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  Exhibit 10.4

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”). THESE SECURITIES MAY BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B)
OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION
S UNDER THE SECURITIES ACT, (C) IN COMPLIANCE WITH RULE 144 OR 144A
THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS, (D) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT, OR (E) IN A TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED
TO THE COMPANY AN OPINION OF COUNSEL OR OTHER EVIDENCE OF
EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE COMPANY.
HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES
ACT.

 

 

12% SENIOR SECURED CONVERTIBLE PROMISSORY NOTE

 

 

SINCERITY APPLIED MATERIALS HOLDINGS CORP.

 

 

DUE _______, 2018

 

Original
Issue Date: _______________,
2017  US$__________

 

 

This
12% Senior Secured Convertible Promissory Note (the
“Note”)
is one of a series of duly authorized and issued promissory notes
(the “Notes”) of SINCERITY APPLIED MATERIALS HOLDINGS
CORP., a Nevada corporation (the “Company”), designated as
its 12% Senior Secured Convertible Promissory Notes. This Note has
been issued in accordance with exemptions from registration under
the Securities Act pursuant to a Subscription Agreement dated
__________, 2017 (the “Subscription Agreement”)
between the Company and the Holder (as defined below). Capitalized
terms not otherwise defined herein shall have the meanings ascribed
to them in the Subscription Agreement.

 

 

Article I.

 

Section
1.01                                  Principal
and Interest.

 

(a) FOR VALUE RECEIVED,
the Company hereby promises to pay to the order of ____________________ (together with
its/his/her permitted assigns, the “Holder”), in lawful money
of the United States of America and in immediately available funds
the principal sum of Dollars
(US$_______) on _______________, 20181 (the “Maturity
Date”).

 

(b) The Company further
promises to pay interest on the unpaid principal amount of this
Note at a rate per annum equal to twelve percent (12%) which shall
be cumulative and shall be payable in shares of the Company’s
Common Stock as of the day on which the Note is converted (the
“Conversion Date”) or in cash on the Maturity Date.
Interest shall accrue from the Original Issue Date through the date
of conversion or maturity as applicable.

 

 

1 Thirteen (13) month anniversary of the date of
issuance.

 

{00180970.2 / 4133.003}

 

 

(c) In the event the
Holder has not converted this Note into Common Stock prior to the
Maturity Date and the Company is unable to pay the Note in cash,
the term of this Note shall automatically extend for one additional
month and shall automatically extend for additional one month
periods in the event that the Company remains unable to pay this
Note in cash on the Maturity Date, as such may be extended. At
least 30 days prior to the Maturity Date, including all extensions
thereof, the Company must give Holder written notice of its ability
to pay this Note in cash, during which period Holder shall retain
the right to convert this Note, including accrued interest due
thereon, on the terms set forth herein. Failure to provide such
notice on a timely basis, or otherwise, shall result in an
automatic extension of the Maturity Date.

 

(d) From and after the
occurrence of an Event of Default (as defined herein), the interest
rate shall be increased to eighteen percent (18%) per annum. In the
event that such Event of Default is subsequently cured, the
adjustment referred to in the preceding sentence shall cease to be
effective as of the date of such cure; provided, however, that the
interest, as calculated at such increased rate during the
continuance of such Event of Default, shall continue to apply to
the extent relating to the days after the occurrence of such Event
of Default through and including the date of cure of such Event of
Default.

 

Section
1.02                                  Definitions.  For
purposes of this Note, the following terms shall have the following
meanings.

 

(a) “Bloomberg”
means Bloomberg LP.

 

(b) “Common Stock”
means the Company’s common stock, par value $0.001 per
share.

 

(c) “Common Stock
Equivalents” means securities of the Company or a
subsidiary of the Company which are convertible into or exercisable
for shares of Common Stock.

 

(d) “Exempt Issuance” means 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.

 

 

 

 

(e) “Majority
Holders” means the holders of Notes representing more
than 50% of the aggregate principal amount of the Notes then
outstanding.

 

(f) “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.

 

(g) “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.

 

(h)  “Qualified
Financing” means a financing by the Company or a
subsidiary of the Company of at least $20,000,000 involving the
sale of Common Stock or Common Stock Equivalents

 

(i) “Trading Day”
means a 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.

 

(j) “VWAP” means,
for any date, the price 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.

 

 

 

 

Section
1.03                                  Optional
Conversion.

 

(a) Optional
Conversion.  All outstanding principal and accrued
interest then due on this Note shall be convertible at the option
of the Holder, in whole or in part, at any time after the earlier
of (i) the completion of a Qualified Financing, subject to the
limitations and qualifications set forth in Section 6.01 (d)(iii)
below; or (ii) the one-year anniversary of the Original Issue Date,
into such number of fully paid and non-assessable shares of Common
Stock as is determined by dividing the outstanding principal amount
of the Note plus accrued and unpaid interest due thereon by the QF
Based Note Conversion Price (as defined below) or the VWAP Based
Note Conversion Price (as defined below), as applicable, in effect
at the time of conversion.

 

(b) Note Conversion Prices. Subject
to Section 6.01(d)(ii) and 6.01(d)(iii) below, the Note conversion
price per share of Common Stock shall be (i) in the event of the
completion of a Qualified Financing prior to the one-year
anniversary of the Original Issue Date, 80% of the lowest price at
which Common Stock or Common Stock Equivalents are sold in the
Qualified Financing (the “QF Based Note Conversion
Price”); or (ii) in the event a Qualified Financing is not
completed prior to the one-year anniversary of the Original Issue
Date, 80% of the VWAP for the Common Stock during the ten
consecutive Trading Days ending on the Trading Day immediately
prior to the date on which a Notice of Conversion is received by
the Company from the Holder (the “VWAP Based Note Conversion
Price”), subject to a minimum VWAP Based Note
Conversion Price of $0.10 per share (the “Note Floor Price”);
provided,
however, that the
QF Based Note Conversion Price, the VWAP Based Note Conversion
Price, the Note Floor Price and the rate at which Notes may be
converted into shares of Common Stock, shall be subject to
adjustment as provided in Section 6.01 below.

 

(c) Notice of
Conversion.  The Holder shall effect conversions
by providing the Company with the form of conversion notice
attached hereto as Annex
A (a “Notice
of Conversion”).  Each Notice of Conversion
shall specify the principal amount of Notes to be converted and the
amount of accrued but unpaid interest to be converted which shall
be the full amount of accrued interest payable with respect to the
amount of principal being converted. To effect conversions the
Holder must surrender the Note(s) being converted. If less than the
full principal amount of a surrendered Note is being converted, a
replacement Note equal in principal amount to the non-converted
portion of the surrendered Note shall be issued to the
Holder.

 

(d) Fractional
Shares.  No fractional shares of Common Stock
shall be issued upon conversion of this Note. In lieu of any
fractional shares to which the Holder would otherwise be entitled,
the Company shall pay cash equal to such fraction multiplied by the
fair market value of a share of Common Stock as determined in good
faith by the Board of Directors, or round-up to the next whole
number of shares, at the Company’s option. Whether or not
fractional shares would be issuable upon such conversion shall be
determined on the basis of the total amount of principal and
accrued interest the Holder is at the time converting into Common
Stock and the aggregate number of shares of Common Stock issuable
upon such conversion.

 

(e) Mechanics of
Conversion.

 

 

 

 

i. Issuance of Common Stock upon
Conversion.  Not later than five (5) Trading Days
after each Conversion Date (the “Share Delivery Date”),
the Company shall issue, or cause to be issued, to the converting
Holder, the number of shares of Common Stock being acquired upon
the conversion of Notes, in uncertificated book-entry form on the
stock ledger of the Company’s Common Stock, and shall send to
the registered holder of such shares of Common Stock any notice or
statement required by the Nevada Revised Statutes. All Notes which
shall have been converted as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such Notes
shall immediately cease and terminate at the Conversion Date,
except only the right of the holders thereof to receive shares of
Common Stock in exchange therefor as provided herein, and to
receive payment in lieu of any fraction of a share otherwise
issuable upon such conversion as provided herein.

 

ii. Obligation Absolute; Damages.
To the extent determinable, the Company’s obligation to issue
and deliver the Conversion Shares upon conversion of Notes in
accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by a Holder to enforce the
same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any person or any action to
enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by such
Holder or any other person of any obligation to the Company;
provided, however, that such delivery shall not operate as a waiver
by the Company of any such action that the Company may have against
such Holder.

 

(f) Reservation of Shares Issuable upon
Conversion.  The Company covenants that it will at
all times reserve and keep available out of its authorized and
unissued shares of Common Stock for the sole purpose of issuance
upon conversion of the Notes, free from preemptive rights or any
other actual contingent purchase rights of persons other than
Holders of Notes, not less than such aggregate number of shares of
the Common Stock as shall be issuable upon the conversion of all
outstanding Notes. The Company covenants that all shares of Common
Stock that shall be so issuable shall, upon issue in accordance
with the terms herein, shall be duly authorized, validly issued,
fully paid and nonassessable.

 

Section
1.04                                  Absolute
Obligation/Ranking.

 

(a) This Note is a
direct debt obligation of the Company. Except as expressly provided
herein, no provision of this Note shall alter or impair the
obligation of the Company, which is absolute and unconditional, to
pay the principal of, and interest on, this Note at the time,
place, and rate, and in the coin or currency, herein
prescribed.

 

(b) This Note ranks
pari passu with all other Notes now or hereafter issued pursuant to
the Subscription Agreement. Except as expressly provided herein, or
unless waived by the Majority Holders, this Note, and all other
Notes now or hereafter issued pursuant to the Subscription
Agreement, rank senior to all existing indebtedness of the Company,
and will rank senior to all future indebtedness of the Company
except for trade payables and accrued liabilities incurred in the
ordinary course of business consistent with past practices. The
Company presently has no outstanding debt instruments or notes
other than the Notes and no third party consents to subordinate
their outstanding debt are required.

 

Section
1.05                                  Redemption.  This
Note may not be pre-paid by the Company and may not be redeemed
prior to the Maturity Date.

 

 

 

 

Section
1.06                                  

 

Section
1.07                                  Different
Denominations; Transfer.

 

(a) This Note is
exchangeable for an equal aggregate principal amount of Notes of
different authorized denominations, as requested by the Holder
surrendering the same. No service charge will be made for such
registration of transfer or exchange.

