exhibit

Exhibit 10.1

SUBSCRIPTION ESCROW AGREEMENT 

THIS SUBSCRIPTION ESCROW AGREEMENT dated as of August 3, 2020 (this “Agreement”), is entered into among Preferred Capital Securities, LLC (the “Dealer Manager”), Prospect Capital Corporation (the “Issuer”) and UMB Bank, National Association, a national banking association, as escrow agent (the “Escrow Agent”).

WHEREAS, the Issuer intends to raise cash funds from Investors (as defined below) pursuant to a public offering (the “Offering”) of up to 40,000,000 shares of preferred stock, having a purchase price of $25.00 per share of preferred stock (for an aggregate offering amount of $1,000,000,000), consisting of (i) shares of Series A1 Preferred Stock, par value $0.001 per share of the Issuer, (ii) shares of Series M1 Preferred Stock, par value $0.001 per share of the Issuer, (iii) shares of Series M2 Preferred Stock, par value $0.001 per share, of the Issuer (collectively, the “Securities”), pursuant to the registration statement on Form N-2 of the Issuer (No. 333-236415) (as amended, the “Offering Document”). 

WHEREAS, the Escrow Agent is willing to accept appointment as escrow agent only for the express duties set forth herein.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:

1.     Proceeds to be Escrowed.  On or before the date the Issuer begins selling the Securities, the Issuer shall establish an escrow account with the Escrow Agent to be invested in accordance with Section 7 entitled “ESCROW ACCOUNT FOR THE BENEFIT OF INVESTORS OF A1/M1/M2 PREFERRED STOCK OF PROSPECT CAPITAL CORPORATION” (including such abbreviations as are required for the Escrow Agent’s systems) (the “Escrow Account”) with three separate subaccounts (an “A1 Subaccount”, a “M1 Subaccount”, and a “M2 Subaccount”).  All checks, wire transfers and other funds received from subscribers of Securities via “Direct Registration Settlement” (as described in the Offering Document) (“Investors”) in payment for the Securities (“Investor Funds”) will be delivered to the Escrow Agent within one business day following the day upon which such Investor Funds are received by the Issuer or its agents, and shall, upon receipt by the Escrow Agent, be retained in escrow by the Escrow Agent.  Upon receipt of any such Investor Funds, the Issuer or the Dealer Manager shall direct the Escrow Agent in writing whether such funds shall be deposited into the A1 Subaccount, the M1 Subaccount or the M2 Subaccount.  In the absence of the receipt of such written direction, the Escrow Agent shall have no obligation to determine whether such Investor Funds shall be deposited into the A1 Subaccount, the M1 Subaccount or the M2 Subaccount.  During the term of this Agreement, the Issuer or its agents shall cause all checks received by and made payable to it for payment for the Securities to be endorsed in favor of the Escrow Agent and delivered to the Escrow Agent for deposit in the Escrow Account.  

 

The initial escrow period shall commence upon the effectiveness of this Agreement and shall continue until the Termination Date (as defined herein).  The Escrow Account shall not be an interest-bearing account.

The Escrow Agent shall have no duty to make any disbursement, investment or other use of Investor Funds until and unless it has good and collected funds.  If any checks deposited in the Escrow Account are returned or prove uncollectible after the funds represented thereby have been released by the Escrow Agent, then the Issuer shall promptly reimburse the Escrow Agent for any and all costs incurred for such.  The Escrow Agent shall be under no duty or responsibility to enforce collection of any check delivered to it hereunder.  

2.     Investors.  Investors will be instructed by the Dealer Manager or any soliciting dealers retained by the Dealer Manager (the “Soliciting Dealers”) to remit the purchase price in the form of checks (“instruments of payment”) payable to the order of, or funds wired in favor of, “UMB BANK, N.A., ESCROW AGENT FOR PROSPECT CAPITAL CORPORATION.”  Any checks made payable to a party other than the Escrow Agent shall be returned to the Dealer Manager or Soliciting Dealer that submitted the check.  

If any subscription agreement for the purchase of Securities solicited by a Soliciting Dealer is rejected by the Issuer, then upon the Escrow Agent’s receipt of written notice from the Issuer or Dealer Manager of such rejection, the check for the purchase of Securities will be returned to the rejected subscriber within ten business days from the date of rejection.  The Issuer and Dealer Manager shall provide any necessary documentation to the Escrow Agent, upon which it may rely, to enable the Escrow Agent to return amounts to rejected subscribers.  

All Investor Funds deposited in the Escrow Account shall not be subject to any liens or charges by the Issuer or the Escrow Agent, or judgments or creditors’ claims against the Issuer, until and unless released to the Issuer as hereinafter provided.  The Issuer understands and agrees that the Issuer shall not be entitled to any Investor Funds on deposit in the Escrow Account and no such funds shall become the property of the Issuer, or any other entity except as released to the Issuer pursuant to Section 3. The Escrow Agent will not use the information provided to it by the Issuer for any purpose other than to fulfill its obligations as Escrow Agent hereunder.  The Escrow Agent will treat all Investor information as confidential; provided  if the Escrow Agent is compelled—in the absence of a protective order or other remedy—to disclose the Investor information, the Escrow Agent may without liability disclose the Investor information that is required but must exercise commercially reasonable efforts (at the sole expense of the Issuer) to preserve the confidential treatment of the Investor Information. Despite the foregoing, however, nothing in this Agreement prohibits, prevents, or limits the Escrow Agent from disclosing any Investor information, without notice to or consent of the Issuer, if the disclosure is made to a supervisory or governmental authority or a self-regulatory organization in the course of any examination, inquiry, or audit of the Escrow Agent or Issuer or any of the Escrow Agent’s representatives or businesses.  

3.     Disbursement of Funds.  The Escrow Agent, upon receipt of an Escrow Release Notice, attached hereto as Exhibit C, shall periodically transfer any portion of the Investor Funds in the A1 

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Subaccount, the M1 Subaccount, and/or the M2 Subaccount to the Issuer or such other parties as set forth in the applicable Escrow Release Notice.  The Escrow Agent shall effect such transfer by the close of business on the date the Escrow Agent receives the applicable Escrow Release Notice; provided, however, if the Escrow Agent receives the applicable Escrow Release Notice after 2pm Central Time, then the Escrow Agent shall effect such transfer by the close of business on the next succeeding business day after it receives such Escrow Release Notice.  Notwithstanding the foregoing, if requested by the Escrow Agent, the Escrow Agent shall have no obligation to transfer Investor Funds to any party until after it has received an executed and valid IRS Form W-9, or valid substitute thereto, from such party.

