UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): March 4,
2019
KNOW LABS, INC.
(Exact
name of registrant as specified in its charter)
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Nevada
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000-30262
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90-0273142
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(State
of other jurisdiction
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(Commission
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(IRS
Employer
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of
incorporation)
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File
Number)
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Identification
No.)
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500 Union Street, Suite 810
Seattle, Washington 98101
(Address
of principal executive office)
(206) 903-1351
(Registrant's
telephone number, including area code)
(Former
name, former address and former fiscal year, if changed since last
report)
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2.
below):
☐
Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a -12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d -2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e -4(c))
Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of
1934 (§240.12b-2 of this chapter).
Emerging
growth company. ☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
Item 3.02 Unregistered Sales of Equity Securities.
On
March 4, 2019, Know Labs, Inc. (the “Company”) closed a
private placement and received gross proceeds of $2,409,975 in
exchange for issuing Subordinated Convertible Notes (the
“Convertible Notes”) and Warrants (the
“Warrants”) in a private placement to 26 accredited
investors, pursuant to a series of substantially identical
Securities Purchase Agreements, Common Stock Warrants, and related
documents.
The Convertible Notes have a principal amount of $2,409,975 and
bear annual interest of 8%. Both the principal amount of and the
interest are payable on a payment-in-kind basis in shares of Common
Stock of the Company (the “Common Stock”). They are due
and payable (in Common Stock) on the earlier of (a) mandatory and
automatic conversion of the Convertible Notes into a financing that
yields gross proceeds of at least $10,000,000 (a “Qualified
Financing”) or (b) on the one-year anniversary of the
Convertible Notes (the “Maturity Date”). Investors will
be required to convert their Convertible Notes into Common Stock in
any Qualified Financing at a conversion price per share equal to
the lower of (i) $1.00 per share or (ii) a 25% discount to the
price per share paid by investors in the Qualified Financing. If
the Convertible Notes have not been paid or converted prior to the
Maturity Date, the outstanding principal amount of the Convertible
Notes will be automatically converted into shares of Common Stock
at the lesser of (a) $1.00 per share or (b) any adjusted price
resulting from the application of a “most favored
nations” provision, which requires the issuance of additional
shares of Common Stock to investors if the Company issues certain
securities at less than the then-current conversion
price.
The Warrants were granted on a 1:0.5 basis (one-half Warrant for
each full share of Common Stock into which the Convertible Notes
are convertible). The Warrants have a five-year term and an
exercise price equal to 120% of the per share conversion price of
the Qualified Financing or other mandatory conversion.
The Convertible Notes are initially convertible into 2,409,975
shares of Common Stock, subject to certain adjustments, and the
Warrants are initially exercisable for 1,204,988 shares of Common
Stock at an exercise price of $1.20 per share of Common Stock, also
subject to certain adjustments.
In connection with the private placement, the placement agent for
the Convertible Notes and the Warrants received a cash fee of
$192,798 and warrants to purchase 289,197 shares of the
Company’s common stock, all based on 8% of gross proceeds to
the Company. The placement agent has also received a $25,000
advisory fee.
As part of the Purchase Agreement, the Company entered into a
Registration Rights Agreement, which grants the investors
“demand” and “piggyback” registration
rights to register the shares of Common Stock issuable upon the
conversion of the Convertible Notes and the exercise of the
Warrants with the Securities and Exchange Commission for resale or
other disposition. In addition, the Convertible Notes are
subordinated to certain senior debt of the Company pursuant to a
Subordination Agreement executed by the investors.
The Convertible Notes and Warrants were issued in transactions that
were not registered under the Securities Act of 1933, as amended
(the “Act”) in reliance upon applicable exemptions from
registration under Section 4(a)(2) of the Act and/or Rule 506 of
SEC Regulation D under the Act.
The Company expects to continue offering additional Convertible
Notes and Warrants on substantially the same terms until April 15,
2019 (unless extended at the discretion of the Company) or until
the Company has raised a maximum of $5 million in gross proceeds
(or such other amount determined by the Company in its
discretion).
The
foregoing description of the financing is qualified in its entirety
by reference to the complete terms and conditions of the
forms of Securities Purchase
Agreement, Subscription Agreement, Subordinated Convertible Note,
Common Stock Purchase Warrant, Subordination Agreement, and
Registration Rights Agreement,
copies of which are attached
to this Current Report on Form 8-K as Exhibits 10.1, 10.2, 10.3,
10.4, 10.5 and 10.6, respectively, and which are incorporated by
reference into this Item 3.02.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
–
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
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Registrant:
KNOW LABS, INC.
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By:
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/s/
Ronald P.
Erickson
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Ronald P.
Erickson
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Chairman of the
Board
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March
6, 2019
Exhibit
10.1
FORM OF SECURITIES PURCHASE AGREEMENT
This
SECURITIES PURCHASE AGREEMENT (the “
Agreement
”) is dated as of and
effective as of
[
] (the “
Effective
Date
”), by and between KNOW LABS, INC., a corporation
incorporated under the laws of the State of Nevada (the
“
Company
”), and
the undersigned purchaser (“
Purchaser
”).
WHEREAS, the
Company and Purchaser are executing and delivering this Agreement
in reliance upon the exemption from securities registration
afforded by Section 4(a)(2) of the Securities Act of 1933, as
amended (the “
Securities
Act
”), and Rule 506(c) of Regulation D
(“
Regulation D
”)
as promulgated by the United States Securities and Exchange
Commission (the “
SEC
”) under the Securities
Act.
WHEREAS, Purchaser
desires to purchase from Company, and the Company desires to sell
and issue to Purchaser, upon the terms and subject to the
conditions contained herein, a subordinated convertible note (the
“
Convertible
Note
”), in the form attached hereto as
Exhibit A,
and warrants to
purchase shares of Common Stock (the “
Warrants
”), in the form attached
hereto as
Exhibit
B
.
NOW,
THEREFORE, in consideration of the premises and the mutual
covenants of the parties hereinafter expressed and other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto, each intending to be
legally bound, agree as follows:
ARTICLE
I
DEFINITIONS
For
purposes of this Agreement, except as otherwise expressly provided
or otherwise defined elsewhere in this Agreement, or unless the
context otherwise requires, the capitalized terms in this Agreement
shall have the meanings assigned to them in the Convertible Note or
this Article as follows:
1.1
“
Action
” as to any Person, means
any action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting
such Person, any of such Person’s subsidiaries or any of such
Person’s or such subsidiaries’ respective properties,
before or by any governmental authority, arbitrator, regulatory
authority (federal, state, county, local or foreign), stock market,
stock exchange or trading facility.
1.2
“
Business Day
” shall mean any day
other than a Saturday, Sunday, or a legal holiday on which federal
banks are authorized or required to be closed for the conduct of
commercial banking business.
1.3
“
Common Stock
”
means the common stock of the Company, par value $0.001 per
share.
1.4
“
Convertible
Note(s)
” shall have the meaning given to it in the
preamble above.
1.5
“
Effective Date
” means the date so
defined in the introductory paragraph of this
Agreement.
1.6
“
Material Adverse Effect
” means any
of (i) a material and adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material and
adverse effect on the results of operations, assets, properties,
business or condition (financial or otherwise) of the Company and
the subsidiaries, taken as a whole, or (iii) a material and adverse
impairment to the Company’s ability to perform on a timely
basis its obligations under any Transaction Document, provided,
however, that any effect(s) arising from or relating to any of the
following shall not be deemed, either alone or in combination, to
constitute, and shall not be taken into account in determining
whether there has been or will be, a Material Adverse Effect: (A)
conditions affecting the industries in which the business operates
(which effect(s), in each case, do not disproportionately affect
the Business relative to other companies conducting businesses
similar to the business); (B) general economic, financial market or
geopolitical conditions (which effect(s), in each case, do not
disproportionately affect the business relative to other companies
conducting businesses similar to the business); (C) any failure to
meet any projections or forecasts for the business for any period
ending (or for which revenues or earnings are released) on or after
the date hereof (provided that the underlying causes of any such
failure (subject to the other provisions of this definition) shall
not be excluded); (D) any change in accounting rules (including
generally accepted accounting principles in the United States), or
the enforcement, implementation or interpretation thereof, after
the date hereof; or (E) any effect caused by, relating to or
resulting from the announcement or pendency of the transactions
contemplated by this Agreement.
1.7
“
Person
” means any individual, sole
proprietorship, joint venture, partnership, limited liability
company, corporation, association, cooperation, trust, estate,
governmental authority, or any other entity of any nature
whatsoever.
1.8
“
Securities
” means, collectively,
the Convertible Notes, the Warrants, and any additional shares of
Common Stock issuable (i) in connection with a conversion of the
Convertible Notes,
(ii)
upon exercise of the Warrants or (iii) in accordance with any of
the terms or provisions of this Agreement or any other Transaction
Documents.
1.9
“
Subordination Agreement
” means the
Subordination Agreement dated the date hereof by and between
Purchaser and Clayton Struve, the form of which is attached hereto
as
Exhibit
C
.
1.10
“
Subscription Agreement
” means the
Subscription Agreement, Suitability Questionnaire, and Accredited
Investor Status Certification executed by Purchaser, the form of
which is attached hereto as
Exhibit D
.
1.11
“
Transaction Documents
” means this
Agreement any and all documents or instruments executed or to be
executed by the Company in connection with this Agreement,
including the Subscription Agreement(s), the Convertible Note(s),
the Warrant(s), and the Subordination Agreement(s), together with
all modifications, amendments, extensions, future advances,
renewals, and substitutions thereof.
1.12
“
Warrant(s)
”
shall have the meaning given to it in the preamble
above.
ARTICLE
II
PURCHASE AND SALE OF CONVERTIBLE NOTES AND WARRANTS
2.1
Purchase and Sale
. Subject to
the satisfaction (or waiver) of the terms and conditions of this
Agreement, Purchaser agrees to purchase, and Company agrees to sell
and issue to Purchaser, the Convertible Notes and the Warrants in
the amount of the Purchase Price, all as set forth on
Schedule 1
attached hereto. The
Purchase Price for each Convertible Note purchased shall be equal
to its face value. The aggregate principal amount of Convertible
Notes which may be purchased under this Agreement from time to time
shall not exceed $5,000,000; provided, that the Company may
increase such aggregate principal amount of Convertible Notes in
its sole discretion. The Company shall notify Purchaser of any such
increase, but Purchaser shall have no right of first offer,
preemptive right, or any similar right with respect to such
additional Convertible Notes.
2.2
Closing Date
. The purchase and
sale of the Convertible Notes and Warrants to Purchaser shall take
place on the Effective Date, or such later date as the Company and
Purchaser may agree in writing, subject to satisfaction of the
conditions set forth in this Agreement (the “
Closing Date
”). Additional
closings with other purchasers of the Convertible Notes and
Warrants may be held from time to time in the sole discretion of
the Company.
2.3
Form of Payment
. Subject to the
satisfaction of the terms and conditions of this Agreement, on the
Closing Date: (i) Purchaser shall deliver to the Company, to the
account designated in the Subscription Agreement, the Purchase
Price for the Convertible Note and Warrants and (ii) the Company
shall deliver to Purchaser the Convertible Note(s) and Warrant(s)
which Purchaser is purchasing hereunder, duly executed on behalf of
the Company, together with any other documents required to be
delivered pursuant to this Agreement.
ARTICLE
III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser
represents and warrants to the Company as follows:
3.1
Certifications in Subscription
Agreement
. The certifications of Purchaser contained in the
Subscription Agreement are true and correct as of the Effective
Date, and Purchaser hereby reaffirms the representations,
warranties, agreements, acknowledgments, and understandings of
Purchaser contained in the Subscription Agreement as of the
Effective Date.
3.2
Additional Information
. The
Purchaser understands and agrees that the Purchaser may be asked or
required to provide documentation (“
Documentation
”) to verify the
Purchaser’s accredited investor status. Notwithstanding
anything else contained herein or in
other materials
provided to Purchaser, this Documentation may be retained and
reviewed by the Company and copies of the Documentation may be
provided to affiliates of the Company and Boustead Securities, LLC,
a member of FINRA and SIPC, who is acting as the Company’s
exclusive placement agent in connection with this offering (the
“
Placement
Agent
”), and its affiliates. Purchaser understands
that the Company may not accept Purchaser’s subscription if
Purchaser is not able to provide Documentation acceptable to
Company and the Placement Agent, or for any other
reason.
3.3
Reliance on Exemptions
.
Purchaser understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of,
and Purchaser’s compliance with, the representations,
warranties, agreements, acknowledgments, and understandings of
Purchaser set forth herein and in the Subscription Agreement to
determine the availability of such exemptions and the eligibility
of Purchaser to acquire the Securities.
3.4
Authorization, Enforcement
.
This Agreement has been duly and validly authorized, executed and
delivered by, or on behalf of, Purchaser and is a valid and binding
agreement of Purchaser, enforceable in accordance with its terms,
except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation, and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’
rights and remedies.
3.5
Foreign Investors
. If Purchaser
is not a United States person (as defined by Section 7701(a)(30) of
the Internal Revenue Code of 1986, as amended), Purchaser hereby
represents that it has satisfied itself as to the full observance
of the laws of its jurisdiction in connection with any invitation
to subscribe for the Securities or any use of this Subscription
Agreement, including (i) the legal requirements within its
jurisdiction for the purchase of the Securities, (ii) any foreign
exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained, and
(iv) the income tax and other tax consequences, if any, that may be
relevant to the purchase, holding, redemption, sale, or transfer of
the Securities. Purchaser’s subscription and payment for and
continued beneficial ownership of the Securities will not violate
any applicable securities or other laws of the Purchaser’s
jurisdiction.
ARTICLE
IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to Purchaser as
follows:
4.1
Organization
. The Company is a
corporation, duly incorporated, validly existing and in good
standing under the laws of the State of Nevada. The Company has the
full corporate power and authority to: (i) enter into and execute
this Agreement and the other Transaction Documents and to perform
all of its obligations hereunder and thereunder; and (ii) own and
to conduct and carry on its business as currently conducted. The
Company is duly qualified to transact business and is in good
standing as a foreign corporation in each jurisdiction where
the
character of its
business or the ownership or use and operation of its assets or
properties requires such qualification.
4.2
Authority and Approval of Agreement;
Binding Effect
. The execution and delivery by Company of
this Agreement and the other Transaction Documents, and the
performance by Company of all of its obligations hereunder and
thereunder, including the issuance of the Securities, have been
duly and validly authorized and approved by the Company and its
board of directors pursuant to all applicable laws and no other
action or consent on the part of Company, its board directors or
any other Person is necessary or required by the Company to execute
this Agreement and the other Transaction Documents, consummate the
transactions contemplated herein and therein, perform all of
Company’s obligations hereunder and thereunder, or to issue
the Securities. This Agreement and each of the other Transaction
Documents have been duly and validly executed by Company (and the
officer executing this Agreement and all such other Transaction
Documents is duly authorized to act and execute same on behalf of
Company) and constitute the valid and legally binding agreements of
Company, enforceable against Company in accordance with their
respective terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, and other similar laws
relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies.
4.3
SEC Reports
. Other than as
disclosed in the SEC Reports (with respect to a potential late
filing of a Form 8-K on June 27, 2017, about which the Company is
engaged in discussions with the SEC), the Company has filed all
reports, schedules, forms, statements and other documents required
to be filed by it under the Securities Exchange Act of 1934 (the
“
Exchange Act
”),
including pursuant to Section 13(a) or 15(d) thereof, for the two
years preceding the date hereof (or such shorter period as the
Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively
referred to herein as the “
SEC Reports
”), on a timely basis
or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such
extension. As of their respective filing dates, or to the extent
corrected by a subsequent restatement, the SEC Reports complied in
all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the SEC
promulgated thereunder, and none of the SEC Reports, as amended
from time to time, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading. All material agreements to which the Company or any
subsidiary is a party or to which the property or assets of the
Company or any of its subsidiaries are subject are included as part
of or specifically identified in the SEC Reports. The private
placement memorandum (the “
PPM
”) prepared in connection with
the offering contemplated by this Agreement and delivered to the
Purchaser does not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports
complies in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with U.S. generally
accepted accounting principles, and fairly present in all
material
respects the
financial position of the Company and its consolidated subsidiaries
as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit
adjustments.
4.4
Capitalization
. The authorized
capital stock of the Company is as set forth in the Company’s
latest Annual Report on Form 10-K or Quarterly Report on Form 10-Q
(as applicable) as filed with the SEC. As of the Effective Date,
and except as disclosed in the SEC Reports, (i) no shares of the
Company’s capital stock are subject to preemptive rights or
any other similar rights or any claims or encumbrances suffered or
permitted by the Company; (ii) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company, or
contracts, commitments, understandings or arrangements by which the
Company is or may become bound to issue additional shares of
capital stock of the Company, or options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares
of capital stock of the Company; (iii) there are no outstanding
debt securities, notes, credit agreements, credit facilities or
other contracts or instruments evidencing indebtedness of the
Company or any of its, or by which the Company is or may become
bound; (iv) there are no outstanding registration statements with
respect to the Company or any of its securities; (v) there are no
agreements or arrangements under which the Company is obligated to
register the sale of any of their securities under the Securities
Act (except pursuant to this Agreement); (vi) there are no
financing statements securing obligations filed in connection with
the Company or any of its assets; (vii) there are no securities or
instruments containing anti-dilution or similar provisions that
will be triggered by this Agreement or any related agreement or the
consummation of the transactions described herein or therein; and
(viii) there are no outstanding securities or instruments of the
Company which contain any redemption or similar provisions, and
there are no contracts by which the Company is or may become bound
to redeem a security of the Company. No further approval or
authorization of any stockholder, the Board of Directors or others
is required for the issuance and sale of the
Securities.