 

(b) This Note may be
offered, sold, assigned or transferred by the Holder without the
consent of the Company, provided that the provisions of the
Subscription Agreement are complied with in all respects; provided,
further that this Note may not be transferred in increments of less
than $10,000 without the prior written consent of the Company,
which consent shall not be unreasonably withheld, unless the entire
principal amount is being transferred.

 

Section
1.08                                  Reliance
on Note Register.  Prior to due presentment to the
Company for permitted transfer or payment of this Note, the Company
and any agent of the Company may treat the person in whose name
this Note is duly registered on the Note Register as the owner
hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Note is overdue, and
neither the Company nor any such agent shall be affected by notice
to the contrary.

 

Section
1.09                                  Paying
Agent and Registrar.  Initially, the Company will
act as paying agent and registrar. The Company may change any
paying agent, registrar, or Company-registrar by giving the Holder
not less than ten (10) business days’ written notice of its
election to do so, specifying the name, address, telephone number
and facsimile number of the paying agent or registrar. Upon an
assignment of the Note to the Company, the Company may act as
paying agent and registrar without regard to the notice provision
provided above.

 

Section
1.10                                  Investment
Representations.  This Note has been issued
subject to certain investment representations of the original
Holder set forth in the Subscription Agreement and may be
transferred or exchanged only in compliance with the Subscription
Agreement and applicable federal and state securities laws and
regulations.

 

Section
1.11                                  Security;
Other Rights.

 

(a) The obligations of
the Company to the Holder under this Note shall be secured by a
perfected first priority security interest in all now owned or
hereafter acquired and owned assets of the Company and its
subsidiaries, pari passu
with the other holders of Notes now or hereafter issued pursuant to
and set forth in the Security Agreement dated _______, 2017 (the
“Security
Agreement”) among the Company, the Holder and the
person appointed by the purchasers of a majority of the Units sold
in the Offering to serve as the collateral agent
thereunder.

 

(b) In addition to the
rights and remedies given it by this Note, the Security Agreement,
the Registration Rights Agreement and the Subscription Agreement,
the Holder shall have all those rights and remedies allowed by
applicable laws. The rights and remedies of the Holder are
cumulative and recourse to one or more right or remedy shall not
constitute a waiver of the others.

 

 

 

 

Section
1.12                                  Registration.  The
Company has granted to the Holder registration rights with respect
to any Common Stock issuable to Holder upon conversion of principal
and interest on this Note as provided in the Subscription Agreement
and Registration Rights Agreement.

 

Article II.

 

Section
2.01                                  Events
of Default.  Each of the following events shall
constitute a default under this Note (each an “Event of
Default”):

 

(a) failure by the
Company to pay any principal amount or interest when due hereunder
within five (5) business days of the date such payment is
due;

 

(b) the Company or any
subsidiary of the Company shall: (i) make a general assignment
for the benefit of its creditors; (ii) apply for or consent to
the appointment of a receiver, trustee, assignee, custodian,
sequestrator, liquidator or similar official for itself or any of
its assets and properties; (iii) commence a voluntary case for
relief as a debtor under the United States Bankruptcy Code;
(iv) file with or otherwise submit to any governmental
authority any petition, answer or other document seeking:
(A) reorganization, (B) an arrangement with creditors or
(C) to take advantage of any other present or future
applicable law respecting bankruptcy, reorganization, insolvency,
readjustment of debts, relief of debtors, dissolution or
liquidation; (v) file or otherwise submit any answer or other
document admitting or failing to contest the material allegations
of a petition or other document filed or otherwise submitted
against it in any proceeding under any such applicable law, or
(vi) be adjudicated a bankrupt or insolvent by a court of
competent jurisdiction;

 

(c) any case,
proceeding or other action shall be commenced against the Company
or any subsidiary of the Company for the purpose of effecting, or
an order, judgment or decree shall be entered by any court of
competent jurisdiction approving (in whole or in
part) anything specified in Section 2.01(b) hereof, or any
receiver, trustee, assignee, custodian, sequestrator, liquidator or
other official shall be appointed with respect to the Company, or
shall be appointed to take or shall otherwise acquire possession or
control of all or a substantial part of the assets and properties
of the Company, and any of the foregoing shall continue unstayed
and in effect for any period of sixty (60) days;

 

(d) any material breach
by the Company of any of its material representations or warranties
contained in this Note, the Subscription Agreement or the Security
Agreement which is not cured within ten (10) days after receipt of
written notice thereof;

 

(e) any material
default other than a payment default, whether in whole or in part,
shall occur in the due observance or performance of any obligations
or other covenants, terms or provisions to be performed by the
Company under this Note which is not cured within ten (10) days
after receipt of written notice thereof;

 

The
cure periods referenced in (d) and (e) above shall not apply to
Events of Default which are not capable of being cured and to
negative covenants.

 

(f) any event of
default by the Company or any subsidiary under the Security
Agreement shall have occurred and be continuing beyond all grace
and/or cure periods, or the Security Agreement shall fail to remain
in full force and effect prior to payment in full of all amounts
payable under this Note or any action shall be taken by the Company
to discontinue, amend, modify or limit the Security Agreement or
assert the invalidity thereof prior to payment in full of all
amounts payable under this Note; or

 

 

 

 

(g) a default under any
of the other Notes.

 

Section
..02                                  If
any Event of Default specified in Section 2.01(b) or Section
2.01(c) occurs, then the full principal amount of this Note,
together with any other amounts owing in respect thereof, to the
date of the Event of Default, shall become immediately due and
payable without any action on the part of the Holder, and if any
other Event of Default occurs, the full principal amount of this
Note, together with any other amounts owing in respect thereof, to
the date of acceleration shall become, at the Holder’s
election, immediately due and payable in cash. All Notes for which
the full amount hereunder shall have been paid in accordance
herewith shall promptly be surrendered to or as directed by the
Company. The Holder need not provide, and the Company hereby
waives, any presentment, demand, protest or other notice of any
kind, and the Holder may immediately and without expiration of any
grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable
law. Such declaration may be rescinded and annulled by the Holder
at any time prior to payment hereunder and the Holder shall have
all rights as a Note holder until such time, if any, as the full
payment under this Section shall have been received by it. No such
rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon.

 

 

Article III.

 

Section
3.01                                  Negative
Covenants.  So long as this Note and any other
Notes shall remain in effect and until any outstanding principal
and interest and all fees and all other expenses or amounts payable
under this Note and the Subscription Agreement have been paid in
full, unless the Majority Holders shall otherwise consent in
writing (such consent not to be unreasonably withheld), the Company
shall not:

 

(a) Senior or Pari Passu
Indebtedness.  Incur, create, assume, guaranty or
permit to exist any indebtedness that ranks senior in priority to,
or pari passu with, the obligations under this Note and the
Subscription Agreement (other than trade payables and accrued
liabilities incurred in the ordinary course of business consistent
with past practices).

 

(b) Liens.  Create,
incur, assume or permit to exist any lien on any Collateral (as
such term is defined in the Security Agreement) now owned or
hereafter acquired and owned by it or on any income or revenues or
rights in respect thereof, except:

 

(i) liens on Collateral
of the Company existing on the date hereof and set forth on
Schedule A attached
hereto, provided that such liens shall secure only those
obligations which they secure on the date hereof;

 

(ii) any
lien created under this Note or the Security
Agreement;

 

(iii) any
lien existing on any Collateral prior to the acquisition thereof by
the Company, provided that

 

1)

such lien is not
created in contemplation of or in connection with such acquisition
and

 

2)

such lien does not
apply to any other property or assets of the Company;

 

 

 

 

(iv) liens
for taxes, assessments and governmental charges; and

 

(v) liens arising out
of judgments or awards (other than any judgment that constitutes an
Event of Default hereunder) in respect of which the Company shall
in good faith be prosecuting an appeal or proceedings for review
and in respect of which it shall have secured a subsisting stay of
execution pending such appeal or proceedings for review, provided
the Company shall have set aside on its books adequate reserves
with respect to such judgment or award.

 

(c) Dividends and
Distributions.  Declare or pay, directly or
indirectly, any dividend or make any other distribution (by
reduction of capital or otherwise), whether in cash, property,
securities or a combination thereof, with respect to any shares of
its capital stock or directly or indirectly redeem, purchase,
retire or otherwise acquire for value any shares of any class of
its capital stock or set aside any amount for any such
purpose.

 

(d) Limitation on Certain Payments and
Prepayments.

 

(i) Pay in cash any
amount in respect of any indebtedness or preferred stock that may
at the obligor’s option be paid in kind or in other
securities; or

 

(ii) Optionally
prepay, repurchase or redeem or otherwise defease or segregate
funds with respect to any indebtedness of the Company, other than
indebtedness under this Note or the Subscription
Agreement. For avoidance
of doubt, nothing in the Section shall be deemed to prevent or
limit the Company from paying accounts payable and accrued
liabilities.

 

(e) Amendments. Amend, modify or
limit any terms of this Note or the Security Agreement or assert
the invalidity of this Note or the Security Agreement.

 

 

Article IV.

 

Section
3.01                                  Representations
of the Company.  All of the representations and
warranties of the Company contained in the Subscription Agreement
to which the Company is a party are incorporated by reference
herein.

 

Section
3.02                                  Representations
of the Holder.  All of the representations and
warranties of the Holder contained in the Subscription Agreement to
which the Holder is a party are incorporated by reference
herein.

 

 

Article V.

 

Section
4.01                                  Registration
Rights.  The Holder shall have registration rights
with respect to the Conversion Shares as set forth in the
Registration Rights Agreement.

 

 

Article VI.

 

Section
5.01                                  Certain
Adjustments.

 

(a) Subdivision
or Combination of Stock.  If, at any time while this Note is
outstanding the Company shall subdivide (whether by way of stock dividend, stock split or
otherwise) its outstanding
shares of Common Stock into a greater number of shares, the QF
Based Note Conversion Price, if then established, and Note Floor
Price in effect immediately prior to such subdivision shall be
proportionately reduced, 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 QF Based Note Conversion Price, if
then established, and Note Floor Price in effect immediately prior
to such combination shall be proportionately
increased. The QF Based Note
Conversion Price and Note Floor Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive
event or events described in this Section 6.01(a). Simultaneously
with any adjustment to the QF Based Note Conversion Price, the
number of Conversion Shares which may be acquired upon conversion
of this Note shall be increased or decreased
proportionally.