Upon the Escrow Agent’s receipt of written notice that (i) the Issuer is abandoning the sale of the Securities; or (ii) the Securities and Exchange Commission or any other federal or state regulatory authority that a stop or similar order has been issued with respect to the Offering Document and has remained in effect for at least 20 days, the Escrow Agent shall return Investor Funds to Investors.    The Issuer and Dealer Manager shall provide any necessary documentation to the Escrow Agent, upon which it may rely, to enable the Escrow Agent to return amounts to Investors.

4.    Term of Escrow.  Unless otherwise extended, the “Termination Date” shall be the earliest of:  (a) the date of the termination of the Dealer Manager Agreement entered into between the Issuer and Preferred Capital Securities, LLC on or about the date hereof related to the Offering, as specified by the Issuer in a written notice to the Escrow Agent; (b) the date the Escrow Agent receives written notice from the Issuer that all the Securities offered pursuant to the Offering Document are sold, (c) the date all funds held in the Escrow Account are distributed to the Issuer or to Investors pursuant to Section 3 and the Issuer has informed the Escrow Agent in writing to close the Escrow Account; (d) the date the Escrow Agent receives written notice from the Issuer that it is abandoning the sale of the Securities; and (e) the date the Escrow Agent receives notice from the Securities and Exchange Commission or any other federal or state regulatory authority that a stop or similar order has been issued with respect to the Offering Document and has remained in effect for at least 20 days.  After the Termination Date, the Issuer and its agents shall not deposit, and the Escrow Agent shall not accept, any additional amounts representing payments by prospective Investors.  

5.     Duty and Liability of the Escrow Agent. The sole duty of the Escrow Agent shall be to receive Investor Funds and subscription agreements and hold them subject to release, in accordance herewith, and the Escrow Agent shall be under no duty to determine whether the Issuer, the Dealer Manager or any Soliciting Dealer is complying with requirements of this Agreement, the Offering or applicable securities or other laws in tendering the Investor Funds to the Escrow Agent. No other agreement entered into between the parties, or any of them, shall be considered as adopted or binding, in whole or in part, upon the Escrow Agent notwithstanding that any such other agreement may be referred to herein or deposited with the Escrow Agent or the Escrow Agent may have knowledge thereof, including specifically but without limitation the Offering Document or any other document related to the Offering (including the subscription agreement and exhibits thereto), and the Escrow Agent’s rights and responsibilities shall be governed solely by this Agreement.  The Escrow Agent shall not be responsible for or be required 

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to enforce any of the terms or conditions of the Offering Document or any other document related to the Offering (including the subscription agreement and exhibits thereto) or other agreement between the Issuer and any other party.  The Escrow Agent may conclusively rely upon and shall be protected in acting upon any statement, certificate, notice, request, consent, order or other document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Escrow Agent shall have no duty or liability to verify any such statement, certificate, notice, request, consent, order or other document, and its sole responsibility shall be to act only as expressly set forth in this Agreement. Concurrent with the execution of this Agreement, the Issuer and the Dealer Manager shall each deliver to the Escrow Agent an authorized signers form in the form of Exhibit A or Exhibit A-1 to this Agreement, as applicable.  The Escrow Agent shall be under no obligation to institute or defend any action, suit or proceeding in connection with this Agreement unless first indemnified to its satisfaction.  The Escrow Agent may consult counsel of its own choice with respect to any question arising under this Agreement and the Escrow Agent shall not be liable for any action taken or omitted in good faith upon advice of such counsel.  The Escrow Agent shall not be liable for any action taken or omitted by it in good faith except to the extent that a court of competent jurisdiction determines that the Escrow Agent’s gross negligence, bad faith, or willful misconduct was the primary cause of loss. The Escrow Agent is acting solely as escrow agent hereunder and owes no duties, covenants or obligations, fiduciary or otherwise, to any other person by reason of this Agreement, except as otherwise stated herein, and no implied duties, covenants or obligations, fiduciary or otherwise, shall be read into this Agreement against the Escrow Agent.  If any disagreement between any of the parties to this Agreement, or between any of them and any other person, including any Investor, resulting in adverse claims or demands being made in connection with the matters covered by this Agreement, or if the Escrow Agent is in doubt as to what action it should take hereunder, the Escrow Agent may, at its option, refuse to comply with any claims or demands on it, or refuse to take any other action hereunder, so long as such disagreement continues or such doubt exists, and in any such event, the Escrow Agent shall not be or become liable in any way or to any person for its failure or refusal to act, and the Escrow Agent shall be entitled to continue so to refrain from acting until (a) the rights of all interested parties shall have been fully and finally adjudicated by a court of competent jurisdiction, or (b) all differences shall have been adjudged and all doubt resolved by agreement among all of the interested persons, and the Escrow Agent shall have been notified thereof in writing signed by all such persons. Notwithstanding the foregoing, the Escrow Agent may in its discretion obey the order, judgment, decree or levy of any court, whether with or without jurisdiction and the Escrow Agent is hereby authorized in its sole discretion to comply with and obey any such orders, judgments, decrees or levies.  If any controversy should arise with respect to this Agreement the Escrow Agent shall have the right, at its option, to institute an interpleader action in any court of competent jurisdiction to determine the rights of the parties.  IN NO EVENT SHALL THE ESCROW AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL LOSSES OR DAMAGES OF ANY KIND WHATSOEVER (INCLUDING WITHOUT LIMITATION LOST PROFITS), EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSSES OR DAMAGES AND REGARDLESS OF THE FORM OF ACTION.  The parties hereto agree that the Escrow Agent has no role in the preparation of the Offering Document (including the subscription agreement and other exhibits thereto) and makes no representations or warranties with respect to the information contained therein or omitted therefrom.  The Escrow Agent shall have no obligation, duty or 

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liability with respect to compliance with any federal or state securities, disclosure or tax laws concerning the Offering Document or any other document related to the Offering (including the subscription agreement and other exhibits thereto) or the issuance, offering or sale of the Securities.  The Escrow Agent shall have no duty or obligation to monitor the application and use of the Investor Funds once transferred to the Issuer, that being the sole obligation and responsibility of the Issuer.