4.5
No Conflicts; Consents and
Approvals
. The execution, delivery, and performance of this
Agreement and the Transaction Documents, and the consummation of
the transactions contemplated hereby and thereby, including the
issuance of any of the Securities, will not: (i) constitute a
violation of or conflict with the Articles of Incorporation or
Bylaws of the Company (the “
Organizational Documents
”); (ii)
constitute a violation of, or a default or breach under (either
immediately, upon notice, upon lapse of time, or both), or
conflicts with, or gives to any other Person any rights of
termination, amendment, acceleration or cancellation of, any
provision of any material contract to which Company is a party or
by which any of its assets or properties may be bound; or (iii)
constitute a violation of, or conflict with, any law (including
United States federal and state securities laws). The Company is
not in violation of its Organizational Documents and the Company is
not in default or breach (and no event has occurred which with
notice or lapse of time or both could put the Company in default or
breach) under, and the Company has not taken any action or failed
to take any action that would give to any other Person any rights
of termination, amendment, acceleration, or cancellation of, any
material contract to which the Company is a party or by which any
property or assets of the Company are bound or
affected.
4.6
Issuance of Securities
. The
Securities are duly authorized and, upon issuance in accordance
with the terms hereof, shall be duly issued, fully paid and
non-assessable, and free from all encumbrances with respect to the
issue thereof, and will be issued in compliance with all applicable
United States federal and state securities laws.
4.7
Brokerage Fees
. There is no
Person acting on behalf of the Company who is entitled to or has
any claim for any brokerage or finder’s fee or commission in
connection with the execution of this Agreement or the consummation
of the transactions contemplated hereby, except for Boustead
Securities, LLC, which is acting as placement agent (the
“
Placement
Agent
”) for the sale of the Securities.
4.8
No Material Adverse Changes
.
Since the date of the latest audited financial statements included
within the SEC Reports and except as otherwise disclosed in the
PPM, there has not been any adverse change in the business,
financial condition, operations, results of operations, or future
prospects of the Company.
4.9
Litigation
. There is no Action
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) except as disclosed in the SEC Reports or the
PPM, could, if there were an unfavorable decision, individually or
in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any subsidiary,
nor to the knowledge of the Company or any subsidiary, any director
or officer thereof (in his or her capacity as such), is or has been
the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of
breach of fiduciary duty, except as disclosed in the SEC Reports or
the PPM. There has not been, and to the knowledge of the Company,
there is not pending or contemplated any investigation by the SEC
involving the Company or any current or former director or officer
of the Company (in his or her capacity as such). The SEC has not
issued any stop order or other order suspending the effectiveness
of any registration statement filed by the Company under the
Exchange Act or the Securities Act.
4.10
No
Undisclosed Material Liabilities
. There are no liabilities
of the Company or any subsidiary of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such
a liability, other than: (a) liabilities provided for in the
audited consolidated balance sheet of the Company and the
subsidiaries as of September 30, 2018 or disclosed in the notes
thereto; and (b) other undisclosed liabilities which, individually
or in the aggregate, have not resulted in or could reasonably be
expected to result in a Material Adverse Effect.
4.11
Intellectual
Property
. The Company and its subsidiaries have, or have
rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights,
licenses and other similar rights (collectively, the
“
Intellectual Property
Rights
”) that are necessary or material for use in
connection with the business of the Company as described in the SEC
Reports and which the failure to so have could, individually or in
the aggregate, have or reasonably be expected to result in a
Material Adverse Effect. Neither the
Company nor any
subsidiary has received a written notice that the Intellectual
Property Rights used by the Company or any subsidiary violates or
infringes upon the rights of any Person. Except as set forth in the
SEC Reports or the PPM, to the Company’s knowledge, all such
Intellectual Property Rights are enforceable and there is no
existing infringement by another Person of any of the Intellectual
Property Rights. The Company and its subsidiaries have taken
reasonable steps to protect the Company’s and its
subsidiaries’ rights in their Intellectual Property Rights
and confidential information (the “
Confidential Information
”). Each
employee, consultant and contractor who has had access to
Confidential Information which is necessary for the conduct of the
business of the Company and its subsidiaries as currently conducted
or as currently proposed to be conducted has executed an agreement
to maintain the confidentiality of such Confidential Information
and has executed appropriate agreements that are substantially
consistent with the Company’s standard forms thereof. Except
under confidentiality obligations, there has been no material
disclosure of any of the Company’s or its subsidiaries’
Confidential Information to any third party.
4.12
Solvency
.
The Company has not (a) made a general assignment for the benefit
of creditors; (b) filed any voluntary petition in bankruptcy or
suffered the filing of any involuntary petition by its creditors;
(c) suffered the appointment of a receiver to take possession of
all, or substantially all, of its assets; (d) suffered the
attachment or other judicial seizure of all, or substantially all,
of its assets; (e) admitted in writing its inability to pay its
debts as they come due; or (f) made an offer of settlement,
extension or composition to its creditors generally.
4.13
Related
Party Transactions
. Except as set forth in the SEC Reports
or the PPM: (a) none of the Company or any of its affiliates,
officers, directors, stockholders or employees, or any affiliate of
any of such Person, has any material interest in any property, real
or personal, tangible or intangible, including the Company’s
Intellectual Property used in or pertaining to the business of the
Company, except for the normal rights of a stockholder, or, to the
Company’s knowledge, any supplier, distributor or customer of
the Company, (b) there are no agreements, understandings or
proposed transactions between the Company and any of its officers,
directors, employees, affiliates, or, to the Company’s
knowledge, any affiliate thereof, (c) to the Company’s
knowledge, no employee, officer or director of the Company or any
of its Subsidiaries has any direct or indirect ownership interest
in any firm or corporation with which the Company is affiliated or
with which the Company has a business relationship, or any firm or
corporation that competes with the Company; (d) to the
Company’s knowledge, no member of the immediate family of any
officer or director of the Company is directly or indirectly
interested in any material contract of the Company filed as an
exhibit to the Company’s SEC Reports, or
(e) there are no
amounts owed (cash and stock) to officers, directors and
consultants (salary, bonuses or other forms of
compensation).
4.14
Disclosure
.
Neither the Company nor any Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any
information that constitutes or might constitute material,
non-public information, other than the terms of the transactions
contemplated hereby and other information that will be disclosed
promptly following the execution of this Agreement. The Company
understands and confirms that the Purchasers will rely on the
foregoing representation in effecting transactions in securities of
the Company.
ARTICLE
V
COVENANTS
5.1
Covenants
.
(a)
Corporate Existence
. The
Company shall at all times preserve and maintain its: (i) existence
and good standing in the jurisdiction of its organization; and (ii)
its qualification to do business and good standing in each
jurisdiction where the nature of its business makes such
qualification necessary, and shall at all times continue as a going
concern in the business which the Company is presently
conducting.
(b)
Notice of Default
.
The Company shall, promptly, but not more than five
(5)
days after the commencement thereof, give notice to Purchaser in
writing of the occurrence of any “
Event of Default
” (as such term is
defined in any of the Transaction Documents) or of any event which,
with the lapse of time, the giving of notice or both, would
constitute an Event of Default hereunder or under any other
Transaction Document.
(c)
Reservation of Shares
. So long
as any Securities are owned beneficially and/or of record by any
Purchaser or any transferee thereof, the Company covenants and
agrees that it will at all times reserve and keep available out of
its authorized and unissued shares of Common Stock a number of
shares of Common Stock sufficient for the sole purpose of issuance
upon conversion of the Convertible Notes, payment of interest on
the Convertible Note and exercise of the Warrants (and/or any
transferee thereof), free from preemptive rights or any other
actual contingent purchase rights of persons other than the
applicable Purchaser (and any other holders of any Convertible Note
and/or Warrants transferred from a Purchaser).
(d)
Transferability;
Certificate
.
(i)
The
Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of the
Securities other than pursuant to an effective registration
statement, to the Company, to an affiliate of a Purchaser or in
connection with a pledge as contemplated in Section 7.1(d)(ii), the
Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor, the form
and substance of which opinion shall be reasonably satisfactory to
the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities
Act.
(ii)
Certificates
evidencing Securities will contain a standard legend referring to
transfer restrictions under the Securities Act.
(iii)
The
Company acknowledges and agrees that a Purchaser may from time to
time pledge, and/or grant a security interest in some or all of the
Securities pursuant to a bona fide margin agreement in connection
with a bona fide margin account and, if required under the terms of
such agreement or account, such Purchaser may transfer pledged or
secured Securities to the pledgees or secured parties. Such a
pledge or transfer would not be subject to approval or consent of
the Company and no legal opinion of legal counsel to the pledgee,
secured party or pledgor shall be required in connection with the
pledge, but such legal opinion may be
required in
connection with a subsequent transfer following default by the
Purchaser transferee of the pledge. No notice shall be required of
such pledge. At the appropriate Purchaser’s expense, the
Company will execute and deliver such reasonable documentation as a
pledgee or secured party of Securities may reasonably request in
connection with a pledge or transfer thereof including the
preparation and filing of any required prospectus supplement under
Rule 424(b)(3) of the Securities Act or other applicable provision
of the Securities Act to appropriately amend the list of selling
stockholders thereunder. Except as otherwise provided in Section
7.1(d)(iv), any Securities subject to a pledge or security interest
as contemplated by this Section 7.1(d)(iii) shall continue to bear
the legend set forth in this Section 7.1(d)(ii) and be subject to
the restrictions on transfer set forth in Section
7.1(d)(i).
(iv)
Certificates
representing Securities shall be eligible for removal of the
restrictive legend (including the legend set forth in Section
7.1(d)(ii)): (i) following any sale of such Securities pursuant to
the plan of distribution in an effective registration statement (in
compliance with any prospectus delivery requirements) or (ii)
following a sale or transfer of such Securities pursuant to Rule
144 (assuming the transferee is not an affiliate of the Company),
or
(iii) while such
Securities are eligible for sale by the selling Purchaser without
the requirement for the Company to be in compliance with the
current public information required under Rule 144 as to such
Securities and without volume or manner-of-sale restrictions. The
Company agrees that following such time as legends are no longer
required to be set forth on certificates representing Securities
under this Section 7.1(d), it will, no longer than three trading
days following the delivery by a Purchaser to the Company or the
transfer agent of a certificate representing such Securities
containing a restrictive legend, deliver or instruct the transfer
agent to deliver to such Purchaser, Securities which are free of
all restrictive and other legends. If the Company is then eligible,
certificates for Securities subject to legend removal hereunder
shall be transmitted by the transfer agent to a Purchaser by
crediting the prime brokerage account of such Purchaser with the
Depository Trust Company System as directed by such
Purchaser.
(e)
Furnishing of Information
. As
long as any Purchaser or any transferee owns any Securities, the
Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant
to the Exchange Act. As long as any Purchaser owns Securities, if
the Company is not required to file reports pursuant to such laws,
it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144.
The Company further covenants that it will take such further action
as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell the
Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.
(f)
Integration
. The Company shall
not, and shall use its best efforts to ensure that no affiliate of
the Company shall, sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities
to the Purchasers, or that would be integrated with the offer or
sale of the Securities for purposes of the rules and regulations of
any trading market on which the Common Stock of the Company then
trades in a manner that would require
stockholder
approval of the sale of the Securities to the
Purchasers.
(g)
Securities Laws Disclosure;
Publicity
. By (i) 9:30 a.m. (New York time) on the trading
day following the Closing Date, the Company shall issue a press
release, disclosing the transactions contemplated by the
Transaction Documents and the Closing and by (ii) 5:30
p.m.
(New York time) on the fourth Trading Day following the Closing
Date, the Company will file a Current Report on Form 8-K,
disclosing the material terms of the Transaction Documents (and
attach as exhibits thereto all existing Transaction Documents) and
the Closing. The Company covenants that following such disclosure,
the Purchasers shall no longer be in possession of any material,
non-public information with respect to the Company or any
subsidiary. In addition, the Company will make such other filings
and notices in the manner and time required by the SEC and the
trading market on which the Common Stock of the Company is quoted.
Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory
agency or trading market, without the prior written consent of such
Purchaser, except to the extent such disclosure is required by law
or trading market regulations.
(h)
Indemnification of Purchasers
.
The Company will indemnify and hold the Purchasers and their
respective directors, officers, shareholders, partners, members,
affiliates, employees and agents (each, an
“Purchaser Party”
) harmless
from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation in respect thereof
(collectively,
“Losses”
) that any such
Purchaser Party may suffer or incur as a result of or relating to
any misrepresentation, breach or inaccuracy of any representation,
warranty, covenant or agreement made by any of the Company in any
Transaction Document or in any certificate or other instrument
delivered by or on behalf of the Company. In addition to the
indemnity contained herein, the Company will reimburse each
Purchaser Party for its reasonable legal and other expenses
(including the cost of any investigation, preparation and travel in
connection therewith) incurred in connection therewith, as such
expenses are incurred.
(i)
Non-Public
Information
. The Company covenants and agrees that, except
as specifically contemplated by the Transaction Documents, neither
it nor any other Person acting on its behalf will provide any
Purchaser or its agents or counsel with any information that the
Company believes constitutes material non-public information,
unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
ARTICLE
VI
CONDITIONS PRECEDENT TO THE COMPANY’ S OBLIGATIONS TO
SELL
The
obligation of the Company hereunder to issue and sell the
Securities to Purchaser is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions;
provided, that these conditions are for the Company’s sole
benefit and may be
waived by the
Company at any time in its sole discretion:
6.1
Purchaser shall
have executed the Transaction Documents and delivered the Purchase
Price to the Company.
6.2
The representations
and warranties of Purchaser shall be true and correct in all
material respects as of the Closing Date (except for
representations and warranties that speak as of a specific date),
and Purchaser shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by Purchaser at or prior to the Closing Date.
6.3
The Company shall
have received such certificates, confirmations, resolutions,
acknowledgements, or other documentation necessary or advisable
from all applicable governmental authorities, including, but not
limited to, those located in the State of Nevada, as the Company
may require in order to evidence such governmental
authorities’ approval of this Agreement, the Transaction
Documents and the purchase of the Securities contemplated
hereby.
6.4
No statute, rule,
regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the
Transaction Documents.
ARTICLE
VII
CONDITIONS PRECEDENT TO THE PURCHASER’S OBLIGATIONS TO
PURCHASE
The
obligation of Purchaser hereunder to purchase the Convertible Note
is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions (in addition to any other
conditions precedent elsewhere in this Agreement); provided, that
these conditions are for Purchaser’s sole benefit and may be
waived by Purchaser at any time in its sole
discretion:
7.1
The Company shall
have executed and delivered the Transaction Documents to
Purchaser.
7.2
The representations
and warranties of the Company shall be true and correct in all
material respects as of the Closing Date (except for
representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied, and complied in
all material respects with the covenants, agreements, and
conditions required by this Agreement to be performed, satisfied,
or complied with by the Company at or prior to the Closing
Date.
7.3
No statute, rule,
regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the
Transaction Documents.
7.4
No stop order or
suspension of trading shall have been imposed by the SEC or any
other governmental or regulatory body having jurisdiction over the
Company or the market(s) where the Common Stock of the Company is
listed or quoted with respect to public trading in the Common Stock
of the Company.
7.5
The Company shall
have executed such other agreements, certificates, confirmations or
resolutions as Purchaser may require to consummate the transactions
contemplated by this Agreement and the Transaction Documents,
including a closing statement and joint disbursement instructions
as may be required by Purchaser.
ARTICLE
IX
MISCELLANEOUS
8.1
Notices
. All notices of
request, demand and other communications hereunder shall be
addressed to the parties as follows:
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If to the Company:
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Know Labs, Inc.
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500 Union Street, Suite 810
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Seattle, WA, 98101
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Attn: Ronald P. Erickson, Chairman
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E-mail: ron@knowlabs.co
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If to Purchaser:
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To the address and other contact information specified in the
Subscription Agreement.
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unless
the address is changed by the party by like notice given to the
other party. Notice shall be in writing and shall be deemed
delivered: (i) if mailed by certified mail, return receipt
requested, postage prepaid and properly addressed to the address
below, then three (3) Business Days after deposit of same in a
regularly maintained U.S. Mail receptacle; or (ii) if mailed by
Federal Express, UPS, or other nationally recognized overnight
courier service, next day delivery, then one (1) Business Day after
deposit of same in a regularly maintained receptacle of such
overnight courier; or (iii) if hand delivered or sent by email,
then upon hand delivery or receipt thereof. Notwithstanding the
foregoing, notice, consents, waivers, or other communications
referred to in this Agreement sent by e-mail shall be deemed to
have been delivered only when the sending party has confirmed (by
reply e-mail or some other form of written confirmation from the
receiving party) that the notice has been received by the other
party.
8.2
Entire Agreement
. This
Agreement and the other Transaction Documents: (i) constitute the
entire agreement between the parties and (ii) are the final
expression of the intentions of the Company and Purchaser. No
promises, either expressed or implied, exist between the Company
and Purchaser, unless contained herein or in the Transaction
Documents. This Agreement and the Transaction Documents supersede
all negotiations, representations, warranties, commitments, offers,
and contracts (of any kind or nature, whether oral or written)
prior to the execution hereof.