 

 

 

 

(b) Dividends in Stock,
Property, Reclassification. If,
at any time while the Notes are outstanding, the holders of Common
Stock (or any shares of stock or other securities at the time
receivable upon the conversion of the Notes) shall have received or
become entitled to receive, without payment
therefore:

 

(i) any
Common Stock Equivalents, or any rights or options to subscribe
for, purchase or otherwise acquire any of the foregoing by way of
dividend or other distribution, or

 

(ii) additional
stock or other securities or property (other than 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 adjustment in respect of which shall be
covered by the terms of Section 6.01(a) above),

 

then and in each such case, the QF Based Note Conversion Price shall be adjusted
proportionately, and the Holder
hereof shall, upon the conversion of the Notes, 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 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 QF Based Note Conversion Price, as so
adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described in this Section
601(b).

 

(c) Reorganization,
Reclassification, Consolidation, Merger or Sale. At any time while this Note is outstanding,
if any recapitalization, reclassification or reorganization of the
capital stock of the Company, or any consolidation or merger of the
Company with another Company, 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 lawful and
adequate provisions shall be made by the Company whereby the Holder
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 conversion of the
Note) 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 conversion of the Note. 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
to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Note Conversion
Price) shall thereafter be applicable, in relation to any shares of
stock, securities or assets thereafter deliverable upon the
conversion thereof. To the extent necessary to effect the foregoing
provisions, the successor Company (if other than the Company)
resulting from such consolidation or merger or the
Company purchasing such assets shall assume by written instrument
executed and mailed or delivered to the Holder at the last address
of the Holder appearing on the books of the Company, the obligation
to deliver to the Holder such shares of stock, securities or assets
as, in accordance with the
foregoing provisions, the 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 convert the Holder’s Note during the 10-day
period commencing on the date of such notice to the effective date
of the event triggering such notice to the extent that an optional
conversion right is then available. In any event, the successor
Company (if other than the Company) resulting from such
consolidation or merger or the Company purchasing such assets shall
be deemed to assume such obligation to deliver to the 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.

 

 

 

 

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

 

(i)
Except as otherwise provided in Section 6.01(d)(iii) 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 Original Issue Date of this Note, in a Qualified Financing, at
a price per share reflecting a Post-Acquisition Valuation of less
than $15,000,000, the QF Based Note Conversion Price and the number
of Conversion Shares that can be acquired upon conversion of this
Note 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 Original Issue Date of this Note
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 conversion of this Note 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 QF
Based Note Conversion Price at which each share of Common Stock may
be purchased upon conversion of this Note 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%. This would result in a QF Based Note Conversion Price equal
to 64% of the lowest price at which Common Stock or Common Stock
Equivalents are sold in the Qualified Financing.

 

(ii)
In the event the Company or a subsidiary of the Company does not
complete a Qualified Financing within one year of the Original
Issue Date of this Note such that this Note 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, while this Note remains outstanding, completes a
Qualified Financing or other financing at a price per share
reflecting a Post-Acquisition Valuation of less than $15,000,000,
the VWAP Based Note Conversion Price then in effect and the number
of Conversion Shares to be obtained upon conversion of this Note
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 Original Issue Date of
this Note, reflecting a Post-Acquisition Valuation of $12,000,000
(i.e. at a valuation equal to 80% of $15,000,000), the number of
Conversion Shares issuable upon conversion of this Note shall be
increased by dividing the number of shares issuable upon conversion
of this Note immediately prior to such Qualified Financing or other
financing by .8 (which is the number obtained by dividing
12,000,000 by 15,00,000) and the VWAP % used to determine the VWAP
Based Note Conversion Price under this Note 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 Note is convertible at a price per share equal to 80% of the
VWAP, this Note 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, while this Note remains
outstanding, 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 conversion of this Note and the
VWAP % used to determine the VWAP Based Note Conversion Price under
this Note would be further adjusted proportionately, in the same
manner as provided above.

 

 

 

 

 

(iii)
Notwithstanding Sections 6.01(d)(i)and(ii) 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 Original Issue Date of this Note
and prior to a Qualified Financing, this Note shall become
immediately convertible at a VWAP based price per share under the
same terms and conditions set forth in Section 6.01(d)(ii) above,
including those relating to a proportional reduction to the VWAP %
and an increase in the number of shares issuable upon conversion of
this Note. Any subsequent Non-Qualified Financings or Qualified
Financings taking place while this Note remains outstanding shall
be treated in the same manner as set forth in the last sentence of
Section 6(d)(ii) above. By way of example, if the Company or a
subsidiary of the Company completes a Non-Qualified Financing
within one year of the Effective Date of this Note at a
Post-Acquisition Valuation of $12,000,000 (ie. at a valuation equal
to 80% of $15,000,000) prior to a Qualified Financing, this Note
shall become immediately convertible at a price per share equal to
64%(80% multiplied by 80%) of the VWAP and the number of shares
issuable upon conversion of this Note shall be increased by
dividing the number of shares issuable upon conversion of this Note
immediately prior to such Non-Qualified Financing by .8 (which is
the number obtained by dividing 12,000,000 by
15,000,000).

 

(iv)
Exempt Issuances will not trigger any adjustments under this
Section 6.01(d).

 

(e) Adjustment
to QF Based Note Conversion Price Resulting from Certain Equity
Sales. If the Company, at any
time while this Note is outstanding, and the QF Based Note
Conversion 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 QF Based Note Conversion 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
QF Based Note Conversion Price, such issuance shall be deemed to
have occurred for less than the QF Based Note Conversion Price on
such date of the Dilutive Issuance at such effective price) then
simultaneously with consummation of each Dilutive Issuance the QF
Based Note Conversion 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 6.01(e) in the case of an Exempt
Issuance.

 

 

 

 

 

(f) Certain Events.
If any event occurs as to which the
other provisions of this Section 6.01 are not strictly applicable
but the lack of any adjustment would not fairly protect the
purchase rights of the Holder under this Note 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 Note 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 6.01(f) will
increase the applicable conversion price or decrease the number of
Conversion Shares as otherwise determined pursuant to this Section
6.01 and elsewhere in the Note.

 

(g) Adjustment
to VWAP Based Note Conversion Price.  The calculation of the VWAP Based Note Conversion
Price shall be adjusted consistent with the provision of this
Section 6.01 should any of the events described in this Section
6.01 take place during the pricing period for the determination of
the VWAP Based Conversion Price.

 

 

Article VII.

 

Section
6.01                                  Notice.  All
notice and other communications hereunder which are required or
permitted under this Note will be in writing and shall be deemed
effectively given to a party by (a) 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 business
day, or the next business day after the date of transmission, if
such notice or communication is delivered on a day that is not a
business day or later than 5:00 P.M., New York City time, on any
business day; (b) seven days after deposit with the United States
Post Office, by certified mail, return receipt requested,
first-class mail, postage prepaid; (c) on the date delivered, if
delivered by hand or by messenger or overnight courier, addressee
signature required (costs prepaid), to the addresses below or at
such other address and/or to such other persons as shall have been
furnished by the parties:

 

	

If to
the Company:

 

	

Sincerity
Applied Materials Holdings Corp.

P.O.
Box 374

100
Toorak Road

South
Yarra VIC 3141

Attn:
Mr. Zhang Yiwen, CEO

Email:
james@sincerityplastics.com

 

	

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

	

CKR
Law, LLP

1330
Avenue of the Americas, 14th Floor

New
York, NY 10019

Attention:  Scott
Rapfogel, Esq.

Telephone:  212.259.7300

 

	

If to
the Holder:

	

To the
Holder’s address set forth on the Omnibus Signature Page to
the Subscription Agreement

 

 

 

 

Section
6.02                                  Governing
Law; Jurisdiction.  All questions concerning the
construction, validity, enforcement and interpretation of this Note
shall be governed by and construed and enforced in accordance with
the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that any
legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Note (whether
brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) may be
commenced in the state and federal courts sitting in the City of
New York, Borough of Manhattan (the “New York Courts”). Each
party hereto hereby irrevocably submits to the jurisdiction of the
New York Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of this
Note), and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, or such New York
Courts are improper or inconvenient venue for such proceeding. Each
party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such
party at the address in effect for notices to it under this Note
and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in
any manner permitted by law. Nothing herein shall affect the right
of the Holder to commence legal proceedings or otherwise proceed
against the Company in any other jurisdiction.

 

Each
party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in
any legal proceeding arising out of or relating to this Note or the
transactions contemplated hereby. If either party shall commence an
action or proceeding to enforce any provisions of this Note, then
the prevailing party in such action or proceeding shall be
reimbursed by the other party for its attorney’s fees and
other costs and expenses incurred with the investigation,
preparation and prosecution of such action or
proceeding.

 

Section
6.03                                  Severability.  The
invalidity of any of the provisions of this Note shall not
invalidate or otherwise affect any of the other provisions of this
Note, which shall remain in full force and effect.

 

Section
6.04                                  Entire
Agreement and Amendments.  This Note together with
the Subscription Agreement and Security Agreement represents the
entire agreement between the parties hereto with respect to the
subject matter hereof and there are no representations, warranties
or commitments, except as set forth herein. This Note may be
amended only by an instrument in writing executed by the Company
and the Majority Holders.

 

Section
6.05                                  Cancellation.  After
all principal, accrued interest and other amounts at any time owed
on this Note has been paid in full, this Note shall automatically
be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.

 

Section
6.06                                  Construction;
Headings.  The headings of this Note are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Note.

 

Section
6.07                                  Payment
of Collection, Enforcement and Other Costs.  If
(a) this Note is placed in the hands of an attorney for collection
or enforcement or is collected or enforced through any legal
proceeding or the Holder otherwise takes action to collect amounts
due under this Note or to enforce the provisions of this Note or
(b) there occurs any bankruptcy, reorganization, receivership of
the Company or other proceedings affecting Company creditors’
rights and involving a claim under this Note, then the Company
shall pay the costs incurred by the Holder for such collection,
enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including, but
not limited to, attorneys’ fees and
disbursements.

 

 

 

 

Section
6.08                                  The
Company hereby covenants and agrees that the Company will not, by
amendment of its Certificate of Corporation, Bylaws or through any
reorganization, transfer of assets, consolidation, merger, scheme
of arrangement, 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 of this Note, and will at all times
in good faith carry out all of the provisions of this Note and take
all action as may be required to protect the rights of the Holder
of this Note. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of
Common Stock receivable upon satisfaction of this Note above the
price then in effect, (ii) shall take all such actions as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock
upon the satisfaction of this Note.

 

 

 

 

 

IN WITNESS WHEREOF, with the intent to
be legally bound hereby, the Company as executed this Note as of
the date first written above.