6.     Escrow Agent’s Fee. The Escrow Agent shall be entitled to compensation for its services as stated in the fee schedule attached hereto as Exhibit B, which compensation shall be paid by the Issuer. The fee agreed upon for the services rendered hereunder is intended as full compensation for the Escrow Agent’s services as contemplated by this Agreement; provided, however, that if (a) the conditions for the disbursement of funds under this Agreement are not fulfilled, (b) the Escrow Agent renders any material service not contemplated in this Agreement, (c) there is any assignment of interest in the subject matter of this Agreement, (d) there is any material modification hereof, (e) any material controversy arises hereunder, or (f) the Escrow Agent is made a party to any litigation pertaining to this Agreement or the subject matter hereof, then the Escrow Agent shall be reasonably compensated for such extraordinary services and reimbursed for all reasonable costs and expenses, including reasonable attorney’s fees, occasioned by any delay, controversy, litigation or event, and the same shall be recoverable from the Issuer.  The Issuer’s obligations under this Section 6 shall survive the resignation or removal of the Escrow Agent and the assignment or termination of this Agreement.

7.    Investment of Investor Funds.  Investor Funds shall be deposited in the Escrow Account in accordance with Section 1 and held un-invested in the Escrow Account, which shall be non-interest bearing.

8.     Notices.  All notices, requests, demands, and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of service if served personally on the party to whom notice is to be given, (b) on the day of transmission if sent by facsimile/email transmission bearing an authorized signature to the facsimile number/email address given below, and written confirmation of receipt is obtained promptly after completion of transmission, (c) on the day after delivery to Federal Express or similar overnight courier, or (d) on the fifth day after mailing, if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid, and properly addressed, return receipt requested, to the party as follows:

If to the Issuer:
 
Prospect Capital Corporation
10 East 40th Street, 42nd Floor
New York, New York 10016
Attention:  Russell Wininger, Sean Dailey, Nishil Mehta, Joseph Roth

with a copy to: 

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Skadden, Arps, Slate, Meagher & Flom LLP
One Manhattan West
New York, New York 10001
Attention: Michael Hoffman, Kenneth Burdon

If to the Dealer Manager:

Preferred Capital Securities, LLC
3284 Northside Parkway, NW, Suite 150
Atlanta, GA 30327
Email: bcho@prefcapitalsecurities.com
Attention:  Brian Cho, Chief Compliance Officer

with a copy to: 

Practus, LLP
2575 Peachtree Road NE, Unit 17B
Atlanta, GA 30305
Attention: Kirk Montgomery           

If to Escrow Agent:

UMB Bank, National Association
928 Grand Blvd. 12th Floor
Mail Stop: 1011201
Kansas City, Missouri 64106
Attention:  Lara Stevens, Corporate Trust & Escrow Services Dept.
Telephone: (816) 860-3017
Fax: (816) 860-3029
Email: lara.stevens@umb.com

Any party may change its address for purposes of this Section by giving the other party written notice of the new address in the manner set forth above.

9.     Indemnification of Escrow Agent. The Issuer and the Dealer Manager hereby agree to, jointly and severally, indemnify, defend and hold harmless the Escrow Agent from and against, any and all losses, liabilities and damages, reasonable costs and expenses, including, without limitation, reasonable counsel fees and expenses, which the Escrow Agent may suffer or incur by reason of any action, claim or proceeding brought against the Escrow Agent arising out of or relating in any way to this Agreement or any transaction to which this Agreement relates unless such loss, liability, cost, damage or expense is finally determined by a court of competent jurisdiction to have been primarily caused by the gross negligence or willful misconduct of the Escrow Agent.  The terms of this Section shall survive the termination of this Agreement and the resignation or removal of the Escrow Agent.

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10.     Successors and Assigns. Except as otherwise provided in this Agreement, no party hereto shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other parties hereto and any such attempted assignment without such prior written consent shall be void and of no force and effect. This Agreement shall inure to the benefit of and shall be binding upon the successors and permitted assigns of the parties hereto.  Any corporation or association into which the Escrow Agent may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer all or substantially all of its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which the Escrow Agent is a party, shall be and become the successor Escrow Agent under this Agreement and shall have and succeed to the rights, powers, duties, immunities and privileges as its predecessor, without the execution or filing of any instrument or paper or the performance of any further act.

11.     Governing Law; Jurisdiction. This Agreement is governed by and shall be construed and interpreted in accordance with the laws of the State of New York without giving effect to the conflict of laws principles thereof. The parties irrevocably and unconditionally submit to the exclusive jurisdiction of the federal and state courts located in the Borough of Manhattan, City, County and State of New York, for any proceedings commenced regarding this Agreement. The parties irrevocably submit to the jurisdiction of such courts for the determination of all issues in such proceedings and irrevocably waive any objection to venue or inconvenient forum for any proceeding brought in any such court. The parties irrevocably and unconditionally waive any right to trial by jury with respect to any proceeding relating to this Agreement.

12.     Severability. If any provision of this Agreement is declared by any court or other judicial or administrative body to be null, void, or unenforceable, said provision shall survive to the extent it is not so declared, and all of the other provisions of this Agreement shall remain in full force and effect.

13.     Amendments; Waivers. This Agreement may be amended or modified, and any of the terms, covenants, representations, warranties, or conditions hereof may be waived, only by a written instrument executed by the parties hereto, or in the case of a waiver, by the party waiving compliance. Any waiver by any party of any condition, or of the breach of any provision, term, covenant, representation, or warranty contained in this Agreement, in any one or more instances, shall not be deemed to be nor construed as further or continuing waiver of any such condition, or of the breach of any other provision, term, covenant, representation, or warranty of this Agreement.  The Issuer and the Dealer Manager agree that any requested waiver, modification or amendment of this Agreement shall be consistent with the terms of the Offering.  

14.     Entire Agreement. This Agreement contains the entire agreement and understanding among the parties hereto with respect to the escrow contemplated hereby and supersedes and replaces all prior and contemporaneous agreements and understandings, oral or written, with regard to such escrow.

15.     Section Headings. The section headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

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16.     Counterparts. This Agreement may be executed (including by facsimile transmission) with counterpart signature pages or in counterparts, each of which shall be deemed an original, but all of which shall constitute the same instrument.  Copies, telecopies, facsimiles, electronic files and other reproductions of original executed documents shall be deemed to be authentic and valid counterparts of such original documents for all purposes, including the filing of any claim, action or suit in the appropriate court of law.  The parties hereto agree that the transactions described herein may be conducted and related documents may be stored by electronic means.

17.     Resignation. The Escrow Agent may resign upon 30 days’ advance written notice to the parties hereto. If a successor escrow agent is not appointed by the Issuer within the 30-day period following such notice, the Escrow Agent may petition any court of competent jurisdiction to name a successor escrow agent, or may interplead the Investor Funds with such court, whereupon the ruling of the court will determine with respect to the petition Escrow Agent’s duties hereunder shall terminate.