8.3
Amendments; Waivers
. No
amendment, modification, or termination of any provision of this
Agreement or of the Transaction Documents, or waiver or consent to
any departure by either party therefrom, shall in any event be
effective unless the same shall be in writing and signed by the
other party, and any such waiver or consent shall be effective only
for the specific purpose for which given.
8.4
Assignability
. Purchaser may at
any time assign Purchaser’s rights in this Agreement, the
Convertible Notes, any Transaction Document, or any part thereof,
subject to applicable law, including federal and state securities
laws. The Company may not sell or assign this Agreement, any
Transaction Document, or any other agreement with Purchaser, or any
portion thereof, either voluntarily or by operation of law, nor
delegate any of its duties of obligations hereunder or thereunder,
without the prior written consent of Purchaser, which consent shall
not be unreasonably withheld. This Agreement shall be binding upon
Purchaser and the Company and their respective legal
representatives, successors and permitted assigns.
8.5
Governing Law
. This Agreement
shall be governed by and be construed in accordance with the laws
of the State of Nevada without regard to the conflicts of law rules
of such state. The parties hereby irrevocably and unconditionally
submit, for themselves and their property, to the jurisdiction of
the state or federal courts situated in Las Vegas, Nevada, in
respect of actions brought against it in any action, suit, or
proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties
hereto hereby irrevocably and unconditionally agrees that all
claims in respect of any such action, suit or proceeding may be
heard and determined in such courts. Each of the parties hereto
agrees that a final judgment in any such action, suit, or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by law.
8.6
Enforceability; Severability
.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by, unenforceable or invalid under any jurisdiction,
such provision shall as to such jurisdiction, be severable and be
ineffective to the extent of such prohibition or invalidity,
without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of such provision in any
other jurisdiction.
8.7
Interpretation
. If any
provision in this Agreement requires judicial or similar
interpretation, the judicial or other such body interpreting or
construing such provision shall not apply the assumption that the
terms hereof shall be more strictly construed against one party
because of the rule that an instrument must be construed more
strictly against the party which itself or through its agents
prepared the same. The parties hereby agree that all parties and
their agents have participated in the preparation hereof
equally.
8.8
Execution
. This Agreement may
be executed in one or more counterparts, all of which taken
together shall be deemed and considered one and the same Agreement,
and same shall become effective when counterparts have been signed
by each party and each party has delivered its signed counterpart
to the other party. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a
“.pdf’ format file or other similar format file,
such
signature shall be
deemed an original for all purposes and shall create a valid and
binding obligation of the party executing same with the same force
and effect as if such facsimile or “.pdf’ signature
page was an original thereof.
8.9
Headings
. The article and
section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or
interpretation of the Agreement.
8.10
No
Third Party Beneficiaries
. This Agreement is intended for
the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.
8.11
Fees
and Expenses
. Each party shall be responsible for paying its
own fees and expenses in connection with this Agreement, the other
Transaction Agreements, and the transactions contemplated hereby
and thereby. Notwithstanding the foregoing, the Company shall be
directly responsible for the payment the fees or commissions
payable to the Placement Agent.
8.12
Survival
.
The representations, warranties, agreements and covenants contained
herein shall survive the Closing and the delivery of the Securities
for 18 months following the Closing Date.
(signature page follows)
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date and year set forth above.
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COMPANY:
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KNOW LABS, INC.
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By:
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Name: Ronald P. Erickson
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Title: Chairman
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By:
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Name: Phillip A. Bosua
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Title: Chief Executive Officer
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PURCHASER:
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Signature:
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Name:
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SCHEDULE
1
PURCHASE PRICE;
SECURITIES PURCHASED
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Name of
Purchaser
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Purchase Price and
Principal Amount of Convertible Note Being Purchased
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Number
of Shares issuable upon exercise of Warrant
Purchased
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$
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EXHIBIT A
FORM OF
CONVERTIBLE NOTE
EXHIBIT B
FORM OF
WARRANT
EXHIBIT C
FORM OF
SUBORDINATION AGREEMENT
EXHIBIT D
FORM OF
SUBSCRIPTION AGREEMENT
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Exhibit
10.2
KNOW LABS, INC.
(the
“Company”)
INSTRUCTIONS FOR COMPLETION OF FORM OF SUBSCRIPTION AGREEMENT AND
SUITABILITY QUESTIONNAIRE (APPENDIX I)
Item
I:
Name
and address information must be provided. Securities will be issued
in the name(s) set forth in this Item and delivered to the address
set forth in this Item. If two people are subscribing jointly, both
people must provide their names and social security numbers. A
telephone number must also be provided.
Item
II:
If
the securities are to be held in a different name than the investor
and sent to a different address (i.e., an IRA or other account held
at a brokerage firm), this Item must be completed. If the
securities are to be issued and delivered directly to the entity
listed in Item I, this Item need not be completed.
Item
III:
This
Item needs to be read by the investor, but nothing needs to be
written here. The Interests are suitable for investment only by
prospective investors who are “Accredited
Investors.”
Item
IV:
A.
Only complete this Item by checking the appropriate line if you are
an individual investor.
B.
Only
complete this Item if you are an entity investor.
C.
Only complete
this Item if you are a trust investor.
Item
V:
This Item must
be completed only if you are relying on an income standard (i.e.,
you checked or initialed Item IV.A.1).
Item
VI:
At
least one of the numbered verification methods must be initialed in
this Item and the
indicated
documents provided. A form of “Accredited Investor Status
Certification” is included for your convenience if you choose
to have a third party certify your status (option 3).
Item
VII:
This
Item needs to be read by the investor, but nothing needs to be
written here.
Item
VIII:
Federal law
requires us to collect information on the sources of funds. Please
complete Section 1, add the documents requested in Section 2 only
if funds did not come from an approved country (U.S. is approved),
and complete Section 3.
Item
IX:
The
Subscription Agreement must be signed and dated here.
Item
X:
The
Managing Dealer must complete this item and sign to verify that
this is a suitable investment, as well as for record keeping
purposes.
Appendix
I:
You
must thoroughly complete Appendix I, the Suitability Questionnaire,
in order for the Fund and the Managing Dealer to make a
determination whether this is a suitable investment for you.
Subscription Agreements not accompanied by this Suitability
Questionnaire will not be processed and will be returned to you for
completion
.
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INSTRUCTIONS FOR PAYMENT
Review and
complete the Subscription Agreement and Suitability Questionnaire
and mail or deliver the documents, along with a check (bearing
subscriber’s name) made payable to “FinTech Clearing
LLC” in the amount of your total subscription
to:
Boustead
Securities, LLC
Attn: Peter
Conley, Managing Director 6 Venture, Suite 265
Irvine, CA
92618
Direct:
310-383-7874
Email:
pete@boustead1828.com
If you prefer to send a wire transfer instead of a check, please
scan and email your completed Subscription Agreement to Peter
Conley at pete@boustead1828.com and send the wire transfer using
these instructions:
Wiring Instructions
Pacific
Mercantile Bank
Beneficiary
Account Name: FinTech Clearing, LLC
REF:
Full Name of Subscriber
If you need assistance, please
contact:
Peter Conley,
Managing Director of Boustead Securities, LLC
Phone: (310)
383-7874 –
pete@boustead1828.com
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SUBSCRIPTION AGREEMENT
KNOW LABS, INC. (THE “COMPANY”)
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Please read all instructions and the terms and
conditions of this Subscription Agreement (this
“Agreement”) carefully before filling out this
Agreement. This is a legally binding document. If you need
assistance, please call Peter Conley at
(310)
383-7874.
●
When Agreement
is complete, mail the Agreement and your investment
to:
Boustead
Securities, LLC
Address: 6
Venture, Suite 265
Irvine, CA
92618
Email: pete@boustead1828.com
●
Make checks
payable to “FinTech Clearing LLC” or
●
______
Check here if
you are sending your subscription funds by wire
transfer.
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☐
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Individual
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☐
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Joint Registration
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☐
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Trust
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☐
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Corporation, Partnership, LLC
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Account
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If no box below is
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Association or Other Entity the securities as JTWROS.
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Pension or Profit Sharing Plan, checked, we will issue
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☐
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Individual
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☐
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Tenants in Common
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Retirement
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☐
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Tenants by Entirety
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Account (IRA)
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☐
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Community Property
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PLEASE PUT A CHECK NEXT TO EACH SOCIAL SECURITY NUMBER OR TAX ID
NUMBER THAT IS RESPONSIBLE FOR TAXES. WE WILL REPORT THIS NUMBER TO
THE IRS.
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☐
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Name of INVESTOR (Individual, Entity, Custodian, Trust or
Beneficiary)
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Date of Birth
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Soc. Sec./Tax ID #
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☐
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Name of SIGNER (Signer for Entity, Trust. Name of IRA
Participant)
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Date of Birth
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Soc. Sec./Tax ID #
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☐
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Name of JOINT INVESTOR or CO- TRUSTEE
(if
applicable)
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Date of Birth
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Soc. Sec./Tax ID #
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Marital Status (please check
one)
☐
Single
☐ Married
☐ Separated ☐
Divorced
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Is the
record holder a publicly held entity or a subsidiary of a publicly
held entity (i.e., an entity that has a
class of securities
registered under the Securities Exchange Act of 1934) (please check
one)? ☐ Yes or
☐ No
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$_________________Investment
Amount_________________Number of Shares of Common Stock_________
Number of Common Warrants
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HOME
ADDRESS
☐ USE THIS ADDRESS FOR MAILING
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Street Address
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Email Address
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City
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State
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ZIP+4
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Home Phone Number (with Area Code)
(
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)_________________________________
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Fax Number (with Area Code) (___
)________________________
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BUSINESS
ADDRESS
☐ USE THIS ADDRESS FOR MAILING
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Name of Company
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Email Address
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Street Address
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Unit
Number
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City
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State
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ZIP+4
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Business
Phone Number (with Area Code)
(
___
)___________________
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Fax Number (with Area Code) (___
)_________________
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II.
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ALTERNATIVE
DISTRIBUTION INFORMATION
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To direct distributions to a party other
than the registered owner, complete the information
below
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YOU MUST COMPLETE THIS ITEM IF THIS IS AN IRA
INVESTMENT.
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Name of Firm (Bank or Brokerage):
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Account Name:
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Account Number:
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Address:
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City, State Zip Code:
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III.
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SUBSCRIPTION AGREEMENT
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You as
an individual or you on behalf of the subscribing entity are being
asked to complete this Subscription Agreement so a determination
can be made as to whether or not you are qualified to purchase
securities under applicable federal and state securities laws.
Your answers to the questions
contained herein must be true and correct in all respects, and a
false representation by you may constitute a violation of law for
which a claim for damages may be made against you.
Your
answers will be kept strictly confidential; however, by signing
this Agreement, you will be authorizing the Company to present a
completed copy of this Agreement to such parties as they may deem
appropriate in order to make certain that the offer and sale of the
securities will not result in a violation of the Securities Act of
1933, as amended (the “Act”) or of the securities laws
of any state.
This
Agreement does not constitute an offer to sell or a solicitation of
an offer to buy securities or any other security. All questions
must be answered. If the appropriate answer is “None”
or “Not Applicable,” please state so. Please print or
type your answers to all questions and attach additional sheets if
necessary to complete your answers to any item. Please initial any
correction.
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INDIVIDUAL
SUBSCRIBERS:
If the
securities subscribed for are to be owned by more than one person,
you and the other co-subscriber must each complete separate
Agreements (except if the co-subscriber is your spouse) and sign
the Signature Page annexed hereto. If your spouse is a
co-subscriber, you must indicate their name and social security
number.
CORPORATIONS,
PARTNERSHIPS, PENSION PLANS AND TRUSTS:
The
information requested herein relates to the subscribing entity and
not to you personally (unless otherwise determined in the Item IV.
Accredited Investor Status).
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IV.
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ACCREDITED
INVESTOR STATUS
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TO
BE AN ACCREDITED INVESTOR, YOU MUST MEET ONE OF THE FOLLOWING
TESTS, PLEASE CHECK THE APPROPRIATE SPACES BELOW.
A.
INDIVIDUAL ACCOUNTS
I
certify that I am an “accredited investor”
because:
1.
______
I
had an individual income of more than $200,000 in each of the two
most recent calendar years, and I reasonably expect to have an
individual income in excess of $200,000 in the current calendar
year; or my spouse and I had joint income in excess of $300,000 in
each of the two most recent calendar years, and we reasonably
expect to have a joint income in excess of $300,000 the current
calendar year
(please complete
“Item V. Income Statement”)
;
OR
2.
_____I have an
individual net worth, or my spouse and I have a joint net worth, in
excess of $1,000,000 (excluding my (our) primary
residence).
For
purposes of this Subscription Agreement “individual
income” means “adjusted gross income” as reported
for Federal income tax purposes, exclusive of any income
attributable to a spouse or to property owned by a spouse, and
increased by the following amounts:
(i) the
amount of any interest income received which is tax-exempt under
Section 103 of the Internal Revenue Code of 1986, as amended, (the
“Code”); (ii) the amount of losses claimed as a limited
partner in a limited partnership (as reported on Schedule E of form
1040);
(iii)
any deduction claimed for depletion under Section 611 et seq. of
the Code; and (iv) any amount by which income from long-term
capital gains has been reduced in arriving at adjusted gross income
pursuant to the provisions of Sections 1202 of the Code as it was
in effect prior to enactment of the Tax Reform Act of
1986.
For
purposes of this Subscription Agreement, “joint income”
means “adjusted gross income” as reported for Federal
income tax purposes, including any income attributable to a spouse
or to property owned by a spouse and increased by the following
amounts: (i) the amount of any interest income received which is
tax-exempt under Section 103 of the Code; (ii) the amount of losses
claimed as a limited partner in
a limited
partnership (as reported on Schedule E of Form 1040); (iii) any
deduction claimed for depletion under Section 611 et seq. of the
Code; and (iv) any amount by which income from long-term capital
gains has been reduced in arriving at adjusted gross income
pursuant to the provisions of Section 1202 of the Code as it was in
effect prior to enactment of the Tax Reform Act of
1986
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IV.
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ACCREDITED
INVESTOR STATUS
(Continued)
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For the
purposes of the Subscription Agreement, “net worth”
means (except as otherwise specifically defined) the excess of
total assets at fair market value over total liabilities, excluding
your primary residence and the related amount of indebtedness
secured by the primary residence up to its fair market value;
provided
,
however
, that indebtedness secured by
the primary residence should be considered a liability and deducted
from net worth to the extent that (i) the amount of such
indebtedness outstanding at the time of execution of this Agreement
exceeds the amount outstanding 60 calendar days before such time,
other than as a result of the acquisition of the primary residence;
and (ii) the amount of the indebtedness exceeds the estimated fair
market value of the primary residence at the time of execution of
this Agreement.
B. CORPORATIONS, PARTNERSHIPS, LIMITED
LIABILITY COMPANIES, EMPLOYEE BENEFIT PLANS, OROTHER
ENTITIES
(Please provide a copy of the Corporate Resolution
authorizing this investment, Partnership Agreement, Limited
Liability Company Operating Agreement, Employee Benefit Plan, or
other entity documentation as applicable.)
1.
Has the subscribing
entity been formed for the specific purpose of investing inthe
securities? ☐ YES ☐ NO
If your
answer to question 1 is “No,” CHECK whichever of the
following statements (a-e) is applicable to the subscribing entity.
If your answer to question 1 is “Yes,” the subscribing
entity must be able to certify to statement (c) below in order to
qualify as an “accredited
investor.”
The
undersigned certifies that:
(a)
_____the undersigned entity is an “accredited
investor,” because it is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security Act
of 1974 (“ERISA”), provided that the investment
decision is made by a plan fiduciary, as defined in Section 3(21)
of ERISA, and the plan fiduciary is a bank, savings and loan
association, insurance company or registered investment
adviser;
OR
(b)
_____the undersigned entity is an “accredited
investor,” because it is an employee benefit plan within the
meaning of ERISA, Title I that has total assets in excess of
$5,000,000;
OR
(c)
_____the undersigned entity is an
“accredited investor,” because it is an entity whose
shareholders, partners, beneficiaries or equity owners are all
accredited investors
(If you are
checking this option, please submit a list of all
owners;
EACH
owner of the entity must complete
Item IV
and
,
complete Item V, if applicable. Make copies of this Item IV (and V
if applicable) to do this and note each owner’s name on each
copy)
; I am one of its equity owners and I meet at least one
of the conditions described below
(Please also CHECK the appropriate space
below):
_____I had an
individual income of more than $200,000 in each of the two most
recent calendar years, and I reasonably expect to have an
individual income in excess of $200,000 in the current calendar
year; or my spouse and I had joint income in excess of $300,000 in
each of the two most recent calendar years, and we reasonably
expect to have a joint income in excess of $300,000 the current
calendar year
(please complete
“Item V. Income Statement”)
;
or
_____
I have an
individual net worth, or my spouse and I have a joint net worth, in
excess of $1,000,000 (excluding my (our) primary
residence)
OR
(d)
_____the undersigned entity is an “accredited
investor,” because it is a self-directed employee benefit
plan; I solely make its investment decisions and I meet at least
one of the conditions described below
(Please also CHECK the appropriate space
below);
_____I
had an individual income of more than $200,000 in each of the two
most recent calendar years, and I reasonably expect to have an
individual income in excess of $200,000 in the current calendar
year; or my spouse and I had joint income in excess of $300,000 in
each of the two most recent calendar years, and we reasonably
expect to have a joint income in excess of
$300,000 the
current calendar year
(please
complete “Item V. Income Statement”)
;
or
_____Ihave an
individual net worth, or my spouse and I have a joint net worth, in
excess of $1,000,000 (excluding my (our) primary
residence)
OR
(e)
_____t
he undersigned
entity is an “accredited investor,” because it is a
corporation, a partnership or a Massachusetts or similar business
trust with total assets in excess of $5,000,000.