 

SINCERITY
APPLIED MATERIALS HOLDINGS CORP.

 

By:                                                            

Name:  

Title:  

 

 

 

 

 

 

 

 

 

 

ANNEX A

 

NOTICE
OF CONVERSION

 

(TO BE
EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT

 

12%
SENIOR SECURED CONVERTIBLE NOTES

 

The
undersigned hereby elects to convert the amount of principal and
accrued interest indicated below due on the 12% Senior Secured
Convertible Note(s) of SINCERITY
APPLIED MATERIALS HOLDINGS CORP., a Nevada corporation (the
“Company”) accompanying this Notice of Conversion,
according to the conditions hereof, as of the date written
below.  If shares of Common Stock are to be issued in the
name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is
delivering herewith such documents and opinions as may be required
by the Company.  No fee will be charged to the Holders
for any conversion, except for any such transfer
taxes.

 

Conversion
calculations:

 

Delivery Date of
Notice of Conversion:    

Applicable
Conversion
Price:                                                                                                                                      

Principal Amount of
Notes to be
Converted:     

Amount
of Accrued but Unpaid

Interest on the
Notes to be
Converted:                

Number of Shares of
Common Stock to be
Issued:                     

Name in Which
Shares of Common Stock are to be
Issued:                            

	
 

	

[HOLDER]

	
 

	
 

	
 

	
 

	
 

	

__________________________________ 

	
 

	

Name:  

	
 

	

Title:  

	
 

	

Address:Blueprint

  Exhibit 10.5

 

FORM OF

REGISTRATION RIGHTS AGREEMENT

 

This
Registration Rights Agreement (this “Agreement”) is made and entered
into effective as of ______ ___, 2017, among Sincerity Applied
Materials Holdings Corp., a Nevada corporation (the
“Company”), the
persons who have purchased the Units and have executed omnibus or
counterpart signature page(s) hereto (each, a “Purchaser” and collectively, the
“Purchasers”),
and the persons or entities identified on Schedule 1 hereto holding
Registrable Pre-Acquisition Shares. Capitalized terms used herein
shall have the meanings ascribed to them in Section 1 below or in the
Subscription Agreement.

 

RECITALS:

 

WHEREAS, the Company has offered and
sold in compliance with Rule 506 of Regulation D promulgated under
the Securities Act to accredited investors in a private placement
offering (the “Offering”) units of securities of
the Company (the “Units”), each Unit consisting of
(i) one 12% Senior Secured Convertible Note with a term of 13
months in the face (principal) amount of $10,000 (the
“Note”) and (ii)
one five-year warrant to purchase the number of shares of Common
Stock issuable upon exercise thereof as set forth in the Warrant
(the “Warrant”)
pursuant to that certain Subscription Agreement entered into by and
between the Company and each of the subscribers for the Units set
forth on the signature pages affixed thereto (the
“Subscription
Agreement”); and

 

WHEREAS, the Company has agreed to enter
into a registration rights agreement with each of the Purchasers in the Offering who purchased the
Units and with certain other persons; and

 

WHEREAS, in conjunction with the closing
of the Offering, the Company has completed an acquisition (the
“Acquisition”)
with Sincerity Australia Pty Ltd., an Australia corporation
(“Sincerity
Australia”) and the sole shareholder/member of
Sincerity Australia pursuant to which Sincerity Australia will
become a wholly owned subsidiary of the Company;

 

NOW, THEREFORE, in consideration of the
mutual promises, representations, warranties, covenants, and
conditions set forth herein, the parties mutually agree as
follows:

 

1. Certain
Definitions.  As used in this Agreement, the
following terms shall have the following respective
meanings:

 

“Anti-Dilution
Shares” means shares of Common Stock, if any, issued
pursuant to the anti-dilution provisions contained in the Notes and
the Warrants.

 

“Approved Market” means
the OTC Markets Group, the Nasdaq Stock Market, the New York Stock
Exchange or the NYSE MKT.

 

 

 

 

“Blackout Period” means,
with respect to a registration, a period during which the Company,
in the good faith judgment of its board of directors, determines
(because of the existence of, or in anticipation of, any
acquisition, financing activity, receipt of clinical trial results
or other transaction involving the Company, or the unavailability
for reasons beyond the Company’s control of any required
financial statements, disclosure of information which is in its
best interest not to publicly disclose, or any other event or
condition of similar significance to the Company) that the
registration and distribution of the Registrable Securities to be
covered by such registration statement, if any, or the filing of an
amendment to such registration statement in the circumstances
described in Section 4(g), would be seriously
detrimental to the Company and its stockholders, in each case
commencing on the day the Company notifies the Holders that they
are required, because of the determination described above, to
suspend offers and sales of Registrable Securities and ending on
the earlier of (1) the date upon which the material non-public
information resulting in the Blackout Period is disclosed to the
public or ceases to be material and (2) such time as the Company
notifies the selling Holders that sales pursuant to such
Registration Statement or a new or amended Registration Statement
may resume; provided, however, that no Blackout Period shall extend
for a period of more than thirty (30) consecutive Trading Days
(except for a Blackout Period arising from the filing of a
post-effective amendment to the Registration Statement to update
the prospectus therein to include the information contained in the
Company’s Annual Report on Form 10-K, which Blackout Period
may extend for the amount of time reasonably required to respond to
comments of the staff of the Commission (the “Staff”) on such amendment) and
aggregate Blackout Periods shall not exceed sixty (60) Trading Days
in any twelve (12) month period.

 

“Business Day” means any
day of the year, other than a Saturday, Sunday, or other day on
which banks in the State of New York are required or authorized to
close.

 

“Commission” means the U.
S. Securities and Exchange Commission or any other federal agency
at the time administering the Securities Act.

 

“Common Stock” means the
common stock, par value $0.001 per share, of the Company and any
and all shares of capital stock or other equity securities of: (i)
the Company which are added to or exchanged or substituted for the
Common Stock by reason of the declaration of any stock dividend or
stock split, the issuance of any distribution or the
reclassification, readjustment, recapitalization or other such
modification of the capital structure of the Company; and (ii) any
other corporation, now or hereafter organized under the laws of any
state or other governmental authority, with which the Company is
merged, which results from any consolidation or reorganization to
which the Company is a party, or to which is sold all or
substantially all of the shares or assets of the Company, if
immediately after such merger, consolidation, reorganization or
sale, the Company or the stockholders of the Company own equity
securities having in the aggregate more than 50% of the total
voting power of such other corporation.

 

“Conversion Shares” means
the shares of Common Stock issuable to the Purchasers pursuant to
the conversion of the Notes and any shares of Common Stock issued
or issuable with respect to such shares upon any stock split,
dividend or other distribution, recapitalization or similar event
with respect to the foregoing or pursuant to the anti-dilution
provision applicable to the Notes.

 

“Effective Date” means the
date of the closing of the Offering.

 

 

 

 

“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission promulgated thereunder.

 

“Family Member” means (a)
with respect to any individual, such individual’s spouse, any
descendants (whether natural or adopted), any trust all of the
beneficial interests of which are owned by any of such individuals
or by any of such individuals together with any organization
described in Section 501(c)(3) of the Internal Revenue Code of
1986, as amended, the estate of any such individual, and any
corporation, association, partnership or limited liability company
all of the equity interests of which are owned by those above
described individuals, trusts or organizations and (b) with respect
to any trust, the owners of the beneficial interests of such
trust.

 

“Holder” means (i) each
Purchaser or any of such Purchaser’s respective successors
and Permitted Assignees who acquire rights in accordance with this
Agreement with respect to any Registrable Securities directly or
indirectly from a Purchaser or from any Permitted Assignee; and
(ii) each Pre-Acquisition Stockholder, or its respective successors
and Permitted Assignees who acquire rights in accordance with this
Agreement with respect to any Registrable Securities directly or
indirectly from such holder or from any Permitted Assignee
thereof.

 

 “Majority
Holders” means, at any time, Holders of a majority of
the Registrable Securities then outstanding.

 

“Note” shall have the
meaning set forth in the Recitals.

 

“Permitted Assignee” means
(a) with respect to a partnership, its partners or former partners
in accordance with their partnership interests, (b) with respect to
a corporation, its stockholders in accordance with their interest
in the corporation, (c) with respect to a limited liability
company, its members or former members in accordance with their
interest in the limited liability company, (d) with respect to an
individual party, any Family Member of such party, (e) an entity or
trust that is controlled by, controls, or is under common control
with a transferor, or (f) a party to this Agreement.

 

The
terms “register,”
“registered,” and
“registration” refer to a
registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration
statement.

 

“Pre-Acquisition
Stockholder” means a person who was a stockholder of
the Company immediately prior to the Acquisition.

 

“Registrable Pre-Acquisition
Shares” means the shares of Common Stock held by a
Pre-Acquisition Stockholder which were acquired by the
Pre-Acquisition Stockholder prior to the Acquisition and which
represented 10% or more of the Company’s outstanding Common
Stock immediately prior to the Acquisition.

 

 “Registrable
Securities” means (a) the Conversion Shares and
Warrant Shares and (b) the Registrable Pre-Acquisition Shares; but,
in each case, excluding any otherwise Registrable Securities that
(i) have been sold or otherwise transferred other than to a
Permitted Assignee, or (ii) may be sold at the time under the
Securities Act without restriction, including manner of sale,
current information requirements or volume limitations either
pursuant to Rule 144 of the Securities Act or otherwise during any
ninety (90) day period.

 

 

 

 

“Registration Default
Period” means the period during which any Registration
Event occurs and is continuing.

 

“Registration Effectiveness
Date” means the date that is one hundred and twenty
(120) calendar days after the Closing Date of the
Offering

 

“Registration Event” means
the occurrence of any of the following events:

 

(a) the Company fails
to file with the Commission the Registration Statement on or before
the Registration Filing Date;

 

(b) the Registration
Statement is not declared effective by the Commission on or before
the Registration Effectiveness Date;

 

(c) after the SEC
Effective Date, the Registration Statement ceases for any reason to
remain continuously effective or the Holders are otherwise not
permitted to utilize the prospectus therein to resell the
Registrable Securities for a period of more than fifteen (15)
consecutive Trading Days, excluding Blackout Periods permitted and
excused herein;

 

(d) the Registrable
Securities, if issued and outstanding, are not listed or included
for quotation on an Approved Market, or trading of the Common Stock
is suspended or halted on the Approved Market, which at the time
constitutes the principal markets for the Common Stock, for more
than three (3) full, consecutive Trading Days; provided, however, a
Registration Event shall not be deemed to occur if all or
substantially all trading in equity securities (including the
Common Stock) is suspended or halted on the Approved Market for any
length of time.; or

 

(e) after the SEC
Effective Date, the Company fails to file with the Commission when
due (after giving effect to any extension of a due date for filing
pursuant to Rule 12b-25 under the Exchange Act) an Annual Report on
Form 10-K or a Quarterly Report on Form 10-Q.

