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  Exhibit 10.2

 

SUBSCRIPTION AGREEMENT

 

This
Subscription Agreement (this “Agreement”)
has been executed by the purchaser set forth on the signature page
hereof (the “Purchaser”)
in connection with the private placement offering (the
“Offering”)
by Sincerity Applied Materials
Holdings Corp. (f/k/a Symbid Corp.), a Nevada corporation
(the “Company”
or “SAMHC”)
of a minimum of $150,000 (the “Minimum
Offering”) and a maximum of $500,000 (the
“Maximum
Offering”) of units of securities (the
“Units”),
at a purchase price of $10,000 per Unit (the “Purchase
Price”). Each Unit consists of (i) one 12% Senior
Secured Convertible Promissory Note with a term of 13 months in the
face (principal) amount of $10,000, substantially in the form of
Exhibit A hereto
(the “Note”)
and (ii) one warrant substantially in the form of Exhibit B hereto (the
“Warrant”)
exercisable for a period of five (5) years from issuance
representing the right to purchase shares of common stock of the
Company, $0.001 par value per share (the “Common
Stock”), at the exercise price and on the other terms
set forth in the Warrant. The shares of Common Stock issuable upon
exercise of the Warrant are hereinafter referred to as the
“Warrant
Shares”). Each Note is convertible into shares of
Common Stock (the “Conversion
Shares”) at a conversion price and on the other terms
set forth in the Note. The repayment of the Note is secured by the
assets of the Company, as set forth in the Security Agreement,
substantially in the form of Exhibit C hereto. This
subscription is being submitted to you in accordance with and
subject to the terms and conditions described in this Agreement and
other Disclosure Materials (as defined below). The minimum
subscription is $10,000. The Company may accept subscriptions for
less than $10,000 in its sole discretion.

 

The
Units, the Notes and the Warrants and upon conversion of the Notes
and the exercise of the Warrants, the Conversion Shares and Warrant
Shares, respectively, being subscribed for pursuant to this
Agreement have not been registered under the Securities Act of
1933, as amended (the “Securities
Act”). The Offering is being made on a reasonable best
efforts basis to “accredited investors,” as defined in
Regulation D under the Securities Act in
reliance upon the exemption from securities registration afforded
by Section 4(a)(2) of the Securities Act and
Rule 506 of Regulation D.

 

The
Units are being offered and sold in conjunction with an acquisition
(the “Acquisition”)
between the Company, Sincerity
Australia Pty. Ltd., an Australian corporation
(“Sincerity
Australia”) and the sole shareholder/member of
Sincerity Australia (the “Sincerity Shareholder”), and
certain other transactions, on the terms and conditions described
in the Acquisition Agreement among the Company, Sincerity Australia
and the Sincerity Shareholder pursuant to which Sincerity Australia
will become a wholly owned subsidiary of the Company, and all of
the outstanding capital stock of Sincerity Australia will be
exchanged for shares of the Company’s Common Stock (the
“Acquisition
Shares”).

 

The
undersigned acknowledges receipt of a copy of the Registration
Rights Agreement, substantially in the form of Exhibit D hereto (the
“Registration
Rights Agreement”), pursuant to which, among other
things, the Company agrees to register under the Securities Act for
resale the Conversion Shares, the Warrant Shares and the shares of
Common Stock held by certain pre-Acquisition stockholders of the
Company.

 

The
initial closing of the Offering (the “Initial
Closing,” and the date on which such Initial Closing
occurs, hereinafter referred to as the “Initial Closing
Date”), shall take place at the offices of CKR Law
LLP, at 1330 Avenue of the Americas, New York, New York 10019. The
Company may conduct one or more additional closings for a period of
up to sixty (60) days following the Initial Closing Date. The
Initial Closing and all subsequent closings are hereinafter
referred to as a “Closing”
and the date of all Closings are hereinafter referred to as a
“Closing
Date”.

 

 

 

 

The
Initial Closing will not occur unless:

 

a. funds deposited in
escrow as described in Section 2b below are equal to
at least the Minimum Offering and corresponding documentation with
respect to such amounts, have been delivered by the Purchaser and
other “Purchasers” under Subscription Agreements of
like tenor with this Agreement (collectively, the
“Purchasers”)
as described in Section
2a below;

 

b. the Acquisition is
simultaneously effected; and

 

c. the other
conditions set forth in Sections 8 and 9 shall have been
satisfied.

 

The
Term Sheet and any supplement or amendment thereto, and any
disclosure schedule or other information document, delivered to the
Purchaser prior to Purchaser’s execution of this Agreement,
and any such document delivered to the Purchaser after
Purchaser’s execution of this Agreement and prior to the
Closing of the Purchaser’s subscription hereunder (including,
without limitation, a substantially complete draft of the Current
Report on Form 8-K describing the Acquisition, the Offering and the
related transactions, including “Form 10 information”
(as defined in Rule 144(i)(3) under the Securities Act), to be
filed by the Company with the Securities and Exchange Commission
(the “SEC”)
within four Business Days after the Closing of the Acquisition and
the Initial Closing of the Offering (the “Super
8-K”)), are collectively referred to as the
“Disclosure
Materials.” (“Business
Day” means a day, other than a Saturday or Sunday, on
which banks in New York City are open for the general transaction
of business.)

 

1. Subscription.  The undersigned
Purchaser hereby subscribes to purchase the amount of Units set
forth on the Omnibus Signature Page attached hereto, for the
aggregate Purchase Price as set forth on such Omnibus Signature
Page, subject to the terms and conditions of this Agreement and on
the basis of the representations, warranties, covenants and
agreements contained herein.

 

2. Subscription Procedure.  To
complete a subscription for the Units, the Purchaser must fully
comply with the subscription procedure provided in paragraphs a.
through c. of this Section on or before the Closing
Date.

 

a. Subscription
Documents.  On or before the Initial Closing Date
or a subsequent Closing Date, as applicable, the Purchaser shall
review, complete and execute the Omnibus Signature Page to this
Agreement, the Registration Rights Agreement and the Security
Agreement, Investor Profile, Anti-Money Laundering Form and
Investor Certification, attached hereto following the Omnibus
Signature Page (collectively, the “Subscription
Documents”), if applicable, additional forms and
questionnaires distributed to the Purchaser and deliver the
Subscription Documents and such additional forms and questionnaires
to CKR Law LLP (“CKR”),
at the address set forth under the caption “How to subscribe for Units in the private
offering of SAMHC.” below. Executed documents may be
delivered to CKR by facsimile or .pdf sent by electronic mail
(e-mail), if the Purchaser delivers the original copies of the
documents to CKR as soon as practicable thereafter.

 

b. Purchase
Price.  Simultaneously with the delivery of the
Subscription Documents to CKR as provided herein, and in any event
on or prior to the Initial Closing Date or a subsequent Closing
Date, as applicable, the Purchaser shall deliver to CKR, in its
capacity as escrow agent (the “Escrow
Agent”), under an escrow agreement substantially in
the form of Exhibit
E hereto, among the Company and the Escrow Agent (the
“Escrow
Agreement”) the full Purchase Price by certified or
other bank check or by wire transfer of immediately available
funds, pursuant to the instructions set forth under the caption
“How to subscribe for Units
in the private offering of SAHMC” below. Such funds
will be held for the Purchaser’s benefit in the escrow
account established for the Offering (the “Escrow
Account”) and
will be returned promptly, without interest or offset, if this
Agreement is not accepted by the Company or if the Offering is
terminated pursuant to its terms prior to the Initial
Closing.

 

 

 

 

c. Company
Discretion.  The Purchaser understands and agrees
that the Company in its sole discretion reserves the right to
accept or reject this or any other subscription for Units, in whole
or in part, notwithstanding prior receipt by the Purchaser of
notice of acceptance of this subscription. The Company shall have
no obligation hereunder until the Company shall execute and deliver
to the Purchaser an executed copy of this Agreement. If this
subscription is rejected in whole, or the Offering is terminated,
all funds received from the Purchaser will be returned without
interest or offset, and this Agreement shall thereafter be of no
further force or effect. If this subscription is rejected in part,
the funds for the rejected portion of this subscription will be
returned without interest or offset, and this Agreement will
continue in full force and effect to the extent this subscription
was accepted.

 

3. Sales to be made through Company
Officers. Sales of Units shall be made by officers of the
Company. No sales commissions or other forms of remuneration shall
be payable to Company officers in connection with the
Offering. 

 

4. Representations and Warranties of the
Company.  Except as set forth in the Super 8-K,
which disclosures (other than disclosures under “risk
factors” or similar disclosures) qualify these
representations and warranties in their entirety, the Company
hereby represents and warrants to the Purchaser, as of the date
hereof and on the Initial Closing Date after giving effect to the
Acquisition (unless otherwise specified), the
following:

 

a. Organization and
Qualification.  The Company and each of its
subsidiaries is a corporation or other business entity duly
organized, validly existing and in good standing under the laws of
the jurisdiction of its formation, and has the requisite corporate
power to own its properties and to carry on its business as now
being conducted. The Company and each of its subsidiaries is duly
qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the assets, business,
financial condition, results of operations or future prospects of
the Company and its subsidiaries (in each case as described in the
Super 8-K) taken as a whole (a “Material Adverse
Effect”).

 

b. Authorization, Enforcement, Compliance
with Other Instruments.  (i) The Company has
the requisite corporate power and authority to enter into and
perform its obligations under this Agreement, the Registration
Rights Agreement, the Security Agreement, the Notes, the Investor
Warrants, the Acquisition Agreement, the Escrow Agreement and each
of the other agreements and documents that are exhibits hereto or
thereto or are contemplated hereby or thereby or necessary or
desirable to effect the transactions contemplated hereby or thereby
(the “Transaction
Documents”) and to issue the Notes, the Warrants, the
Conversion Shares, and the Warrant Shares in accordance with the
terms hereof and thereof; (ii) the execution and delivery by the
Company of each of the Transaction Documents and the consummation
by it of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Units, Notes,
Warrants, Conversion Shares and Warrant Shares have been, or will
be at the time of execution of such Transaction Document, duly
authorized by the Company’s Board of Directors, and no
further consent or authorization is, or will be at the time of
execution of such Transaction Document, required by the Company,
its Board of Directors or its stockholders; (iii) each of the
Transaction Documents will be duly executed and delivered by the
Company; and (iv) the Transaction Documents when executed will
constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of creditors’ rights and remedies
and, with respect to any rights to indemnity or contribution
contained in the Registration Rights Agreement, as such rights may
be limited by state or federal laws or public policy underlying
such laws.

 

 

 

 

c. Capitalization.  The
authorized capital stock of the Company consists of 290,000,000
shares of Common Stock and 10,000,000 shares of preferred stock.
Immediately before giving effect to the Acquisition and the Closing
of the Offering, the Company will have 3,122,287 shares of Common
Stock and no preferred stock issued and outstanding. All of the
outstanding shares of Common Stock have been duly authorized,
validly issued and are fully paid and nonassessable. Immediately
after giving effect to the Acquisition and the Closing on $250,000,
the pro forma outstanding capitalization of the Company will be as
set forth under “Pro Forma
Capitalization” in Schedule 4c. After giving
effect to the Acquisition: (i) no shares of capital stock of the
Company or any of its subsidiaries will be subject to preemptive
rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company; (ii) except for the Notes and
Warrants, there will be no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into,
any shares of capital stock of the Company or any of its
subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or
may become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries; (iii) there will be no
outstanding debt securities of the Company or any of its
subsidiaries other than
the Notes (iv) other than pursuant to the Registration Rights
Agreement, there will be no agreements or arrangements under which
the Company or any of its subsidiaries is obligated to register the
sale of any of their securities under the Securities Act;
(v) there will be no outstanding comment letters from the SEC
or any other regulatory agency; (vi) there will be no securities or
instruments of the Company or any of its subsidiaries containing anti-dilution or
similar provisions, including the right to adjust the exercise,
exchange or reset price under such securities, that will be
triggered by the issuance of the Units; and (vii) no co-sale right,
right of first refusal or other similar right will exist with
respect to the Units or the issuance and sale thereof. Upon
request, the Company will make available to the Purchaser true and
correct copies of the Company’s Articles of Incorporation, as
in effect as of the Closing Date, and the Company’s By-laws,
as in effect as of the Closing Date, and the terms of all
securities exercisable for Common Stock and the material rights of
the holders thereof in respect thereto.

 

d. Issuance of Units, Notes and
Warrants.  The Units, Notes and Warrants are duly
authorized and, when issued and paid for in accordance with the
terms hereof, shall be duly issued, fully paid and nonassessable,
and are free and clear of all taxes, liens and charges with respect
to the issue thereof. The Conversion Shares and Warrant Shares
(collectively, the “Underlying
Shares”) have been duly authorized and reserved for
issuance, and upon conversion of the Notes and exercise of the
Warrants in accordance with their terms, including payment of the
exercise price for the Warrants, will be validly issued, fully paid
and nonassessable, and are free and clear from all taxes, liens and
charges with respect to the issue thereof.

 

 

 

 

e. No Conflicts.  The
execution, delivery and performance of each of the Transaction
Documents by the Company, and the consummation by the Company of
the transactions contemplated hereby and thereby will not (i)
result in a violation of the Articles of Incorporation or the
By-laws (or equivalent constitutive document) of the Company or any
of its subsidiaries or (ii) violate or conflict with, or result in
a breach of any provision of, or constitute a default (or an event
which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any subsidiary is a party,
except for those which would not reasonably be expected to have a
Material Adverse Effect, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including U.S. federal
and state securities laws and regulations) applicable to the
Company or by which any property or asset of the Company or any
subsidiary is bound or affected, except for those which would not
reasonably be expected to have a Material Adverse Effect. Neither
the Company nor any subsidiary is in violation of any term of or in
default under its Articles of Incorporation or By-laws or any other
constitutive documents. Except for those violations or defaults
which would not reasonably be expected to have a Material Adverse
Effect, neither the Company nor any subsidiary is in violation of
any term of or in default under any material contract, agreement,
mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company
or any subsidiary. The business of the Company and its subsidiaries
is not being conducted, and shall not be conducted in violation of
any law, ordinance, or regulation of any governmental entity,
except for any violation which would
not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the Securities
Act and any applicable state securities laws, neither the Company
nor any of its subsidiaries is required to obtain any consent,
authorization or order of, or make any filing or registration with,
any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by
this Agreement or the other Transaction Documents in accordance
with the terms hereof or thereof. Neither the execution and
delivery by the Company of the Transaction Documents, nor the
consummation by the Company of the transactions contemplated hereby
or thereby, will require any notice, consent or waiver under any
contract or instrument to which the Company or any subsidiary is a
party or by which the Company or any subsidiary is bound or to
which any of their assets is subject, except for any notice,
consent or waiver the absence of which would not reasonably be
expected, individually or in the aggregate, to have a Material
Adverse Effect. All consents, authorizations, orders, filings and
registrations which the Company or any of its subsidiaries is
required to obtain pursuant to the preceding two sentences have
been or will be obtained or effected on or prior to the
Closing.

 

f. Absence of
Litigation.  There is no action, suit, claim,
inquiry, notice of violation, proceeding (including any partial
proceeding such as a deposition) or investigation before or by any
court, public board, governmental or administrative agency,
self-regulatory organization, arbitrator, regulatory authority,
stock market, stock exchange or trading facility (an
“Action”)
now pending or, to the knowledge of the Company, threatened,
against or affecting the Company or
any of its subsidiaries or any of their respective officers or
directors, which would be reasonably likely to (i) adversely affect
the validity or enforceability of, or the authority or ability of
the Company to perform its obligations under, this Agreement or any
of the other Transaction Documents, or (ii) have a Material Adverse
Effect. For the purpose of this Agreement, the knowledge of
the Company means the knowledge of the officers of the Company (for
the avoidance of doubt, after giving effect to the Acquisition) and
Sincerity Australia (both actual or knowledge that they would have
had upon reasonable investigation).

 

 

 

 

g. Acknowledgment Regarding
Purchaser’s Purchase of the Units. The Company
acknowledges and agrees that each Purchaser is acting solely in the
capacity of an arm’s length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby and
thereby. The Company further acknowledges that no Purchaser is
acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and
the transactions contemplated thereby and any advice given by any
Purchaser or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to the Purchaser’s
purchase of the Units.