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IV.
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ACCREDITED
INVESTOR STATUS
(Continued)
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C. TRUST ACCOUNTS
(Please provide a
complete copy of the Trust document.)
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1.
Has the subscribing
entity been formed for the specific purpose of investing in the
securities? YES ☐ NO ☐
If your
answer to question 1 is “No,” CHECK whichever of the
following statements (a-c) is applicable to the subscribing entity.
If your
answer to question
1 is “Yes,” the subscribing entity must be able to
certify to the statement (c) below in order to qualify as an
“accredited investor.”
The
undersigned trustee certifies that the trust is an
“accredited investor” because:
(a)
_____t
he trust has total
assets in excess of $5,000,000 and the investment decision has been
made by a “sophisticated person,” as described in Rule
506(b)(ii) promulgated under the Act;
or
(b)
_____t
he trustee making
the investment decision on its behalf is a bank (as defined in
Section 3(a)(2) of the Act), a saving and loan association or other
institution as defined in Section 3(a)(5)(A) of the Act, acting in
its fiduciary capacity;
or
(c)
_____t
he grantor(s) of
the trust may revoke the trust at any time and regain title to the
trust assets and has (have) retained sole investment control over
the assets of the trust and the (each) grantor(s) meets at least
one of the conditions described above under INDIVIDUAL ACCREDITED
INVESTOR STATUS.
Each grantor must
also INITIAL the appropriate space below
.
_____ I
had an individual income of more than $200,000 in each of the two
most recent calendar years, and I reasonably expect to have an
individual income in excess of $200,000 in the current calendar
year; or my spouse and I had joint income in excess of $300,000 in
each of the two most recent calendar years, and we reasonably
expect to have a joint income in excess of
$300,000 the
current calendar year
(please
complete “Item V. Income Statement”)
;
or
_____I
have an individual net worth, or my spouse and I have a joint net
worth, in excess of $1,000,000 (excluding my (our) primary
residence)
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IF
YOU ARE RELYING ON AN INCOME STANDARD TO BE AN ACCREDITED INVESTOR
(I.E., YOU CHECKED OR INITIALED ITEM IV.A.1), YOU MUST COMPLETE
THIS ITEM.
Please
specify the type of entity whose Income appears below:
☐
Individual
☐
Joint
☐
Trust
☐
Beneficiary
☐
Shareholder
☐ Partner
Please
specify the amount of income (see definitions of individual income
and joint income in Item IV.A) in the previous two calendar years
and your projected income for the current calendar
year.
2016: $
___________________________________________
2017: $
___________________________________________
2018: $
___________________________________________(projected)
Current
occupation:
______________________________________________________________________________________________________
Name of
Employer:
______________________________________________________________________________________________________
Position or Title:
_______________________________________________ Telephone number:
(___)___________ -________________________
Former
employment (if current employment is less than five
years):
Name of
Employer:
______________________________________________________________________________________________________
Position or Title:
________________________________________ Period Employed:
________________________to________________________
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1.
Income
Verification – Please indicate how you plan to verify your
income and attach the indicated documents
for the previous two years
:
☐
W-2
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☐
Form 1099
☐
Schedule K-1
☐
Form 1040
☐
Other - Please explain and attach relevant documents:
_____________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
2.
Net Worth
Verification – Please indicate how you plan to verify your
net worth and attach the indicated documents
dated within the last 90
days
:
a.
Assets:
☐ Bank
Statements
☐ Brokerage
Statements and other statements of securities holdings
☐
Certificates of Deposit
☐ Tax
Assessments
☐ Appraisal
Reports issued by independent third parties
☐ Other -
Please explain and attach relevant documents:
______________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
b.
Liabilities:
☐
A consumer report from at least one of the nationwide consumer
reporting agencies
_____
All liabilities necessary to make a determination of net worth have
been disclosed.
(Please initial
ifapplicable.)
3.
Alternatively, you
may provide a written certification from one of the following third
parties that they have taken reasonable steps within the prior
three months to verify that you, the purchaser, are an accredited
investor based on either the income requirement or the net worth
requirement:
☐
A registered broker-dealer
☐
A federal or state registered investment adviser
A
licensed attorney who is in good standing under the laws of the
jurisdictions in which he or she is admitted to practice law A
certified public accountant who is duly registered and in good
standing under the laws of the place of his or her residence
or
principal office
☐
A certified financial planner
☐
Other - Please explain and attach written confirmation:
_____________________________________________________________________________________
____________________________________________________________________________________________________________________________________
For
your convenience, we have attached an Accredited Investor Status
Certification form for your professional to use.
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I
understand that investment in the securities is an
illiquid investment
. In particular, I
recognize that I must bear the economic risk of investment in the
securities for an indefinite period of time since the securities
have not been registered under the Act and therefore cannot be sold
unless either they are subsequently registered under the Act or an
exemption from such registration is available and a favorable
opinion of counsel for the Company to that effect is obtained if
requested by the Company. I consent to the affixing by the Company
of such legends on certificates representing the securities as any
applicable federal or state securities law may require from time to
time.
I
represent and warrant to the Company that: (i) all information
provided in this Agreement is complete, true and correct; (ii) I
and my investment managers, if any, have carefully reviewed the
Private Placement Memorandum, including its attachments,
(the
“Memorandum”),
and understand the risks of, and other considerations relating to,
a purchase of these securities, including, but not limited to, the
risks set forth under “Risk Factors” in the Memorandum;
(iii) I and my investment managers, if any, have been afforded the
opportunity to obtain all information necessary to verify the
accuracy of any representations or information set forth in the
Memorandum and have had all inquiries to the Company answered, and
have been furnished all requested materials relating to the Company
and the offering and sale of the securities and anything set forth
in the Memorandum; (iv) I have such knowledge and experience in
financial and investment matters, either alone or with my
investment managers, that I am capable of evaluating the merits
a
nd risks of this
investment; (v) neither I nor my investment managers, if any, have
been furnished any offering literature by the Company or any of its
affiliates, associates or agents other than the Memorandum, and the
documents referenced therein; and (vi) I am acquiring the
securities for which I am subscribing for my own account, as
principal, for investment and not with a view to the resale or
distribution of all or any part of the securities.
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VII.
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CERTIFICATIONS
(Continued)
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The undersigned, if
a corporation, partnership, trust or other form of business entity:
(i) is authorized and otherwise duly qualified to purchase and hold
the securities; (ii) has obtained such additional tax and other
advice that it has deemed necessary; (iii) has its
principal
place of business
at its address set forth in this Agreement; and (iv) has not been
formed for the specific purpose of acquiring the securities
(although this may not necessarily disqualify the subscriber as a
purchaser). The persons executing the Agreement, as well as all
other documents related to the offering, represent that they are
duly authorized to execute all such documents on behalf of the
entity. (If the undersigned is one of the aforementioned entities,
it agrees to supply any additional written information that may be
required.)
All of
the information which I have furnished to the Company and which is
set forth in this Agreement is correct and complete as of the date
of this Agreement. If any material change in this information
should occur prior to my subscription being accepted, I will
immediately furnish the revised or corrected information. I further
agree to be bound by all of the terms and conditions of the
offering described in the Memorandum. I am the only person with a
direct or indirect interest in the securities subscribed for by
this Agreement.
I agree
to indemnify and hold harmless the Company and its officers,
directors, employees, affiliates, and agents as well as the
brokerage firm through which I am subscribing (if any) and all of
its officers, directors, employees, affiliates, and agents from and
against all
damages, losses,
costs and expenses (including reasonable attorneys’ fees)
they may incur by reason of the failure of the undersigned to
fulfill any of the terms or conditions of this Agreement. This
subscription is not transferable or assignable by me without the
written consent of the Company. If more than one person is
executing this Agreement, the obligations of each shall be joint
and several, and the representations and warranties contained in
this Agreement shall be deemed to be made by, and be binding upon,
each of these persons and his or her heirs, executors,
administrators, successors, and assigns. This subscription, upon
acceptance by the Company, shall be binding upon my heirs,
executors, administrators, successors, and assigns.
This
Agreement shall be deemed to have been made in the State of
Delaware and shall be construed, and the rights and liabilities
determined, in accordance with the law of the State of Delaware,
without regard to the conflicts of laws rules of such jurisdiction.
I agree to submit to the jurisdiction of the courts of the State of
Maryland with respect to any proceeding relating to or arising from
this Agreement, and hereby irrevocably waive, and agree not to
assert in any suit, action or proceeding, any claim that I am not
personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is brought in an inconvenient forum or
that the venue of such suit, action or proceeding is improper. I
hereby irrevocably waive personal service of process and consent to
process being served in such suit, action or proceeding by mailing
a copy thereof to my address for such notices under the Securities
Purchase Agreement by and between the Company and myself, and agree
that such service shall constitute good and sufficient service of
process and notice thereof. I acknowledge and agree that nothing
contained herein shall be deemed to limit in any way any right to
serve process in any manner permitted by law.
I HEREBY IRREVOCABLY WAIVE ANY RIGHT I MAY
HAVE, AND AGREE NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
Under
penalties of perjury, I certify that (i) my taxpayer identification
number shown in this Agreement is correct; and (ii) I am not
subject to backup withholding because: (a) I have not been notified
that I am subject to backup withholding as a result of a failure to
report all interest and dividends; or (b) the Internal Revenue
Service has notified me that I am no longer subject to backup
withholding. (If you have been notified that you are subject to
backup withholding and the Internal Revenue Service has not advised
you that backup withholding has been terminated, strike out item
(ii).)
BY
SIGNING THIS AGREEMENT, I ACKNOWLEDGE THAT I HAVE CAREFULLY
REVIEWED THE SECURITIES PURCHASE AGREEMENT AND THE PRIVATE
PLACEMENT MEMORANDUM RELATED TO THIS INVESTMENT AND AM BOUND BY THE
TERMS OF THIS AGREEMENT, THE SECURITIES PURCHASE AGREEMENT AND THE
PRIVATE PLACEMENT MEMORANDUM.
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VIII.
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INFORMATION
REQUIRED BY FEDERAL
LAW
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Federal
law requires us to obtain the following information from you to
detect and prevent misuse of the world financial
system.
1.
In the space
provided below, please provide details of
where monies were transferred from
to
the Company in relation to your subscription for the
securities.
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COUNTRY
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NAME
OF
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CONTACT
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NAME
OF
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ACCOUNT
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BANK/FINANCIAL
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NAME/PHONE
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ACCOUNTHOLDER
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NUMBER
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INSTITUTION
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NUMBER
AT
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BANK/FINANCIAL
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INSTITUTION
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If the
country from which the monies were transferred appears in the
Approved Country List below, please skip to section 3. If the
country does not appear, please go to section 2.
Approved
Country List
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Argentina
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Australia
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Austria
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Belgium
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Brazil
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Canada
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China
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Denmark
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European
Commission
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Finland
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France
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Germany
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Greece
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Gulf
Co-operation Council
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Hong
Kong, China
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Iceland
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India
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Ireland
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Italy
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Japan
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Republic of
Korea
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Luxembourg
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Malaysia
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Mexico
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Netherlands,
Kingdom of
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New
Zealand
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Norway
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Portugal
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Russian
Federation
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Singapore
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South
Africa
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Spain
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Sweden
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Switzerland
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Turkey
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United
Kingdom
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United
States
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2.
If subscription
monies were transferred to the Company from any country other than
on the “Approved Country List” (see above), please
provide the following documentation to the Company (all copies
should be in English and certified as being “true and correct
copies of the original” by a notary public of the
jurisdiction of which you are resident).
(i)
evidence of name,
signature, date of birth and photographic
identification;
(ii)
evidence of
permanent address; and
(iii)
where possible, a
reference from a bank with whom the individual maintains a current
relationship and has maintained such relationship for at least two
years.
(i)
a copy of its
certificate of incorporation and any change of name
certificate;
(ii)
a certificate of
good standing;
(iii)
a register or other
acceptable list of directors and officers;
(iv)
a properly
authorized mandate of the company to subscribe in the form, for
example, of a certified resolution which includes naming authorized
signatories;
(v)
a description of
the nature of the business of the company;
(vi)
identification, as
described above for individuals, for at least two directors and
authorized signatories;
(vii)
a register of
members or list of shareholders holding a controlling interest;
and
(viii)
identification, as
described above, for individuals who are beneficial owners of
corporate shareholders which hold 10% or more of the capital share
of the company.
(c)
For
Partnerships and Unincorporated Businesses:
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(i)
a copy of any
certificate of registration and a certificate of good standing, if
registered;
(ii)
identification, as
described above, for individuals and, where relevant, companies
constituting a majority of the partners, owners or managers and
authorized signatories;
(iii)
a copy of the
mandate from the partnership or business authorizing the
subscription in the form, for example, of a certified resolution
which includes naming authorized signatories; and
(iv)
a copy of
constitutional documents (formation and partnership
agreements).
(i)
identification, as
described above, for individuals or companies (as the case may be)
in respect of the trustees;
(ii)
identification, as
described above for individuals, of beneficiaries, any person on
whose instructions or in accordance with those wishes the
trustee/nominee is prepared or accustomed to act and the settlor of
the trust; and
(iii)
evidence of the
nature of the duties or capacity of the trustee.
3.
The
Company is also required to verify the source of funds. To this
end, summarize the underlying source of the funds remitted to us
(for example, where subscription monies were the profits of
business (and if so please specify type of business), investment
income, savings, etc.).
|
|
This
Agreement contains various statements and representations by
subscribers and should be carefully reviewed in its entirety before
executing this signature page. I hereby certify that I have
reviewed and am familiar with the terms of this
Agreement.
This
Agreement incorporates by reference all forms of securities to be
purchased. I agree to be bound by all of the terms and conditions
of this Agreement and the Memorandum to which this Agreement is a
part.
Dated
_____________________________________
Amount of Subscription:
$_________________________________($1.00 per unit)
SIGNATURE
BLOCK FOR INDIVIDUALS:
Individual’s
Signature:
_____________________________________________
Individual’s
Printed Name:
__________________________________________
SIGNATURE
BLOCK FOR JOINT ACCOUNTS:
Individual
#1’s Signature:
___________________________________________
Individual
#1’s Printed Name:
________________________________________
Individual
#2’s Signature:
____________________________________________
Individual
#2’s Printed Name:
_________________________________________
|
|
IX.
|
SIGNATURES
(Continued)
|
|
SIGNATURE
BLOCK FOR ENTITIES OR TRUSTS:
Name of
Entity/Trust:
_______________________________________________
By:
(Signature)
Signer’s
Printed Name:
_____________________________________________
Signer’s
Title:
_____________________________________________________
(Example: Manager,
Member, Trustee, etc.)
By:
(Signature)
Signer’s
Printed
Name:
______________________________________________
Signer’s
Title:
_____________________________________________________
(Example: Manager,
Member, Trustee, etc.)
SIGNATURE
BLOCK FOR IRAS:
Name of IRA:
_____________________________________________________
By:
(Custodian/Trustee Signature)
Custodian/Trustee’s
Printed Name:
____________________________________
Custodian/Trustee’s
Title:
____________________________________________
IRA
Participant’s Signature:
__________________________________________
IRA
Participant’s Printed Name:
______________________________________
Investment Authorization.
The
undersigned corporation, partnership, limited liability company,
benefit plan, or IRA has all requisite authority to acquire the
securities hereby subscribed for and to enter into the Agreement,
and further, the undersigned officer, partner, manager, or
fiduciary of the subscribing entity has been duly authorized by all
requisite action on the part of such entity to execute these
documents on its behalf. Such authorization has not been revoked
and is still in full force and effect.
Check
Box:
☐ Yes
☐ No
☐ Not Applicable
CAPACITY CLAIMED BY SIGNER
: (check one
box)
|
|
☐
Individual(s)
|
|
|
☐
Attorney-In-Fact
|
|
|
☐
Partner(s)
|
|
|
☐
Trustee(s)
|
|
|
☐
Corporate
Officer:
|
|
|
☐
Other:
|
|
|
|
Title
|
|
|
Title
|
|
|
|
|
|
|
|
X.
|
VERIFICATION
OF MANAGING
DEALER
|
|
|
I state
that I am familiar with the financial affairs and investment
objectives of the investor named above and reasonably believe that
a purchase of the securities is a suitable investment for this
investor and that the investor, either individually or together
with his, her, or its investment managers, if any, understands the
terms of and is able to evaluate the merits of this
offering.
I
acknowledge:
(a)
that I have
reviewed the Memorandum, Subscription Agreement and forms of
securities presented to me, and attachments (if any)
thereto;
(b)
that the
Subscription Agreement and attachments thereto have been fully
completed and executed by the appropriate party; and
(c)
that the
subscription will be deemed received by the Company upon acceptance
of the Subscription Agreement.
|
|
|
|
|
|
Broker/Dealer
|
|
Account Executive
|
|
|
|
|
|
|
|
|
|
(Name of Broker/Dealer)
|
|
(Signature)
|
|
|
|
|
|
|
|
|
|
(Street Address of Broker/Dealer Office)
|
|
(Print Name)
|
|
|
|
|
|
|
|
|
|
(City of Broker/Dealer Office) (State) (Zip)
|
|
(Representative I.D. Number)
|
|
|
|
|
|
(
)
-
|
|
|
|
(Telephone Number of Broker/Dealer Office)
|
|
(Date)
|
|
|
|
|
|
(
)
-
|
|
|
|
(Fax Number of Broker/Dealer Office)
|
|
(E-mail Address of Account Executive)
|
APPENDIX
I SUITABILITY QUESTIONNAIRE
(
Each
responding individual must complete his/her own Suitability
Questionnaire
)
Name
of Individual Investor OR Name of Person Answering Questions on
behalf of an Entity/Trust/IRA Investor:
A.