 

“Registration Filing Date”
means the date that is sixty (60) calendar days after the Closing
Date of the Offering

 

“Registration Statement”
means the registration statement that the Company is required to
file pursuant to Section 3(a) of this Agreement to
register the Registrable Securities.

 

“Restricted Holders” means
all officers and directors of the Company and certain stockholders
of the Company who have entered into lock-up agreements with the
Company upon the closing of the Acquisition, pursuant to which they
agree to certain restrictions on the sale or disposition (including
pledge) of the Common Stock held by (or issuable to)
them.

 

“Rule 144” means Rule 144
promulgated by the Commission under the Securities Act, as such
rule may be amended or supplemented from time to time, or any
similar successor rule that may be promulgated by the
Commission.

 

“Rule 145” means Rule 145
promulgated by the Commission under the Securities Act, as such
rule may be amended or supplemented from time to time, or any
similar successor rule that may be promulgated by the
Commission.

 

 

 

 

“Rule 415” means Rule 415
promulgated by the Commission under the Securities Act, as such
rule may be amended or supplemented from time to time, or any
similar successor rule that may be promulgated by the
Commission.

 

“Securities Act” means the
Securities Act of 1933, as amended, or any similar federal statute
promulgated in replacement thereof, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at
the time.

 

“SEC Effective Date” means
the date the Registration Statement is declared effective by the
Commission.

 

“Trading Day” means any
day on which such national securities exchange, the OTC Markets
Group or such other securities market or quotation system, which at
the time constitutes the principal securities market for the Common
Stock, is open for general trading of securities.

 

 “Warrant
Shares” means the shares of Common Stock issuable to
the Purchasers pursuant to the exercise of the Warrants and any
shares of Common Stock issued or issuable with respect to such
shares upon any stock split, dividend or other distribution,
recapitalization or similar even with respect to the foregoing or
pursuant to the anti-dilution provision applicable to the
Warrants.

 

“Warrants” shall have the
meaning set forth in the Recitals.

 

2. Term.  This Agreement
shall terminate with respect to each Holder on the earlier of: (i)
the date that is two (2) years from the SEC Effective Date and (ii)
the date on which all Registrable Securities held by such Holder
have been transferred other than to a Permitted Assignee.
Notwithstanding the foregoing, Section 3(b), Section 6, Section 8, Section 9 and Section 11 shall survive the
termination of this Agreement.

 

3. Registration.

 

(a) Registration on Form
S-1.  The Company shall file with the Commission a
Registration Statement on Form S-1, or any other form for which the
Company then qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the resale by the
Holders of all of the Registrable Securities, and the Company shall
(i) use its commercially reasonable efforts to make the initial
filing of the Registration Statement no later than the Registration
Filing Date, (ii) use its commercially reasonable efforts to cause
such Registration Statement to be declared effective no later than
the Registration Effectiveness Date and (iii) use its commercially
reasonable efforts to keep such Registration Statement effective
for a period of two (2) years after the SEC Effective Date or for
such shorter period ending on the date on which all Registrable
Securities have been transferred other than to a Permitted Assignee
(the “Effectiveness Period”);
provided,
however,
that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section,
or keep such registration effective pursuant to the terms
hereunder, in any particular jurisdiction in which the Company
would be required to qualify to do business as a foreign
corporation or as a dealer in securities under the securities laws
of such jurisdiction or to execute a general consent to service of
process in effecting such registration, qualification or
compliance, in each case where it has not already done so; and
provided further, the Company shall be entitled to suspend the
effectiveness of the Registration Statement at any time prior to
the expiration of the Effectiveness Period during a Blackout
Period. Notwithstanding the foregoing, in the event that the Staff
should limit the number of Registrable Securities that may be sold
pursuant to the Registration Statement, the Company may remove from
the Registration Statement such number of Registrable Securities as
specified by the Commission on behalf of all of the holders of
Registrable Securities first from the shares of Common
Stock issuable upon exercise of the Placement Agent Warrants, on a
pro-rata basis among the holders thereof (and on an as-exercised
basis with respect to any Placement Agent Warrants not then
exercised), second,
from the other Registrable Securities, on a pro rata basis among
the holders thereof (such Registrable Securities, the
“Reduction
Securities”). In such event, the Company shall give
the Purchasers prompt notice of the number of Registrable
Securities excluded therefrom. Holders of Reduction Securities
shall have piggyback registration rights with regard to such
Reduction Securities. No liquidated damages shall accrue or be
payable to any holder pursuant to Section 3(a) with respect to any
Reduction Securities.

 

 

 

 

If,
after the SEC Effective Date and until the fifth (5th) anniversary
thereof, the Company shall determine to register for sale for cash
any of its Common Stock, for its own account or for the account of
others (other than the Holders), other than (i) a registration
relating solely to employee benefit plans or securities issued or
issuable to employees, consultants (to the extent the securities
owned or to be owned by such consultants could be registered on
Form S-8 (or its then equivalent form) or any of their Family
Members (including a registration on Form S-8 (or its then
equivalent form)), (ii) a registration relating solely to a
Securities Act Rule 145 transaction or a registration on Form S-4
(or its then equivalent form) in connection with a merger,
acquisition, divestiture, reorganization or similar event, or (iii)
a transaction relating solely to the sale of debt or convertible
debt instruments, then the Company shall promptly give to each
holder of Reduction Securities written notice thereof (the
“Registration Rights
Notice”) (and in no event shall such notice be given
less than twenty (20) calendar days prior to the filing of such
registration statement), and shall, subject to the paragraph
immediately below, include as a piggyback registration, all of the
Reduction Securities specified in a written request delivered by
the holder thereof within ten (10) calendar days after delivery to
the holder of such written notice from the Company. However, the
Company may, without the consent of such holders, withdraw such
registration statement prior to its becoming effective if the
Company or such other selling stockholders have elected to abandon
the proposal to register the securities proposed to be registered
thereby. The right contained in this paragraph may be exercised by
each holder of Reduction Securities only with respect to two (2)
qualifying registrations.

 

If a
Piggyback Registration is for a registered public offering that is
to be made by an underwriting, the Company shall so advise the
holders of Reduction Securities as part of the Registration Rights
Notice. In that event, the right of any holder to piggyback
registration shall be conditioned upon such holder’s
participation in such underwriting and the inclusion of such
holder’s Reduction Securities in the underwriting to the
extent provided herein. All holders proposing to sell any of their
Reduction Securities through such underwriting shall (together with
the Company and any other stockholders of the Company selling their
securities through such underwriting) enter into an underwriting
agreement in customary form with the underwriter selected for such
underwriting by the Company or such other selling stockholders, as
applicable. Notwithstanding any other provision of this
Section
3(a), if the underwriter or the
Company determines that marketing factors require a limitation on
the number of shares of Common Stock or the amount of other
securities to be underwritten, the underwriter may exclude some or
all Reduction Securities from such registration and underwriting.
The Company shall so advise all holders (except those holders who
failed to timely elect to include their Reduction Securities
through such underwriting or have indicated to the Company their
decision not to do so), and indicate to each such holder the number
of shares of Reduction Securities that may be included in the
registration and underwriting, if any. The number of shares of
Reduction Securities to be included in such registration and
underwriting shall be allocated among such holders as
follows:

 

(i) If the piggyback
registration was initiated by the Company, the number of shares
that may be included in the registration and underwriting shall be
allocated first to the Company and then, subject to obligations and
commitments existing as of the date hereof, to all persons
exercising piggyback registration rights (including the holders)
who have requested to sell in the registration on a pro rata basis
according to the number of shares requested to be included therein;
and

 

 

 

 

(ii) If
the piggyback registration was initiated by the exercise of demand
registration rights by a stockholder or stockholders of the
Company, then the number of shares that may be included in the
registration and underwriting shall be allocated first to such
selling stockholders who exercised such demand to the extent of
their demand registration rights, and then, subject to obligations
and commitments existing as of the date hereof, to the Company and
then, subject to obligations and commitments existing as of the
date hereof, to all persons exercising piggyback registration
rights (including the Holders) who have requested to sell in the
registration on a pro rata basis according to the number of shares
requested to be included therein.

 

No
Reduction Securities excluded from the underwriting by reason of
the underwriter’s marketing limitation shall be included in
such registration. If any holder disapproves of the terms of any
such underwriting, such holder may elect to withdraw such
holder’s Reduction Securities therefrom by delivering a
written notice to the Company and the underwriter. The Reduction
Securities so withdrawn from such underwriting shall also be
withdrawn from such registration; provided, however, that, if by the
withdrawal of such Reduction Securities, a greater number of
Reduction Securities held by other holders may be included in such
registration (up to the maximum of any limitation imposed by the
underwriters), then the Company shall offer to all holders who have
included Reduction Securities in the registration the right to
include additional Reduction Securities pursuant to the terms and
limitations set forth herein in the same proportion used above in
determining the underwriter limitation.