 

h. No General
Solicitation.  Neither the Company, nor any of its
Affiliates, nor, to the knowledge of the Company, any person acting
on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Units.
“Affiliate”
means, with respect to any person, any other person that, directly
or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such person, as such
terms are used in and construed under Rule 144 under the
Securities Act (“Rule
144”). With respect to a Purchaser, any investment
fund or managed account that is managed on a discretionary basis by
the same investment manager as such Purchaser will be deemed to be
an Affiliate of such Purchaser.

 

i. No Integrated
Offering.  Neither the Company, nor any of its
Affiliates, nor to the knowledge of the Company, any person acting
on its or their behalf has, directly or indirectly, made any offers
or sales of any security or solicited any offers to buy any
security, under circumstances that would require registration of
the Units, Notes or Warrants under the Securities Act or cause this
offering of Units to be integrated with prior offerings by the
Company for purposes of the Securities Act.

 

j. Employee
Relations.  Neither the Company nor any subsidiary
is involved in any labor dispute nor, to the knowledge of the
Company, is any such dispute threatened. Neither the Company nor
any subsidiary is party to any collective bargaining agreement. The
Company’s and/or its subsidiaries’ employees are not
members of any union, and the Company believes that its and its
subsidiaries’ relationship with their respective employees is
good.

 

k. Intellectual Property
Rights.  After giving effect to the Acquisition,
the Company and each of its subsidiaries owns, possesses, or has
rights to use, all Intellectual Property necessary for the conduct
of the Company’s and its subsidiaries’ businesses as
now conducted, except as such failure to own, possess or have such
rights would not reasonably be expected to result in a Material
Adverse Effect. Intellectual
Property shall mean all patents, patent applications, trade
and service marks, trade and service mark registrations, trade
names, copyrights, licenses, inventions, trade secrets, domain
names, technology and know-how.

 

 

 

 

l. Environmental
Laws.

 

(i)

The Company and each subsidiary has complied with
all applicable Environmental Laws (as defined below), except for
violations of Environmental Laws that, individually or in the
aggregate, have not had and would not reasonably be expected to
have a Material Adverse Effect. There is no pending or, to the
knowledge of the Company, threatened civil or criminal litigation,
notice of violation, formal administrative proceeding, or
investigation, inquiry or information request, relating to any
Environmental Law involving the Company or any subsidiary, except
for litigation, notices of violations, formal administrative
proceedings or investigations, inquiries or information requests
that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect. For
purposes of this Agreement, “Environmental
Law” means any national,
state, provincial or local law, statute, rule or regulation or the
common law relating to the environment or occupational health and
safety, including without limitation any statute, regulation,
administrative decision or order pertaining to (i) treatment,
storage, disposal, generation and transportation of industrial,
toxic or hazardous materials or substances or solid or hazardous
waste; (ii) air, water and noise pollution; (iii) groundwater and
soil contamination; (iv) the release or threatened release into the
environment of industrial, toxic or hazardous materials or
substances, or solid or hazardous waste, including without
limitation emissions, discharges, injections, spills, escapes or
dumping of pollutants, contaminants or chemicals; (v) the
protection of wild life, marine life and wetlands, including
without limitation all endangered and threatened species; (vi)
storage tanks, vessels, containers, abandoned or discarded barrels,
and other closed receptacles; (vii) health and safety of employees
and other persons; and (viii) manufacturing, processing, using,
distributing, treating, storing, disposing, transporting or
handling of materials regulated under any law as pollutants,
contaminants, toxic or hazardous materials or substances or oil or
petroleum products or solid or hazardous waste. As used above, the
terms “release”
and “environment”
shall have the meaning set forth in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as
amended.

 

(ii)

To
the knowledge of the Company there is no material environmental
liability with respect to any solid or hazardous waste transporter
or treatment, storage or disposal facility that has been used by
the Company or any subsidiary.

 

(iii)

The
Company and its subsidiaries (i) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses except to
the extent that the failure to have such permits, licenses or other
approvals would not have a Material Adverse Effect and (ii) are in
compliance, in all material respects, with all terms and conditions
of any such permits, licenses or approvals.

 

 

 

 

 

m. Authorizations;
Regulatory Compliance.  The Company and each of its
subsidiaries holds, and is operating in compliance with, all
authorizations, licenses, permits, approvals, clearances,
registrations, exemptions, consents, certificates and orders of any
governmental authority and supplements and amendments thereto
(collectively, “Authorizations”)
required for the conduct of its business and all such
Authorizations are valid and in full force and effect and neither
the Company nor any of its subsidiaries is in material violation of
any terms of any such Authorizations, except, in each case, such as
would not reasonably be expected to have a Material Adverse Effect;
and neither the Company nor any of its subsidiaries has received
written notice of any revocation or modification of any such
Authorization, except to the extent that any such revocation or
modification would not be reasonably expected to have a Material
Adverse Effect. The Company and each of its subsidiaries is in
compliance with all applicable federal, state, local and foreign
laws, regulations, orders and decrees, including such laws and
regulations applicable to import and export, except as would not reasonably be expected to
have a Material Adverse Effect. Neither the Company nor any of its
subsidiaries has received written notice of any ongoing claim,
action, suit, proceeding, hearing, enforcement, investigation,
arbitration or other action from any Governmental Authority or
third party alleging that any product operation or activity is in
material violation of any healthcare laws or Authorizations.
Neither the Company nor any of its subsidiaries has received
written notice that any governmental authority has taken, is taking
or intends to take action to limit, suspend, modify or revoke any
healthcare laws or Authorizations. The Company and each of its
subsidiaries has filed, obtained, maintained or submitted all
reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments thereto as required by
any or Authorizations and that all such reports, documents, forms,
notices, applications, records, claims, submissions and supplements
or amendments were complete, correct and not misleading on the date
filed (or were corrected or supplemented by a subsequent
submission). Neither the Company nor any of its subsidiaries has,
either voluntarily or involuntarily, initiated, conducted, or
issued or caused to be initiated, conducted or issued, any recall,
safety alert, or other notice or action relating to any alleged
product defect or violation and, to the Company’s knowledge,
no third party has initiated or conducted any such notice or
action. Neither the Company nor any of its subsidiaries is a party
to any corporate integrity agreement, deferred prosecution
agreement, monitoring agreement, consent decree, settlement order,
or similar agreements, or has any reporting obligations pursuant to
any such agreement, plan or correction or other remedial measure
entered into with any Governmental Authority.

 

n. Title.  Neither the
Company nor any of its subsidiaries owns any real property. Each of
the Company and its subsidiaries has good and marketable title to
all of its personal property and assets, free and clear of any
restriction, mortgage, deed of trust, pledge, lien, security
interest or other charge, claim or encumbrance which would have a
Material Adverse Effect. Except as set forth on Schedule 4n, with respect to
properties and assets it leases, each of the Company and its
subsidiaries is in compliance with such leases and holds a valid
leasehold interest free of any liens, claims or encumbrances which
would have a Material Adverse Effect.

 

o. No Material Adverse Effects,
etc.  Neither the Company nor any subsidiary is
subject to any judgment, decree, order, rule or regulation which in
the judgment of the Company’s officers has had, or is
reasonably expected in the future to have, a Material Adverse
Effect. Neither Company nor any subsidiary is in breach of any
contract or agreement which breach, in the judgment of the
Company’s officers, has had, or is reasonably expected to
have a Material Adverse Effect.

 

 

 

 

p. Tax Status.  The
Company and each subsidiary has made and filed (taking into account
any valid extensions) all federal and state income and all other
tax returns, reports and declarations required by any jurisdiction
to which it is subject (except in any case in which the failure to
so file would not have a Material Adverse Effect) and (unless and
only to the extent that the Company or such subsidiary has set
aside on its books provisions reasonably adequate for the payment
of all unpaid and unreported taxes) has paid all taxes and other
governmental assessments and charges shown or determined to be due
on such returns, reports and declarations, except those being
contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or
declarations apply or as would not have a Material Adverse Effect.
To the knowledge of the Company, there are no unpaid taxes in any
material amount claimed to be due from the Company or any
subsidiary by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such
claim.

 

q. Certain
Transactions.  Except for arm’s length
transactions pursuant to which the Company or any subsidiary makes
payments in the ordinary course of business upon terms no less
favorable than it could obtain from third parties, none of the
officers, directors, or employees of the Company or any subsidiary
is presently a party to any transaction with the Company or any
subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer,
director, trustee or partner. All transactions that would be
required to be disclosed by the Company pursuant to Item 404 of
Regulation S-K promulgated under the Securities Act are disclosed
in the SEC Reports in accordance with Item 404 or in the Super
8-K.

 

r. Rights of First
Refusal.  The Company is not obligated to offer
the securities offered hereunder on a right of first refusal basis
or otherwise to any third parties including, but not limited to,
current or former stockholders of the Company, underwriters,
brokers, agents or other third parties.

 

s. Insurance.  The
Company and its subsidiaries have insurance policies of the type
and in amounts customarily carried by organizations conducting
businesses or owning assets similar to those of the Company and its
subsidiaries. There is no material claim pending under any such
policy as to which coverage has been questioned, denied or disputed
by the underwriter of such policy.

 

t. SEC Reports.  The
Company has filed all reports, schedules, forms, statements and
other documents required to be filed by the Company under the
Securities Exchange Act of 1934, as amended (the
“Exchange
Act”), including pursuant to Section 15(d) thereof (or
that it would have been required to file by Section 15(d) of the
Exchange Act if its duty to file thereunder had not been
automatically suspended) (collectively, together with the Super
8-K, the “SEC
Reports”) for the two (2) years preceding the date
hereof (or such shorter period since the Company was first required
by law or regulation to file such material). To the Company’s
knowledge, the draft Super 8-K furnished to each Purchaser prior to
the Closing will not materially deviate from the Super 8-K. The
Super 8-K complies, and the other SEC Reports at the time they were
filed complied, in all material respects with the Securities Act or
the Exchange Act, as applicable, and the applicable rules and
regulations of the SEC thereunder. There are no
contracts, agreements or other documents that are required to be
described in the SEC Reports and/or to be filed as exhibits thereto
that are not described, in all material respects, and/or filed as
required. There has not been any material change or amendment to,
or any waiver of any material right under, any such contract or
agreement that has not been described in and/or filed as an exhibit
to the SEC Reports.

 

 

 

 

u. Financial
Statements.  The financial statements of the
Company included in the SEC Reports comply in all material respects
with applicable accounting requirements and the rules and
regulations of the SEC with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in
accordance with GAAP applied on a consistent basis during the
periods involved, except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries taken as
a whole as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, year-end audit
adjustments. The pro forma financial information and the related
notes, if any, included in the SEC Reports have been properly
compiled and prepared in accordance with the applicable
requirements of the Securities Act and the regulations promulgated
thereunder and fairly present in all material respects the
information shown therein, and the assumptions used in the
preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions and
circumstances referred to therein.

 

v. Material
Changes.  Since the respective date of the latest
balance sheet of the Company included in the SEC Reports and the
latest balance sheet of Sincerity Australia included in the
financial statements contained within the Super 8-K, except as
specifically disclosed in the SEC Reports or the Super 8-K, (i)
there have been no events, occurrences or developments that have
had or would reasonably be expected to have a Material Adverse
Effect with respect to the Company or Sincerity Australia, (ii)
there have not been any changes in the authorized capital, assets,
financial condition, business or operations of the Company or
Sincerity Australia from that reflected in the financial statements
contained within the SEC Reports except changes in the ordinary
course of business which have not been, either individually or in
the aggregate, materially adverse to the business, properties,
financial condition or results of operations of the Company or
Sincerity Australia, (iii) neither the Company or any subsidiary
nor Sincerity Australia has incurred any material liabilities
(contingent or otherwise) other than (A) trade payables, accrued
expenses and other liabilities incurred in the ordinary course of
business consistent with past practice and (B) liabilities not
required to be reflected in the financial statements of the Company
or of Sincerity Australia, as applicable, pursuant to GAAP or to be
disclosed in the SEC Reports or Super 8-K, (iv) neither the Company
or any subsidiary nor Sincerity Australia has materially altered
its method of accounting or the manner in which it keeps its
accounting books and records, and (v) neither the Company or any
subsidiary nor Sincerity Australia has declared or made any
dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock.

 

w. Disclosure
Controls. The Company has
established and maintains disclosure controls and procedures (as
defined in Rules 13a-14 and 15d-14 under the Exchange Act) and such
controls and procedures are effective in ensuring that material
information relating to the Company, including its subsidiaries, is
made known to the principal executive officer and the principal
financial officer.

 

x. Sarbanes-Oxley.  Except
as disclosed in the SEC Reports, the Company is in compliance in
all material respects with all of the provisions of the
Sarbanes-Oxley Act of 2002 which are applicable to it.

 

 

 

 

y. Off-Balance Sheet
Arrangements.  There is no transaction,
arrangement, or other relationship between the Company or any
subsidiary and an unconsolidated or other off-balance sheet entity
that is required to be disclosed by the Company in its SEC Reports
and is not so disclosed or that otherwise would have a Material
Adverse Effect.

 

z. Foreign Corrupt
Practices.  Neither the Company and its
subsidiaries, nor to the Company’s knowledge, any agent or
other person acting on behalf of the Company or its subsidiaries,
has: (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or
campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on
its behalf of which the Company is aware) which is in violation of
law or (iv) violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended.

 

aa. Brokers’
Fees.  Neither of the Company nor any of its
subsidiaries has any liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.

 

bb. Disclosure
Materials.  The SEC Reports and the Disclosure
Materials taken as a whole do not contain an untrue statement of a
material fact or omit to state a material fact required to be
stated therein (in the case of SEC Reports) or necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading.

 

cc. Investment
Company.  The Company is not required to be
registered as, and is not an Affiliate of, and immediately
following the Closing will not be required to register as, an
“investment company” within the meaning of the
Investment Company Act of 1940, as amended.

 

dd. Reliance.  The
Company acknowledges that the Purchaser is relying on the
representations and warranties made by the Company hereunder and
that such representations and warranties are a material inducement
to the Purchaser purchasing the Notes. The Company further
acknowledges that without such representations and warranties of
the Company made hereunder, the Purchaser would not enter into this
Agreement.

 

ee. Use of Proceeds.  The
Company presently intends to use the net proceeds from the Offering
primarily for general working capital.

 

ff. Anti-Dilution.  Each
Purchaser (but not any transferees of their Notes or Warrants other
than Permitted Assignees (as such term is defined in the
Registration Rights Agreement)) will have anti-dilution protection
with respect to such Notes and Warrants as set forth in the Notes
and Warrants, respectively.

 

gg. CKR Investors. One or more
Purchasers introduced by CKR Law LLP (“CKR”),
the pre-Acquisition principal stockholder of and corporate and
securities counsel to the Company shall have the right to invest up
to $250,000 in the Offering. Such Purchasers must be approved by
Sincerity Australia in advance, which approval shall not be
unreasonably withheld.

 

 

 

 

5. Representations, Warranties and Agreements of
the Purchaser.  The Purchaser, severally and not
jointly with any other Purchaser, represents and warrants to, and
agrees with, the Company the following:

 

a. The Purchaser has
the knowledge and experience in financial and business matters
necessary to evaluate the merits and risks of its prospective
investment in the Company, and has carefully reviewed and
understands the risks of, and other considerations relating to, the
purchase of Units, Notes and Warrants (and, as applicable, the
underlying Conversion Shares and Warrant Shares) and the tax
consequences of the investment, and has the ability to bear the
economic risks of the investment. The Purchaser can afford the loss
of its entire investment.