Please list all of
the educational institutions you have attended (including colleges,
and specialized training schools) and indicate the dates attended
and the degree(s) obtained from each (if any).
|
From
|
To
|
Institution
|
Degree
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B.
Please provide the
following information concerning your business
experience:
B-1
. Indicate your principal business
experience or other occupations during the last ten years. (Please
list your present, or most recent, position first and the others in
reverse chronological order.)
|
From
|
To
|
Institution
|
Degree
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
B-2
. Describe, in greater detail, your
present or most recent business or occupation, as listed in your
answer to Question B-1. Please indicate such information as the
nature of your employment, the principal business of your employer,
the principal activities under your management or supervision and
the scope (e.g., dollar volume, industry rank, etc.) of such
activities.
Sustainability
Questionnaire
1
1
B-3.
Describe any significant
business you engage in or intend to engage in other than as
specified above.
B-4.
Are you a registered
broker-dealer?
If Yes,
will you receive the Securities to be purchased pursuant to the
attached Subscription Agreement as compensation for underwriting
activities?
If Yes,
provide a brief description of the transaction(s)
involved.
B-5.
Are you an affiliate of a
registered broker-dealer(s)? (For purposes of this response, an
“affiliate” of or person “affiliated with”
a specified person is a person that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is
under common control with, the person specified.)
If Yes,
identify the registered broker-dealer(s) and describe the nature of
the affiliation(s).
B-6.
If the answer to Item B-5 is Yes,
did you, at the time of purchase of the Securities pursuant to the
attached Subscription Agreement, have any agreements, plans or
understandings, directly or indirectly, with any person to
distribute such securities?
If Yes,
please explain:
Sustainability
Questionnaire
2
1
C.
Please provide the
following information concerning your financial
experience:
C-1.
Indicate by check mark which of the
following categories best describes the extent of your prior
experience in the areas of investment listed below:
|
Substantial
Experience
|
Limited
Experience
|
No
Experience
|
|
Stock
& Bonds
|
|
|
|
|
Penny
Stocks
|
|
|
|
|
Government
Securities
|
|
|
|
|
Municipal
(tax-exempt) Securities
|
|
|
|
|
Stock
options
|
|
|
|
|
Commodities
|
|
|
|
|
Real
estate programs
|
|
|
|
|
Securities for
which no market exists
|
|
|
|
|
Limited
partnerships (tax deferred)
|
|
|
|
|
Investments
generally
|
|
|
|
C-2.
For those investments for which you
indicated “substantial experience” above, please answer
the following additional questions by checking the appropriate
box:
(a)
Do you make your
own investment decisions with respect to such investments? (Please
check the appropriate box with respect to your involvement in
making investment decisions).
☐
Usually (i.e. most
often)
☐
Frequently (i.e.
regularly)
Sustainability
Questionnaire
3
1
(b)
What are your
principal sources of investment knowledge or advice? (You may check
more than one.)
☐
First-hand
experience with industry
☐
Financial
publication(s)
☐
Trade or industry
publication(s)
C-3.
Indicate by check mark whether you
maintain any of the following types of accounts over which you,
rather than a third party, exercise investment discretion, and the
length of time you have maintained each type of
account.
|
Securities
(cash)
|
|
|
|
|
|
|
Yes
|
|
No
|
|
|
|
|
|
|
|
|
Securities (margin)
|
|
|
|
|
|
|
Yes
|
|
No
|
|
|
|
|
|
|
|
|
Commodities
|
|
|
|
|
|
|
Yes
|
|
No
|
|
C-5
. Please provide in the space below
anyadditional information which would indicate that you have
sufficient knowledge and experience in financial and business
matters so that you are capable of evaluating the merits and risks
of investing in restricted securities of private or thinly traded
enterprise.
Sustainability
Questionnaire
4
1
C-6.
Are you, your spouse, or any other
immediate family members, including parents, in- laws, and siblings
that are dependents, an officer, director or greater than ten
percent (10%) shareholder of the Company?
C-7.
Are you the beneficial or
registered owner of any securities of the Company other than the
Securities to be purchased pursuant to the attached Subscription
Agreement?
If Yes,
please describe the type and amount of such other
securities.
C-8.
Are you, your spouse, or any other
immediate family members, including parents, in- laws, and siblings
that are dependents, employed by or associated with the securities
industry (for example, investment advisor, sole proprietor,
partner, officer, director, branch manager or broker at a
broker-dealer firm or municipal securities dealer) or a financial
regulatory agency, such as FINRA or the New York Stock
Exchange?
If Yes,
please provide the name and contact information for such
firm.
C-9.
Are you a senior military,
governmental or political official in a non-US
country?
If Yes,
please provide the name of the country.
Sustainability
Questionnaire
5
1
ACCREDITED
INVESTOR STATUS CERTIFICATION
Know
Labs, Inc. (the
“
Company
”
)
____________________________________________________________________
(“Client”)
has requested that I provide the Company with this Accredited
Investor Status Certification (this
“Certification”)
to assist the Company in itsverification of Client’s status
as an “Accredited Investor” within the meaning of Rule
501(a) of the Securities Act of 1933, in connection with
Client’s potential purchase of securities offered for sale by
the Company (the “Offering”).
1. I
hereby certify that I am (please check the appropriate
box):
☐
a registered
broker-dealer, as defined in the Securities Exchange Act of 1934,
CRD number:
☐
a state or federal
registered investment advisor, CRD number:
__________________________________;
☐
a licensed attorney
in good standing in all jurisdictions where I am admitted to
practice law, state and bar number:
______________________________________________________________________________
;
☐
a certified public
accountant in good standing under the laws of the place of my
residence or principal office, state and license
number:______________________________________________________________________________.
☐
A certified
financial planner; or
☐
Another licensed
professional:
_________________________________________________________________________________.
2.
I hereby represent
that, within the prior three months, I have conducted a reasonable
investigation into the financial status of Client, and therefore
hereby certify that Client satisfies one or more of the following
criteria (check each box that applies):
☐
a natural person
whose individual “net worth,”
1
or joint net worth with Client’s
spouse, exceeds
$1,000,000 (may be
shown by bank statements, brokerage statements, and other
statements of securities holdings, certificates of deposit, tax
assessments, or appraisal reports issued by independent third
parties);
☐
a natural person
who had an individual income in excess of $200,000 in each of the
two most recent years, or joint income with Client’s spouse
in excess of $300,000 in each of those years (shown by any IRS form
that reports the investor’s income for the two most recent
years (e.g., Form W-2, Form 1099, Schedule K-1 to Form 1065, Form
1040);
1
“Net worth” means the excess
of total assets at fair market value over total liabilities,
excluding Client’s primary residence and the related amount
of indebtedness secured by the primary residence up to its fair
market value;
provided
,
however
, that indebtedness
secured by the primary residence should be considered a liability
and deducted from net worth to the extent that: (i) the amount of
such indebtedness outstanding at the time of the investigation
exceeds the amount outstanding 60 calendar days before such time,
other than as a result of the acquisition of the primary residence;
and (ii) the amount of the indebtedness exceeds the estimated fair
market value of the primary residence at the time of the
investigation.
Accredited
Investor Status Certification
1
1
☐
an entity such as
an Individual Retirement Account (IRA) or Self-Employed Person
(SEP) Retirement Account, and all beneficial owners meet at least
one of the two standards listed immediately above;
☐
an employee benefit plan within the meaning of
Title 1 of ERISA and the plan has total assets in excess of
$5,000,000
;
☐
a corporation,
partnership, Massachusetts business trust, or non-profit
organization within the meaning of Section 501(c)(3) of the
Internal Revenue Code with total assets in excess of
$5,000,000
;
☐
a trust with total
assets in excess of $5,000,000;
☐
a business in which
all equity owners are Accredited Investors; or
☐
a bank, insurance
company, registered investment company, business development
company, or small business investment company.
To the
best of my knowledge, no facts, circumstances, or events have
arisen after my investigation that the Client has ceased to be an
Accredited Investor.
I
acknowledge that the Company will rely upon this Certification in
determining the Client’s eligibility to participate in the
Offering and I consent to such reliance. However, this
Certification may not be used, quoted from, referred to, or relied
upon by the Company or by any other person for any other
purpose.
This
Certification is limited to the matters expressly set forth herein
and speaks only as of the date set forth below. Nothing may be
inferred or implied beyond the matters expressly contained herein.
The undersigned assumes no obligation to update this
letter.
Dated:
_____________________________, __________
Firm Name:
_________________________________________________________________________________
Firm Address:
_______________________________________________________________________________
Firm Phone
Number:
_________________________________________________________________________
_
Signature:
___________________________________________________________________________________
Printed Name and
Title:
_________________________________________________________________________
Accredited Investor
Status Certification
2
1
Exhibit
10.3
NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
KNOW
LABS, INC.
FORM
OF 8.0% SUBORDINATED CONVERTIBLE NOTE
|
Original Issue Date:
[_________________________]
|
Principal Amount:
$[__________________]
|
THIS
8.0% SUBORDINATED CONVERTIBLE NOTE (this “
Note
”) is issued, dated, and
effective as of the Original Issue Date set forth above by Know
Labs, Inc., a Nevada corporation (the “
Company
”), having its principal
place of business at 500 Union Street, Suite 810, Seattle, WA
98101, to [________________________] (together with its successors
and permitted assigns, the “
Holder
”), pursuant to exemptions
from registration under the Securities Act of 1933, as amended (the
“
Securities
Act
”). The Company promises to pay the aggregate
unpaid Principal Amount under this Note set forth above (the
“
Principal
Amount
”) to the Holder on the earlier of: (1)
mandatory and automatic conversion of this Note into the next
financing for the Company, provided such financing yields gross
proceeds to the Company of at least $10 million as set forth below
under “Mandatory Conversion” (a “
Qualified Financing
”) or (2) the
one (1) year anniversary of this Note (the “
Maturity Date
”), and to pay
interest to the Holder on the aggregate unconverted and then
outstanding Principal Amount in accordance with the provisions of
this Note.
This
Note is subject to the following additional
provisions:
Section 1
.
Definitions
. For the purposes
hereof, in addition to the terms defined elsewhere in this Note (a)
capitalized terms not otherwise defined herein shall have the
meanings set forth in the Securities Purchase Agreement and (b) the
following terms shall have the following meanings:
“
Bankruptcy Event
” means any of the
following events: (a) the Company commences a case or other
proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction relating to the
Company; (b) there is commenced against the Company any such case
or proceeding that is not dismissed within sixty (60) days after
commencement; (c) the Company is adjudicated insolvent or bankrupt
or any order of relief or other order approving any such case or
proceeding is entered; (d) the Company suffers any appointment of
any custodian or the like for it or any substantial part of its
property that is not discharged or stayed
within sixty (60)
calendar days after such appointment; (e) the Company makes a
general assignment for the benefit of creditors; (f) the Company
calls a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or (g) the
Company, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or
takes any corporate or other action for the purpose of effecting
any of the foregoing.
“
Business Day
” means any day other
than a Saturday, Sunday, or a legal holiday on which federal banks
are authorized or required to be closed for the conduct of
commercial banking business.
“
Change of Control
” means any of
the following events: (a) consummation of any merger or
consolidation of the Company in which the Company is not the
continuing or surviving corporation, or pursuant to which shares of
the Company’s common stock are converted into cash,
securities, or other property, if following such merger or
consolidation the holders of the Company’s outstanding voting
securities immediately prior to such merger or consolidation own
less than fifty percent (50%) of the outstanding voting securities
of the surviving corporation; (b) consummation of any sale, lease,
exchange or other transfer, in one transaction or a series of
related transactions of all or substantially all of the
Company’s assets; or (c) a change in ownership of the
Company’s capital stock as a result of which the owners of
the Company’s outstanding capital stock immediately prior to
the change own less than fifty percent (50%) of the Company’s
outstanding capital stock following such change.
“
Common Stock Equivalents
” means
any securities of the Company or its subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
“
Event of Default
” shall have the
meaning set forth in Section 5(a).
“
Original Issue Date
” means the
date of the first issuance of this Note as set forth above,
regardless of any transfers of this Note and regardless of the
number of instruments which may be issued to evidence this
Note.
“
Permitted Indebtedness
” means (a)
the indebtedness evidenced by this Note, (b) the indebtedness
existing on the Closing Date, (c) lease obligations and purchase
money indebtedness incurred in connection with the acquisition of
capital assets and lease obligations with respect to newly acquired
or leased assets, and (d) indebtedness that is expressly
subordinate to this Note pursuant to a written subordination
agreement with the Holder that is acceptable to the Holder in its
sole and absolute discretion.
“
Permitted Lien
” means the
individual and collective reference to the following: (a) liens
existing on the Closing Date, (b) liens for taxes, assessments and
other
governmental
charges or levies not yet due or liens for taxes, assessments and
other governmental charges or levies being contested in good faith
and by appropriate proceedings for which adequate reserves (in the
good faith judgment of the management of the Company) have been
established in accordance with GAAP; (c) liens imposed by law which
were incurred in the ordinary course of the Company’s
business, such as carriers’, warehousemen’s and
mechanics’ liens, statutory landlords’ liens, and other
similar liens arising in the ordinary course of the Company’s
business, and which (x) do not individually or in the aggregate
materially detract from the value of such property or assets or
materially impair the use thereof in the operation of the business
of the Company and its consolidated Subsidiaries or (y) are being
contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing for the foreseeable
future the forfeiture or sale of the property or asset subject to
such lien; and (d) liens incurred in connection with Permitted
Indebtedness.
“
Securities Purchase Agreement
”
means the Securities Purchase Agreement, dated as of the date
hereof, between the Company and the original Holder, as amended,
modified, or supplemented from time to time in accordance with its
terms.
Section 2.
Interest,
Prepayment.
a)
Interest Rate.
Interest shall accrue daily on the outstanding
Principal
Amount of this Note
at a rate per annum equal to eight percent (8.0%), and is
Payable-In- Kind (“
PIK
”) as set forth
below.
b)
Payment of Interest
. On the
Maturity Date, the Company shall pay to the Holder any accrued but
unpaid and unconverted interest hereunder on the aggregate
unconverted and then outstanding Principal Amount of this Note. The
amount of interest that has accrued on the Principal Amount hereof
as of any date may be added to and included with the Principal
Amount being so converted on any date on which a conversion is
effected under Section 3 below.
c)
Interest Calculations
. Interest
shall be calculated on the basis of a three hundred sixty (360)-day
year, consisting of twelve (12) thirty (30) calendar day periods,
and shall accrue daily commencing on the Original Issue Date until
payment in full of the outstanding Principal Amount, together with
all accrued and unpaid interest and other amounts which may become
due hereunder, has been made or until such Principal Amount and
interest have been duly converted. Interest hereunder will be paid
to the Person in whose name this Note is registered on the records
of the Company regarding registration and transfers of this
Note.
d)
Prepayment
. This Note may be
prepaid by the Company at any time following the Original Issuance
Date on seven (7) day’s prior written to the
Holder.
Section 3.
Conversion.
a)
Mandatory
Conversion on Qualified Financing. Each Holder will be
required to convert
the Note into a Qualified Financing at a conversion price per share
equal to the lower of (i) $1.00 or (ii) a twenty five percent (25%)
discount to the price per share paid by investors in such Qualified
Financing. This mandatory conversion shall be automatic and
the
Company will provide notice to Holder at least seven (7) days prior
to the closing of a Qualified Financing as to the number of shares
Holder would receive based on applying the discounted pricing
described above for the Principal Amount and PIK shares. In
conjunction with any conversion, Holder will become a party to and
will execute appropriate subscription and other agreements in
substantially the form executed by investors in the Qualified
Financing.
b).
Other Mandatory Conversion
. If
the Note has not been paid or converted prior to the Maturity Date,
the outstanding Principal Amount of the Note will be automatically
converted on the Maturity Date into shares of common stock of the
Company based on the lesser of (i) $1.00 per share or (ii) any
adjusted price resulting from the application of the “Most
Favored Nations Provision” set forth below. In such event the
Anti-Dilution Period, as defined below, will be extended for a
further twelve (12) months.
c).
Payment on Change of Control
.
If prior to the Maturity Date, there is a Change of Control and the
Note has not previously been converted, a Holder may elect to have
the Note together with any accrued interest repaid in full at that
time in cash plus an additional ten percent (10%) on the Principal
Amount of the Note.
d).
Most Favored Nations Provision.