18.    References to Escrow Agent.  Other than the Offering Document, any of the other documents related to the Offering (including the subscription agreement and exhibits thereto) and any amendments thereof or supplements thereto, no printed or other matter in any language (including, without limitation, notices, reports and promotional material) which mentions the Escrow Agent’s name or the rights, powers, or duties of the Escrow Agent shall be issued by the Issuer or the Dealer Manager, or on the Issuer’s or the Dealer Manager’s behalf, unless the Escrow Agent shall first have given its specific written consent thereto.  Notwithstanding the foregoing, any amendment or supplement to the Offering Document or any other document related to the Offering (including the subscription agreement and exhibits thereto) that revises, alters, modifies, changes or adds to the description of the Escrow Agent or its rights, powers or duties hereunder shall not be issued by the Issuer or the Dealer Manager, or on the Issuer’s or the Dealer Manager’s behalf, unless the Escrow Agent has first given specific written consent thereto.

19.    Regulatory Compliance.  The Issuer and the Dealer Manager shall provide to the Escrow Agent upon the execution of this Agreement any documentation requested and any information reasonably requested by the Escrow Agent to comply with the USA Patriot Act of 2001, as amended from time to time and the Bank Secrecy Act, as amended from time to time.  

[Signature page follows.]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the date and year first set forth above.

PROSPECT CAPITAL CORPORATION

By:/s/ Grier Eliasek        
Name: Grier Eliasek
Title: President & Chief Operating Officer

PREFERRED CAPITAL SECURITIES, LLC

By:/s/ Brian Cho        
Name: Brian Cho
Title: Chief Compliance Officer

UMB BANK, NATIONAL 
ASSOCIATION, as Escrow Agent

By:/s/ Lara L. Stevens        
Name: Lara L. Stevens 
Title: Vice President

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Exhibit A

CERTIFICATE AS TO AUTHORIZED SIGNATURES

The specimen signatures shown below are the specimen signatures of the individuals who have been designated as Authorized Representatives of Prospect Capital Corporation and are authorized to initiate and approve transactions of all types for the above-mentioned account on behalf of Prospect Capital Corporation 

	
		
	Name/Title
 
 
	Specimen Signature

	Grier Eliasek
President & Chief Operating Officer
	/s/ Grier Eliasek
Signature

	 
	 

	Kristin Van Dask
Chief Financial Officer, Chief Compliance Officer & Secretary

	/s/ Kristin Van Dask
Signature

	 
	 

	

	

_______________________________
Signature

	 
	 

	

	_______________________________
Signature

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Exhibit A-1

CERTIFICATE AS TO AUTHORIZED SIGNATURES
The specimen signatures shown below are the specimen signatures of the individuals who have been designated as Authorized Representatives of Preferred Capital Securities, LLC and are authorized to initiate and approve transactions of all types for the above-mentioned account on behalf of Preferred Capital Securities, LLC.

	
		
	Name/Title
 
 
	Specimen Signature

	Jeff Smith
Chief Executive Officer
	/s/ Jeff Smith
Signature

	 
	 

	Brian Cho
Chief Compliance Officer
	/s/ Brian Cho
Signature

	 
	 

	Greg Mausz
Chief Operating Officer
	/s/ Greg Mausz
Signature

	
		
	Alex Evans
Vice President of Operations
	/s/ Alex Evans
Signature

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Exhibit B

ESCROW FEES AND EXPENSES

Annual Fee 
Annual Escrow Agent                        $30,000

Annual Fee will be payable upon the effectiveness of this agreement and will be billed annually in advance thereafter.  Other fees and expenses will be billed as incurred. 
Fees specified are for the regular, routine services contemplated by this Agreement, and any additional or extraordinary services, including, but not limited to disbursements involving a dispute or arbitration, or administration while a dispute, controversy or adverse claim is in existence, will be charged based upon time required at the then standard hourly rate.  

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Exhibit C

FORM OF ESCROW RELEASE NOTICE

Date:                 

UMB Bank, National Association
928 Grand Blvd. 12th Floor
Mail Stop: 1011201
Kansas City, MO 64106

Ladies and Gentlemen:

In accordance with the terms of Section 3 of the Subscription Escrow Agreement dated as of February 14, 2017 (as the same may be amended from time to time, the “Escrow Agreement”), among Prospect Capital Corporation (the “Issuer”), Preferred Capital Securities, LLC (the “Dealer Manager”) and UMB Bank, National Association (the “Escrow Agent”), the Issuer and the Dealer Manager hereby notify the Escrow Agent that the ________ closing will be held on ___________ for gross proceeds of $_________.

PLEASE DISTRIBUTE FUNDS BY WIRE TRANSFER (or as indicated) AS FOLLOWS 
(wire instructions attached) from the A1 Subaccount:

$
$

PLEASE DISTRIBUTE FUNDS BY WIRE TRANSFER (or as indicated) AS FOLLOWS 
(wire instructions attached) from the M1 Subaccount:

$
$

Very truly yours,

PROSPECT CAPITAL CORPORATION, 
as the Issuer

By:                             
    Name:                         
    Title:                        

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PREFERRED CAPITAL SECURITIES, LLC, 
as the Dealer Manager

By:                             
    Name:                        
Title:                        

14Exhibit 10.38 

 

 

 

Note Purchase Agreement

 

By and Among

 

Electromedical Technologies,
Inc.

 

And

 

JR-HD Enterprises III, LLC

 

 

Dated as of July [___],
2020

 

 

 

 

    

     

    

 

TABLE OF CONTENTS

 

	Article I.   DEFINITIONS	1
	Section 1.01   Definitions.	1
	Section 1.02   Interpretive Provisions.	2
	Article II.   PURCHASE AND SALE	3
	Section 2.01   Purchase and Sale.	3
	Section 2.02   Deliverables at Closing.	3
	Section 2.03   Closing.	3
	Section 2.04   Use of Proceeds.	3
	Article III.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY	3
	Section 3.01   Authorization of Transactions.	3
	Section 3.02   Governmental Approvals; Non-contravention.	4
	Section 3.03   Brokers.	4
	Article IV.   REPRESENTATIONS AND WARRANTIES OF BUYER	4
	Section 4.01   Authorization of Transactions.	4
	Section 4.02   Governmental Approvals; Non-contravention.	5
	Section 4.03   Investment Representations.	5
	Section 4.04   Brokers.	6
	Article V.   INDEMNIFICATION	6
	Section 5.01   General Indemnification.	6
	Section 5.02   Procedures for Indemnification.	6
	Section 5.03   Payment.	6
	Section 5.04   Effect of Knowledge on Indemnification.	6
	Article VI.   MISCELLANEOUS	7
	Section 6.01   Notices.	7
	Section 6.02   Attorneys’ Fees	7
	Section 6.03   Amendments; No Waivers; No Third-Party Beneficiaries.	8
	Section 6.04   Expenses.	8
	Section 6.05   Further Assurances.	8
	Section 6.06   Successors and Assigns; Benefit.	8
	Section 6.07   Governing Law; Etc.	9
	Section 6.08   Survival.	9
	Section 6.09   Resolution of Disputes.	10
	Section 6.10   Severability.	10
	Section 6.11   Entire Agreement.	10
	Section 6.12   Specific Performance.	10
	Section 6.13   Construction.	11
	Section 6.14   Counterparts.	11