 

(f) Liquidated
Damages.  If a Registration Event occurs, then the
Company will make payments to each Holder of Registrable
Securities, as liquidated damages to such Holder by reason of the
Registration Event, a cash sum calculated at a rate of twelve
percent (12%) per annum of: (i) the aggregate purchase price paid
by such Holder pursuant to the Subscription Agreement, or (ii) to a
Holder of Registrable Pre-Acquisition Shares, the product of $0.30
(as adjusted for stock splits, stock dividends, combinations,
recapitalizations or similar events) multiplied by the number of
Registrable Pre-Acquisition Shares held by such Holder, but in each
case of (i)-(ii), only with respect to such Holder’s
Registrable Securities that are affected by such Registration Event
and only for the period during which such Registration Event
continues to affect such Registrable Securities. Notwithstanding
the foregoing, the maximum amount of liquidated damages that may be
paid by the Company pursuant to this Section 3(b) shall be an amount equal to
eight percent (8%) of the applicable foregoing amounts described in
clauses (i), (ii) and (iii) in the preceding sentence with respect
to such Holder’s Registrable Securities that are affected by
all Registration Events in the aggregate. Each payment of
liquidated damages pursuant to this Section 3(b) shall be due and payable in
arrears within five (5) days after the end of each full 30-day
period of the Registration Default Period until the termination of
the Registration Default Period and within five (5) days after such
termination. The Registration Default Period shall terminate upon
the earlier of such time as the Registrable Securities that are
affected by the Registration Event cease to be Registrable
Securities or (i) the filing of the Registration Statement in the
case of clause (a) of the definition of Registration Event, (ii)
the SEC Effective Date in the case of clause (b) of the definition
of Registration Event, (iii) the ability of the Holders to effect
sales pursuant to the Registration Statement in the case of clause
(c) of the definition of Registration Event, and (iv) the listing
or inclusion and/or trading of the Common Stock on an Approved
Market, as the case may be, in the case of clause (d) of the
definition of Registration Event. The amounts payable as liquidated
damages pursuant to this Section 3(b) shall be payable in lawful
money of the United States. Notwithstanding the foregoing, the
Company will not be liable for the payment of liquidated damages
described in this Section 3(b) for any delay in
registration of Registrable Securities that would otherwise be
includable in the Registration Statement pursuant to Rule 415
solely as a result of a comment received from the Staff requiring a
limit on the number of Registrable Securities included in such
Registration Statement in order for such Registration Statement to
be able to avail itself of Rule 415, or, with respect to a Holder,
if such Holder fails to provide to the Company information
concerning the Holder and manner of distribution of the
Holder’s Registrable Securities that is required by SEC Rules
to be disclosed in a registration statement utilized in connection
with the registration of the Registrable Securities.

 

 

 

 

(g) Other
Limitations.  Notwithstanding the provisions of
Section
3(b) above, if (i) the
Commission does not declare the Registration Statement effective on
or before the Registration Effectiveness Date, or (ii) the
Commission allows the Registration Statement to be declared
effective at any time before or after the Registration
Effectiveness Date, subject to the withdrawal of certain
Registrable Securities from the Registration Statement, and the
reason for (i) or (ii) is the Commission’s determination that
(x) the offering of any of the Registrable Securities constitutes a
primary offering of securities by the Company, (y) Rule 415 may not
be relied upon for the registration of the resale of any or all of
the Registrable Securities, and/or (z) a Holder of any Registrable
Securities must be named as an underwriter, the Holders understand
and agree that in the case of (ii) the Company may (notwithstanding
anything to the contrary contained herein) reduce, on a pro rata
basis, in the manner provided above, the total number of
Registrable Securities to be registered on behalf of each such
Holder, and in the case of (i) or (ii) the Holder shall not be
entitled to liquidated damages with respect to the Registrable
Securities not registered for the reason set forth in (i) or so
reduced on a pro rata basis as set forth above.

 

(h) Registration of Anti-Dilution
Shares.  In the event that Anti-Dilution Shares are issued,
the resale of which is not covered by the Registration Statement,
the Company shall file an additional registration statement
covering the resale of such Anti-Dilution Shares on the same
material terms applicable to the Registrable Securities provided
however, the initial filing deadline shall be sixty (60) calendar
days after the first anniversary of the Closing Date and the
effectiveness deadline shall be one hundred twenty (120) calendar
days after the first anniversary of the Closing Date.

 

4. Registration
Procedures.  The Company will keep each Holder
reasonably advised as to the filing and effectiveness of the
Registration Statement. At its expense with respect to the
Registration Statement, the Company will:

 

(a) prepare and file
with the Commission with respect to the Registrable Securities, a
Registration Statement in accordance with Section 3(a) hereof, and use its
commercially reasonable efforts to cause such Registration
Statement to become effective and to remain effective for
the Effectiveness
Period;

 

(b) not name any Holder
in the Registration Statement as an underwriter without that
Holder’s prior written consent;

 

(c) if the Registration
Statement is subject to review by the Commission, promptly respond
to all comments and diligently pursue resolution of any comments to
the satisfaction of the Commission;

 

(d) prepare and file
with the Commission such amendments and supplements to such
Registration Statement as may be necessary to keep such
Registration Statement effective during the Effectiveness
Period;

 

(e) furnish, without
charge, to each Holder of Registrable Securities covered by such
Registration Statement (i) a reasonable number of copies of such
Registration Statement (including any exhibits thereto other than
exhibits incorporated by reference), each amendment and supplement
thereto as such Holder may reasonably request, (ii) such number of
copies of the prospectus included in such Registration Statement
(including each preliminary prospectus and any other prospectus
filed under Rule 424 of the Securities Act) as such Holders may
reasonably request, in conformity with the requirements of the
Securities Act, and (iii) such other documents as such Holder may
reasonably require to consummate the disposition of the Registrable
Securities owned by such Holder, but only during the Effectiveness
Period; provided that the Company shall have no obligation to
furnish any document pursuant to this clause that is available on
the EDGAR system;

 

 

 

 

(f) use its
commercially reasonable efforts to register or qualify such
registration under such other applicable securities laws of such
jurisdictions within the United States as any Holder of Registrable
Securities covered by such Registration Statement reasonably
requests and as may be necessary for the marketability of the
Registrable Securities (such request to be made by the time the
applicable Registration Statement is deemed effective by the
Commission) and do any and all other acts and things necessary to
enable such Holder to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such Holder;
provided, that the
Company shall not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be
required to qualify but for this paragraph, (ii) subject itself to
taxation in any such jurisdiction, or (iii) consent to general
service of process in any such jurisdiction where it has not
already done so;

 

(g) as promptly as
practicable after becoming aware of such event, notify each Holder
of Registrable Securities, the disposition of which requires
delivery of a prospectus relating thereto under the Securities Act,
of the happening of any event, which comes to the Company’s
attention, that will after the occurrence of such event cause the
prospectus included in such Registration Statement, if not amended
or supplemented, to contain an untrue statement of a material fact
or an omission to state a material fact required to be stated
therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading and
the Company shall promptly thereafter prepare and furnish to such
Holder a supplement or amendment to such prospectus (or prepare and
file appropriate reports under the Exchange Act) so that, as
thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not contain an untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, unless suspension of the use of such prospectus
otherwise is authorized herein or in the event of a Blackout
Period, in which case no supplement or amendment need be furnished
(or Exchange Act filing made) until the termination of such
suspension or Blackout Period; provided that any and all
information provided to the Holder pursuant to such notification
shall remain confidential to each Holder until such information
otherwise becomes public, unless disclosure by a Holder is required
by law;

 

(h) comply, and
continue to comply during the Effectiveness Period, in all material
respects with the Securities Act and the Exchange Act and with all
applicable rules and regulations of the Commission with respect to
the disposition of all securities covered by such Registration
Statement;

 

(i) as promptly as
practicable after becoming aware of such event, notify each Holder
of Registrable Securities being offered or sold pursuant to the
Registration Statement of the issuance by the Commission of any
stop order or other suspension of effectiveness of the Registration
Statement;

 

(j) use
its commercially reasonable efforts to cause all the Registrable
Securities covered by the Registration Statement to be quoted on
the OTC Markets Group or such other principal securities market or
quotation system on which securities of the same class or series
issued by the Company are then listed or traded or
quoted;

 

(k) provide a transfer
agent and registrar, which may be a single entity, for the shares
of Common Stock at all times and cooperate with the Holders to
facilitate the timely preparation and delivery of the Registrable
Securities to be delivered to a transferee pursuant to the
Registration Statement (whether electronically or in certificated
form) which Registrable Securities shall be free, to the extent
permitted by the Subscription Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holders may
request;

 

 

 

 

(l) cooperate with the
Holders of Registrable Securities being offered pursuant to the
Registration Statement to issue and deliver, or cause its transfer
agent to issue and deliver, certificates representing Registrable
Securities to be offered pursuant to the Registration Statement
within a reasonable time after the delivery of certificates
representing the Registrable Securities to the transfer agent or
the Company, as applicable, and enable such certificates to be in
such denominations or amounts as the Holders may reasonably request
and registered in such names as the Holders may
request;

 

(m) notify the Holders,
the Placement Agents and their counsel as promptly as reasonably
possible and (if requested by any such Person) confirm such notice
in writing no later than one (1) Trading Day following the day:
(i)(A) when a Prospectus or any prospectus supplement or
post-effective amendment to a Registration Statement is proposed to
be filed; (B) when the Commission notifies the Company whether
there will be a “no review,” “review” or a
“completion of a review” of such Registration Statement
and whenever the Commission comments in writing on such
Registration Statement (in which case the Company shall provide
true and complete copies thereof and all written responses thereto
to each of the Holders that pertain to the Holders as a selling
stockholder, but not information which the Company believes would
constitute material and non-public information); and (C) with
respect to each Registration Statement or any post-effective
amendment, when the same has been declared effective, provided,
however, that such notice under this clause (C) shall be delivered
to each Holder; (ii) of any request by the Commission or any other
federal or state governmental authority for amendments or
supplements to a Registration Statement or prospectus or for
additional information that pertains to the Holders as selling
stockholders; or (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities
for sale in any jurisdiction, or the initiation or threatening of
any proceeding for such purpose;

 

(n) during the
Effectiveness Period, refrain from bidding for or purchasing any
Common Stock or any right to purchase Common Stock or attempting to
induce any person to purchase any such security or right if such
bid, purchase or attempt would in any way limit the right of the
Holders to sell Registrable Securities by reason of the limitations
set forth in Regulation M of the Exchange Act; and

 

(o) take all other
commercially reasonable actions necessary to enable, expedite, or
facilitate the Holders to dispose of the Registrable Securities by
means of the Registration Statement during the term of this
Agreement.

 

5. Obligations of the
Holders.

 

(a) Each Holder agrees
that, upon receipt of any notice from the Company of the happening
of any event of the kind described in Section 4(g) hereof or of the
commencement of a Blackout Period, such Holder shall discontinue
the disposition of Registrable Securities included in the
Registration Statement until such Holder’s receipt of the
copies of the supplemented or amended prospectus contemplated by
Section
4(g) hereof or
notice of the end of the Blackout Period, and, if so directed by
the Company, such Holder shall deliver to the Company (at the
Company’s expense) all copies (including, without limitation,
any and all drafts), other than permanent file copies, then in such
Holder’s possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such
notice.