If the Note has not been paid or converted prior to the Maturity
Date, and if at any time or from time to time prior to January 31,
2020 (the “
Anti- Dilution
Period
”) the Company issues any additional securities
(a “
New
Issuance
”) (including, but not limited to, any class
of shares, preferred stock, warrants, rights to subscribe for
shares, convertible debt or other securities convertible into any
share class, referred to below collectively as “
Securities
”) for a consideration
per share, after giving effect to, and net of, commissions, fees
and other expenses, that is less, or which on conversion or
exercise of the underlying security is less, than the conversion
price of the Holder (as adjusted for changes resulting from any
forward or reverse share splits, stock dividends and similar
events) (a “
Down Round
Price
”), the Company shall issue additional Securities
to Holder at no additional cost in an amount that it would have
received at the Down Round Price, rounded up to the next whole
share, on a full ratchet basis at no additional consideration
(“
Holder’s Down Round
Issuances
"). In the event that a New Issuance is made at a
Down Round Price and includes both equity securities and rights to
acquire additional securities (whether in the form of warrants,
options or other rights) (the “
Rights
”), then as part of any full
ratchet adjustment the Company shall also include, within the
Holder’s Down Round Issuances, that number of Rights which
Holder would have acquired had it participated in the New
Issuance.
Section 4
.
Negative Covenants
. As long as
any portion of this Note remains outstanding, unless the Holder
shall have otherwise given prior written consent, the Company shall
not, and shall not permit any of its subsidiaries (whether or not a
subsidiary on any Closing Date) to, directly or
indirectly:
a)
other than
Permitted Indebtedness, enter into, create, incur, assume,
guarantee, or suffer to exist any indebtedness for borrowed money
of any kind, including but not limited to, a guarantee, on or with
respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits
therefrom;
b)
other than
Permitted Liens, enter into, create, incur, assume, or suffer to
exist any liens of any kind, on or with respect to any of its
property or assets now owned
or hereafter
acquired or any interest therein or any income or profits
therefrom;
c)
repay, repurchase,
or offer to repay, repurchase or otherwise acquire more than a
de minimis
number
of shares of its Common Stock or Common Stock Equivalents other
than repurchases of Common Stock or Common Stock Equivalents of
departing employees of the Company, provided that such repurchases
shall not exceed an aggregate of $150,000 for all employees during
the term of this Note;
d)
pay cash dividends
or distributions on Common Stock of the Company;
e)
enter into any
transaction with any Affiliate of the Company which would be
required to be disclosed in any public filing with the Commission,
unless such transaction is expressly approved by a majority of the
disinterested directors of the Company (even if less than a quorum
otherwise required for board approval); or
f)
enter
into any agreement with respect to any of the
foregoing.
Section
5.
Events of Default.
a)
“
Event of Default
” means, wherever
used herein, any of the following events (whatever the reason for
such event and whether such event shall be voluntary or involuntary
or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any
administrative or governmental body), provided that an event
specified in item i, ii, iii, or vii below will not become an Event
of Default unless and until it is not cured, if possible to cure,
within the earlier to occur of (i) five (5) Business Days after
notice of such failure sent by the Holder or by any other Holder
and (ii) ten (10) Business Days after the Company has become or
should have become aware of such failure:
i.
any default in the
payment of (A) the Principal Amount of this Note or (B) interest,
and other amounts owing to the Holder of this Note, as and when the
same shall become due and payable;
ii.
the Company shall
fail to observe or perform any other covenant or agreement
contained in this Note;
iii.
a
default or event of default shall occur under any of the
Transaction Documents (subject to any grace or cure period provided
in the applicable Transaction Document);
iv.
any representation
or warranty made in the Transaction Documents shall be untrue or
incorrect in any material respect as of the date when made or
deemed made;
v.
the Company shall be subject to a Bankruptcy Event;
vi. the
Company shall default on any of its obligations under any
mortgage, credit
agreement, or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or
by which there may be secured or evidenced, any indebtedness for
borrowed money or money due under any long term leasing or
factoring arrangement that (A) involves an obligation greater than
$100,000, whether such indebtedness now exists or shall hereafter
be created and (B) results in such indebtedness becoming or being
declared due and payable prior to the date on which it would
otherwise become due and payable;
vii.
if
at any time commencing six (6) months from the date hereof the
Company is not subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended, or has
failed to file all reports required to be filed thereunder during
the then preceding twelve (12) months;
viii.
any
monetary judgment, writ or similar final process shall be entered
or filed against the Company, any subsidiary or any of their
respective property or other assets for more than $100,000, and
such judgment, writ or similar final process shall remain
unvacated, unbonded, or unstayed for a period of forty-five (45)
calendar days; provided, however, that any judgment which is
covered by insurance or an indemnity from a creditworthy party
(such creditworthiness as reasonably determined by the Holder)
shall not be included in calculating the amount of such judgment,
writ, or final process so long as the Company provides the Holder a
written statement from such insurer or indemnity provider (which
written statement shall be reasonably satisfactory to the Holder)
to the effect that such judgment is covered by insurance or an
indemnity and the Company will receive the proceeds of such
insurance or indemnity within forty-five (45) calendar days of the
issuance of such judgment.
(b)
Acceleration Upon
Event of Default
. If any Event of Default occurs, the
outstanding Principal Amount of this Note, plus accrued but unpaid
interest and other amounts owing in respect thereof through the
date of acceleration, shall become, at the Holder’s election
(which the Holder shall not make more than the later of thirty (30)
calendar days after the date such Event of Default is cured or
otherwise resolved and the Holder is aware of such cure or
resolution), immediately due and payable in cash. If there is such
an acceleration, then upon the payment in full of the amounts due
hereunder, the Holder shall promptly surrender this Note to or as
directed by the Company. In connection with such acceleration
described herein, 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 acceleration may be rescinded and annulled by Holder at
any time prior to payment hereunder and the Holder shall have all
rights as a holder of the Note until such time, if any, as the
Holder receives full payment pursuant to this Section 5(b). No such
rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon.
Section 6.
Miscellaneous.
a)
Notices. Any and
all notices or other communications or deliveries to be
provided
by the Holder hereunder, including, without limitation, any notice
of conversion, shall be in writing and delivered in the manner and
to the address(s) set forth in the Securities
Purchase
Agreement.
b)
Absolute Obligation
. 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 accrued interest, as
applicable, on this Note at the time, place, and rate, and in the
coin or currency, herein prescribed. This Note is a direct debt
obligation of the Company.
c)
Lost or Mutilated Note
. If this
Note shall be mutilated, lost, stolen, or destroyed, the Company
shall execute and deliver, in exchange and substitution for and
upon cancellation of a mutilated Note, or in lieu of or in
substitution for a lost, stolen, or destroyed Note, a new Note for
the Principal Amount of this Note so mutilated, lost, stolen, or
destroyed, but only upon receipt of evidence of such loss, theft,
or destruction of such Note, and of the ownership hereof,
reasonably satisfactory to the Company.
d)
Governing Law
. 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
Nevada, without regard to the principles of conflict of laws
thereof. Each party agrees that all legal proceedings concerning
the interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees, or agents) shall be commenced in
the state and federal courts sitting in Nevada (the
“
Nevada
Courts
”). Each party hereto hereby irrevocably submits
to the exclusive jurisdiction of the Nevada 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 any of the
Transaction Documents), 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 such Nevada
Courts, or such Nevada 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 other manner permitted by applicable law. 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 reasonably incurred in the investigation,
preparation and prosecution of such action or
proceeding.
e)
Waiver
. Any waiver by the
Company or the Holder of a breach of any provision of this Note
shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of
this Note. The failure of the Company or the Holder to insist upon
strict adherence to any term of this Note on one or more occasions
shall not be considered a waiver or deprive that party of the right
thereafter to
insist upon strict
adherence to that term or any other term of this Note. Any waiver
by the Company or the Holder must be in
writing.
f)
Severability
. If any provision
of this Note is invalid, illegal or unenforceable, the balance of
this Note shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it
shall be found that any interest or other amount deemed interest
due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum rate of interest permitted under
applicable law. The Company covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would
prohibit or forgive the Company from paying all or any portion of
the principal of or interest on this Note as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which
may affect the covenants or the performance of this indenture, and
the Company (to the extent it may lawfully do so) hereby expressly
waives all benefits or advantage of any such law, and covenants
that it will not, by resort to any such law, hinder, delay, or
impeded the execution of any power herein granted to the Holder,
but will suffer and permit the execution of every such as though no
such law has been enacted.
g)
Next Business Day
. Whenever any
payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next
succeeding Business Day.
h)
Headings
. The headings
contained herein are for convenience only, do not constitute a part
of this Note and shall not be deemed to limit or affect any of the
provisions hereof.
i)
Series of Notes
. This Note is
one of a series of Notes of the Company in the aggregate principal
amount of up to Five Million Dollars as described in that certain
Confidential Private Placement Memorandum, dated January 2019,
delivered to the Holder in connection with the transactions
contemplated by the Transaction Documents. All Notes in such series
shall rank equally and ratably without preference or priority of
any said Notes over any others thereof.
(signature page follows)
IN
WITNESS WHEREOF, the Company has caused this Note to be duly
executed by a duly authorized officer as of the date first above
indicated.
KNOW
LABS, INC.
|
By:
|
|
|
Name: Ronald P.
Erickson
|
|
Title:
Chairman
|
|
|
|
|
By:
|
|
|
Name: Phillip A. Bosua
|
|
Title: Chief
Executive Officer
|
Exhibit
10.4
NEITHER
THIS SECURITY NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
KNOW
LABS, INC.
FORM
OF COMMON STOCK PURCHASE WARRANT
|
Warrant
Shares: [ ________________________]
|
Initial
Exercise Date:
[________________________]
|
|
|
Issue
Date:
[_________________________]
|
THIS
COMMON STOCK PURCHASE WARRANT (the “
Warrant
”) certifies that, for
value received, [_______________] (together with its successors and
permitted assigns, the “
Holder
”) is entitled, upon the
terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the Initial Exercise
Date and on or prior to 5:00 p.m. Pacific Time on [5 years from
Issue Date
]
(the
“
Termination
Date
”) but not thereafter, to subscribe for and
purchase from Know Labs, Inc., a Nevada corporation (the
“
Company
”), up
to
[
________________] shares (as
subject to adjustment hereunder, the “
Warrant Shares
”) of the common
stock of the Company, par value $0.001 per share (the
“
Common Stock
”).
The purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price, as defined in Section
2(b).
Section 1
.
Definitions
. Capitalized terms
used and not otherwise defined herein shall have the meanings set
forth in that certain Securities Purchase Agreement, dated as of
the date hereof, between the Company and the original Holder, as
amended, modified, or supplemented from time to time in accordance
with its terms (the “
Securities Purchase
Agreement
”).
Section 2
.
Exercise
.
a)
Exercise of the
purchase rights represented by this Warrant may be made, in whole
or in part, at any time or times on or after the Initial Exercise
Date and on or before the Termination Date by delivery to the
Company (or such other office or agency of the Company as it may
designate by notice in writing to the registered Holder at the
address of the Holder set forth in the Securities Purchase
Agreement) of a duly executed facsimile copy (or e-mail attachment)
of the Notice of Exercise in the form annexed hereto (the
“
Notice of
Exercise”
). Within two (2) Trading Days following the
date of exerciseas aforesaid, the Holder shall deliver the
aggregate Exercise Price for the shares specified in the applicable
Notice of Exercise by wire transfer or cashier’s check drawn
on a United States bank unless the cashless exercise procedure
specified in Section 2(c) below is specified in the applicable
Notice of Exercise. The term "
Trading Day
" shall mean a day
on
which the principal securities exchange or quotation system on
which the Common Stock is listed or admitted to trading is open for
the transaction of business. No ink-original Notice of Exercise
shall be required, nor shall any medallion guarantee (or other type
of guarantee or notarization) of any Notice of Exercise form be
required. Notwithstanding anything herein to the contrary, the
Holder shall not be required to physically surrender this Warrant
to the Company until the Holder has purchased all of the Warrant
Shares available hereunder and the Warrant has been exercised in
full, in which case, the Holder shall surrender this Warrant to the
Company for cancellation within two (2) Trading Days of the date
the final Notice of Exercise is delivered to the Company. Partial
exercises of this Warrant resulting in purchases of a portion of
the total number of Warrant Shares available hereunder shall have
the effect of lowering the outstanding number of Warrant Shares
purchasable hereunder in an amount equal to the applicable number
of Warrant Shares purchased.
The
Holder and the Company shall maintain records showing the number of
Warrant Shares purchased and the date of such purchases. The
Company shall deliver any objection to any Notice of Exercise
within one (1) Business Day of receipt of such notice. The Holder
and any assignee, by acceptance of this Warrant, acknowledge and
agree that, by reason of the provisions of this Section, following
the purchase of a portion of the Warrant Shares hereunder, the
number of Warrant Shares available for purchase hereunder at any
given time may be less than the amount stated on the face
hereof.
b)
Exercise Price
. The exercise
price per share of the Common Stock under this Warrant shall be
$1.20, subject to adjustment hereunder (the “
Exercise Price
”).
c)
Cashless Exercise
. If, after
the six month anniversary of the Initial Exercise Date, at the time
of exercise hereof there is no effective registration statement
registering, or the prospectus contained therein is not available
for the issuance of the Warrant Shares to the Holder, then this
Warrant may also be exercised, in whole or in part, at such time by
means of a “cashless exercise” in which the Holder
shall be entitled to receive a number of Warrant Shares equal to
the quotient obtained by dividing [(A-B)*(X)] by (A),
where:
(A)
= the
last VWAP immediately preceding the date of delivery of the Notice
of Exercise giving rise to the applicable “cashless
exercise,” as set forth in the applicable Notice of Exercise
(to clarify, the "last VWAP" will be the last VWAP as calculated
over an entire Trading Day such that, in the event that this
Warrant is exercised at a time that the Trading Market is open, the
prior Trading Day's VWAP shall be used in this
calculation);
(B)
= the
Exercise Price of this Warrant, as adjusted hereunder;
and
(X)
= the
number of Warrant Shares that would be issuable upon exercise of
this Warrant in accordance with the terms of this Warrant if such
exercise were by means of a cash exercise rather than a cashless
exercise.
If
Warrant Shares are issued in such a cashless exercise, the parties
acknowledge and agree that in accordance with Section 3(a)(9) of
the Securities Act, the Warrant Shares shall take on the registered
characteristics of the Warrants being exercised, and the holding
period of the Warrants being exercised may be tacked on to the
holding period of the Warrant Shares. The Company agrees not to
take any position contrary to this Section 2(c).
For avoidance of
doubt, no “cashless exercise” under this Section 2(c)
may occur (i) during the first six months following the Initial
Exercise Date or (ii) after the six months following the Initial
Exercise Date if there is an effective registration statement
registering the issuance of the Warrant Shares to the
Holder.
“
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
Trading Market, 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 L.P. (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 OTCQB or OTCQX is not a Trading Market, the volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on OTCQB or OTCQX as applicable, (c) if the Common
Stock is not then listed or quoted for trading on OTCQB or OTCQX
and if prices for the Common Stock are then reported in the
“Pink Sheets” published by OTC Markets, Inc. (or a
similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the
Common Stock so reported, or (d) 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 Purchasers of a
majority in interest of the Securities then outstanding and
reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.
d)
Mechanics of
Exercise
.
i.
Delivery of Warrant Shares Upon
Exercise
. The Company shall cause the Warrant Shares
purchased hereunder to be transmitted by the Transfer Agent to the
Holder by crediting the account of the Holder’s or its
designee’s balance account with The Depository Trust Company
through its Deposit or Withdrawal at Custodian system
(“
DWAC
”) if
theCompany is then a participant in such system and either (A)
there is an effective registration statement permitting the
issuance of the Warrant Shares to or resale of the Warrant Shares
by Holder or (B) this Warrant is being exercised via
“cashless exercise”, and otherwise by physical delivery
of a certificate, registered in the Company’s share register
in the name of the Holder or its designee, for the number of
Warrant Shares to which the Holder is entitled pursuant to such
exercise to the address specified by the Holder in the Notice of
Exercise by the date that is two (2) Trading Days after the
delivery to the Company of the Notice of Exercise (such date, the
“
Warrant Share Delivery
Date
”). The Warrant Shares shall be deemedto have been
issued, and Holder or any other person so designated to be named
therein shall be deemed to have become a holder of record of such
shares for all purposes, as of the date the Warrant has been
exercised, with payment to the Company of the Exercise Price (or by
cashless exercise, if permitted) and all taxes required to be paid
by the Holder, if any, pursuant to Section 2(d)(v) prior to the
issuance of such shares, having been paid.
ii.
Delivery of New Warrants Upon
Exercise
. Notwithstanding Section 2(a) above, if this
Warrant shall have been exercised in part, the
Company shall, at
the request of a Holder and upon surrender of this Warrant
certificate, at the time of delivery of the Warrant Shares, deliver
to the Holder a new Warrant evidencing the rights of the Holder to
purchase the unpurchased Warrant Shares called for by this Warrant,
which new Warrant shall in all other respects be identical with
this Warrant.
iii.
Rescission
Rights
. If the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to Section
2(d)(i) by the Warrant Share Delivery Date, then the Holder will
have the right to rescind such exercise.
iv.
No Fractional Shares or Scrip
.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price.
v.
Charges, Taxes and Expenses
.
Issuance of Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such Warrant Shares, all of which taxes
and expenses shall be paid by the Company, and such Warrant Shares
shall be issued in the name of the Holder or in such name or names
as may be directed by the Holder; provided, that in the event
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto. The Company shall pay all Transfer Agent fees
required for same-day processing of any Notice of Exercise and all
fees to the Depository Trust Company (or another established
clearing corporation performing similar functions) required for
same-day electronic delivery of the Warrant Shares.
vi.
Closing of Books
. The Company
will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
Section 3.