 

    i

     

    

 

NOTE PURCHASE AGREEMENT

 

This Note Purchase
Agreement (together with all exhibits hereto, this “Agreement”) is entered into as of July [__], 2020 (the “Closing
Date”), by and among Electromedical Technologies, Inc., a Delaware corporation (the “Company”) and JR-HD Enterprises
III, LLC, a Delaware limited liability company (“Buyer”). The Company and the Buyer may be collectively referred to
herein as the “Parties” and individually as a “Party”.

 

WHEREAS, the Company
desires to issue and sell to the Buyer a convertible promissory note in the aggregate principal amount of $430,000 and in the form
as attached hereto as Exhibit A (the “Note”) on the terms set forth herein and the Buyer wishes to purchase the Note
on the terms and conditions provided for herein;

 

NOW, THEREFORE, in
consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

Article I.             
DEFINITIONS

 

Section 1.01        Definitions.
In addition to the terms defined elsewhere in this Agreement, the following terms, as used herein, have the following
meanings:

 

		(a)	“Affiliate” means, with respect to a specified Person, any other Person that directly
or indirectly Controls, is Controlled by or is under common Control with, the specified Person.

 

		(b)	“Business Day” means any day except Saturday, Sunday and any legal holiday or a day
on which banking institutions in Delaware generally are authorized or required by Law or other governmental actions to close.

 

		(c)	“Contract” means any contract, commitment, understanding or agreement (whether oral
or written).

 

		(d)	“Common Stock” mean shares of common stock, par value $0.00001 per share, of the Company.

 

		(e)	“Control” means (a) the possession, directly or indirectly, of the power to vote 10%
or more of the securities or other equity interests of a Person having ordinary voting power, (b) the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of a Person, by contractor otherwise, or (c) being
a director, officer, executor, trustee or fiduciary (or their equivalents) of a Person or a Person that controls such Person.

 

		(f)	“Governmental Entity” means any federal, state, municipal, local or foreign government
and any court, tribunal, arbitral body, administrative agency, department, subdivision, entity, commission or other governmental,
government appointed, quasi-governmental or regulatory authority, reporting entity or agency, domestic, foreign or supranational.

 

		(g)	“Law” means any applicable foreign, federal, state or local law (including common law),
statute, treaty, rule, directive, regulation, ordinances and similar provisions having the force or effect of law or an Order of
any Governmental Entity.

 

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		(h)	“Liabilities” means liabilities, obligations or responsibilities of any nature whatsoever,
whether direct or indirect, matured or un-matured, fixed or unfixed, known or unknown, asserted or un asserted, choate or inchoate,
liquidated or unliquidated, secured or unsecured, absolute, contingent or otherwise, including any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost or expense.

 

		(i)	“Lien” means, with respect to any property or asset, any lien, security interest, mortgage,
pledge, charge, claim, lease, agreement, right of first refusal, option, limitation on transfer or use or assignment or licensing,
restrictive easement, charge or any other restriction of any kind, and any conditional sale or voting agreement or proxy, and including
any restriction on the ownership, use, voting, transfer, possession, receipt of income or other exercise of any attributes of ownership,
in respect of such property or asset, and any agreement to give any of the foregoing.

 

		(j)	“Losses” means any losses, damages, deficiencies, Liabilities, assessments, fines,
penalties, judgments, actions, claims, costs, disbursements, fees, expenses or settlements of any kind or nature, including legal,
accounting and other professional fees and expenses.

 

		(k)	“Order” means any judgment, writ, decree, determination, award, compliance agreement,
settlement agreement, injunction, ruling, charge, judicial or administrative order, determination or other restriction of any Governmental
Entity or arbitrator.

 

		(l)	“Person” means a natural person, a corporation, a limited liability company, a partnership,
an association, a trust or any other entity or organization, including a government or political subdivision or any agency or instrumentality
thereof.

 

		(m)	“Securities Act” means the United States Securities Act of 1933, as amended, and the
rules and regulation promulgated thereunder.

 

		(n)	“Transactions” means the purchase and sale of the Note and the other transactions contemplated
under the Transaction Documents.

 

		(o)	“Transaction Documents” means this Agreement, the Note and any other agreement, document,
certificate or writing delivered or to be delivered in connection with this Agreement and any other document related to the Transactions
related to the forgoing, including, without limitations, those delivered at the Closing.

 

Section 1.02       
Interpretive Provisions.

 

Unless the express context otherwise requires,
the words “hereof,” “herein,” and “hereunder” and words of similar import, when used in this
Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement; terms defined in the
singular shall have a comparable meaning when used in the plural, and vice versa; the terms “Dollars” and “$”
mean United States Dollars, unless otherwise specified herein; references herein to a specific Section, Subsection, Recital or
Exhibit shall refer, respectively, to Sections, Subsections, Recitals or Exhibits of this Agreement; wherever the
word “include,” “includes,” or “including” is used in this Agreement, it shall be deemed to
be followed by the words “without limitation”; references herein to any gender shall include each other gender; references
herein to any Person shall include such Person’s heirs, executors, personal representatives, administrators, successors and
assigns; provided, however, that nothing contained in this Section 1.02 is intended to authorize any assignment or transfer not
otherwise permitted by this Agreement; references herein to a Person in a particular capacity or capacities shall exclude such
Person in any other capacity; references herein to any contract or agreement (including this Agreement) mean such contract or agreement
as amended, supplemented or modified from time to time in accordance with the terms thereof; with respect to the determination
of any period of time, the word “from” means “from and including” and the words “to” and “until”
each means “to but excluding”; references herein to any Law or any license mean such Law or license as amended, modified,
codified, reenacted, supplemented or superseded in whole or in part, and in effect from time to time; and references herein to
any Law shall be deemed also to refer to all rules and regulations promulgated thereunder.