 

b. The Purchaser is
acquiring the Units, Notes and Warrants (and, as applicable, the
underlying Conversion Shares and Warrant Shares) for investment for
its own account and not with the view to, or for resale in
connection with, any distribution thereof. The Purchaser
understands and acknowledges that the Offering and sale of the
Units have not been registered under the Securities Act or any
state securities laws, by reason of a specific exemption from the
registration provisions of the Securities Act and applicable state
securities laws, which depends upon, among other things, the bona
fide nature of the investment intent as expressed herein. The
Purchaser further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to any third person with respect to
any of the Units, Notes, Warrants, Conversion Shares or Warrant
Shares. The Purchaser understands and acknowledges that the
Offering of the Units will not be registered under the Securities
Act nor under the state securities laws on the ground that the sale
of the Units to the Purchaser as provided for in this Agreement and
the issuance of securities hereunder is exempt from the
registration requirements of the Securities Act and any applicable
state securities laws. The Purchaser is an “accredited
investor” as defined in Rule 501 of Regulation D as
promulgated by the SEC under the Securities Act, for the reason(s)
specified on the Accredited Investor
Certification attached hereto as completed by Purchaser, and
Purchaser shall submit to the Company such further assurances of
such status as may be reasonably requested by the Company.
The Purchaser resides in the
jurisdiction set forth on the Purchaser’s Omnibus Signature
Page affixed hereto. The Purchaser has not taken any of the actions
set forth in, and is not subject to, the disqualification
provisions of Rule 506(d)(1) of the Securities Act.

 

c. The Purchaser (i)
if a natural person, represents that he or she is the greater of
(A) 21 years of age or (B) the age of legal majority in his or her
jurisdiction of residence, and has full power and authority to
execute and deliver this Agreement and all other related agreements
or certificates and to carry out the provisions hereof and thereof;
(ii) if a corporation, partnership, limited liability company,
association, joint stock company, trust, unincorporated
organization or other entity, represents that such entity was not
formed for the specific purpose of acquiring the Units, such entity
is duly organized, validly existing and in good standing under the
laws of the state or jurisdiction of its organization, the
consummation of the transactions contemplated hereby is authorized
by, and will not result in a violation of state law or its charter
or other organizational documents, such entity has full power and
authority to execute and deliver this Agreement and all other
related agreements or certificates and to carry out the provisions
hereof and thereof and to purchase and hold the Units, Notes and
Warrants, the execution and delivery of this Agreement has been
duly authorized by all necessary action, this Agreement has been
duly executed and delivered on behalf of such entity and is a
legal, valid and binding obligation of such entity; or (iii) if
executing this Agreement in a representative or fiduciary capacity,
represents that it has full power and authority to execute and
deliver this Agreement in such capacity and on behalf of the
subscribing individual, ward, partnership, trust, estate,
corporation, or limited liability company or partnership, or other
entity for whom the Purchaser is executing this Agreement, and such
individual, partnership, ward, trust, estate, corporation, or
limited liability company or partnership, or other entity has full
right and power to perform pursuant to this Agreement and make an
investment in the Company, and represents that this Agreement
constitutes a legal, valid and binding obligation of such entity.
The execution and delivery of this Agreement will not violate or be
in conflict with any order, judgment, injunction, agreement or
controlling document to which the Purchaser is a party or by which
it is bound.

 

 

 

 

d. The Purchaser understands that the Units are being
offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of,
and such Purchaser’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such
Purchaser set forth herein in order to determine the availability
of such exemptions and the eligibility of such Purchaser to acquire
such securities. The Purchaser further acknowledges and
understands that the Company is relying on the representations and
warranties made by the Purchaser hereunder and that such
representations and warranties are a material inducement to the
Company to sell the Units to the Purchaser. The Purchaser further
acknowledges that without such representations and warranties of
the Purchaser made hereunder, the Company would not enter into this
Agreement with the Purchaser.

 

e. The Purchaser
understands that no public market exists for the Units, Notes or
Warrants and that a limited public market presently exists for the
Common Stock and that there can be no assurance that an active
public market for the Common Stock will exist in the future. The
Common Stock is presently approved for quotation on OTC Markets.
The Company makes no representation, warranty or covenant with
respect to the continued quotation of the Common Stock on the OTC
Markets quotation or listing on any other market or
exchange.

 

f. The Purchaser has
received, reviewed and understood the information about the
Company, including all Disclosure Materials, and has had an
opportunity to discuss the Company’s business, management and
financial affairs with the Company’s management. The
Purchaser understands that such discussions, as well as any
Disclosure Materials provided by the Company, were intended to
describe the aspects of the Company’s business and prospects
and the Offering which the Company believes to be material, but
were not necessarily a thorough or exhaustive description, and
except as expressly set forth in this Agreement, the Company makes
no representation or warranty with respect to the completeness of
such information and makes no representation or warranty of any
kind with respect to any information provided by any entity other
than the Company. Some of such information may include projections
as to the future performance of the Company, which projections may
not be realized, may be based on assumptions which may not be
correct and may be subject to numerous factors beyond the
Company’s control. Additionally, the Purchaser understands
and represents that it is purchasing the Units notwithstanding the
fact that the Company may disclose in the future certain material
information the Purchaser has not received, including (without
limitation) financial statements of the Company and/or Sincerity
Australia for the current or prior fiscal periods, and any
subsequent period financial statements that will be filed with the
SEC, that it is not relying on any such information in connection
with its purchase of the Units and that it waives any right of
action with respect to the nondisclosure to it prior to its
purchase of the Units of any such information. Each Purchaser has
sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to
its acquisition of the Units.

 

g. The Purchaser
acknowledges that the Company is not acting as a financial advisor
or fiduciary of the Purchaser (or in any similar capacity) with
respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and no investment advice has been
given by the Company, or any of its representatives or agents in
connection with the Transaction Documents and the transactions
contemplated hereby and thereby. The Purchaser further represents
to the Company that the Purchaser’s decision to enter into
the Transaction Documents has been based solely on the independent
evaluation by the Purchaser and its representatives.

 

 

 

 

h. As of the Closing,
all actions on the part of Purchaser, and its officers, directors
and partners, if applicable, necessary for the authorization,
execution and delivery of this Agreement, the Registration Rights
Agreement, the Security Agreement and the performance of all
obligations of the Purchaser hereunder and thereunder shall have
been taken, and this Agreement, the Registration Rights Agreement,
and the Security Agreement assuming due execution by the parties
hereto and thereto, constitute valid and legally binding
obligations of the Purchaser, enforceable in accordance with their
respective terms, subject to: (i) judicial principles limiting the
availability of specific performance, injunctive relief, and other
equitable remedies and (ii) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
generally relating to or affecting creditors’
rights.

 

i. Purchaser
represents that neither it nor, to its knowledge, any person or
entity controlling, controlled by or under common control with it,
nor any person having a beneficial interest in it, nor any person
on whose behalf the Purchaser is acting: (i) is a person listed in
the Annex to Executive Order No. 13224 (2001) issued by the
President of the United States (Executive Order Blocking Property
and Prohibiting Transactions with Persons Who Commit, Threaten to
Commit, or Support Terrorism); (ii) is named on the List of
Specially Designated Nationals and Blocked Persons maintained by
the U.S. Office of Foreign Assets Control; (iii) is a non-U.S.
shell bank or is providing banking services indirectly to a
non-U.S. shell bank; (iv) is a senior non-U.S. political figure or
an immediate family member or close associate of such figure; or
(v) is otherwise prohibited from investing in the Company pursuant
to applicable U.S. anti-money laundering, anti-terrorist and asset
control laws, regulations, rules or orders (categories (i) through
(v), each a “Prohibited
Purchaser”). The Purchaser agrees to provide the
Company, promptly upon request, all information that the Company
reasonably deems necessary or appropriate to comply with applicable
U.S. anti-money laundering, anti-terrorist and asset control laws,
regulations, rules and orders. The Purchaser consents to the
disclosure to U.S. regulators and law enforcement authorities by
the Company and its Affiliates and agents of such information about
the Purchaser as the Company reasonably deems necessary or
appropriate to comply with applicable U.S. anti-money laundering,
anti-terrorist and asset control laws, regulations, rules and
orders. If the Purchaser is a financial institution that is subject
to the USA Patriot Act, the Purchaser represents that it has met
all of its obligations under the USA Patriot Act. The Purchaser
acknowledges that if, following its investment in the Company, the
Company reasonably believes that the Purchaser is a Prohibited
Purchaser or is otherwise engaged in suspicious activity or refuses
to promptly provide information that the Company requests, the
Company has the right or may be obligated to prohibit additional
investments, segregate the assets constituting the investment in
accordance with applicable regulations or immediately require the
Purchaser to transfer the Units and underlying securities. The
Purchaser further acknowledges that the Purchaser will have no
claim against the Company or any of its Affiliates or agents for
any form of damages as a result of any of the foregoing
actions.

 

If the
Purchaser is affiliated with a non-U.S. banking institution (a
“Foreign
Bank”), or if the Purchaser receives deposits from,
makes payments on behalf of, or handles other financial
transactions related to a Foreign Bank, the Purchaser represents
and warrants to the Company that: (1) the Foreign Bank has a fixed
address, other than solely an electronic address, in a country in
which the Foreign Bank is authorized to conduct banking activities;
(2) the Foreign Bank maintains operating records related to its
banking activities; (3) the Foreign Bank is subject to inspection
by the banking authority that licensed the Foreign Bank to conduct
banking activities; and (4) the Foreign Bank does not provide
banking services to any other Foreign Bank that does not have a
physical presence in any country and that is not a regulated
Affiliate.

 

 

 

 

The
Purchaser or its duly authorized representative realizes that
because of the inherently speculative nature of businesses of the
kind conducted and contemplated by the Company, the Company’s
financial results may be expected to fluctuate from month to month
and from period to period and will, generally, involve a high
degree of financial and market risk that could result in
substantial or, at times, even total losses for investors in
securities of the Company. The Purchaser has carefully read the
risk factors and other information (including the financial
statements of Sincerity Australia) included in the Super 8-K. The
Purchaser has carefully considered such risk factors before
deciding to invest in the Units.

 

j. The Purchaser has
adequate means of providing for its current and anticipated
financial needs and contingencies, is able to bear the economic
risk for an indefinite period of time and has no need for liquidity
of the investment in the Units and could afford a complete loss of
such investment.

 

k. The Purchaser is
not subscribing for Units as a result of or subsequent to any
advertisement, article, notice or other communication, published in
any newspaper, magazine or similar media or broadcast over
television, radio, or the internet, or presented at any seminar or
meeting, or any solicitation of a subscription by a person not
previously known to the Purchaser in connection with investments in
securities generally.

 

l. The Purchaser
acknowledges that no U.S. federal or state agency or any other
government or governmental agency has passed upon the Notes or made
any finding or determination as to the fairness, suitability or
wisdom of any investments therein.

 

m. Other than
consummating the transactions contemplated hereunder, the Purchaser
has not directly or indirectly, nor has any individual or entity
acting on behalf of or pursuant to any understanding with such
Purchaser, executed any purchases or sales, including Short Sales,
of the securities of the Company during the period commencing as of
the time that such Purchaser first received a term sheet (written
or oral) from the Company or any other individual or entity
representing the Company setting forth the material terms of the
transactions contemplated hereunder and ending immediately prior to
the execution hereof. Notwithstanding the foregoing, in the case of
a Purchaser that is a multi-managed investment vehicle whereby
separate portfolio managers manage separate portions of such
Purchaser’s assets and the portfolio managers have no direct
knowledge of the investment decisions made by the portfolio
managers managing other portions of such Purchaser’s assets,
the representation set forth above shall only apply with respect to
the portion of assets managed by the portfolio manager that made
the investment decision to purchase the Units covered by this
Agreement. Other than to other individuals or entities party to
this Agreement, such Purchaser has maintained the confidentiality
of all disclosures made to it in connection with this transaction
(including the existence and terms of this transaction).
Notwithstanding the foregoing, for avoidance of doubt, nothing
contained herein shall constitute a representation or warranty, or
preclude any actions, with respect to the identification of the
availability of, or securing of, available shares to borrow in
order to effect Short Sales or similar transactions in the future.
For purposes of this Agreement, “Short
Sales” means all “short sales” as defined
in Rule 200 of Regulation SHO under the Exchange Act (but shall not
be deemed to include the location and/or reservation of borrowable
shares of Common Stock).

 

n. The Purchaser
agrees to be bound by all of the terms and conditions of the
Registration Rights Agreement and Security Agreement and to perform
all obligations thereby imposed upon it.

 

o. The Purchaser is
aware that the anti-manipulation rules of Regulation M under the
Exchange Act may apply to sales of the Conversion Shares and
Warrant Shares and other activities with respect to the Conversion
Shares by the Purchaser.

 

p. All of the
information concerning the Purchaser set forth herein, and any
other information furnished by the Purchaser in writing to the
Company or a Placement Agent for use in connection with the
transactions contemplated by this Agreement, is true, correct and
complete in all material respects as of the date of this Agreement,
and, if there should be any material change in such information
prior to the admission of the undersigned to the Company, the
Purchaser will promptly furnish revised or corrected information to
the Company.

 

q. (For ERISA plans only) The
fiduciary of the Employee Retirement Income Security Act of 1974
(“ERISA”)
plan (the “Plan”)
represents that such fiduciary has been informed of and understands
the Company’s investment objectives, policies and strategies,
and that the decision to invest “plan assets” (as such
term is defined in ERISA) in the Company is consistent with the
provisions of ERISA that require diversification of plan assets and
impose other fiduciary responsibilities. The Purchaser fiduciary or
Plan (a) is responsible for the decision to invest in the Company;
(b) is independent of the Company or any of its Affiliates; (c) is
qualified to make such investment decision; and (d) in making such
decision, the Purchaser fiduciary or Plan has not relied primarily
on any advice or recommendation of the Company or any of its
Affiliates.

 

6. Transfer Restrictions.  The
Purchaser acknowledges and agrees as follows:

 

a. The Units, Notes
and Warrants, including the Conversion Shares and Warrant Shares,
have not been registered for sale under the Securities Act, in
reliance on the private offering exemption in Section 4(a)(2)
thereof; other than as expressly provided in the Registration
Rights Agreement, the Company does not currently intend to register
the Conversion Shares and Warrant Shares under the Securities Act
at any time in the future; and the undersigned will not immediately
be entitled to the benefits of Rule 144 with respect to the
Conversion Shares or Warrant Shares.

 

b. The Purchaser
understands that there are substantial restrictions on the
transferability of the Units, Notes and Warrants and that the
certificates representing the Conversion Shares and Warrant Shares
shall bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of such
certificates or other instruments):

 

 

 

 

THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES
ACT”), OR ANY STATE SECURITIES LAWS, AND NEITHER SUCH
SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN EXEMPTION
FROM SUCH REGISTRATION EXISTS AND THE COMPANY RECEIVES AN OPINION
OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY
TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES LAWS OR (3) SOLD PURSUANT TO RULE 144
UNDER THE SECURITIES ACT.

 

In
addition, if any Purchaser is an Affiliate of the Company,
certificates evidencing the Conversion Shares and Warrant Shares
issued to such Purchaser may bear a customary
“Affiliates” legend.

 

The
legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of Conversion
Shares or Investor Warrant Shares, as applicable, upon which it is
stamped, if (a) such Conversion Shares or Investor Warrant
Shares are sold pursuant to a registration statement under the
Securities Act, or (b) such holder delivers to the Company an
opinion of counsel, reasonably acceptable to the Company, that a
disposition of the Conversion Shares or Investor Warrant Shares, as
applicable, is being made pursuant to an exemption from such
registration and that the Conversion Shares or Investor Warrant
Shares, after such transfer, shall no longer be “restricted
securities” within the meaning of Rule 144.

 

c.  Each
Purchaser understands that the Company is and immediately prior to
the closing of the Acquisition will be a “shell
company” as defined in Rule 12b-2 under the Exchange Act and
upon filing with the SEC of the Super 8-K reporting the
consummation of the Acquisition and related transactions and the
transactions contemplated by this Agreement, and otherwise
containing “Form 10 information” as discussed below,
the Company will reflect therein that it is no longer a shell
company. Pursuant to Rule 144(i), securities issued by a current or
former shell company that otherwise meet the holding period and
other requirements of Rule 144 nevertheless cannot be sold in
reliance on Rule 144 until one year after the Company (a)
is no longer a shell company; and (b) has filed current “Form
10 information“ (as defined in Rule 144(i)) with the SEC
reflecting that it is no longer a shell company, and provided that
at the time of a proposed sale pursuant to Rule 144, the Company is
subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act and has filed all reports and other materials required
to be filed by Section 13 or 15(d) of the Exchange Act, as
applicable, during the preceding 12 months (or for such shorter
period that the issuer was required to file such reports and
materials), other than Form 8-K reports. As a result, the restrictive legends
on certificates for the Conversion Shares and Warrant
Shares cannot
be removed except in connection with an actual sale meeting the
foregoing requirements or pursuant to an effective registration
statement.