Certain
Adjustments
a)
Stock Dividends and Splits
. If
the Company, at any time while this Warrant is outstanding: (i)
pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant),
(ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of
shares, or (iv) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common
Stock
(excluding treasury shares, if any) outstanding immediately before
such event and of which the denominator shall be the number of
shares of Common Stock outstanding immediately after such event,
and the number of shares issuable upon exercise of this Warrant
shall be proportionately adjusted such that the aggregate Exercise
Price of this Warrant shall remain unchanged. Any adjustment made
pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
b)
Calculations
. All calculations
under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 3, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
c)
Notice to
Holder
.
i.
Adjustment to Exercise Price
.
Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly deliver to the Holder
a notice setting forth the Exercise Price after such adjustment and
any resulting adjustment to the number of Warrant Shares and
setting forth a brief statement of the facts requiring such
adjustment.
ii.
Notice to Allow Exercise by
Holder
. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property, or (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation, or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be
delivered to the Holder (unless such notice is filed with the
Commission, which in such case, no additional notice is required to
be provided to the Holder), at least ten (10) calendar days prior
to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to
bedetermined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, or share exchange 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 of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. The Holder shall remain entitled to exercise this Warrant
during the period commencing on the date of such notice to the
effective date of the event triggering such notice except as may
otherwise be expressly set forth herein.
Section 4
.
Transfer of
Warrant
.
a)
Transferability
. This Warrant
and all rights hereunder (including, without limitation, any
registration rights) are transferable, in whole or in part, upon
surrender of this Warrant at the principal office of the Company or
its designated agent, together with a written assignment of this
Warrant substantially in the form attached hereto dulyexecuted by
the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything herein to the contrary, the
Holder shall not be required to physically surrender this Warrant
to the Company unless the Holder has assigned this Warrant in full,
in which case, the Holder shall surrender this Warrant to the
Company within two (2) Business Days of the date the Holder
delivers an assignment form to the Company assigning this Warrant
full. The Warrant, if properly assigned in accordance herewith, may
be exercised by a new holder for the purchase of Warrant Shares
without having a new Warrant issued.
b)
New Warrants
. This Warrant may
be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which
may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with
such notice. All Warrants issued on transfers or exchanges shall be
dated the initial issuance date of this Warrant and shall be
identical with this Warrant except as to the number of Warrant
Shares issuable pursuant thereto.
c)
Warrant Register
. The Company
shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “
Warrant Register
”), in the name of
the record Holder hereof from time to time. The Company may deem
and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
Section 5
.
Miscellaneous
.
a)
No Rights as Stockholder Until
Exercise
. This Warrant does not entitle the Holder to any
voting rights, dividends, or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section
2(d)(i).
b)
Loss, Theft, Destruction, or
Mutilation of Warrant
. The Company covenants that upon
receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate relating to the Warrant Shares, and in case of
loss, theft, or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
c)
Saturdays, Sundays, Holidays,
etc
. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein
shall not be a Business Day, then, such action may be taken or such
right may be exercised on the next succeeding Business
Day.
d)
Authorized
Shares
.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock
certificates to execute and issue the necessary Warrant Shares upon
the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure
that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any
requirements of the Trading Market upon which the Common Stock may
be listed. The Company covenants that all Warrant Shares which may
be issued upon the exercise of the purchase rights represented by
this Warrant will, upon exercise of the purchase rights represented
by this Warrant and payment for such Warrant Shares in accordance
herewith, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges created by
the Company in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such
issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek toavoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use
commercially
reasonable efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction
thereof, as may be, necessary to enable the Company to perform its
obligations under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e)
No Net Cash Settlement
.
Notwithstanding anything herein to the contrary, in no event will
the Holder hereof be entitled to receive a net-cash settlement as
liquidated damages in lieu of physical settlement in shares of
Common Stock, regardless of whether the Common Stock underlying
this Warrant is registered pursuant to an effective registration
statement; provided, however, that the foregoing will not preclude
the Holder from seeking other remedies at law or equity for
breaches by the Company of its registration obligations
hereunder.
f)
Jurisdiction
. All questions
concerning the construction, validity, enforcement, and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Securities Purchase
Agreement.
g)
Restrictions
. The Holder
acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered, will have restrictions upon resale
imposed by state and federal securities laws.
h)
Non-waiver
. No course of
dealing or any delay or failure to exercise any right hereunder on
the part of Holder shall operate as a waiver of such right or
otherwise prejudice the Holder’s rights, powers, or
remedies.
i)
Notices
. Any notice, request or
other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the
notice provisions of the Securities Purchase
Agreement.
j)
Limitation of Liability
. No
provision hereof, in the absence of any affirmative action by the
Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
k)
Remedies
. The Holder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performanceof its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in
any action for specific performance that a remedy at law would be
adequate.
l)
Successors and Assigns
. Subject
to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company
and the successors and
permitted assigns
of Holder. The provisions of this Warrant are intended to be for
the benefit of any Holder from time to time of this Warrant and
shall be enforceable by the Holder or holder of Warrant
Shares.
m)
Amendment
. This Warrant may be
modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.
n)
Severability
. Wherever
possible, each provision of this Warrant shall be interpreted in
such manner as to be effective and valid under applicable law, but
if any provision of this Warrant shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this
Warrant.
o)
Headings
. The headings used in
this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this
Warrant.
(signature page follows
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
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KNOW
LABS, INC.
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By:
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Name: Ronald P.
Erickson
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Title:
Chairman
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By:
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Name: Phillip A.
Bosua
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Title: Chief
Executive Officer
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NOTICE
OF EXERCISE
(1)
The undersigned
hereby elects to purchase ___________________ Warrant Shares of the
Company pursuant to the terms of the attached Warrant (only if
exercised in full), and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if
any.
(2)
Payment shall take the form of (check applicable
box):
☐ in lawful
money of the United States; or
☐
if permitted the cancellation of such number of Warrant Shares as
is necessary, in accordance with the formula set forth in
subsection 2(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection
2(c).
(3)
Please issue said
Warrant Shares in the name of the undersigned or in such other name
as is specified below:
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
[SIGNATURE OF
HOLDER]
Name of Investing
Entity:
____________________________________________________________________
Signature of Authorized Signatory of Investing
Entity
:______________________________________________
Name
of Authorized Signatory:
________________________________________________________________
Title of
Authorized
Signatory:__________________________________________________________________
Date
:______________________________________________________________________________________
ASSIGNMENT
FORM
(To assign the foregoing Warrant, execute this form and supply
required information. Do not use this form to purchase
shares.)
FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
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Name:
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(Please
Print)
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Address:
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(Please
Print)
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Dated:
_________________________________,
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Holder’s
Signature: _______________________________________
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Holder’s
Address:_________________________________________
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Exhibit
10.5
KNOW
LABS, INC. SUBORDINATION AGREEMENT
THIS
SUBORDINATION AGREEMENT (this "
Agreement
") dated [_________________ ],
is between [___________________________________________ ] (the
"
Subordinated Creditor
"),
and Clayton Struve ("
Senior
Creditor
").
Recitals
A.
Subordinated
Creditor is purchasing a certain Subordinated Convertible Note of
even date hereof (the “
Note
”) from Know Labs, Inc., a
Nevada corporation (the "
Company
") pursuant to that certain
Securities Purchase Agreement dated as of the date hereof between
the Company and Subordinated Creditor (the “
Securities Purchase Agreement
”).
All capitalized terms not otherwise defined in this Agreement shall
have the meanings assigned to them in the Securities Purchase
Agreement.
B.
Senior Creditor has
previously provided loans to the Company in the aggregate amount of
$1,071,000 (the “
Senior
Loan
”).
C.
As a condition to
purchasing the Note, Subordinated Creditor has agreed to
subordinate the Note and related obligations to Subordinated
Creditor (the "
Subordinated
Debt
") to all of the Company’s indebtedness and
obligations to Senior Creditor (the "
Senior Debt
").
THE
PARTIES AGREE AS FOLLOWS:
1.
All Subordinated
Debt payments are subordinated to Senior Creditor's right to full
payment and performance of the Senior Debt and all of the Company's
other obligations to Senior Creditor existing now or later,
together with collection costs, including attorneys' fees, and
including any interest accruing after any Bankruptcy
Event.
2. Subordinated
Creditor will not:
a)
demand or receive
from the Company (and the Company will not pay) any part of the
Subordinated Debt, by payment, prepayment, or otherwise, which may
now or hereafter be owing by the Company to Subordinated Creditor,
or
b)
accelerate the
Subordinated Debt, or begin to or participate in any action against
the Company with respect to such Subordinated Debt, until all the
Senior Debt is paid, or
c)
assign any of the
Subordinated Debt or any collateral security therefore without
notice to or consent of Senior Creditor and unless assigned
pursuant to an assignment made expressly subject to this
Agreement.
This
does not prohibit each such Subordinated Creditor from converting
any Subordinated Debt into equity securities of the Company or
exercising any rights as a stockholder of the Company.
3.
Subordinated
Creditor must deliver to Senior Creditor, in the form received, any
payment, distribution, security, or proceeds it receives on the
Subordinated Debt other than according to this
Agreement.
4.
These provisions
remain in full force and effect, despite any Bankruptcy Event, and
Senior Creditor's claims against the Company and the Company's
estate will be fully paid before any payment is made to any
Subordinated Creditor with respect to the Subordinated
Debt.
5.
Until the Senior
Debt is paid, Subordinated Creditor irrevocably appoints Senior
Creditor as its attorney-in-fact, with power of attorney with power
of substitution, in each such Subordinated Creditor's name or in
Senior Creditor's name, for Senior Creditor's use and benefit
without notice to each such Subordinated Creditor, to do the
following in the case of any Bankruptcy Event involving the
Company:
a)
file any claims for
the Subordinated Debt for Subordinated Creditor if such
Subordinated Creditor does not do so at least thirty (30) days
before the time to file claims expires; and
b)
accept or reject
any plan of reorganization or arrangement for Subordinated Creditor
and vote Subordinated Creditor's claims in respect of the
Subordinated Debt in any way it chooses.
6.
Subordinated
Creditor will immediately place a legend on the Subordinated Debt
instruments that the instruments are subject to this Agreement. No
amendment of the Subordinated Debt documents will modify this
Agreement in any way that terminates or impairs the subordination
of the Subordinated Debt or the subordination of the security
interest or lien that Senior Creditor has in the Company's
property.
7.
This Agreement
shall be binding upon Subordinated Creditor, its successors, or
assigns, and shall inure to the benefit of and be enforceable by
each Senior Creditor and its successors or assigns.
8.
This Agreement
shall terminate upon the date on which the Senior Debt shall have
been paid in full.
9.
Senior Creditor may
administer and manage its credit and other relationships with the
Company in its own best interest, without notice or consent of
Subordinated Creditor. At any time and from time to time, Senior
Creditor may enter into any amendment or agreement with the Company
as Senior Creditor may deem proper.
10.
All conditions,
covenants, duties, and obligations contained in this Agreement can
be waived only by written agreement. Forbearance or indulgence in
any form or manner by
a party shall not
be construed as a waiver, nor in any way limit the remedies
available to that party.
11.
If one or more
provisions of this Agreement are held to be unenforceable under
applicable law, such provision shall be excluded from this
Agreement, and the balance of the Agreement shall be interpreted as
if such provision were so excluded, and shall be enforceable in
accordance with its terms.
12.
This Agreement may
be executed in two or more counterparts, each of which is an
original and all of which together constitute one
instrument.
13.
This Agreement
shall be governed by and be construed in accordance with the laws
of the State of Nevada without regard to the conflicts of law rules
of such state. The parties hereby irrevocably and unconditionally
submit, for themselves and their property, to the jurisdiction of
the courts sitting in Las Vegas, Nevada and any appellate court
from any thereof, in respect of actions brought against it in any
action, suit or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action, suit or
proceeding may be heard and determined in such courts. Each of the
parties hereto agrees that a final judgment in any such action,
suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by law.
14.
If there is an
action to enforce the rights of a party under this Agreement, the
party prevailing will be entitled, in addition to other relief, all
reasonable costs and expenses, including reasonable attorneys'
fees, incurred in the action.
(signature page follows)
IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first set forth above.
SUBORDINATED
CREDITOR:
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Signature:
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Name:
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SENIOR
CREDITOR:
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Clayton
Struve
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AGREED AND
ACKNOWLEDGED:
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KNOW LABS, INC.
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By:
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Name: Ronald P.
Erickson
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Title:
Chairman
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By:
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Name: Phillip A.
Bosua
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Title: Chief
Executive Officer
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Exhibit
10.6
FORM
OF REGISTRATION RIGHTS AGREEMENT
This
REGISTRATION RIGHTS
AGREEMENT
(this
“Agreement”
) is made and
entered into as of January [_____ ], 2019, by and among Know Labs,
Inc., a Nevada corporation (the
“Company”
) and the investors
identified on
Schedule
A
hereto (each, including their respective successors and
assigns, an “
Investor
” and collectively, the
“
Investors
”).
WHEREAS,
in connection with the
Securities Purchase Agreement by and among the parties hereto of
even date herewith (the “
Purchase Agreement
”), the Company
has agreed, upon the terms and subject to the conditions set forth
in the Purchase Agreement, to issue and sell to each Investor units
comprised of (i) subordinated convertible notes (the
“
Convertible
Notes
”) and (ii) warrants to purchase fifty percent
(50%) of one share of the Company’s common stock, $0.001 par
value per share (“
Common
Stock
”) at an exercise price of $1.20 per whole share
(the “
Warrants
”); and
WHEREAS
, in accordance with the terms of
the Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended,
and the rules and regulations thereunder, or any similar successor
statute (collectively, the “
Securities Act
”), and applicable
state securities laws.
NOW, THEREFORE,
in consideration of the
premises and the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and each of the Investors
hereby agree as follows:
1.
Definitions
. Capitalized terms
used and not otherwise defined herein that are defined in the
Purchase Agreement will have the respective meanings given such
terms in the Purchase Agreement. As used in this Agreement, the
following terms have the respective meanings set forth in this
Section 1 and other terms are defined throughout this
Agreement:
“Commission Comments”
means
written comments pertaining solely to Rule 415 which are received
by the Company from the Commission to a filed Registration
Statement, which either (i) requires the Company to limit the
number of Registrable Securities which may be included therein to a
number which is less than the number sought to be included thereon
as filed with the Commission or (ii) requires the Company to either
exclude Registrable Securities held by specified Holders or deem
such Holders to be underwriters with respect to Registrable
Securities they seek to include in such Registration
Statement.
“Effective Date”
means, as
to a Registration Statement, the date on which such Registration
Statement is first declared effective by the
Commission.
“Effectiveness Date”
means
(a) with respect to the initial Registration Statement required to
be filed pursuant to Section 2(a), the earlier of: (i) the
120
th
day following the Final
Closing Date and (ii) the fifth Trading Day following the date on
which the Company is notified by the Commission that the initial
Registration Statement will not be reviewed or is no longer subject
to further review and comments; (b) with respect to any additional
Registration Statements required to be filed under Section 2(b) due
to SEC Restrictions, the earlier of: (i) the 90
th
day following the applicable
Restriction Termination Date and (ii) the fifth Trading Day
following the date
on which the Company is notified by the Commission that such
Registration Statement will not be reviewed or is no longer subject
to further review and comments; and (c) with respect to a
Registration Statement required to be filed under Section 2(c), the
earlier of: (i) the 90
th
day
following the date on which the Company becomes eligible to utilize
Form S-3 to register the resale of Common Stock, and (ii) the fifth
Trading Day following the date on which the Company is notified by
the Commission that the Registration Statement will not be reviewed
or is no longer subject to further review and
comments.
“Effectiveness Period”
means, as to any Registration Statement required to be filed
pursuant to this Agreement, the period commencing on the Effective
Date of such Registration Statement and ending on (a) the date that
all of the Registrable Securities covered by such Registration
Statement have been publicly sold by the Holders of the Registrable
Securities included therein, or (b) such time as all of the
Registrable Securities covered by such Registration Statement may
be sold by the Holders without volume restrictions pursuant to Rule
144 as determined by the counsel to the Company pursuant to a
written opinion letter to such effect, addressed and acceptable to
the Company's transfer agent and the affected Holders.
“Exchange Act”
means the
Securities Exchange Act of 1934, as amended.
“Filing Date”
means (a) with
respect to the initial Registration Statement required to be filed
pursuant to Section 2(a), the 45
th
day following the Final Closing Date;
(b) with respect to any additional Registration Statements required
to be filed under Section 2(b) due to SEC Restrictions, the
30
th
day following the
applicable Restriction Termination Date; and (c) with respect to a
Registration Statement required to be filed under Section 2(c), the
30
th
day following the date on
which the Company becomes eligible to utilize Form S-3 to register
the resale of Common Stock.
“Final Closing Date”
means
the date on which the final closing of the purchase and sale of the
Convertible Notes and Warrants occurs pursuant to Section 2.2 of
the Purchase Agreement.
“FINRA”
means the Financial
Industry Regulatory Authority, Inc.
“Holder”
or
“Holders”
means the holder
or holders, as the case may be, from time to time of Registrable
Securities and, if other than an Investor, a Person (as defined in
the Purchase Agreement) to whom the rights hereunder have been
properly assigned pursuant to Section 7 hereof.
“Investment Amount”
means,
with respect to each Investor, the Investment Amount indicated on
such Investor’s signature page to this Agreement, which is
also reflected on the Schedule of Investors attached hereto as
Schedule
A
.
“Nevada Courts”
means the
state and federal courts sitting in Nevada.