 

    2

     

    

 

Article II.             
PURCHASE AND SALE

 

Section 2.01       
Purchase and Sale. Subject to the terms and conditions of this Agreement, at the Closing (as defined below), the
Company shall issue and sell to Buyer a Note in the aggregate principal amount of $430,000, for a purchase price of $400,000 (the
“Purchase Price”), reflecting a $30,000 original issue discount, and subject to the immediately following sentence.
The Parties acknowledge and agree that the Company has agreed to pay to Buyer $10,000 to cover Buyer’s legal costs in preparing
this Agreement and the Note. To the extent such amount has not been paid as of the Closing (as defined below), Buyer shall be entitled
to retain such amount from the Purchase Price, but such amount shall be deemed paid as a portion of the Purchase Price.

 

Section 2.02       
Deliverables at Closing. At the Closing (as defined below), Buyer shall deliver the Purchase Price to the Company
via a check payable to the Company or wire transfer pursuant to the wire transfer instructions as provided by the Company to Buyer,
and the Company shall issue to Buyer the Note.

 

Section 2.03       
Closing. On the terms set forth herein, the closing of the Transactions (the “Closing”) shall take place
by conference call and electronic communication (i.e., emails/pdf) or facsimile, with exchange of original signatures to follow
by mail, on the date hereof and effective as of 11:59 p.m. Eastern time, on such date.

 

Section 2.04       
Use of Proceeds. The Company covenants and agrees that it shall utilize the Purchase Price to pay for auditing fees
and other necessary costs to get the Company’s filings with the Securities and Exchange Commission up to date and compliant,
and to pay for legal, organizational and marketing costs for a planned offering pursuant to Regulation A under the Securities Act.

 

Article III.          
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents
and warrants to Buyer that the following representations and warranties contained in this Article III are true and correct as of
the Closing Date:

 

Section 3.01       
Authorization of Transactions. The Company is a corporation duly authorized and in good standing in the State of
Delaware and has the requisite power and capacity to execute and deliver the Transaction Documents to which it is a party and to
perform its obligations hereunder and thereunder. The execution, delivery and performance by the Company of the applicable Transaction
Documents and the consummation of the Transactions have been duly and validly authorized by all requisite action on the part of
the Company. The Transaction Documents to which the Company is a party have been duly and validly executed and delivered by The
Company. Each Transaction Document to which the Company is a party constitutes the valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms and conditions, except to the extent enforcement thereof
may be limited by applicable bankruptcy, insolvency or other Laws affecting the enforcement of creditors’ rights or by the
principles governing the availability of equitable remedies.

 

    3

     

    

 

Section 3.02       
Governmental Approvals; Non-contravention. 

 

		(a)	No consent, Order, action or non-action of, or filing, notification, declaration or registration
with, any Governmental Entity or Person is necessary for the execution, delivery or performance by the Company of this Agreement
or any other Transaction Document to which the Company is a party.

 

		(b)	The execution, delivery and performance by the Company of the Transaction Documents to which the
Company is a party, and the consummation by the Company of the Transactions, do not (i) violate or conflict with any Law or Order
to which the Company or the Note may be subject, (ii) constitute a violation or breach of, be in conflict with, constitute or create
(with or without due notice or lapse of time or both) a default (or give rise to any right of termination, modification, cancellation
or acceleration) of any obligation under any Contract to which the Company is a party or to which the Company or the Note are subject
or by which the Company’s properties, assets or rights are bound or (iii) result in the creation or imposition of any Lien
upon any of the rights, properties or assets of the Company or on the Note.

 

Section 3.03       
Brokers. The Company has not engaged, or caused to be incurred any Liability or obligation to, any investment banker,
finder, broker or sales agent or any other Person in connection with the origin, negotiation, execution, delivery or performance
of the Transaction Documents to which it is a party, or the Transactions.

 

Article IV.           
REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer represents and
warrants to the Company that the following statements contained in this Article IV are true and correct as of the Closing Date:

 

Section 4.01       
Authorization of Transactions. Buyer is a limited liability company, duly qualified under the laws of the State of
Delaware, and has the requisite power and capacity to execute and deliver the Transaction Documents to which it is a party and
to perform its obligations hereunder and thereunder. The execution, delivery and performance by Buyer of the applicable Transaction
Documents and the consummation of the Transactions have been duly and validly authorized by all requisite action on the part of
Buyer. The Transaction Documents to which Buyer is a party have been duly and validly executed and delivered by Buyer. Each Transaction
Document to which Buyer is a party constitutes the valid and legally binding obligation of Buyer, enforceable against Buyer in
accordance with its terms and conditions, except to the extent enforcement thereof may be limited by applicable bankruptcy, insolvency
or other Laws affecting the enforcement of creditors’ rights or by the principles governing the availability of equitable
remedies.

 

    4

     

    

 

Section 4.02       
Governmental Approvals; Non-contravention.

 

		(a)	No consent, Order, action or non-action of, or filing, notification, declaration or registration
with, any Governmental Entity is necessary for the execution, delivery or performance by Buyer of this Agreement or any other Transaction
Document to which Buyer is a party.

 

		(b)	The execution, delivery and performance by Buyer of the Transaction Documents to which Buyer is
a party, and the consummation by Buyer of the Transactions, do not violate any Laws or Orders to which Buyer is subject or violate,
breach or conflict with any provision of Buyer’s organizational documents.

 

Section 4.03       
Investment Representations.

 

		(a)	Buyer understands and agrees that the consummation of this Agreement including the delivery of
the Note as contemplated hereby and the shares of Common Stock that may be issued to Buyer pursuant to the Note (the “Shares”
and, together with the Note, collectively, the “Securities”) constitute the offer and sale of securities under the
Securities Act and applicable state statutes and that the Securities are being acquired for Buyer’s own account and not with
a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration
under the Securities Act.

 

		(b)	Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation
D under the Securities Act.

 

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

 

		(d)	At no time was Buyer presented with or solicited by any leaflet, newspaper or magazine article,
radio or television advertisement, or any other form of general advertising or solicited or invited to attend a promotional meeting
otherwise than in connection and concurrently with such communicated offer. Buyer is not purchasing the Note acquired by Buyer
hereunder as a result of any “general solicitation” or “general advertising,” as such terms are defined
in Regulation D under the Securities Act, which includes, but is not limited to, any advertisement, article, notice or other communication
regarding the Note acquired by Buyer hereunder published in any newspaper, magazine or similar media or on the internet or broadcast
over television, radio or the internet or presented at any seminar or any other general solicitation or general advertisement.