 

 

 

 

7. Covenants.

 

a. Best
Efforts.  Each party
shall use its best efforts timely to satisfy each of the conditions
to be satisfied by it as provided in Sections
8
and 9 of this Agreement.

 

b. Form
D.  The Company
agrees to file a Form D with respect to the offer and sale of the
Units as required under Regulation D. The Company shall take such
action as the Company shall reasonably determine is necessary to
qualify the Units, or obtain an exemption for the Units for sale to
the Subscribers at the Initial Closing and each subsequent Closing
pursuant to this Agreement under applicable securities or
“Blue Sky” laws of the states of the United States and
foreign jurisdictions, as applicable.

 

c. Reporting
Status.  Until the date on which the Subscriber
shall have sold all of Subscriber’s Conversion Shares and
Warrant Shares, the Company
shall file in a timely manner (or, with respect to Form 8-K
reports, shall use its commercially reasonable efforts to file in a
timely manner) all reports required to be filed with the SEC
pursuant to the Exchange Act, and the regulations of the SEC
thereunder, and the Company shall not terminate its status as an
issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would
otherwise permit such termination.

 

d. Use of Proceeds.  The
Company shall use the net
proceeds from the sale of the Units (after deducting fees and
expenses (including legal fees and expenses and fees payable to the
Escrow Agent)) for working capital and general corporate
purposes.

 

e. Listings or
Quotation.  The Company shall use its commercially
reasonable efforts to maintain the listing or quotation of its
Common Stock upon the OTCQB tier of the OTC
marketplace.

 

f. Survival.  The
representations and warranties of the Company and the Subscriber
contained in Sections
4 and 5
shall survive the Closing for a period of twenty-four (24) months.
The covenants contained in Sections 7 and 18 shall survive for the
maximum period permitted by law. Each Subscriber shall be
responsible only for its own representations, warranties,
agreements and covenants hereunder.

 

8. Conditions to Company’s Obligations at
Closing.  The Company’s obligation to
complete the sale and issuance of the Units and deliver the Units
and underlying securities to each Purchaser, individually, at the
Initial Closing and each subsequent Closing shall be subject to the
following conditions to the extent not waived by the
Company:

 

a. Receipt of
Payment.  The Company shall have received payment,
by certified or other bank check or by wire transfer of immediately
available funds, in the full amount of the purchase price for the
number of Units being purchased by such Purchaser at the applicable
Closing.

 

b. Representations and
Warranties.  The representations and warranties
made by the Purchaser in Section 5 hereof shall be true
and correct in all material respects when made, and shall be true
and correct in all material respects on such Closing Date with the
same force and effect as if they had been made on and as of said
date (except in each case to the extent any such representation and
warranty is qualified by materiality, in which case, such
representation and warranty shall be true and correct in all
respects as so qualified). The Purchaser shall have performed in
all material respects all obligations and covenants herein required
to be performed by it on or prior to such Closing
Date.

 

 

 

 

c. Receipt of Executed
Documents.  Such Purchaser shall have executed and
delivered to the Company the Omnibus Signature Page, the Purchaser
Questionnaire and the Selling Stockholder
Questionnaire.

 

d. Effectiveness of the
Acquisition.  The Acquisition shall have been
effected (or is simultaneously effected, in the case of the Initial
Closing).

 

e. Minimum
Offering.  The Initial Closing shall be at least
for the amount of Units in the Minimum Offering at the Purchase
Price.

 

f. Lock-Up and No Short Selling
Agreement.  At the Initial Closing of the
Offering, (a) all officers and directors of the Company, (b)
post-Acquisition key employees agreed to by the Company and
Sincerity Australia, if any, (c) all post-Acquisition shareholders
of the Company holding Common Stock representing 5% or more of the
Company’s outstanding Common Stock (each a
“Restricted
Holder” and, collectively, the “Restricted
Holders”) shall have entered into agreements with the
Company for a term of twenty-four months (the “Restricted
Period”), whereby they will agree to certain
restrictions on the sale or disposition (including pledge) of all
of the Company’s Common Stock held by (or issuable to) them,
excluding any shares purchased by them in the Offering. The
lock-ups will contain customary transfer exceptions.

 

In
addition, each Restricted Holder shall agree that they will not,
for a period of 12 months following the Initial Closing Date,
directly or indirectly, effect or agree to effect any short sale
(as defined in Rule 200 under Regulation SHO of the Exchange Act),
whether or not against the box, establish any “put equivalent
position” (as defined in Rule 16a-1(h) under the Exchange
Act) with respect to the Common Stock, borrow or pre-borrow any
shares of Common Stock, or grant any other right (including,
without limitation, any put or call option) with respect to the
Common Stock or with respect to any security that includes, relates
to or derives any significant part of its value from the Common
Stock or otherwise seek to hedge its position in the Common
Stock.

 

9. Conditions to Purchasers’ Obligations at
Closing.  Each Purchaser’s obligation to
accept delivery of the Units and underlying securities and to pay
for the Units shall be subject to the following conditions to the
extent not waived by the Placement Agent on behalf of the
Purchasers:

 

a. Representations and Warranties
Correct.  The representations and warranties made
by the Company in Section
4 hereof shall be true and correct in all material respects
(except to the extent any such representation and warranty is
qualified by materiality or reference to Material Adverse Effect,
in which case, such representation and warranty shall be true and
correct in all respects as so qualified) as of, and as if made on,
the date of this Agreement and as of the applicable Closing Date,
except to the extent any such representation or warranty expressly
speaks as of an earlier date, in which case such representation or
warranty shall be true and in all material respects correct as of
such earlier date (except in each case to the extent any such
representation and warranty is qualified by materiality or
reference to Material Adverse Effect, in which case, such
representation and warranty shall be true and correct in all
respects as so qualified). The Company shall have performed in all
material respects all obligations and covenants herein required to
be performed by it on or prior to the Initial Closing
Date.

 

 

 

 

b. Receipt of Executed Transaction
Documents.  The Company shall have executed the
Registration Rights Agreement and the Escrow
Agreement.

 

c. Effectiveness of the
Acquisition.  The Acquisition shall have been
effected (or is simultaneously effected, in the case of the
Closing).

 

d. Minimum
Offering.  The Initial Closing shall be at least
for the amount of Units in the Minimum Offering at the Purchase
Price.

 

e. Certificate.  The
Chief Executive Officer of the Company shall execute and deliver to
CKR a certificate addressed to the Purchasers to the effect that
the representations and warranties of the Company in Section 4 hereof are true and
correct in all material respects (except to the extent any such
representation and warranty is qualified by materiality or
reference to Material Adverse Effect, in which case, such
representation and warranty shall be true and correct in all
respects as so qualified) as of, and as if made on, the date of
this Agreement and as of such Closing Date and that the Company has
satisfied in all material respects all of the conditions set forth
in this Section
9.

 

f. Good Standing.  The
Company and each of its subsidiaries is a corporation or other
business entity duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its
formation.

 

g. Judgments.  No
judgment, writ, order, injunction, award or decree of or by any
court, or judge, justice or magistrate, including any bankruptcy
court or judge, or any order of or by any governmental authority,
shall have been issued, and no action or proceeding shall have been
instituted by any governmental authority, enjoining or preventing
the consummation of the transactions contemplated
hereby.

 

h. Lock-Up and No Short Selling
Agreements.  The agreement required by
Section
8f shall have been executed by
the persons referred to therein and delivered to the
Company.

 

i. Delivery of Draft of Super
8-K.  A substantially complete draft of the Super
8-K, including audited and interim unaudited financial statements
of Sincerity Australia and pro forma financial statements
reflecting the Acquisition, all compliant with applicable SEC
regulations for inclusion under Item 2.01(f) and/or 5.01(a)(8) of
SEC Form 8-K, shall have been delivered to the
Purchasers.

 

10. Indemnification.

 

a. The Company agrees
to indemnify and hold harmless the Purchaser, and its directors,
officers, shareholders, members, partners, employees and agents
(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), each person who controls such Purchaser (within
the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or 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 such
controlling person, from and against all losses, liabilities,
claims, damages, costs, fees and expenses whatsoever (including,
but not limited to, any and all expenses incurred in investigating,
preparing or defending against any litigation commenced or
threatened) based upon or arising out of the Company’s actual
or alleged false acknowledgment, representation or warranty, or
misrepresentation or omission to state a material fact, or breach
by the Company of any covenant or agreement made by the Company,
contained herein or in any other Disclosure Materials; provided,
however, that the Company will not be liable in any such case to
the extent and only to the extent that any such loss, liability,
claim, damage, cost, fee or expense arises out of or is based upon
the inaccuracy of any representations made by such indemnified
party in this Agreement, or the failure of such indemnified party
to comply with the covenants and agreements contained herein. The
liability of the Company under this paragraph shall not exceed the
total Purchase Price paid by the Purchaser hereunder, except in the
case of fraud.

 

 

 

 

b. Promptly after
receipt by an indemnified party under this Section 10 of notice of the
commencement of any Action, such indemnified party will, if a claim
in respect thereof is to be made against the indemnifying party
under this Section
10, notify the
indemnifying party in writing of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party
otherwise than under this Section 10. In case any such Action is
brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein, and to the extent
that it may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof, with counsel
satisfactory to such indemnified party; provided, however, if the
defendants in any such Action include both the indemnified party
and the indemnifying party and either (i) the indemnifying party or
parties and the indemnified party or parties mutually agree or (ii)
representation of both the indemnifying party or parties and the
indemnified party or parties by the same counsel is inappropriate
under applicable standards of professional conduct due to actual or
potential differing interests between them, the indemnified party
or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the
defense of such Action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such
indemnified party of its election so to assume the defense of such
Action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party
under this Section
10 for any
reasonable legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i)
the indemnified party shall have employed counsel in connection
with the assumption of legal defenses in accordance with the
proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel in such circumstance),
(ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the
Action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of
the indemnifying party. No indemnifying party shall (i) without the
prior written consent of the indemnified parties (which consent
shall not be unreasonably withheld), settle or compromise or
consent to the entry of any judgment with respect to any pending or
threatened Action in respect of which indemnification or
contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such Action)
unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability
arising out of such Action, or (ii) be liable for any settlement of
any such Action effected without its written consent (which consent
shall not be unreasonably withheld), but if settled with its
written consent or if there be a final judgment of the plaintiff in
any such Action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.

 

11. Revocability; Binding
Effect.  The subscription hereunder may be revoked
prior to the Closing thereon, provided that written notice of
revocation is sent and is received by the Company at least one
Business Day prior to the Closing on such subscription. The
Purchaser hereby acknowledges and agrees that this Agreement shall
survive the death or disability of the Purchaser and shall be
binding upon and inure to the benefit of the parties and their
heirs, executors, administrators, successors, legal representatives
and permitted assigns. If the Purchaser is more than one person,
the obligations of the Purchaser hereunder shall be joint and
several and the agreements, representations, warranties and
acknowledgments herein shall be deemed to be made by and be binding
upon each such person and such person’s heirs, executors,
administrators, successors, legal representatives and permitted
assigns.

 

 

 

 

12. Modification.  This Agreement
shall not be amended, modified or waived except by an instrument in
writing signed by the Company and the holders of at least a
majority in principal amount of the Notes. Any amendment,
modification or waiver effected in accordance with this
Section 12 shall be
binding upon the Purchaser and each transferee of the Shares, each
future holder of all Notes and Conversion Shares, and the
Company.

 

13. Immaterial Modifications to the Registration
Rights Agreement and Security Agreement.  The
Company may, at any time prior to the Closing, amend the
Registration Rights Agreement and/or Security Agreement if
necessary to clarify any provision therein, without first providing
notice or obtaining prior consent of the Purchaser.

 

14. Beneficiaries of the Agreement. 
This Agreement is intended for the benefit of the parties hereto
and their respective successors and permitted assigns and is not
for the benefit of, nor may any provision hereof be enforced by,
any other Person, except as otherwise set forth in Section 9 and this
Section.

 

15. Notices.  Any notice,
consents, waivers or other communication required or permitted to
be given hereunder shall be in writing and will be deemed to have
been delivered: (i) upon receipt, when personally delivered; (ii)
upon receipt when sent by certified mail, return receipt requested,
postage prepaid; (iii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party;
(iv) when sent, if by e-mail, (provided that such sent e-mail is
kept on file (whether electronically or otherwise) by the sending
party and the sending party does not receive an automatically
generated message from the recipient’s e-mail server that
such e-mail could not be delivered to such recipient); or (v) one
(1) Business Day after deposit with an overnight courier service
with next day delivery specified, in each case, properly addressed
to the party to receive the same. The addresses, facsimile numbers
and email addresses for such communications shall be:

 

(a) 

if to the Company,
at

 

Sincerity Applied
Materials Holdings Corp.

P.O.
Box 374

100
Toorak Road

South
Yarra V1C 3141

Attention:  Mr.
Zhang Yiwen, CEO

Email:  james@sincerityplastics.com

 

with
copies (which shall not constitute notice) to:

 

CKR Law
LLP

1330
Avenue of the Americas

New
York, NY 10019

Attention:  Scott
Rapfogel

Facsimile:  1-212-259-8200

E-mail:  srapfogel@ckrlaw.com

 

or

 

 

 

 

 

(b)           if
to the Purchaser, at the address set forth on the Omnibus Signature
Page hereof

 

(or, in
either case, to such other address as the party shall have
furnished in writing in accordance with the provisions of this
Section). Any notice or other communication given by certified mail
shall be deemed given at the time of certification thereof, except
for a notice changing a party’s address which shall be deemed
given at the time of receipt thereof.

 

16. Assignability.  This Agreement
and the rights, interests and obligations hereunder are not
transferable or assignable by the Purchaser, and the transfer or
assignment of the Units and underlying securities shall be made
only in accordance with all applicable laws.

 

17. Applicable Law.  This
Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without reference to the principles
thereof relating to the conflict of laws.

 

18. Arbitration.  The parties
agree to submit all controversies to arbitration in accordance with
the provisions set forth below and understand that:

 

a. Arbitration shall
be final and binding on the parties.

 

b. The parties are
waiving their right to seek remedies in court, including the right
to a jury trial.

 

c. Pre-arbitration
discovery is generally more limited and different from court
proceedings.

 

d. The
arbitrator’s award is not required to include factual
findings or legal reasoning and any party’s right to appeal
or to seek modification of rulings by arbitrators is strictly
limited.

 

e. The panel of
arbitrators will typically include a minority of arbitrators who
were or are Affiliated with the securities industry.

 

f. All controversies
which may arise between the parties concerning this Agreement shall
be determined by arbitration pursuant to the rules then pertaining
to the Financial Industry Regulatory Authority in New York, New
York. Judgment on any award of any such arbitration may be entered
in the Supreme Court of the State of New York or in any other court
having jurisdiction of the person or persons against whom such
award is rendered. Any notice of such arbitration or for the
confirmation of any award in any arbitration shall be sufficient if
given in accordance with the provisions of this Agreement. The
parties agree that the determination of the arbitrators shall be
binding and conclusive upon them. The prevailing party, as
determined by such arbitrators, in a legal proceeding shall be
entitled to collect any costs, disbursements and reasonable
attorney’s fees from the other party. Prior to filing an
arbitration, the parties hereby agree that they will attempt to
resolve their differences first by submitting the matter for
resolution to a mediator, acceptable to all parties, and whose
expenses will be borne equally by all parties. The mediation will
be held in the County of New York, State of New York, on an
expedited basis. If the parties cannot successfully resolve their
differences through mediation within sixty (60) days from the
receipt of the written notice of a matter from the notifying party,
the matter will be resolved by arbitration. The arbitration shall
take place in the County of New York, State of New York, on an
expedited basis.