 

 

 

 

(b) The Holders of the
Registrable Securities shall provide such information as may
reasonably be requested by the Company in connection with the
preparation of any registration statement, including amendments and
supplements thereto, in order to effect the registration of any
Registrable Securities under the Securities Act pursuant to
Section
3(a) of this Agreement and in
connection with the Company’s obligation to comply with
federal and applicable state securities laws, including a completed
questionnaire in the form attached to this Agreement as Annex A (a
“Selling Securityholder
Questionnaire”) or any update thereto not later than
three (3) Business Days following a request therefore from the
Company.

 

(c) Each Holder, by its
acceptance of the Registrable Securities, agrees to cooperate with
the Company as reasonably requested by the Company in connection
with the preparation and filing of any Registration Statement
hereunder, unless such Holder has notified the Company in writing
of its election to exclude all of its Registrable Securities from
such Registration Statement.

 

6. Registration
Expenses.  The Company shall pay all expenses in
connection with any registration obligation provided herein,
including, without limitation, all registration, filing, stock
exchange fees, printing expenses, all fees and expenses of
complying with applicable securities laws, and the fees and
disbursements of counsel for the Company and of the Company’s
independent accountants; provided, that, in any
underwritten registration or other Secondary Offering, the Company
shall have no obligation to pay any underwriting discounts, selling
commissions or transfer taxes attributable to the Registrable
Securities being sold by the Holders thereof, which underwriting
discounts, selling commissions and transfer taxes shall be borne by
such Holders. Except as provided in this Section 6 and Section 8 of this Agreement, the
Company shall not be responsible for the expenses of any attorney
or other advisor employed by a Holder.

 

7. Assignment of
Rights.  No Holder may assign its rights under
this Agreement to any party without the prior written consent of
the Company; provided, however, that any Holder may
assign its rights under this Agreement without such consent to a
Permitted Assignee as long as (a) such transfer or assignment is
effected in accordance with applicable securities laws; (b) such
transferee or assignee agrees in writing to become bound by and
subject to the terms of this Agreement; and (c) such Holder
notifies the Company in writing of such transfer or assignment,
stating the name and address of the transferee or assignee and
identifying the Registrable Securities with respect to which such
rights are being transferred or assigned. The Company may assign
this Agreement or any rights or obligations hereunder without the
prior written consent of the other party hereto.

 

 

 

 

 

8. Indemnification.

 

(a) In the event of
the offer and sale of Registrable Securities under the Securities
Act, the Company shall, and hereby does, indemnify and hold
harmless, to the fullest extent permitted by law, each Holder, its
directors, officers, partners, and each other person, if any, who
controls or is under common control with such Holder within the
meaning of Section 15 of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, and expenses to
which the Holder or any such director, officer, partner or
controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any
untrue statement of any material fact contained in any registration
statement prepared and filed by the Company under which Registrable
Securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any
omission to state therein a material fact required to be stated or
necessary to make the statements therein in light of the
circumstances in which they were made not misleading, and the
Company shall reimburse the Holder, and each such director,
officer, partner and controlling person for any legal or any other
expenses reasonably incurred by them in connection with
investigating, defending or settling any such loss, claim, damage,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case (i) to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon (x) an untrue
statement in or omission from such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with
written information included in the Selling Securityholder
Questionnaire, attached hereto as Annex A, furnished by a Holder or
its representative to the Company expressly for use in the
preparation thereof or (y) the failure of a Holder to comply with
the covenants and agreements contained in Section 5 hereof respecting the sale of
Registrable Securities; or (ii) if the person asserting any such
loss, claim, damage, liability (or action or proceeding in respect
thereof) who purchased the Registrable Securities that are the
subject thereof did not receive a copy of an amended preliminary
prospectus or the final prospectus (or the final prospectus as
amended or supplemented) at or prior to the written confirmation of
the sale of such Registrable Securities to such person because of
the failure of such Holder to so provide such amended preliminary
or final prospectus and the untrue statement or omission of a
material fact made in such preliminary prospectus was corrected in
the amended preliminary or final prospectus (or the final
prospectus as amended or supplemented). Such indemnity shall remain
in full force and effect regardless of any investigation made by or
on behalf of the Holders, or any such director, officer, partner or
controlling person and shall survive the transfer of such shares by
the Holder.

 

 

 

 

(b) As a condition to
including Registrable Securities in any registration statement
filed pursuant to this Agreement, each Holder agrees, severally and
not jointly, to be bound by the terms of this Section 8 and to indemnify and hold
harmless, to the fullest extent permitted by law, the Company, each
of its directors, officers, partners, and each underwriter, if any,
and each other person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which the
Company or any such director or officer or controlling person may
become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement of a material
fact or any omission of a material fact required to be stated in
any registration statement, any preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement thereto or
necessary to make the statements therein not misleading, to the
extent, but only to the extent, that such untrue statement or
omission is included or omitted in reliance upon and in conformity
with written information included in the Selling Securityholder
Questionnaire, attached hereto as Annex A, furnished by the Holder
or its representative to the Company expressly for use in the
preparation thereof, and such Holder shall reimburse the Company,
and its directors, officers, partners, and any such controlling
persons for any legal or other expenses reasonably incurred by them
in connection with investigating, defending, or settling any such
loss, claim, damage, liability, action, or proceeding; provided, however, that indemnity
obligation contained in this Section 8(b) shall in no event exceed
the amount of the net proceeds received by such Holder as a result
of the sale of such Holder’s Registrable Securities pursuant
to such registration statement, except in the case of fraud or
willful misconduct. Such indemnity shall remain in full force and
effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and
shall survive the transfer by any Holder of such
shares.

 

(c) Promptly after
receipt by an indemnified party of notice of the commencement of
any action or proceeding involving a claim referred to in this
Section
8 (including any
governmental action), such indemnified party shall, if a claim in
respect thereof is to be made against an indemnifying party, give
written notice to the indemnifying party of the commencement of
such action; provided, that the failure of
any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under this
Section, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any
such action is brought against an indemnified party, unless in the
reasonable judgment of counsel to such indemnified party a conflict
of interest between such indemnified party and indemnifying parties
may exist or the indemnified party may have defenses not available
to the indemnifying party in respect of such claim, the
indemnifying party shall be entitled to participate in and to
assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party and, after notice from the indemnifying
party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof,
unless in such indemnified party’s reasonable judgment a
conflict of interest between such indemnified and indemnifying
parties arises in respect of such claim after the assumption of the
defenses thereof or the indemnifying party fails to defend such
claim in a diligent manner, other than reasonable costs of
investigation. Neither an indemnified party nor an indemnifying
party shall be liable for any settlement of any action or
proceeding effected without its consent. No indemnifying party
shall, without the consent of the indemnified party, consent to
entry of any judgment or enter into any settlement, which does not
include as an unconditional term thereof the giving by the claimant
or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation. Notwithstanding
anything to the contrary set forth herein, and without limiting any
of the rights set forth above, in any event any party shall have
the right to retain, at its own expense, counsel with respect to
the defense of a claim. Each indemnified party shall furnish such
information regarding itself or the claim in question as an
indemnifying party may reasonably request in writing and as shall
be reasonably required in connection with defense of such claim and
litigation resulting therefrom.

 

 

 

 

(d) If an indemnifying
party does not or is not permitted to assume the defense of an
action pursuant to Section 8(c) or in the case of the
expense reimbursement obligation set forth in Sections 8(a) and 8(b), the
indemnification required by Sections 8(a) and 8(b) shall be made by periodic
payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or
expenses, losses, damages, or liabilities are
incurred.

 

(e) If the
indemnification provided for in Section 8(a) or 8(b) is held by a court of
competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage or expense
referred to herein, the indemnifying party, in lieu of indemnifying
such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss,
liability, claim, damage or expense (i) in such proportion as is
appropriate to reflect the proportionate relative fault of the
indemnifying party on the one hand and the indemnified party on the
other (determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission
relates to information supplied by the indemnifying party or the
indemnified party and the parties’ relative intent,
knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission), or (ii) if the
allocation provided by clause (i) above is not permitted by
applicable law or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, then in such proportion as
is appropriate to reflect not only the proportionate relative fault
of the indemnifying party and the indemnified party, but also the
relative benefits received by the indemnifying party on the one
hand and the indemnified party on the other, as well as any other
relevant equitable considerations. Notwithstanding any other
provision of this Section
8(e), no Holder shall be required to contribute any amount
in excess of the amount by which the net proceeds received by such
Holder from the sale of the Registrable Securities pursuant to the
Registration Statement exceeds the amount of damages that such
Holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement of a material fact or omission, except
in the case of fraud or willful misconduct. No indemnified party
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any indemnifying party who was not guilty of such
fraudulent misrepresentation.

 

(f) Notwithstanding the
foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into
in connection with an underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting
agreement shall control.

9. Rule 144.  Until the
date on which all Subscribers shall have sold all of their
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.

 

10. Independent Nature of Each
Purchaser’s Obligations and Rights.  The
obligations of each Purchaser under this Agreement are several and
not joint with the obligations of any other Purchaser and each
Purchaser shall not be responsible in any way for the performance
of the obligations of any other Purchaser under this Agreement.
Nothing contained herein and no action taken by any Purchaser
pursuant hereto, shall be deemed to constitute such Purchasers 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. Each 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.

 

 

 

 

11. Miscellaneous.

 

(a) Governing
Law.  This Agreement shall be governed by and
construed in accordance with the laws of the United States of
America and the State of New York, both substantive and remedial,
without regard to New York conflicts of law principles.
Any judicial proceeding brought
against either of the parties to this Agreement or any dispute
arising out of this Agreement or any matter related hereto shall be
brought in the state or federal courts located in the State
of New York and, by its
execution and delivery of this Agreement, each party to this
Agreement accepts the jurisdiction of such courts. The foregoing
consent to jurisdiction shall not be deemed to confer rights on any
person other than the parties to this
Agreement.

 

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

 

(c) Subsequent Registration
Rights.  Until the Registration Statement required
hereunder is declared effective by the Commission, the Company
shall not enter into any agreement granting any registration rights
with respect to any of its securities to any person without the
written consent of the Majority Holders.

 

(d) Successors and
Assigns.  Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding
upon, the successors, Permitted Assignees, executors and
administrators of the parties hereto.

 

(e) No Inconsistent
Agreements.  The Company has not entered, as of
the date hereof, and shall not enter, on or after the date of this
Agreement, into any agreement with respect to its securities that
would have the effect of impairing the rights granted to the
Holders in this Agreement or otherwise conflicts with the
provisions hereof.

 

(f) Entire
Agreement.  This Agreement and the documents,
instruments and other agreements specifically referred to herein or
delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the
subjects hereof.