 

		(e)	Buyer is acquiring the Securities for its own account as principal, not as a nominee or agent,
for investment purposes only, and not with a view to, or for, resale, distribution or fractionalization thereof in whole or in
part and no other person has a direct or indirect beneficial interest in the Securities. Further, Buyer does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third
person, with respect to the Securities.

 

    5

     

    

 

		(f)	Buyer, either alone or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment.

 

		(g)	Buyer understands that no United States federal or state agency or any other governmental or state
agency has passed on or made recommendations or endorsement of the Securities or the suitability of the investment in the Securities
nor have such authorities passed upon or endorsed the merits of the transactions set forth herein.

 

Section 4.04       
Brokers. Buyer has not engaged any investment banker, finder, broker or sales agent or any other Person in connection
with the origin, negotiation, execution, delivery or performance of any Transaction Document to which it is a party, or the Transactions.

 

Article V.              
INDEMNIFICATION

 

Section 5.01       
General Indemnification. Each Party (the “Indemnifying Party”) agrees to indemnify, defend and hold harmless
the other Party and such other Party’s Affiliates and each of their respective directors, officers, managers, partners, employees,
agents, equity holders, successors and assigns (each, an “Indemnified Party”), from and against any and all Losses
incurred or suffered by any Indemnified Party arising out of, based upon or resulting from any breach of any representation or
warranty of the Indemnifying Party herein or breach by the Indemnifying Party of, or any failure the Indemnifying Party to perform,
any of the covenants, agreements or obligations contained in or made pursuant to this Agreement or the Transaction Documents by
the Indemnifying Party.

 

Section 5.02       
Procedures for Indemnification. In the event that an Indemnified Party shall incur or suffer any Losses in respect
of which indemnification may be sought under this Article V against the Indemnifying Party, the Indemnified Party shall assert
a claim for indemnification by providing a written notice (the “Notice of Loss”) to the Indemnifying Party stating
the nature and basis of such indemnification. The Notice of Loss shall be provided to the Indemnifying Party as soon as practicable
after the Indemnified Party becomes aware that it has incurred or suffered a Loss.

 

Section 5.03       
Payment. Upon a determination of liability under this Article V the Indemnifying Party shall pay or cause to be paid
to the Indemnified Party the amount so determined within five (5) Business Days after the date of such determination. If there
should be a dispute as to the amount or manner of determination of any indemnity obligation owed under this Agreement, the Indemnifying
Party shall nevertheless pay when due such portion, if any, of the obligation that is not subject to dispute. Upon the payment
in full of any amounts due under this Article V with respect to any claim, the Indemnifying Party shall be subrogated to the rights
of the Indemnified Party against any Person with respect to the subject matter of such claim.

 

Section 5.04       
Effect of Knowledge on Indemnification. The right to indemnification, reimbursement or other remedy based upon any
representations, warranties, covenants and obligations set forth in this Agreement shall not be affected by any investigation conducted
with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and
delivery of this Agreement, with respect to the accuracy or inaccuracy of or compliance with any such representation, warranty,
covenant or obligation. The waiver of any condition based upon the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, shall not affect the right to indemnification, reimbursement or other remedy
based upon such representations, warranties, covenants or obligations.

 

    6

     

    

 

Article VI.           
MISCELLANEOUS

 

Section 6.01       
Notices. 

 

		(a)	Any notice or other communications required or permitted hereunder shall be in writing and shall
be sufficiently given if personally delivered to it or sent by email, overnight courier or registered mail or certified mail, postage
prepaid, addressed as follows:

 

if to the Company,
to:

 

Electromedical
Technologies, Inc.

Attn: Matthew
Wolfson

16561 N.
92nd Street, Suite 101

Scottsdale,
AZ 85260

Email: [_________________]

 

If to the Buyer, to:

 

JR-HD Eneterprices
III, LLC

Attn: Jeff
Ramson

150 East
58th Street, 20th Floor

New York,
NY 10155

Email: Jramson@pcgadvisory.com

 

With a copy, which
shall not constitute notice, to:

 

Anthony L.G.,
PLLC

Attn: John
Cacomanolis

625 N. Flagler
Drive, Suite 600

West Palm
Beach, FL 33401

Email: jcacomanolis@anthonypllc.com

 

		(b)	Any Party may change its address for notices hereunder upon notice to each other Party in the manner
for giving notices hereunder.

 

		(c)	Any notice hereunder shall be deemed to have been given (i) upon receipt, if personally delivered,
(ii) on the day after dispatch, if sent by overnight courier, (iii) upon dispatch, if transmitted by email with return receipt
requested and received and (iv) three (3) days after mailing, if sent by registered or certified mail.

 

Section 6.02       
Attorneys’ Fees. In the event that any Party institutes any action or suit to enforce this Agreement or to
secure relief from any default hereunder or breach hereof, the prevailing Party shall be reimbursed by the losing Party for all
costs, including reasonable attorney’s fees, incurred in connection therewith and in enforcing or collecting any judgment
rendered therein.

 

    7

     

    

 

Section 6.03       
Amendments; No Waivers; No Third-Party Beneficiaries.

 

		(a)	This Agreement may be amended, modified, superseded, terminated or cancelled, and any of the terms,
covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed by both of the
Parties.

 

		(b)	Every right and remedy provided herein shall be cumulative with every other right and remedy, whether
conferred herein, at law, or in equity, and may be enforced concurrently herewith, and no waiver by any Party of the performance
of any obligation by another Party shall be construed as a waiver of the same or any other default then, theretofore, or thereafter
occurring or existing.

 

		(c)	Neither any failure or delay in exercising any right or remedy hereunder or in requiring satisfaction
of any condition herein nor any course of dealing shall constitute a waiver of or prevent any Party from enforcing any right or
remedy or from requiring satisfaction of any condition. No notice to or demand on a Party waives or otherwise affects any obligation
of that Party or impairs any right of the Party giving such notice or making such demand, including any right to take any action
without notice or demand not otherwise required by this Agreement. No exercise of any right or remedy with respect to a breach
of this Agreement shall preclude exercise of any other right or remedy, as appropriate to make the aggrieved Party whole with respect
to such breach, or subsequent exercise of any right or remedy with respect to any other breach.

 

		(d)	Notwithstanding anything else contained herein, no Party shall seek, nor shall any Party be liable
for, consequential, punitive or exemplary damages, under any tort, contract, equity, or other legal theory, with respect to any
breach (or alleged breach) of this Agreement or any provision hereof or any matter otherwise relating hereto or arising in connection
herewith.

 

Section 6.04       
Expenses. Unless otherwise contemplated or stipulated by a Transaction Document, all costs and expenses incurred
in connection with this Agreement shall be paid by the Party incurring such cost or expense.