 

19. Form D; Blue Sky
Qualification.  The Company agrees to timely file
a Form D with respect to the Units and to provide a copy thereof,
promptly upon request of any Purchaser. The Company shall take such
action as the Company shall reasonably determine is necessary in
order to obtain an exemption for, or to qualify the Units for, sale
to the Purchaser at such Closing under applicable securities or
“Blue Sky” laws of the states of the United States, and
shall provide evidence of such actions promptly upon request of any
Purchaser.

 

 

 

 

20. Use of Pronouns.  All pronouns
and any variations thereof used herein shall be deemed to refer to
the masculine, feminine, neuter, singular or plural as the identity
of the person or persons referred to may require.

 

21. Securities Law Disclosure;
Publicity.   The Company shall not publicly
disclose the name of any Purchaser or an Affiliate of any
Purchaser, or include the name of any Purchaser or an Affiliate of
any Purchaser in any press release or filing with the SEC (other
than the Registration Statement) or any regulatory agency or
principal trading market, without the prior written consent of such
Purchaser, except (i) as required by federal securities law in
connection with (A) any registration statement contemplated by the
Registration Rights Agreement and (B) the filing of final
Transaction Documents with the SEC or (ii) to the extent such
disclosure is required by law, request of the staff of the SEC or
of any regulatory agency or principal trading market regulations,
in which case the Company shall provide the Purchasers with prior
written notice of such disclosure permitted under this sub-clause
(ii). Each Purchaser, severally and not jointly with the other
Purchasers, covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the
Company, such Purchaser will maintain the confidentiality of all
disclosures made to it in connection with such transactions
(including the existence and terms of such
transactions).

 

22. Non-Public
Information.  Except for information (including
the terms of this Agreement and the transactions contemplated
hereby) that will be disclosed in the Super 8-K and filed with the
SEC within four (4) Business Days of the Closing, the Company shall
not and shall cause each of its officers, directors, employees and
agents, not to, provide any Purchaser with any material, non-public
information regarding the Company without the express written
consent of such Purchaser.

 

23. Miscellaneous.

 

a. This Agreement,
together with the Registration Rights Agreement, the Security
Agreement and any confidentiality agreement between the Purchaser
and the Company, constitute the entire agreement between the
Purchaser and the Company with respect to the Offering and
supersedes all prior oral or written agreements and understandings,
if any, relating to the subject matter hereof. The terms and
provisions of this Agreement may be waived, or consent for the
departure therefrom granted, only by a written document executed by
the party entitled to the benefits of such terms or
provisions.

 

b. If the Conversion
Shares and/or Warrant Shares are certificated and any certificate
or instrument evidencing any Conversion Shares, Warrant Shares,
Warrants or Notes is mutilated, lost, stolen or destroyed, the
Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and
substitution therefor, a new certificate or instrument, but only
upon receipt of evidence reasonably satisfactory to the Company and
the Company’s transfer agent of such loss, theft or
destruction and the execution by the holder thereof of a customary
lost certificate affidavit of that fact and an agreement to
indemnify and hold harmless the Company and the Company’s
transfer agent for any losses in connection therewith or, if
required by the transfer agent, a bond in such form and amount as
is required by the transfer agent. The applicants for a new
certificate or instrument under such circumstances shall also pay
any reasonable third-party costs associated with the issuance of
such replacement Conversion Shares, Warrant Shares, Warrants or
Notes. If a replacement certificate or instrument evidencing any
Conversion Shares, Warrant Shares, Warrants or Notes is requested
due to a mutilation thereof, the Company may require delivery of
such mutilated certificate or instrument as a condition precedent
to any issuance of a replacement.

 

 

 

 

c. Each of the parties
hereto shall pay its own fees and expenses (including the fees of
any attorneys, accountants, appraisers or others engaged by such
party) in connection with this Agreement and the transactions
contemplated hereby, whether or not the transactions contemplated
hereby are consummated.

 

d. This Agreement may
be executed in one or more original or facsimile or by an e-mail
which contains a portable document format (.pdf) file of an
executed signature page counterparts, each of which shall be deemed
an original, but all of which shall together constitute one and the
same instrument and which shall be enforceable against the parties
actually executing such counterparts. The exchange of copies of
this Agreement and of signature pages by facsimile transmission or
in .pdf format shall constitute effective execution and delivery of
this Agreement as to the parties and may be used in lieu of the
original Agreement for all purposes. Signatures of the parties
transmitted by facsimile or by e-mail of a document in pdf format
shall be deemed to be their original signatures for all
purposes.

 

e. Each provision of
this Agreement shall be considered separable and, if for any reason
any provision or provisions hereof are determined to be invalid or
contrary to applicable law, such invalidity or illegality shall not
impair the operation of or affect the remaining portions of this
Agreement.

 

f. Paragraph titles
are for descriptive purposes only and shall not control or alter
the meaning of this Agreement as set forth in the
text.

 

g. The Purchaser
hereby agrees to furnish the Company such other information as the
Company may request prior to Closing with respect to its
subscription hereunder.

 

h. The representations
and warranties of the Company and the Purchaser made in this
Agreement shall survive the execution and delivery hereof and the
delivery of the Units and underlying securities.

 

24. Omnibus Signature Page.  This
Agreement is intended to be read and construed in conjunction with
the Registration Rights Agreement and Security Agreement.
Accordingly, pursuant to the terms and conditions of this
Agreement, the Registration Rights Agreement and the Security
Agreement, it is hereby agreed that the execution by the Purchaser
of this Agreement, in the place set forth on the Omnibus Signature
Page below, shall constitute agreement to be bound by the terms and
conditions hereof and the terms and conditions of the Registration
Rights Agreement and Security Agreement, with the same effect as if
each of such separate but related agreement were separately
signed.

 

25. Public Disclosure.  Neither
the Purchaser nor any officer, manager, director, member, partner,
stockholder, employee, Affiliate, Affiliated person or entity of
the Purchaser shall make or issue any press releases or otherwise
make any public statements or make any disclosures to any third
person or entity with respect to the transactions contemplated
herein and will not make or issue any press releases or otherwise
make any public statements of any nature whatsoever with respect to
the Company without the Company’s express prior approval
(which may be withheld in the Company’s sole discretion),
except to the extent such disclosure is required by law, request of
the staff of the SEC or of any regulatory agency or principal
trading market regulations.

 

 

 

 

26. Potential
Conflicts. Legal counsel to the
Company or Sincerity Australia and/or their respective Affiliates,
principals, representatives or employees may now or hereafter own
shares of the Company.

 

27. Independent Nature of Each Purchaser’s
Obligations and Rights.  For avoidance of doubt,
the obligations of the Purchaser under this Agreement are several
and not joint with the obligations of any other Purchaser, and the
Purchaser shall not be responsible in any way for the performance
of the obligations of any other Purchaser under any other
Subscription Agreement. Nothing contained herein and no action
taken by the Purchaser shall be deemed to constitute the Purchaser
as a partnership, an association, a joint venture, or any other
kind of entity, or create a presumption that the Purchasers are in
any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by this Agreement and
any other Subscription Agreements. The Purchaser shall be entitled
to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement, and it shall
not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose.

 

[Signature page follows.]

 

 

 

 

IN
WITNESS WHEREOF, the Company has duly executed this Agreement as of
the ____ day of _________, 2017.

 

	
 

	
 

Sincerity Applied Materials Holdings Corp.

 

By; 
                                                       

Name:  

Title: 

 

 

 

 

 

 

 

 

How to subscribe for Units in the private offering of Sincerity
Applied Materials Holdings Corp.

 

1.

Date and Fill in the number of Units
being purchased and complete and
sign the Omnibus
Signature Page.

 

2.

Initial the Accredited Investor
Certification in the appropriate place or
places.

 

3.

Complete and sign the Investor Profile.

 

4.

Complete and sign the Anti-Money Laundering Information
Form.

 

5.

Unless directed
otherwise by the instructions set forth in the NSC Omnibus
Subscription Package for Retail Investors, fax or email all forms and then send all
signed original documents to:

 

CKR LAW
LLP

1330
Avenue of the Americas

New
York, NY 10019

Facsimile
Number:  212.259.8200

Telephone
Number:  212.259.7300

Attn:  Kathleen
L. Rush

E-mail
Address:  krush@ckrlaw.com

 

6.

If you are paying
the Purchase Price by check, a certified or other bank check
for the exact dollar amount of the Purchase Price for the amount of
Units you are purchasing should be made payable to the order of
“CKR Law LLP, as Escrow Agent
for Sincerity Applied Materials Holdings Corp.” and
should be sent directly to CKR Law LLP, 1330 Avenue of the
Americas, 14th
Floor, New York, NY 10019
Attn: Andrea Nathanson.

 

Checks take up to 5 business
days to clear. A check must be received by the
Escrow Agent at least 6 business days before the closing
date.

 

7.

If you are paying
the Purchase Price by wire transfer, you should send a wire
transfer for the exact dollar amount of the Purchase Price for the
number of Shares you are purchasing according to the following
instructions:

 

	

Bank:

	

Citibank,
N.A.

666
Fifth Avenue

New
York, NY 10103

	

ABA Routing #:

	

021000089

	

SWIFT CODE:

	

CITIUS33

	

Account Name:

	

CKR Law LLP Attorney Trust Account

	

Account #:

	

4987285785

	

Reference:

	

[Please
Insert Name]-SAMHC

 

Thank
you for your interest.

	

 

 

 

Sincerity Applied Materials Holdings Corp.

OMNIBUS
SIGNATURE PAGE TO

SUBSCRIPTION
AGREEMENT, REGISTRATION RIGHTS AGREEMENT,

SECURITY
AGREEMENT AND ESCROW AGREEMENT

 

The undersigned, desiring to: (i) enter into the Subscription
Agreement, dated as of ____________ ___,1 2017 (the “Subscription
Agreement”), between the
undersigned, Sincerity Applied Materials Holdings Corp., a Nevada
corporation (the “Company”),
and the other parties thereto, in or substantially in the form
furnished to the undersigned, (ii) enter into the Registration
Rights Agreement (the “Registration
Rights Agreement”), among
the undersigned, the Company and the other parties thereto, in or
substantially in the form furnished to the undersigned, (iii) enter
into the Security Agreement (the “Security
Agreement”) among the
undersigned, the Company and the other parties thereto, in or
substantially in the form furnished to the undersigned, (iv) enter
into the Escrow Agreement (the “Escrow
Agreement”) among the
undersigned, the Company, CKR Law LLP and the other parties
thereto, in or substantially in the form furnished to the
undersigned and (v) purchase the Notes and Warrants of the Company
as set forth in the Subscription Agreement and below, hereby agrees
to purchase such Notes and Warrants from the Company and further
agrees to join the Subscription Agreement, the Registration Rights
Agreement, the Security Agreement and the Escrow Agreement as a
party thereto, with all the rights and privileges appertaining
thereto, and to be bound in all respects by the terms and
conditions thereof. The undersigned specifically acknowledges
having read the representations section in the Subscription
Agreement entitled “Representations and Warranties of the
Purchaser” and hereby represents that the statements
contained therein are complete and accurate with respect to the
undersigned as a Purchaser.

 

IN
WITNESS WHEREOF, the Purchaser hereby executes this Agreement and
the Registration Rights Agreement the Security Agreement and the
Escrow Agreement.

 

Dated:                                                         

, 2017

 

	
 

	
 

	

X

	

$10,000

	

=

	
 

	
 

	

Number
of Units Purchased

	
 

	
 

	

Purchase Price per
Unit

	
 

	
 

	

Total
Purchase Price

 

 

 

	

SUBSCRIBER (individual)

 

	
 

	

SUBSCRIBER (entity)

 

	
 

	
 

	
 

	
 

	
 

	

Signature

 

	
 

	

Name of
Entity

 

	
 

	
 

	
 

	

By:

	
 

	

Print
Name

 

	
 

	

Signature

 

	
 

	
 

	
 

	

Print
Name:

	
 

	

Signature
(if Joint Tenants or Tenants in Common)

	

Title:

	
 

	
 

	

Address
of Principal Residence:

	
 

	

Address
of Executive Offices:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

Social
Security Number(s):

	
 

	

IRS Tax
Identification Number:

	
 

	
 

	
 

	
 

	
 

	

Telephone
Number:

	
 

	

Telephone
Number:

	
 

	
 

	
 

	
 

	
 

	

Facsimile
Number:

	
 

	

Facsimile
Number:

	
 

	
 

	
 

	
 

	
 

	

E-mail
Address:

	
 

	

E-mail
Address:

	
 

	
 

	
 

	
 

	
 

1 Will reflect the Closing
Date. Not to be completed by Purchaser.

 

 

 

Sincerity Applied Materials Holdings Corp.

 

ACCREDITED INVESTOR CERTIFICATION

 

For Individual Investors Only

(all Individual Investors must
INITIAL
where
appropriate):

 

Initial
_______ 

I have a net worth of at least US$1 million either
individually or through aggregating my individual holdings and
those in which I have a joint, community property or other similar
shared ownership interest with my spouse. (For
purposes of calculating your net worth under this paragraph,
(a) 
your primary residence shall not be included as an
asset; (b)
indebtedness secured by your primary residence, up to the estimated
fair market value of your primary residence at the time of your
purchase of the securities, shall not be included as a liability
(except that if the amount of such indebtedness outstanding at the
time of your purchase of the securities exceeds the amount
outstanding sixty (60) days before such time, other than as a
result of the acquisition of your primary residence, the amount of
such excess shall be included as a liability); and (c) indebtedness
that is secured by your primary residence in excess of the
estimated fair market value of your primary residence at the time
of your purchase of the securities shall be included as a
liability.)

 

Initial
_______ 

I
have had an annual gross income for the past two (2) years of at
least US$200,000 (or US$300,000 jointly with my spouse) and expect
my income (or joint income, as appropriate) to reach the same level
in the current year.

 

Initial
_______ 

I am a director or executive officer
of 

.

 

For Non-Individual Investors (Entities)

(all Non-Individual Investors
must INITIAL where appropriate):

 

Initial
_______ 

The
investor certifies that it is a partnership, corporation, limited
liability company or business trust that is 100% owned by persons
who meet at least one of the criteria for Individual Investors set
forth above (in which case each such person must complete the
Accreditor Investor Certification for Individuals above as well the
remainder of this questionnaire).

 

Initial
_______ 

The
investor certifies that it is a partnership, corporation, limited
liability company or business trust that has total assets of at
least US$5,000,000 and was not formed for the purpose of investing
the Company.

 

Initial
_______ 

The
investor certifies that it is an employee benefit plan whose
investment decision is made by a plan fiduciary (as defined in
Section 3(21) of the Employee Retirement Income Security Act of
1974) that is a bank, savings and loan association, insurance
company or registered investment advisor.

 

Initial
_______ 

The
investor certifies that it is an employee benefit plan whose total
assets exceed US$5,000,000 as of the date of this
Agreement.

 

Initial
_______ 

The
undersigned certifies that it is a self-directed employee benefit
plan whose investment decisions are made solely by persons who meet
at least one of the criteria for Individual Investors.

 

Initial
_______ 

The
investor certifies that it is a U.S. bank as defined in Section
3(a)(2) of the Securities Act, or any U.S. savings and loan
association or other similar U.S. institution as defined in Section
3(a)(5) of the Securities Act acting in its individual or fiduciary
capacity.

 

 

 

 

Initial
_______ 

The
undersigned certifies that it is a broker-dealer registered
pursuant to Section 15 of the Securities Exchange Act of
1934.

 

Initial
_______ 

The
investor certifies that it is an organization described in Section
501(c)(3) of the Internal Revenue Code with total assets exceeding
US$5,000,000 and not formed for the specific purpose of investing
in the Company.

 

Initial
_______ 

The
investor certifies that it is a trust with total assets of at least
US$5,000,000, not formed for the specific purpose of investing in
the Company, and whose purchase is directed by a person with such
knowledge and experience in financial and business matters that
such person is capable of evaluating the merits and risks of the
prospective investment.

 

Initial
_______ 

The
investor certifies that it is a plan established and maintained by
a state or its political subdivisions, or any agency or
instrumentality thereof, for the benefit of its employees, and
which has total assets in excess of US$5,000,000.