 

(g) Notices, etc.  All
notices, consents,
waivers, and other communications which are required or permitted
under this Agreement shall be in writing will be deemed given to a
party (a) upon receipt, when personally delivered; (b) one (1)
Business Day after deposit with an nationally recognized overnight
courier service with next day delivery specified, costs prepaid) on
the date of delivery, if delivered to the appropriate address by
hand or by nationally recognized overnight courier service (costs
prepaid); (c) 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,
provided confirmation of facsimile is mechanically or
electronically generated and kept on file by the sending party and
confirmation of email 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 recipients
email server that such e-mail could not be delivered to such
recipient; (d) the date received or rejected by the addressee, if
sent by certified mail, return receipt requested, postage prepaid;
or (e) seven days after the placement of the notice into the mails
(first class postage prepaid), to the party at the address,
facsimile number, or e-mail address furnished by the such
party,

 

 

 

 

If to
the Company, to:

 

Sincerity
Applied Materials Holdings 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

 

with
copy to:

 

CKR
Law, LLP

1330
Avenue of Americas, 14th FL

New
York, NY 10019

Attention: Scott
Rapfogel

Facsimile:
212-259-8200

E-mail
Address: srapfogel@ckrlaw.com

 

if to a
Purchaser or Broker, to:

 

such
Purchaser or Broker at the address set forth on the signature page
hereto;

 

or at
such other address as any party shall have furnished to the other
parties in writing in accordance with this Section 11(f).

 

(h) Delays or
Omissions.  No delay or omission to exercise any
right, power or remedy accruing to any Holder, upon any breach or
default of the Company under this Agreement, shall impair any such
right, power or remedy of such Holder nor shall it be construed to
be a waiver of any such breach or default, or an acquiescence
therein, or of any similar breach or default thereunder occurring;
nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any Holder of any breach or default under
this Agreement, or any waiver on the part of any Holder of any
provisions or conditions of this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement, or by law
or otherwise afforded to any holder, shall be cumulative and not
alternative.

 

(i) Counterparts.  This
Agreement may be executed in any number of counterparts, and with
respect to any Purchaser, by execution of an Omnibus Signature Page
to this Agreement and the Subscription Agreement, each of which
shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one
instrument. In the event that any signature is delivered by
facsimile transmission or by an e-mail, which contains a portable
document format (.pdf) file of an executed signature page, such
signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile or e-mail of a .pdf
signature page were an original thereof.

 

 

 

 

(j) Severability.  In the
case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby.

 

(k) Amendments.  Except
as otherwise provided herein, the provisions of this Agreement may
be amended at any time and from time to time, and particular
provisions of this Agreement may be waived, with and only with an
agreement or consent in writing signed by the Company and the
Majority Holders; provided that this Agreement may not be amended
and the observance of any term hereof may not be waived with
respect to any Holder without the written consent of such Holder
unless such amendment or waiver applies to all Holders in the same
fashion. The Purchasers and Brokers acknowledge that by the
operation of this Section, the Majority Holders may have the right
and power to diminish or eliminate all rights of the Purchasers
and/or Brokers under this Agreement.

 

[company
signature page follows]

 

 

 

 

This
Registration Rights Agreement is hereby executed as of the date
first above written.

 

The Company:

 

SINCERITY
APPLIED MATERIALS HOLDINGS CORP.

 

By:                                                    

Name:  

Title:  

 

	

Purchasers

See Omnibus Signature Pages to Subscription Agreement

 

	
 

	

Registrable Pre-Acquisition Stockholder (individual):

 

Print
Name

 

Signature

	

Registrable Pre-Acquisition Stockholder (entity):

 

Print
Name of Entity

By:                                                             

Name:  

Title:  

 

All Holders:  Address

 

 

 

 

 

 

Sincerity Applied Materials Holdings Corp.

 

Selling Securityholder Notice and Questionnaire

 

The
undersigned beneficial owner of Registrable Securities of Sincerity
Applied Materials Holdings Corp., a Nevada corporation (the
“Company”), understands
that the Company has filed or intends to file with the U.S.
Securities and Exchange Commission a registration statement (the
“Registration
Statement”) for the registration and resale under Rule
415 of the Securities Act of 1933, as amended, of the Registrable
Securities, in accordance with the terms of the Registration Rights
Agreement (the “Registration Rights
Agreement”) to which this document is annexed. A copy
of the Registration Rights Agreement is available from the Company
upon request at the address set forth below. All capitalized terms
not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.

 

Certain
legal consequences arise from being named as a selling security
holder in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable
Securities are advised to consult their own securities law counsel
regarding the consequences of being named or not being named as a
selling security holder in the Registration Statement and the
related prospectus.

 

NOTICE

 

The
undersigned beneficial owner (the “Selling Securityholder”)
of Registrable Securities hereby elects to include the Registrable
Securities owned by it in the Registration Statement.

 

The
undersigned hereby provides the following information to the
Company and represents and warrants that such information is
accurate:

 

QUESTIONNAIRE

 

1. Name:

 

(a)                 Full
Legal Name of Selling Securityholder

	
 

	
 

 

(b) 

Full Legal Name of
Registered Holder (holder of record) (if not the same as (a) above)
through which Registrable Securities are held:

	
 

	
 

 

(c) 

If you are not a
natural person, full Legal Name of Natural Control Person (which
means a natural person who directly or indirectly alone or with
others has power to vote or dispose of the securities covered by
this Questionnaire):

	
 

	
 

 

 

 

 

2. Address
for Notices to Selling Securityholder:

	
 

	
 

	
 

	

Telephone:                                                                 

Fax:                                                                 

	

Email:                                                                                                                                      

	

Contact
Person:                                                                                                                                      

	
 

3. Broker-Dealer
Status:

 

(a) 

Are you a
broker-dealer?

 

Yes
☐                      

No
☐

 

(b) 

If
“yes” to Section 3(a), did you receive your Registrable
Securities as compensation for investment banking services to the
Company?

 

Yes
☐                      

No
☐

 

Note:                       

If “no”
to Section 3(b), the Commission’s staff has indicated that
you should be identified as an underwriter in the Registration
Statement.

 

(c) 

Are you an
affiliate of a broker-dealer?

 

Yes
☐                      

No
☐

 

(d) 

If you are an
affiliate of a broker-dealer, do you certify that you purchased the
Registrable Securities in the ordinary course of business, and at
the time of the purchase of the Registrable Securities to be
resold, you had no agreements or understandings, directly or
indirectly, with any person to distribute the Registrable
Securities?

 

Yes
☐                      

No
☐

 

Note:                       

If “no”
to Section 3(d), the Commission’s staff has indicated that
you should be identified as an underwriter in the Registration
Statement.

 

4.       

Beneficial
Ownership of Securities of the Company Owned by the Selling
Securityholder:

 

Except as set forth below in this Item 4, the undersigned is not
the beneficial or registered owner of any securities of the
Company.

 

{00180139.4 / 4133.003}

 

 

(a) 

Please list the
type (common stock, warrants, etc.) and amount of all securities of
the Company (including any Registrable Securities) beneficially
owned1 by
the Selling Securityholder:

	
 

	
 

 

5.       

Relationships
with the Company:

 

Except as set forth below, neither you nor (if you are a natural
person) any member of your immediate family, nor (if you are not a
natural person) any of your affiliates2, officers, directors
or principal equity holders (owners of 5% of more of the equity
securities of the undersigned) has held any position or office or
has had any other material relationship with the Company (or its
predecessors or affiliates) during the past three
years.

 

State
any exceptions here:

	
 

	
 

 

The
undersigned agrees to promptly notify the Company of any
inaccuracies or changes in the information provided herein that may
occur subsequent to the date hereof at any time while the
Registration Statement remains effective.

 

By
signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items 1 through 5
and the inclusion of such information in the Registration Statement
and the related prospectus and any amendments or supplements
thereto. The undersigned understands that such information will be
relied upon by the Company in connection with the preparation or
amendment of the Registration Statement and the related prospectus
and any amendments or supplements thereto.

 

1 Beneficially
Owned:  A
“beneficial owner” of a security includes any person
who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares
(i) voting power, including the
power to direct the voting of such security, or (ii) investment power,
including the power to dispose of, or direct the disposition of,
such security.  In addition, a person is deemed to have
“beneficial ownership” of a security of which such
person has the right to acquire beneficial ownership at any time
within 60 days, including, but not limited to, any right to
acquire such security: (i) through the exercise of any option,
warrant or right, (ii) through the conversion of any security
or (iii) pursuant to the power to revoke, or the automatic
termination of, a trust, discretionary account or similar
arrangement.

 

It is
possible that a security may have more than one “beneficial
owner,” such as a trust, with two co-trustees sharing voting
power, and the settlor or another third party having investment
power, in which case each of the three would be the
“beneficial owner” of the securities in the
trust.  The power to vote or direct the voting, or to invest
or dispose of, or direct the investment or disposition of, a
security may be indirect and arise from legal, economic,
contractual or other rights, and the determination of beneficial
ownership depends upon who ultimately possesses or shares the power
to direct the voting or the disposition of the
security.

 

The
final determination of the existence of beneficial ownership
depends upon the facts of each case.  You may, if you believe
the facts warrant it, disclaim beneficial ownership of securities
that might otherwise be considered “beneficially owned”
by you.

 

2 

Affiliate: 
An “affiliate” is a company or person that directly, or
indirectly through one or more intermediaries, controls you, or is
controlled by you, or is under common control with
you.

 

 

 

 

IN
WITNESS WHEREOF the undersigned, by authority duly given, has
caused this Selling Securityholder Notice and Questionnaire to be
executed and delivered either in person or by its duly authorized
agent.

 

BENEFICIAL OWNER (individual)  BENEFICIAL OWNER (entity)

 

 

Signature                                                                                 

Name of
Entity

 

 

Print
Name                                                                                 

Signature

 

Print
Name:                                                           

Signature (if Joint Tenants or Tenants in
Common)   

Title:                                                            

 

PLEASE E-MAIL OR FAX A COPY OF THE COMPLETED AND EXECUTED SELLING
SECURITYHOLDER NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY
OVERNIGHT MAIL, TO:

 

CKR Law
LLP

1330
Avenue of the Americas, 14th Floor

New
York, NY 10022

Attention:  Eleanor
Osmanoff

Facsimile:  (212)
259-8200

E-mail
Address:  eosmanoff@ckrlaw.com

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