 

Section 6.05       
Further Assurances. Following the Closing, each Party shall execute and deliver such documents and other papers and
take such further action as may be reasonably required to carry out the provisions of the Transaction Documents.

 

Section 6.06       
Successors and Assigns; Benefit. The provisions of this Agreement shall be binding upon and inure to the benefit
of the Parties and their respective successors and assigns. No Party may assign, delegate or otherwise transfer any of its rights
or obligations under this Agreement without the written consent of the other Party. Other than as specifically set forth herein,
including in Article V, nothing in this Agreement shall confer on any Person other than the Parties, and their respective successors
and assigns, any rights, remedies, obligations, or Liabilities under or by reason of this Agreement.

 

    8

     

    

 

Section 6.07       
Governing Law; Etc.

 

		(a)	This Agreement, and all matters based upon, arising out of or relating in any way to the Transactions
or the Transaction Documents, including all disputes, claims or causes of action arising out of or relating to the Transactions
or the Transaction Documents as well as the interpretation, construction, performance and enforcement of the Transaction Documents,
shall be governed by the laws of the United States and the State of Delaware, without regard to any jurisdiction’s conflict-of-laws
principles.

 

		(b)	SUBJECT TO Section 6.09, ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS
AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE CONTEMPLATED TRANSACTIONS SHALL BE INSTITUTED SOLELY IN THE FEDERAL COURTS OF
THE UNITED STATES OF AMERICA OR THE COURTS OF THE STATE OF NEW YORK, IN EACH CASE LOCATED IN NEW YORK CITY, NEW YORK, AND EACH
PARTY IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. THE PARTIES IRREVOCABLY
AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY
WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

		(c)	EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS, THE PERFORMANCE THEREOF OR THE FINANCINGS CONTEMPLATED THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS Section 6.07(c).

 

		(d)	Each of the Parties acknowledge that each has been represented in connection with the signing of
this waiver by independent legal counsel selected by the respective Party and that such Party has discussed the legal consequences
and import of this waiver with legal counsel. Each of the Parties further acknowledge that each has read and understands the meaning
of this waiver and grants this waiver knowingly, voluntarily, without duress and only after consideration of the consequences of
this waiver with legal counsel.

 

Section 6.08       
Survival. The representations and warranties in this Agreement shall survive the Closing
for a period of 12 months from the Closing Date, and no claim for indemnification may be made after such time. All covenants and
agreements in this Agreement will survive until fully performed; provided, however, that, nothing herein shall prevent a Party
from making any claim hereunder, or relieve any other Party from any liability hereunder, after such time for any breach thereof.

 

    9

     

    

 

Section 6.09       
Resolution of Disputes. Except as otherwise provided herein, all controversies, disputes or actions between the Parties
arising out of the Transactions or this Agreement, including their respective Affiliates, owners, officers, directors, agents and
employees, arising from or relating to this Agreement shall on demand of either party be submitted for arbitration to in accordance
with the rules and regulations of the American Arbitration Association. The arbitration shall be conducted by one arbitrator jointly
selected by each Party who is a party to the Dispute, provided, however, that if such Parties are unable to agree on the identity
of the arbitrator within 10 Business Days of commencement of efforts to do so, each Party who is a party to the Dispute shall select
one arbitrator and the arbitrators so selected shall select a final arbitrator, and the final arbitrator shall conduct the arbitration
alone. The Parties agree that, in connection with any such arbitration proceeding, each shall submit or file any claim which would
constitute a compulsory counterclaim (as defined by Rule 13 of the Federal Rules of Civil Procedures) within the same proceeding
as the claim to which it relates. Any such claim which is not submitted or filed in such proceeding shall be barred. The arbitrator
shall be instructed to use every reasonable effort to perform its services within seven days of request, and, in any case, as soon
as practicable. The Parties agree to be bound by the provisions of any limitation on the period of time by which claims must be
brought under Delaware law or any applicable federal law. The arbitrator(s) shall have the right to award the relief which he or
she deems proper, consistent with the terms of this Agreement, including compensatory damages (with interest on unpaid amounts
from due date), injunctive relief, specific performance, legal damages and costs. The award and decision of the arbitrator(s) shall
be conclusive and binding on all Parties, and judgment upon the award may be entered in any court of competent jurisdiction. Any
right to contest the validity or enforceability of this award shall be governed exclusively by the United States Arbitration Act.
The arbitration shall be conducted in New York City, New York. The provisions of this Section 6.09 shall continue in full force
and effect subsequent to and notwithstanding the expiration or termination of this Agreement.

 

Section 6.10       
Severability. If any provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the Transactions is not affected in any manner adverse to any Party. Upon such determination
that any provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the
Transactions are fulfilled to the extent possible.

 

Section 6.11       
Entire Agreement. The Transaction Documents constitute the entire agreement between the Parties with respect to the
subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the Parties
with respect to the subject matter hereof and thereof.

 

Section 6.12       
Specific Performance. Each Party agrees that irreparable damage would occur if any provision of this Agreement were
not performed in accordance with the terms hereof and that each Party shall be entitled to seek specific performance of the terms
hereof in addition to any other remedy at law or in equity.

 

    10

     

    

 

Section 6.13       
Construction. The table of contents and headings contained in this Agreement are for reference purposes only and
will not affect in any way the meaning or interpretation of this Agreement. In the event of a conflict between language or amounts
contained in the body of this Agreement and language or amounts contained in the Exhibits attached hereto, the language or amounts
in the body of the Agreement shall control. References to Articles or Sections shall refer to those portions of this Agreement.
The use of the terms “hereunder,” “hereof,” “hereto” and words of similar import shall refer
to this Agreement as a whole and not to any particular Article, Section or clause of or Exhibit to this Agreement.

 

Section 6.14       
Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when counterparts have been signed by each of the Parties and delivered to the other
Parties, it being understood that each Party need not sign the same counterpart. A facsimile copy or electronic transmission of
a signature page shall be deemed to be an original signature page.

 

[Signature page follows]

 

    11

     

    

 

IN WITNESS WHEREOF,
the Parties have caused this Agreement to be duly executed as of the Closing Date.

 

	 	Electromedical Technologies, Inc.
	 	 	 
	 	By:	
	 	Name:	Matthew Wolfson
	 	Title:	Chief Executive Officer

 

 

	 	JR-HD Enterprises III, LLC
	 	 	 
	 	By:	
	 	Name:	Jeff Ramson
	 	Title:	Manager

 

    12

     

    

 

Exhibit A

Convertible Promissory Note

 

(Attached)
 

    13

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