 

Initial
_______ 

The
investor certifies that it is an insurance company as defined in
Section 2(13) of the Securities Act of 1933, or a registered
investment company.

 

Initial
_______ 

The investor certifies that it is
an investment company
registered under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of that
Act.

 

Initial
_______ 

The investor certifies that it is
a Small Business Investment
Company licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment
Act of 1958.

 

Initial
_______ 

The investor certifies that it is a private
business development
company as defined in Section 202(a)(22) of the Investment
Advisers Act of 1940.

 

 

 

 

 

 

ANTI MONEY LAUNDERING REQUIREMENTS

 

The USA PATRIOT Act

 

The USA
PATRIOT Act is designed to detect, deter, and punish terrorists in
the United States and abroad. The Act imposes new anti-money
laundering requirements on brokerage firms and financial
institutions. Since April 24, 2002 all brokerage firms have been
required to have new, comprehensive anti-money laundering
programs.

 

To help
you understand these efforts, we want to provide you with some
information about money laundering and our steps to implement the
USA PATRIOT Act.

 

What is money laundering?

 

Money
laundering is the process of disguising illegally obtained money so
that the funds appear to come from legitimate sources or
activities. Money laundering occurs in connection with a wide
variety of crimes, including illegal arms sales, drug trafficking,
robbery, fraud, racketeering, and terrorism.

 

How big is the problem and why is it important?

 

The use
of the U.S. financial system by criminals to facilitate terrorism
or other crimes could well taint our financial markets. According
to the U.S. State Department, one recent estimate puts the amount
of worldwide money laundering activity at $1 trillion a
year.

 

What are we required to do to eliminate money
laundering?

 

Under
rules required by the USA PATRIOT Act, our anti-money laundering
program must designate a special compliance officer, set up
employee training, conduct independent audits, and establish
policies and procedures to detect and report suspicious transaction
and ensure compliance with such laws. As part of our required
program, we may ask you to provide various identification documents
or other information. Until you provide the information or
documents we need, we may not be able to effect any transactions
for you.

 

 

 

 

 

 

 

EXHIBIT A

 

Form of 12% Senior Secured Convertible Note

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT B

 

Form of Warrant

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT C

 

Form of Security Agreement

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT D

 

Form of Registration Rights Agreement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT E

 

Form of Escrow AgreementBlueprint

  Exhibit 10.3

 

Warrant
Certificate No. ______

 

NEITHER THE SECURITIES REPRESENTED HEREBY NOR THE SECURITIES
ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE
SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST
THEREIN MAY BE OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED
UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (2) AN EXEMPTION FROM SUCH REGISTRATION EXISTS
AND THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF
SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE SATISFACTORY TO THE
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES LAWS. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES
MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES
ACT.

 

Effective
Date: _________, 2017  Expiration Date: __________,
2022

 

SINCERITY APPLIED MATERIALS HOLDINGS CORP.

 

WARRANT
TO PURCHASE COMMON STOCK

 

Sincerity Applied Materials Holdings
Corp., a Nevada
corporation (the “Company”), for value received on
the Effective Date, hereby issues to __________________________
(the “Holder”)
this Warrant (the “Warrant”) to purchase shares (as
from time to time adjusted as hereinafter provided) (each such
share a “Warrant
Share” and all such shares being the
“Warrant
Shares”) of the Company’s Common Stock (as
defined below), at the Exercise Price (as defined below), as
adjusted from time to time as provided herein, on or before the
Expiration Date, all subject to the following terms and
conditions.

 

This
Warrant is one of a series of Warrants of like tenor being issued
to Subscribers in the Company’s private offering (the
“Offering”) of
units of its securities (the “Units”) in accordance with, and
subject to, the terms and conditions described in the Subscription
Agreement entered into by and between the Company and each
Subscriber set forth on the signature pages affixed thereto (the
“Subscription
Agreement”). Each Unit consists of one 12% Senior
Secured Convertible Promissory Note in the face amount of $10,000
(the “Note”) and one Warrant representing the right to
purchase Thirty Three Thousand Three Hundred Thirty Four (33,334)
shares of Common Stock. This Warrant is exercisable upon the
earlier of (i) the completion of a Qualified Financing (as defined
below), subject to the limitations and qualifications set forth in
Section 3(a)(iv)(C) below; or (ii) one year from the Effective Date
of this Warrant. Subject to Sections 3(a)(iv)(A) and 3(a)(iv)(C)
below, in the case of a Qualified Financing the Warrants are
exercisable at a price per share equal to 80% of the lesser of (i)
the price at which Common Stock is sold in the Qualified Financing,
or (ii) the lowest price at which other securities sold in the
Qualified Financing may be converted into or exercised for Common
Stock (such other securities being hereafter referred to as
“Common Stock Equivalents”).Subject to Section
3(a)(iv)(C) below, if a Qualified Financing is not completed within
one year of the Effective Date, this Warrant shall be exercisable
at a price per share equal to 80% of the VWAP (as defined below) of
the Common Stock (as defined below) during the ten consecutive
Trading Days (as defined below) ending on the Trading Day
immediately prior to the date on which a Notice of Exercise is
received by the Company from the Holder. Capitalized terms used
herein without definition have the meanings ascribed to them in the
Subscription Agreement.

 

{00180934.3 / 4133.003}

 

 

As used
in this Warrant, (i) “Business Day” means any day other
than Saturday, Sunday or any other day on which commercial banks in
the City of New York, New York, are authorized or required by law
or executive order to close; (ii) “Common Stock” means the common
stock of the Company, $0.001 par value per share, including any
securities issued or issuable with respect thereto or into which or
for which such shares may be exchanged for, or converted into,
pursuant to any stock dividend, stock split, stock combination,
recapitalization, reclassification, reorganization or other similar
event; (iii) “Exercise
Price” means the price at which one share of Common
Stock can be purchased under this Warrant, subject to adjustment as
provided herein; (iv) “Qualified Financing” means a
financing of not less than $20,000,000 completed by the Company or
a subsidiary of the Company after the Effective Date of this
Warrant involving the sale of Common Stock or Common Stock
Equivalents; (v) “Trading
Day” means any day on which the primary national or
regional stock exchange on which the Common Stock is listed, or if
not so listed, the OTC Bulletin Board or the OTC Markets, if quoted
thereon, is open for the transaction of business; and (vi)
“Affiliate” means any person that, directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, a person, as such
terms are used and construed in Rule 144 promulgated under the
Securities Act of 1933, as amended (the “Securities
Act”); (vii)
“VWAP” means,
for any date, the value weighted average price for the Common Stock
determined by the first of the following clauses that applies: (a)
if the Common Stock is then listed or quoted on a National
Securities Exchange, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the
trading market on which the Common Stock is then listed or quoted
as reported by Bloomberg (based on a Trading Day from 9:30 a.m. New
York City time to 4:00 p.m. New York City time); (b) if the Common
Stock is quoted on any one or more of the OTC Bulletin Board, or
the other OTC markets, including the OTCQX, OTCQB and OTC Pink
Markets or in the “Pink Sheets” published by Pink
Sheets, LLC (or a similar organization or agency succeeding to its
functions of reporting prices), the volume weighted average price
of the Common Stock for such date on the OTC Bulletin Board; (c) if
the Common Stock is not then listed or quoted for trading on the
OTC Bulletin Board and if prices for the Common Stock are then
reported on the OTC markets, including the OTCQX, OTCQB and OTC
Pink markets, or in the “Pink Sheets” published by Pink
Sheets, LLC (or a similar organization or agency succeeding to its
functions of reporting prices), the average of the highest closing
bid and the lowest closing ask price for the Common Stock as
reported by OTC Markets Group; (d) in the event that none of
clauses (a), (b), and (c) are applicable, the fair market value for
a share of Common Stock as mutually determined by the Company and
the Majority Holders, or (e) in all other cases, the fair market
value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Majority Holders and
reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company; provided that in each case
where Bloomberg data is being relied upon, Holder shall provide to
the Company a copy of such information for the Company's records;
provided further herewith, the VWAP may never fall below $0.10 per
share (the “VWAP Floor
Price”) (viii) “National Securities Exchange”
means the following markets or exchanges on which the Common Stock
may be listed or quoted for trading on the date in question: the
NYSE MKT, LLC, the Nasdaq Capital Market, the Nasdaq Global Market,
the Nasdaq Global Select Market, the New York Stock Exchange; (ix)
“Majority
Holders” means the holders of Warrants representing
more than 50% of the Warrant Shares issuable upon exercise of all
Warrants; (x) “Exempt
Issuance” means (a) shares of Common Stock issued or
issuable upon conversion or exchange of any convertible securities
or exercise of any options or warrants outstanding immediately
following the Closing Date; (b) securities issued or issuable
pursuant to an acquisition, joint venture, collaboration, sponsored
research, OEM, marketing, technology license, or similar agreement,
but not including a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an
entity whose primary business is investing in securities; (c)
securities issued to financial institutions or lessors in
connection with credit arrangements, equipment financings, lease
arrangements, etc., in the aggregate not exceeding 10% of the
Common Stock then outstanding; (d) securities issued or issuable
pursuant to the acquisition of another entity or business by the
Company through a merger, purchase of substantially all of the
assets or other reorganization, but not including a transaction in
which the Company is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is
investing in securities; (e) shares of Common Stock issued or
issuable by reason of a dividend, stock split, split-up or other
distribution on shares of Common Stock relating to any
recapitalization, reclassification or reorganization of the capital
stock of the Company, or any consolidation or merger of the Company
with another corporation, or the sale of all or substantially all
of its assets or other transaction effected in such a way that
there is no change of control of the Company; and (f) issuances of
awards under any Company employee benefit plans, and (xi)
“Post-Acquisition
Valuation” means the post-Acquisition, pre-financing
valuation of the Company obtained by multiplying the 50,000,000
shares of Common Stock assumed to be issued and outstanding
immediately following the Acquisition and the Offering by the
lowest price at which Common Stock or Common Stock equivalents are
to be sold in a post-Acquisition financing. By way of example, a
post-Acquisition financing in which Common Stock or Common Stock
Equivalents are sold at $0.30 per share would result in a
Post-Acquisition Valuation of $15,000,000 which represents the
number obtained when multiplying 50,000,000 by $0.30.

 

 

 

 

1. 

DURATION
AND EXERCISE OF WARRANTS

 

(a)           Exercise
Period. The Holder may exercise
this Warrant in whole or in part on any Business Day on or before
5:00 P.M., Eastern Time, on the Expiration Date, at which time this
Warrant shall become void and of no value.

 

(b) 

Exercise
Procedures.

 

(i)           Cash.
While this Warrant remains outstanding and exercisable in
accordance with Section 1(a), the Holder may exercise this Warrant in whole or
in part at any time and from time to time by:

 

(A)           delivery
to the Company of a duly completed and executed copy of the notice
of exercise attached hereto as Exhibit A (the “Notice of
Exercise”), with the
“CASH” payment option indicated;

 

(B)           surrender
of this Warrant to the Secretary of the Company at its principal
offices or at such other office or agency as the Company may
specify in writing to the Holder; and

 

(C)           payment
of the then-applicable Exercise Price per share multiplied by the
number of Warrant Shares being purchased upon exercise of the
Warrant (such amount, the “Aggregate Exercise
Price”) made in the form
of cash, or by wire transfer of immediately available funds,
certified check or bank draft payable in lawful money of the United
States of America.

 

(ii)           Cashless.
In addition to the manner set forth in Section 1(b)(i), while this
Warrant remains outstanding and exercisable in accordance with
Section 1(a), the Holder may, in its sole discretion, exercise all
or any part of the Warrant in a “cashless” or
“net-issue” exercise (a “Cashless Exercise”)
by:

 

(A)           delivery
to the Company of a duly completed and executed Notice of Exercise,
with the “CASHLESS” payment option
indicated;

 

(B)           surrender
of this Warrant to the Secretary of the Company at its principal
offices or at such other office or agency as the Company may
specify in writing to the Holder;

 

whereupon the
Holder shall be entitled to receive a number of Warrant Shares
calculated using the following formula:

 

X            

=            

Y * (A - B)

       A

 

where:

 

X =     

the number of
Warrant Shares to be issued to the Holder

 

 

 

 

Y =       

the number of
Warrant Shares with respect to which the Warrant is being exercised
as specified in the Notice of Exercise

 

A = 

the fair value per
share of Common Stock on the date of exercise of this
Warrant

 

B =       

the then-current
Exercise Price of the Warrant

 

Solely
for the purposes of this Section 1(b), “fair value” per
share of Common Stock shall mean the average Closing Price (as
defined below) per share of Common Stock for the twenty (20)
Trading Days immediately preceding the date on which the Notice of
Exercise is deemed to have been sent to the Company.
“Closing Price”
means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then
listed on a National Securities Exchange, the closing price per
share of the Common Stock for such date (or the nearest preceding
date) on the primary exchange on which the Common Stock is then
listed; (b) if prices for the Common Stock are then quoted on the
OTC Bulletin Board or any tier of the OTC Markets, the closing bid
price per share of the Common Stock for such date (or the nearest
preceding date) so quoted; or (c) if prices for the Common Stock
are then reported in the “Pink Sheets” published by
the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting
prices), the most recent closing bid price per share of the Common
Stock so reported. If the Common Stock is not publicly traded as
set forth above, the “fair value” per share of
Common Stock shall be reasonably and in good faith determined by
the Board of Directors of the Company as of the date which the
Notice of Exercise is deemed to have been sent to the
Company.

 

For
purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Warrant Shares
issued in a Cashless Exercise transaction shall be deemed to have
been acquired by the Holder, and the holding period for such shares
shall be deemed to have commenced, on the date this Warrant was
originally issued.

 

(iii)           Upon
the exercise of this Warrant in compliance with the provisions of
this Section 1(b), and except as limited pursuant to Section
1(b)(iv), the Company shall promptly issue and cause to be
delivered to the Holder a certificate for the Warrant Shares for
which this Warrant was exercised. Each exercise of this Warrant
shall be effective immediately prior to the close of business on
the date (the “Date of
Exercise”) that the
conditions set forth in Section 1(b)(i) or (ii) have been
satisfied, as the case may be. On or before the third
(3rd)
Business Day following the date on which the Company has received
each of the items specified in Section 1(b)(i) or 1(b)(ii), as
applicable (the “Exercise
Deliverables”), the Company shall transmit an
acknowledgment of receipt of the Exercise Deliverables to the
Company’s transfer agent (the “Transfer Agent”). On or before the
fifth (5th) Business Day
following the date on which the Company has received all of the
Exercise Deliverables (the “Share Delivery Date”), the Company
shall (X) provided that the Warrant Shares have been registered or
that the Warrant Shares are eligible for sale under Rule 144
without restriction and that the Transfer Agent is participating in
The Depository Trust Company (“DTC”) Fast Automated
Securities Transfer Program, upon the request of the Holder and to
the extent applicable, Holder’s supplying the Company with
required Rule 144 documentation, cause the Transfer Agent to credit
such aggregate number of shares of Common Stock to which the Holder
is entitled pursuant to such exercise to the Holder’s or its
designee’s balance account with DTC through its Deposit
Withdrawal Agent Commission system, or (Y) if the Warrant Shares
have not been registered and are not eligible for sale under Rule
144 without restriction or if Transfer Agent is not participating
in the DTC Fast Automated Securities Transfer Program, cause the
Transfer Agent to issue and dispatch by overnight courier to the
address as specified in the Notice of Exercise, a certificate,
registered in the Company’s share register in the name of the
Holder or its designee, for the number of shares of Common Stock to
which the Holder is entitled pursuant to such
exercise.

 

 

 

 

The Holder understands that prior to the Acquisition, the Company
has been a “shell company” as defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”), and that upon the filing of a Current Report on
Form 8-K (the “Super 8-K) reporting the consummation of the
Acquisition and the related transactions and otherwise containing
Form 10 information discussed below, the Company will cease to be a
shell company. Pursuant to Rule 144(i), securities issued by a
current or former shell company (that is, this Warrant and the
Warrant Shares) that otherwise meet the holding period and other
requirements of Rule 144 nevertheless cannot be sold in reliance on
Rule 144 until one
year after the Company (a) is no longer a shell company; and
(b) has filed current “Form 10 information“ (as defined
in Rule 144(i)) with the SEC reflecting that it is no longer a
shell company, and provided that at the time of a proposed sale
pursuant to Rule 144, the Company is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act and has
filed all reports and other materials required to be filed by
Section 13 or 15(d) of the Exchange Act, as applicable, during the
preceding 12 months (or for such shorter period that the issuer was
required to file such reports and materials), other than Form 8-K
reports. As a result, the
restrictive legends on certificates for the Warrant and the Warrant
Shares cannot be removed except in connection with an actual sale
meeting the foregoing requirements or pursuant to an effective
registration statement.

 

Upon
delivery of the Exercise Deliverables, the Holder shall be deemed for all corporate
purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised, irrespective
of the date of delivery of the certificates evidencing such Warrant
Shares.

 

(iv)           If
the Company shall fail for any reason or for no reason to issue or
cause to be issued to the Holder, within five (5) Business Days of
receipt of the Exercise Deliverables, a certificate for the number
of shares of Common Stock to which the Holder is entitled and
register or cause to be registered such shares of Common Stock on
the Company’s share register or to credit or cause to be
credited the Holder’s balance account with DTC for such
number of shares of Common Stock to which the Holder is entitled
upon the Holder’s exercise of this Warrant (in each case as
provided above), and if on or after such fifth (5th) Business Day the
Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the
Holder of shares of Common Stock issuable upon such exercise that
the Holder anticipated receiving from the Company (a
“Buy-In”), then
the Company shall, within three (3) Business Days after the
Holder’s request and in the Holder’s discretion, either
(i) pay cash to the Holder in an amount equal to the Holder’s
total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased (the “Buy-In Price”), at which point the
Company’s obligation to deliver a certificate for the shares
of Common Stock to which the Holder would have been entitled and
register or cause to be registered such shares of Common Stock on
the Company’s share register, or to credit or cause to be
credited the Holder’s balance account with DTC for such
number of shares of Common Stock to which the Holder would have
been entitled, shall terminate, or (ii) promptly honor its
obligation to deliver to the Holder a certificate or certificates
representing such shares of Common Stock and pay cash to the Holder
in an amount equal to the excess (if any) of the Buy-In Price over
the product of (A) such number of shares of Common Stock, times (B)
the fair value of the Common Stock on the date of
exercise.

 

 

 

 

(v)           Notwithstanding
the foregoing provisions of this Section 1(b), the Holder may not
exercise this Warrant if and to the extent that such exercise would
require the Company to issue a number of shares of Common Stock in
excess of its authorized but unissued shares of Common Stock, less
all amounts of Common Stock that have been reserved for issue upon
the conversion of all outstanding securities convertible into
shares of Common Stock and the exercise of all outstanding options,
warrants and other rights exercisable for shares of Common Stock.
If the Company does not have the requisite number of authorized but
unissued shares of Common Stock to permit the Holder to exercise
this Warrant, then the Company shall use commercially reasonable
efforts to obtain the necessary stockholder consent to increase the
authorized number of shares of Common Stock to permit such Holder
to exercise this Warrant pursuant to Section 1(b)(i) or Section
1(b)(ii).

 

(vi)           The
delivery by (or on behalf of) the Holder of the Notice of Exercise
and the applicable Exercise Price as provided above shall
constitute the Holder’s certification to the Company that its
representations and warranties contained in Section 5 of the
Subscription Agreement, including without limitation the
representation and warranty that the Holder is an “accredited
investor,” are true and correct as of the exercise date as if
remade in their entirety (or, in the case of any transferee Holder
that is not a party to the Subscription Agreement, such transferee
Holder’s certification to the Company that such
representations are true and correct as to such assignee Holder as
of the exercise date).

 

(c)           Partial
Exercise. This Warrant shall be
exercisable, either in its entirety or, from time to time, for part
only of the number of Warrant Shares referenced by this Warrant;
provided, that any such partial exercise must be for an integral
number of Warrant Shares. If this Warrant is exercised in part, the
Company shall issue, at its expense, a new Warrant, in
substantially the form of this Warrant, referencing such reduced
number of Warrant Shares that remain subject to this
Warrant.

 

(d)           Disputes.
In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the Warrant Shares, the
Company shall promptly issue to the Holder the number of Warrant
Shares that are not disputed and resolve such dispute in accordance
with Section 15.

 

2. 

ISSUANCE
OF WARRANT SHARES

 

(a)           The
Company covenants that all Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, be (i) duly authorized,
fully paid and non-assessable, and (ii) free from all liens,
charges and security interests, with the exception of claims
arising through the acts or omissions of any Holder and except as
arising from applicable Federal and state securities
laws.

 

(b)           The
Company shall register this Warrant upon records to be maintained
by the Company for that purpose in the name of the record holder of
such Warrant from time to time. The Company may deem and treat the
registered Holder of this Warrant as the absolute owner thereof for
the purpose of any exercise thereof, any distribution to the Holder
thereof and for all other purposes.

 

(c)           The
Company will not, by amendment of its certificate of incorporation,
by-laws or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant
and in the taking of all action necessary or appropriate in order
to protect the rights of the Holder to exercise this Warrant, or
against impairment of such rights.

 

 

 

 

3. 

ADJUSTMENTS
OF EXERCISE PRICE, NUMBER AND TYPE OF WARRANT SHARES

 

(a)           General.
The Exercise Price and the number of shares purchasable upon the
exercise of this Warrant shall be subject to adjustment from time
to time upon the occurrence of certain events described in this
Section 3(a); provided,
that notwithstanding the provisions of this Section 3, the Company
shall not be required to make any adjustment if and to the extent
that such adjustment would require the Company to issue a number of
shares of Common Stock in excess of its authorized but unissued
shares of Common Stock, less all amounts of Common Stock that have
been reserved for issue upon the conversion of all outstanding
securities convertible into shares of Common Stock and the exercise
of all outstanding options, warrants and other rights exercisable
for shares of Common Stock. If the Company does not have the
requisite number of authorized but unissued shares of Common Stock
to make any adjustment, the Company shall use its commercially
reasonable efforts to obtain the necessary stockholder consent to
increase the authorized number of shares of Common Stock to make
such an adjustment pursuant to this Section
3(a).

 

(i)           Subdivision
or Combination of Stock. In
case the Company shall at any time subdivide (whether by way of
stock dividend, stock split or otherwise) its outstanding shares of
Common Stock into a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision, if then established,
shall be proportionately reduced and the number of Warrant Shares
shall be proportionately increased, and conversely, in case the
outstanding shares of Common Stock of the Company shall be combined
(whether by way of stock combination, reverse stock split or
otherwise) into a smaller number of shares, the Exercise Price in
effect immediately prior to such combination, if then established,
shall be proportionately increased and the number of Warrant Shares
shall be proportionately decreased. The Exercise Price and the
Warrant Shares, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events
described in this Section 3(a)(i).

 

(ii)           Dividends
in Stock, Property, Reclassification. If at any time, or from time to time, the
holders of Common Stock (or any shares of stock or other securities
at the time receivable upon the exercise of this Warrant) shall
have received or become entitled to receive, without payment
therefor:

 

(A)           any
shares of stock or other securities that are at any time directly
or indirectly convertible into or exchangeable for Common Stock, or
any rights or options to subscribe for, purchase or otherwise
acquire any of the foregoing by way of dividend or other
distribution, or

 

(B)           additional
stock or other securities or property (including cash) by way of
spin-off, split-up, reclassification, combination of shares or
similar corporate rearrangement (other than shares of Common Stock
issued as a stock split or adjustments in respect of which shall be
covered by the terms of Section 3(a)(i) above),

 

then and in each such case, the Exercise Price and the number of
Warrant Shares to be obtained upon exercise of this Warrant shall
be adjusted proportionately, and the Holder hereof shall, upon the
exercise of this Warrant, be entitled to receive, in addition to
the number of shares of Common Stock receivable thereupon, and
without payment of any additional consideration therefor, the
amount of stock and other securities and property (including cash
in the cases referred to above) that such Holder would hold on the
date of such exercise had such Holder been the holder of record of
such Common Stock as of the date on which holders of Common Stock
received or became entitled to receive such shares or all other
additional stock and other securities and property. The Exercise
Price and the Warrant Shares, as so adjusted, shall be readjusted
in the same manner upon the happening of any successive event or
events described in this Section 3(a)(ii).

 

 

 

 

(iii)           Reorganization,
Reclassification, Consolidation, Merger or Sale. If any recapitalization, reclassification or
reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation or
any other entity, or the sale of all or substantially all of its
assets or other transaction shall be effected in such a way that
holders of Common Stock shall be entitled to receive stock,
securities or other assets or property (an
“Organic
Change”), then, as
a condition of such Organic Change, lawful and adequate provisions shall be made by
the Company whereby the Holder hereof shall thereafter have the
right to purchase and receive (in lieu of the shares of the Common
Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented by this
Warrant) such shares of stock, securities or other assets or
property as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to
the number of shares of such stock immediately theretofore
purchasable and receivable assuming the full exercise of the rights
represented by this Warrant. In the event of any Organic Change,
appropriate provision shall be made by the Company with respect to
the rights and interests of the Holder of this Warrant to the end
that the provisions hereof (including, without limitation,
provisions for adjustments of the Exercise Price and of the number
of shares purchasable and receivable upon the exercise of this
Warrant and registration rights substantially the same as
those provided for in the Registration Rights Agreement) shall thereafter be applicable, in relation to
any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The Company shall not effect any
such Organic Change unless, prior to the consummation
thereof, the successor corporation or
entity (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets
shall assume by written instrument reasonably satisfactory in form
and substance to the Holder executed and mailed or delivered to the
registered Holder hereof at the last address of such Holder
appearing on the books of the Company, the obligation to deliver to
such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be
entitled to purchase. If there is an Organic Change, then the
Company shall cause to be mailed to the Holder at its last address
as it shall appear on the books and records of the Company, at
least ten (10) calendar days before the effective date of the
Organic Change, a notice stating the date on which such Organic
Change is expected to become effective or close, and the date as of
which it is expected that holders of the Common Stock of record
shall be entitled to exchange their shares for securities, cash, or
other property delivered upon such Organic Change;
provided,
that the failure to mail such notice or any defect therein or in
the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. The Holder is
entitled to exercise this Warrant during the 10-day period
commencing on the date of such notice to the effective date of the
event triggering such notice. In any event, the successor
corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets
shall be deemed to assume such obligation to deliver to such Holder
such shares of stock, securities or assets even in the absence of a
written instrument assuming such obligation to the extent such
assumption occurs by operation of law.

 

(iv)           Sale
of Common Stock or Common Stock Equivalents at Valuation of Less
Than $15,000,000.

 

 

 

 

(A)
Except as otherwise provided in Section 3(a)(iv)(C) below, in the
event the Company or a subsidiary of the Company shall issue or
sell Common Stock or Common Stock Equivalents, within one year of
the Effective Date of this Warrant, in a Qualified Financing, at a
price per share reflecting a Post-Acquisition Valuation of less
than $15,000,000, the Exercise Price and the number of Warrant
Shares to be obtained upon exercise of this Warrant shall be
adjusted proportionally. By way of example, if the Company or a
subsidiary of the Company completes a Qualified Financing within
one year of the Effective Date of this Warrant reflecting a
Post-Acquisition Valuation of $12,000,000, (i.e. at a valuation
equal to 80% of $15,000,000), the number of shares of Common Stock
issuable upon exercise of this Warrant shall be increased by
dividing the number of shares of Common Stock issuable immediately
prior to such Qualified Financing by .8 (which is the number
obtained by dividing 12,000,000 by 15,000,000) and the Exercise
Price at which each share of Common Stock may be purchased upon
exercise of this Warrant shall be reduced by multiplying the price
otherwise in effect as the result of such Qualified Financing (80%
of the lowest price at which Common Stock or Common Stock
Equivalents are sold in such Qualified Financing) by 80%, which
would result in an Exercise Price equal to 64% of the lowest price
at which Common Stock or Common Stock Equivalents are sold in the
Qualified Financing.

 

(B)
In the event the Company or subsidiary of the Company does not
complete a Qualified Financing within one year of the Effective
Date of this Warrant such that this Warrant becomes exercisable at
a price per share equal to 80% of the VWAP of the Common Stock as
provided herein, and the Company or a subsidiary of the Company
thereafter completes a Qualified Financing or other financing prior
to the Expiration Date at a price per share reflecting a
Post-Acquisition Valuation of less than $15,000,000, the VWAP
Exercise Price formula then in effect and the number of Warrant
Shares to be obtained upon exercise of this Warrant shall be
adjusted proportionally. By way of example, if the Company or a
subsidiary of the Company completes a Qualified Financing or other
financing, one year or more after the Effective Date of this
Warrant, reflecting a Post-Acquisition Valuation of $12,000,000
(i.e. at a valuation equal to 80% of $15,000,000), the number of
Warrant Shares issuable upon exercise of this Warrant shall be
increased by dividing the number of shares issuable upon exercise
of this Warrant immediately prior to such Qualified Financing or
other financing by .8 (which is the number obtained by dividing
12,000,000 by 15,000,000) and the VWAP % used to determine the
Exercise Price under this Warrant shall be reduced by multiplying
the VWAP % in effect immediately prior to such Qualified Financing
or other financing by 80%. Accordingly, if immediately prior to
such Qualified Financing or other financing, this Warrant is
exercisable at a price per share equal to 80% of the VWAP, this
Warrant would thereafter be exercisable at a price per share equal
to 64% of the VWAP. In the event the Company or a subsidiary of the
Company shall thereafter complete one or more additional Qualified
Financings or other financings at a valuation lower than a
valuation which previously triggered a VWAP and related share
amount adjustment, the number of shares issuable upon exercise of
this Warrant and the VWAP % used to determine the Exercise Price
under this Warrant would be further adjusted proportionately, in
the same manner as provided above.

 

 

 

 

(C)
Notwithstanding Sections 3(a)(iv)(A) or (B) above, in the event the
Company or a subsidiary of the Company shall complete a financing
involving the sale of Common Stock or Common Stock Equivalents in
an amount of less than $20,000,000 (a “Non-Qualified
Financing”) at a Post-Acquisition Valuation of less than
$15,000,000 within one year of the Effective Date of this Warrant
and prior to a Qualified Financing, this Warrant shall, become
immediately exercisable at a VWAP based price per share under the
same terms and conditions set forth in (B) above, including those
relating to a proportional reduction to the VWAP % and an increase
in the number of shares issuable upon exercise of this Warrant. Any
subsequent Non-Qualified Financings or Qualified Financings taking
place while this Warrant remains outstanding shall be treated in
the same manner as set forth in the last sentence of Section
3(a)(iv)(B) above. By way of example, if the Company or a
subsidiary of the Company completes a Non-Qualified Financing while
this Warrant remains outstanding at a Post-Acquisition Valuation of
$12,000,000 (i.e. at a valuation equal to 80% of $15,000,000) prior
to a Qualified Financing, this Warrant shall become immediately
exercisable at a price per share equal to 64%(80% multiplied by
80%) of the VWAP and the number of shares issuable upon exercise of
this Warrant shall be increased by dividing the number of shares
issuable upon exercise of this Warrant immediately prior to such
Non-Qualified Financing by .8 (which is the number obtained by
dividing 12,000,000 by 15,000,000).

 

(D)
Exempt Issuances will not trigger any adjustments under this
Section 3(a)(iv).

 

(v)           Subsequent
Equity Sales. If the Company,
at any time while this Warrant is outstanding, and the exercise
price has been established, shall sell or grant any option to
purchase, or sell or grant any right to reprice, or otherwise
dispose of or issue (or announce any offer, sale, grant or any
option to purchase or other disposition) any Common Stock or Common
Stock Equivalents, at an effective price per share less than the
Exercise Price then in effect (such lower price, the
“New Issuance
Price” and such issuances
collectively, a “Dilutive
Issuance” (it being
understood and agreed that if the holder of the Common Stock or
Common Stock Equivalents so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which are issued in
connection with such issuance, be entitled to receive shares of
Common Stock at an effective price per share that is less than the
Exercise Price, such issuance shall be deemed to have occurred for
less than the Exercise Price on such date of the Dilutive Issuance
at such effective price) then simultaneously with consummation of
each Dilutive Issuance the Exercise Price shall be reduced to an
amount equal to the New Issuance Price (the “Adjusted
Price”); (subject to adjustment for stock splits, reverse
splits and similar capital adjustments). Such adjustment shall be
made whenever such Common Stock or Common Stock Equivalents are
issued. Notwithstanding the foregoing, no adjustment shall be made,
paid or issued under this Section 3(a)(v) in the case of an Exempt
Issuance.

 

 (b)           Certificate
as to Adjustments. Upon the
occurrence of each adjustment or readjustment pursuant to this
Section 3, the Company at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and
furnish to each Holder of this Warrant a certificate setting forth
such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Company
shall promptly furnish or cause to be furnished to such Holder a
like certificate setting forth: (i) such adjustments and
readjustments; and (ii) the number of shares and the amount, if
any, of other property which at the time would be received upon the
exercise of the Warrant.

 

 

 

 

(c)           Certain
Events. If any event occurs as
to which the other provisions of this Section 3 are not strictly
applicable but the lack of any adjustment would not fairly protect
the purchase rights of the Holder under this Warrant in accordance
with the basic intent and principles of such provisions, or if
strictly applicable would not fairly protect the purchase rights of
the Holder under this Warrant in accordance with the basic intent
and principles of such provisions, then the Company's Board of
Directors will, in good faith and subject to applicable law, make
an appropriate adjustment to protect the rights of the
Holder; provided,
that no such adjustment pursuant to this Section 3(c) will increase
the Exercise Price or decrease the number of Warrant Shares as
otherwise determined pursuant to this Section
3.

 

4. 

TRANSFERS
AND EXCHANGES OF WARRANT AND WARRANT SHARES

 

(a)           Registration
of Transfers and Exchanges.
Subject to Section 4(c), upon the Holder’s surrender of this
Warrant, with a duly executed copy of the Form of Assignment
attached as Exhibit B, to the Secretary of the Company at its principal
offices or at such other office or agency as the Company may
specify in writing to the Holder, the Company shall register the
transfer of all or any portion of this Warrant. Upon such
registration of transfer, the Company shall issue a new Warrant, in
substantially the form of this Warrant, evidencing the acquisition
rights transferred to the transferee and a new Warrant, in similar
form, evidencing the remaining acquisition rights not transferred,
to the Holder requesting the transfer.

 

(b)           Warrant
Exchangeable for Different Denominations. The Holder may exchange this Warrant for a new
Warrant or Warrants, in substantially the form of this Warrant,
evidencing in the aggregate the right to purchase the number of
Warrant Shares, which may then be purchased hereunder, each of such
new Warrants to be dated the date of such exchange and to represent
the right to purchase such number of Warrant Shares as shall be
designated by the Holder. The Holder shall surrender this Warrant
with duly executed instructions regarding such re-certification of
this Warrant to the Secretary of the Company at its principal
offices or at such other office or agency as the Company may
specify in writing to the Holder.

 

(c)           Restrictions
on Transfers. This Warrant may
not be transferred at any time without (i) registration under the
Securities Act or (ii) an exemption from such registration
and, if requested by the
Company, a written opinion of legal counsel addressed to the
Company that the proposed transfer of the Warrant may be effected
without registration under the Securities Act, which opinion will
be in form and from counsel reasonably satisfactory to the
Company.

 

(d)           Permitted
Transfers and Assignments.
Notwithstanding any provision to the contrary in this Section 4,
the Holder may transfer, with or without consideration, this
Warrant or any of the Warrant Shares (or a portion thereof) to the
Holder’s Affiliates (as such term is defined under Rule 144
of the Securities Act) without obtaining the opinion from counsel
that may be required by Section 4(c)(ii), provided,
that the Holder delivers to the
Company and its counsel certification, documentation, and other
assurances reasonably required by the Company’s counsel to
enable the Company’s counsel to render an opinion to the
Company’s Transfer Agent that such transfer does not violate
applicable securities laws.

 

 

 

 

5. 

MUTILATED
OR MISSING WARRANT CERTIFICATE

 

If this Warrant is mutilated, lost, stolen or
destroyed, upon request by the Holder, the Company will, at its
expense, issue, in exchange for and upon cancellation of the
mutilated Warrant, or in substitution for the lost, stolen or
destroyed Warrant, a new Warrant, in substantially the form of this
Warrant, representing the right to acquire the equivalent number of
Warrant Shares; provided,
that, as a prerequisite to the issuance of a substitute Warrant,
the Company may require satisfactory evidence of loss, theft or
destruction as well as an indemnity from the Holder of a lost,
stolen or destroyed Warrant.

 

6. 

PAYMENT
OF TAXES

 

The Company will pay all transfer and stock
issuance taxes attributable to the preparation, issuance and
delivery of this Warrant and the Warrant Shares (and replacement
Warrants) including, without limitation, all documentary and stamp
taxes; provided,
however,
that the Company shall not be required to pay any tax in respect of
the transfer of this Warrant, or the issuance or delivery of
certificates for Warrant Shares or other securities in respect of
the Warrant Shares to any person or entity other than to the
Holder.

 

7.            

FRACTIONAL
SHARES

 

No
fractional Warrant Shares shall be issued upon exercise of this
Warrant. Upon the full exercise of this Warrant, the Company, in
lieu of issuing any fractional Warrant Share, shall round up the
number of Warrant Shares issuable to nearest whole
share.

 

8. 

NO
STOCK RIGHTS AND LEGEND

 

No
holder of this Warrant, as such, shall be entitled to vote or be
deemed the holder of any other securities of the Company that may
at any time be issuable on the exercise hereof, nor shall anything
contained herein be construed to confer upon the holder of this
Warrant, as such, the rights of a stockholder of the Company or the
right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or give or
withhold consent to any corporate action or to receive notice of
meetings or other actions affecting stockholders (except as
provided herein), or to receive dividends or subscription rights or
otherwise (except as provide herein).

 

Each
certificate for Warrant Shares initially issued upon the exercise
of this Warrant, and each certificate for Warrant Shares issued to
any subsequent transferee of any such certificate, shall be stamped
or otherwise imprinted with a legend in substantially the following
form:

 

THE SECURITIES REPRESENTED
HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND
NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED,
SOLD, PLEDGED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN EXEMPTION
FROM SUCH REGISTRATION EXISTS AND THE COMPANY RECEIVES AN OPINION
OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND
OPINION ARE SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY
BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR APPLICABLE STATE SECURITIES
LAWS. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES
MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES
ACT.

 

 

 

 

9.            

REGISTRATION
RIGHTS

 

The
Holder shall be entitled to the registration rights with respect to
the Warrant Shares set forth in, and subject to the conditions of,
the Registration Rights Agreement.

 

10. 

NOTICES

 

All
notices, consents, waivers, and other communications under this
Warrant must be in writing and will be deemed given to a party (a)
on the date of delivery, if delivered to the appropriate address by
hand or by nationally recognized overnight courier service (costs
prepaid); (b) the date of transmission if sent by facsimile or
e-mail with confirmation of transmission by the transmitting
equipment if such notice or communication is delivered prior to
5:00 P.M., New York City time, on a Trading Day, or the next
Trading Day after the date of transmission, if such notice or
communication is delivered on a day that is not a Trading Day or
later than 5:00 P.M., New York City time, on any Trading Day; (c)
the date received or rejected by the addressee, if sent by
certified mail, return receipt requested, if to the registered
Holder hereof; or (d) seven days after the placement of the notice
into the mails (first class postage prepaid), to the Holder at the
address, facsimile number, or e-mail address furnished by the
registered Holder to the Company in accordance with the
Subscription Agreement by and between the Company and the Holder
or, if the registered Holder is not the original purchaser of this
Warrant, then as provided in the Form of Assignment delivered to
the Company pursuant to Section 4(a) in connection with the
assignment of this Warrant to such Holder, or if to the Company, to
it at:

 

Sincerity
Applied Materials Holding Corp.

P.O.
Box 374

100
Toorak Road

South
Yarra, VIC 3141

Attn:
Mr. Zhang Yiwen, Chief Executive Officer

E-mail
Address:james@sincerityplastics.com

 

(or to such other address, facsimile number, or e-mail address as
the Holder or the Company as a party may designate by notice to the
other party in accordance with this Section 10) with a copy
to

 

CKR
Law, LLP

1330
Avenue of the Americas, 14th Floor

New
York, NY 10019

Attention:  Scott
Rapfogel, Esq.

Facsimile:  212.259.8200

E-mail
Address: srapfogel@ckrlaw.com

 

11. 

SEVERABILITY

 

If
a court of competent jurisdiction holds any provision of this
Warrant invalid or unenforceable, the other provisions of this
Warrant will remain in full force and effect. Any provision of this
Warrant held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or
unenforceable.

 

 

 

 

12. 

BINDING
EFFECT

 

This
Warrant shall be binding upon and inure to the sole and exclusive
benefit of the Company, its successors and assigns, the registered
Holder or Holders from time to time of this Warrant and the Warrant
Shares.

 

13. 

SURVIVAL
OF RIGHTS AND DUTIES

 

This
Warrant shall terminate and be of no further force and effect on
the earlier of 5:00 P.M., Eastern Time, on the Expiration Date or
the date on which this Warrant has been exercised in
full.

 

14. 

GOVERNING
LAW

 

This
Warrant will be governed by and construed under the laws of the
State of New York without regard to conflicts of laws principles
that would require the application of any other law.

 

15. 

DISPUTE
RESOLUTION

 

In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant
Shares, the Company shall submit the disputed determinations or
arithmetic calculations via facsimile within five (5)
Business Days of receipt of the Notice
of Exercise giving rise to such dispute, as the case may be, to the
Holder. If the Holder and the Company are unable to agree upon such
determination or calculation of the Exercise Price or the Warrant
Shares within three Business Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the
Company shall, at its sole discretion, within five (5) Business
Days, submit via facsimile (a) the disputed determination of the
Exercise Price to an independent, reputable investment bank
selected by the Company and approved by the Holder, or (b) the
disputed arithmetic calculation of the Warrant Shares to the
Company’s independent, outside accountant. The Company shall
cause at its expense the investment bank or the accountant, as the
case may be, to perform the determinations or calculations and
notify the Company and the Holder of the results no later than ten
(10) Business Days from the time it receives the disputed
determinations or calculations; provided that, if such disputed
determination or arithmetic calculation being submitted by the
Holder is determined to be incorrect, then the expense of the
investment bank or the accountant shall be the responsibility of
the Holder. Such investment bank’s or accountant’s
determination or calculation, as the case may be, shall be
final, binding and conclusive upon the parties thereto.

 

16. 

NOTICES
OF RECORD DATE

 

Upon
(a) any establishment by the Company of a record date of the
holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or
other distribution, or right or option to acquire securities of the
Company, or any other right, or (b) any capital reorganization,
reclassification, recapitalization, merger or consolidation of the
Company with or into any other corporation or other entity, any
transfer of all or substantially all the assets of the Company, or
any voluntary or involuntary dissolution, liquidation or winding up
of the Company, or the sale, in a single transaction, of a majority
of the Company’s voting stock (whether newly issued, or from
treasury, or previously issued and then outstanding, or any
combination thereof), the Company shall mail to the Holder at least
ten (10) Business Days, or such longer period as may be required by
law, prior to the record date specified therein, a notice
specifying (i) the date established as the record date for the
purpose of such dividend, distribution, option or right and a
description of such dividend, option or right, (ii) the date on
which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up, or
sale is expected to become effective and (iii) the date, if any,
fixed as to when the holders of record of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reorganization,
reclassification, transfer, consolation, merger, dissolution,
liquidation or winding up.

 

 

 

 

17. 

RESERVATION
OF SHARES

 

The
Company shall reserve and keep available out of its authorized but
unissued shares of Common Stock for issuance upon the exercise of
this Warrant, free from pre-emptive rights, such number of shares
of Common Stock for which this Warrant shall from time to time be
exercisable. The Company will take all such reasonable action as
may be necessary to assure that such Warrant Shares may be issued
as provided herein without violation of any applicable law or
regulation. Without limiting the generality of the foregoing, the
Company covenants that it will use commercially reasonable efforts
to take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and
non-assessable Warrant Shares upon the exercise of this Warrant and
use commercially reasonable efforts to obtain all such
authorizations, exemptions or consents, including but not limited
to consents from the Company’s stockholders or Board of
Directors or any public regulatory body, as may be necessary to
enable the Company to perform its obligations under this
Warrant.

 

18. 

HEADINGS

 

The
headings used in this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this
Warrant.

 

19. 

AMENDMENT
AND WAIVERS

 

Any
term of this Warrant may be amended and the observance of any term
of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) with
the written consent of the Company and the Majority
Holders.

 

20. 

NO
THIRD PARTY RIGHTS

 

This
Warrant is not intended, and will not be construed, to create any
rights in any parties other than the Company and the Holder, and no
person or entity may assert any rights as third-party beneficiary
hereunder.

 

[Signature Page Follows]

 

 

 

IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the date first set forth above.

 

SINCERITY
APPLIED MATERIALS HOLDINGS CORP.

 

By:                                                       

Name:  

Title:  

 

 

 

 

{00180934.3 / 4133.003}

 

 

EXHIBIT A

 

NOTICE OF EXERCISE

 

(To be executed by Holder of Warrant if Holder desires to exercise
Warrant)

 

To Sincerity Applied Material Holdings Corp.

 

The undersigned hereby irrevocably elects to exercise this Warrant
with respect to ___________________ shares of Common Stock (as
defined in the Warrant) as follows:

 

Check applicable box

 

☐ 

CASH: Number of
shares of Common Stock exercised X $____ per share = $_________ (to be paid as provided in Section
1(b)(i) of the Warrant) plus any applicable taxes payable by the
undersigned pursuant to the Warrant; or

 

☐ 

CASHLESS (if
eligible in accordance with Section 1(b)(ii) of the
Warrant).

 

The undersigned requests that certificates for such shares be
issued in the name of:

 

_________________________________________

_________________________________________

_________________________________________

(Please print name, address and social security or federal employer
identification number (if applicable))*

 

If
the shares issuable upon this exercise of the Warrant are not all
of the Warrant Shares which the Holder is entitled to acquire upon
the exercise of the Warrant, the undersigned requests that a new
Warrant evidencing the rights not so exercised be issued in the
name of and delivered to:

 

_________________________________________

_________________________________________

_________________________________________

(Please print name, address and social security or federal employer
identification number (if applicable))*

 

Name of Holder
(print):     

(Signature):                                                                                        

(By:)                                                                                        

(Title:)                                                                                        

Dated:                                                                                        

 

*            

If
Warrant Shares are to be issued in any name other than that of the
registered Holder of the Warrant, then the Holder must include an
opinion of counsel, reasonably satisfactory to the Company, to the
effect that such issuance complies with all applicable securities
laws.

{00180934.3 / 4133.003}

 

EXHIBIT B

 

FORM OF ASSIGNMENT

 

FOR
VALUE RECEIVED, ___________________________________ hereby sells,
assigns and transfers to each assignee set forth below all of the
rights of the undersigned under the Warrant (as defined in and
evidenced by the attached Warrant) to acquire the number of Warrant
Shares set opposite the name of such assignee below and in and to
the foregoing Warrant with respect to said acquisition rights and
the shares issuable upon exercise of the Warrant:

 

	

Name of Assignee (and social security or federal employer
identification number (if applicable))

 

	

Address

 

	

Number of Shares

 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

 

If
the total of the Warrant Shares are not all of the Warrant Shares
evidenced by the foregoing Warrant, the undersigned requests that a
new Warrant evidencing the right to acquire the Warrant Shares not
so assigned be issued in the name of and delivered to the
undersigned.

 

Name of Holder
(print):  

(Signature):                                                                                        

(By:)                                                                                        

(Title:)                                                                                        

Dated:                                                                                        

 

{00180934.3 / 4133.003}

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