“Proceeding”
means an
action, claim, suit, investigation or proceeding (including,
without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
“Prospectus”
means the
prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under
the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Registration
Statement, and all other amendments and supplements to the
Prospectus, including post -effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference
in such Prospectus.
“Registrable Securities”
means: (i) any shares of Common Stock issuable upon the conversion
of the Convertible Notes issued to Investors pursuant to the
Purchase Agreement,
(ii)
any shares of Common Stock issuable upon the exercise of the
Warrants issued to the Investors pursuant to the Purchase
Agreement, (iii) any shares of Common Stock issuable upon the
exercise of warrants issued to Boustead Securities, LLC, (the
“
Placement
Agent
”) as compensation in connection with the
financing that is the subject of the Purchase Agreement
(
“Placement Agent Warrant
Shares”
) and (iv) any securities issued or issuable
upon any stock split, dividend or other distribution,
recapitalization or similar event, or any price adjustment as a
result of such stock splits, reverse stock splits or similar events
with respect to any of the securities referenced in (i) –
(iv) above. Notwithstanding the foregoing, a security shall cease
to be a Registrable Security for purposes of this Agreement from
and after such time as the Holder of such security may resell such
security without volume restrictions under Rule 144, as determined
by the counsel to the Company pursuant to a written opinion letter
to such effect, addressed and acceptable to the Company’s
transfer agent and the affected Holders.
“Registration Statement”
means the initial registration statement required to be filed in
accordance with Section 2(a) and any additional registration
statements required to be filed under this Agreement, including in
each case the Prospectus, amendments and supplements to such
registration statements or Prospectus, including pre- and post-
effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference
therein.
“
Required Holders
” means the
Holders of at least a majority of the Registrable
Securities.
“Rule 144”
means Rule 144
promulgated by the Commission pursuant to the
Securities Act, as
such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially
the same effect as such Rule.
“Rule 415”
means Rule 415
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially
the same effect as such Rule.
“Rule 424”
means Rule 424
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially
the same effect as such Rule.
“Selling Holder
Questionnaire”
means the selling security holder
notice and questionnaire attached as
Annex B
hereto.
"
Trading Day
" means a day on which the
Trading Market on which the Common Stock is listed or quoted for
trading is open for the transaction of business.
“
Trading Market
” means any of the
New York Stock Exchange, the NYSE MKT, the NASDAQ Global Select
Market, the NASDAQ Global Market, the NASDAQ Capital Market, the
OTCBB, the OTCQB, the OTCQX or any other market on which the Common
Stock is listed or quoted for trading on the date in
question.
2.
Registration
.
(a)
On or prior to the
applicable Filing Date, the Company shall prepare and file with the
Commission one Registration Statement covering the resale of all
Registrable Securities not already covered by an existing and
effective Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415. Each Registration Statement
required to be filed under this Agreement shall be filed on Form
S-1 (or on such other form appropriate for such purpose) and
contain (except if otherwise required pursuant to written comments
received from the Commission upon a review of such Registration
Statement, other than as to the characterization of any Holder as
an underwriter, which shall not occur unless such characterization
is consistent with written information provided by the Holder in
the Selling Holder Questionnaire) the “Plan of
Distribution” substantially in the form attached hereto as
Annex A
. The
Company shall cause each Registration Statement required to be
filed under this Agreement to be declared effective under the
Securities Act as soon as possible but, in any event, no later than
its Effectiveness Date, and shall use its commercially reasonable
best efforts to keep each such Registration Statement continuously
effective during its entire Effectiveness Period. By 5:00 p.m. (New
York City time) on the Trading Day immediately following the
Effective Date of each Registration Statement, the Company shall
file with the Commission in accordance with Rule 424 under the
Securities Act the final prospectus to be used in connection with
sales pursuant to such Registration Statement (whether or not such
filing is technically required under such Rule).
(b)
Notwithstanding
anything to the contrary contained in this Section 2, if the
Company receives Commission Comments, and following discussions
with and responses to the Commission in which the Company uses its
commercially reasonable best efforts to cause as many Registrable
Securities for as many Holders as possible to be included in the
Registration Statement filed pursuant to Section 2(a) without
characterizing any Holder as an underwriter unless such
characterization is consistent with written information provided by
the Holder in the Selling Holder Questionnaire (and in such regard
uses its commercially reasonable best efforts to cause the
Commission to permit any Holder or its counsel to participate in
Commission conversations on such issue together with the
Company’s counsel, and timely conveys relevant information
concerning such issue with the Holders or their counsel) (the day
that such discussions and responses are concluded shall be referred
to as the “
Tolling
Date
”), the Company is unable to cause the inclusion
of all Registrable Securities, then the Company may, following not
less than three (3) Trading Days prior written notice to the
Holders (i) remove from the Registration Statement such Registrable
Securities (the “
Cut Back
Shares
”) and/or (ii)
agree to such
restrictions and limitations on the registration and resale of the
Registrable Securities, in each case as the Commission may require
in order for the Commission to allow such Registration Statement to
become effective;
provided
, that in no event may
the Company characterize any Holder as an underwriter unless such
characterization is consistent with written information provided by
the Holder in the Selling Holder Questionnaire (collectively, the
“
SEC
Restrictions
”). Unless the SEC Restrictions otherwise
require, any cut -back imposed pursuant to this Section 2(b) shall
be allocated among the Registrable Securities of the Holders on a
pro rata basis. No liquidated damages under Section 2(d) shall
accrue on or as to any Cut Back Shares, and the required
Effectiveness Date for such Registration Statement will be tolled
until such time as the Company is able to effect the registration
of the Cut Back Shares in accordance with any SEC Restrictions if
such Registrable Securities cannot at such time be resold by the
Holders thereof without volume limitations pursuant to Rule 144
(such date, the “
Restriction
Termination Date
”). From and after the Restriction
Termination Date, all provisions of this Section 2 shall again be
applicable to the Cut Back Shares (which, for avoidance of doubt,
retain their character as “Registrable Securities”) if
such Registrable Securities cannot at such time be resold by the
Holders thereof without volume limitations pursuant to Rule 144 so
that the Company will be required to file with and cause to be
declared effective by the Commission such additional Registration
Statements in the time frames set forth herein as necessary to
ultimately cause to be covered by effective Registration Statements
all Registrable Securities. For the avoidance of doubt, the time
period starting from the Tolling Date and ending with the
Restriction Termination Date shall be excluded in calculating the
applicable Effectiveness Date.
(c)
Promptly following
any date on which the Company becomes eligible to use a
registration statement on Form S-3 to register Registrable
Securities for resale, the Company shall file a Registration
Statement on Form S-3 covering all Registrable Securities (or a
post-effective amendment on Form S-3 to the then effective
Registration Statement) and shall cause such Registration Statement
to be filed by the Filing Date for such Registration Statement and
declared effective under the Securities Act as soon as possible
thereafter, but in any event prior to the Effectiveness Date
therefor. Such Registration Statement shall contain (except if
otherwise required pursuant to written comments received from the
Commission upon a review of such Registration Statement, other than
as to the characterization of any Holder as an underwriter, which
shall not occur unless such characterization is consistent with
written information provided by the Holder in the Selling Holder
Questionnaire) the “Plan of Distribution” in
substantially the form attached hereto as
Annex A
. The Company shall use
its commercially reasonable best efforts to keep such Registration
Statement continuously effective under the Securities Act during
the entire Effectiveness Period. By 5:00 p.m. (New York City time)
on the Trading Day immediately following the Effective Date of such
Registration Statement, the Company shall file with the Commission
in accordance with Rule 424 under the Securities Act the final
prospectus to be used in connection with sales pursuant to such
Registration Statement (whether or not such filing is technically
required under such Rule).
(d)
If: (i) a
Registration Statement is not filed on or prior to its Filing Date
covering the Registrable Securities required under this Agreement
to be included therein, or (ii) a Registration Statement is not
declared effective by the Commission on or prior to its required
Effectiveness Date or if by the Trading Day immediately following
the Effective Date the Company shall not have filed a
“final” prospectus for the Registration Statement with
the Commission under Rule 424(b) (whether or not such a prospectus
is technically required by such
Rule), or (iii)
after its Effective Date, without regard for the reason thereunder
or efforts therefore, such Registration Statement ceases for any
reason to be effective and available to the Investors as to the
Registrable Securities to which it is required to cover at any time
prior to the expiration of its Effectiveness Period for more than
an aggregate of 30 Trading Days (which need not be consecutive)
(any such failure or breach being referred to as an
“Event,”
and for purposes of
clauses (i) or (ii) the date on which such Event occurs, or for
purposes of clause (iii) the date which such 30 Trading Day-period
is exceeded, being referred to as
“Event Date”
), then in
addition to any other rights the Investors may have hereunder or
under applicable law, on each such Event Date and on each monthly
anniversary of each such Event Date (if the applicable Event shall
not have been cured by such date) until the applicable Event is
cured, the Company shall pay to each Investor an amount in cash, as
partial liquidated damages and not as a penalty, equal to 1.0% of
the aggregate Investment Amount paid by such Investor pursuant to
the Purchase Agreement. The parties agree that in no event will the
Company be liable for liquidated damages under this Agreement in
excess of 1.0% of the aggregate Investment Amount of the Investors
in any single month and the maximum aggregate liquidated damages
payable to a Investor under this Agreement shall be ten percent
(10%) of the aggregate Investment Amount paid by such Investor
pursuant to the Purchase Agreement per Event. The partial
liquidated damages pursuant to the terms hereof shall apply on a
daily pro-rata basis for any portion of a month prior to the cure
of an Event (except in the case of the first Event Date), and shall
cease to accrue (unless earlier cured) upon the expiration of the
Effectiveness Period.
(e)
Each Holder agrees
to furnish to the Company a completed Questionnaire in the form
attached to this Agreement as
Annex B
(a
“Selling Holder
Questionnaire”
). The Company shall not be required to
include the Registrable Securities of a Holder in a Registration
Statement and shall not be required to pay any liquidated or other
damages under Section 2(d) to any Holder who fails to furnish to
the Company a fully completed Selling Holder Questionnaire at least
two Trading Days prior to the Filing Date (subject to the
requirements set forth in Section 3(a)).
3.
Registration Procedures
. In
connection with the Company’s registration obligations
hereunder:
(a)
The Company shall
not file a Registration Statement, any Prospectus or any amendments
or supplements thereto in which the “Selling
Stockholder” section thereof differs in any material respect
from the disclosure received from a Holder in its Selling Holder
Questionnaire (as amended or supplemented). The Company shall not
file a Registration Statement, any Prospectus or any amendments or
supplements thereto in which it (i) characterizes any Holder as an
underwriter, unless such characterization is consistent with
written information provided by the Holder in the Selling Holder
Questionnaire, (ii) excludes a particular Holder due to such Holder
refusing to be named as an underwriter, or (iii) reduces the number
of Registrable Securities being registered on behalf of a Holder
except pursuant to, in the case of subsection (iii), the Commission
Comments, without, in each case, such Holder’s express
written authorization, unless such reduction is made pursuant to
Section 2(b) hereof. The Company shall also ensure that each
Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein, or necessary to make the
statements therein (in the case of prospectuses, in the light of
the circumstances in
which they were
made) not misleading, except to the extent, but only to the extent,
that such untrue statements or omissions are based solely upon
information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent
that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly
for use in the Registration Statement, such Prospectus or such form
of Prospectus or in any amendment or supplement thereto (it being
understood that the Holder has approved
Annex
A
hereto for this
purpose).
(b)
The Company shall
(i) prepare and file with the Commission such amendments, including
post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep
such Registration Statement continuously effective as to the
applicable Registrable Securities for its Effectiveness Period and,
if required under Section 2(b) with respect to Cut Back Shares,
prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant
to Rule 424; (iii) respond as promptly as reasonably possible to
any comments received from the Commission with respect to each
Registration Statement or any amendment thereto and, as promptly as
reasonably possible provide the Holders true and complete copies of
all correspondence from and to the Commission relating to such
Registration Statement that would not result in the disclosure to
the Holders of material and non-public information concerning the
Company; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect
to the Registration Statement(s) and the disposition of all
Registrable Securities covered by each Registration
Statement.
(c)
The Company shall
notify the Holders as promptly as reasonably possible (and, in the
case of (i)(A) below, not less than three Trading Days prior to
such filing and, in the case of (v) below, not less than three
Trading Days prior to the financial statements in any Registration
Statement becoming ineligible for inclusion therein) and (if
requested by any such Person) confirm such notice in writing no
later than one Trading Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment
to a Registration Statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a
“review” of such Registration Statement and whenever
the Commission comments in writing on such Registration Statement
(the Company shall provide true and complete copies thereof and all
written responses thereto to that pertain to the Holders as a
Selling Stockholder or to the Plan of Distribution, 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 become effective; (ii) of any request by the Commission or
any other Federal or state governmental authority for amendments or
supplements to a Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of
any stop order suspending the effectiveness of a Registration
Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) of the receipt
by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose; and
(v) of the occurrence of any event or passage of time that makes
the financial
statements included
in a Registration Statement ineligible for inclusion therein or any
statement made in such Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any
revisions to such Registration Statement, Prospectus or other
documents so that, in the case of such Registration Statement or
the Prospectus, as the case may be, it will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading, except to the extent, but only to the extent, that
such untrue statements or omissions are based solely upon
information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent
that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly
for use in the Registration Statement, such Prospectus or such form
of Prospectus or in any amendment or supplement thereto (it being
understood that the Holder has approved
Annex A
hereto for this
purpose).
(d)
The Company shall
use its commercially reasonable best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of
a Registration Statement, or the suspension of the qualification of
any of the Registrable Securities for sale in any jurisdiction and,
if such an order or suspension is issued, to obtain the withdrawal
of such order or suspension at the earliest possible moment and to
notify the Holders of the issuance of such order and the resolution
thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.
(e)
The Company shall
furnish to the Holders, without charge and at the option of the
Company in electronic format, at least one conformed copy of each
Registration Statement and each amendment thereto and all exhibits
to the extent requested by the Holders (including those previously
furnished) promptly after the filing of such documents with the
Commission.
(f)
The Company shall
promptly deliver to the Holders, without charge, as many copies of
each Prospectus or Prospectuses (including each form of prospectus)
and each amendment or supplement thereto as the Holders may
reasonably request. The Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the
selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment
or supplement thereto.
(g)
Prior to any public
offering of Registrable Securities, the Company shall register or
qualify such Registrable Securities for offer and sale under the
securities or Blue Sky laws of all jurisdictions within the United
States as any Holder may request, to keep each such registration or
qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the
Registration Statements;
provided
, that in connection
with any such registration or qualification, the Company shall not
be required to (i) qualify to do business in any jurisdiction where
the Company would not otherwise be required to qualify, (ii)
subject itself to general taxation in any such jurisdiction, (iii)
file a general consent to
service of process
in any jurisdiction, or (iv) make any change to the Company’s
articles of incorporation or bylaws.
(h)
The Company shall
cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be
delivered to a transferee pursuant to the Registration
Statement(s), which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends,
and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holders may
request.
(i)
Upon the occurrence
of any event contemplated by Section 3(c)(v), as promptly as
reasonably possible, the Company shall prepare a supplement or
amendment, including a post-effective amendment, to the affected
Registration Statements or a supplement to the related Prospectus
or any document incorporated or deemed to be incorporated therein
by reference, and file any other required document so that, as
thereafter delivered, no Registration Statement nor any Prospectus
will contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading.
(j)
The Company shall
notify the Holders in writing of the happening of any event, as
promptly as practicable after becoming aware of such event, as a
result of which the prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a
material fact or 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 (
provided
, that in no event
shall such notice contain any material, nonpublic information), and
promptly prepare a supplement or amendment to such Registration
Statement to correct such untrue statement or omission. The Company
shall also promptly notify the Holders in writing when a prospectus
or any prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective
amendment has become effective.
(k)
If any Holder is
required under applicable securities laws to be described in the
Registration Statement as an underwriter, at the reasonable request
of such Holder, the Company shall furnish to such Holder, on the
date of the effectiveness of the Registration Statement and
thereafter from time to time on such dates as a Holder may
reasonably request: (i) a letter, dated such date, from the
Company’s independent certified public accountants in form
and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public
offering, addressed to the Holders, and (ii) an opinion, dated as
of such date, of counsel representing the Company for purposes of
such Registration Statement, in form, scope and substance
reasonably acceptable to such counsel and as is customarily given
in an underwritten public offering, addressed to the
Holders.
(l)
The Company shall
hold in confidence and not make any disclosure of information
concerning a Holder provided to the Company unless: (i) disclosure
of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any
Registration Statement, (iii) the release of such information is
ordered pursuant to a subpoena or other final,
non-appealable
order from a court or governmental body of competent jurisdiction,
or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or
any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning a Holder is
sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt written notice to
such Holder and allow such Holder, at the Holder’s expense,
to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.
(m)
The Company shall
use its commercially reasonable best efforts to cause all of the
Registrable Securities covered by a Registration Statement to be
listed on each Trading Market on which securities of the same class
or series issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the
rules of such exchange. The Company shall pay all fees and expenses
in connection with satisfying its obligation under this Section
3(m).
(n)
The Company shall
cooperate with the Holders who hold Registrable Securities being
offered and, to the extent applicable, facilitate the timely
preparation and delivery of certificates (not bearing any
restrictive legend to the extent permitted by the Purchase
Agreement) representing the Registrable Securities to be offered
pursuant to a Registration Statement and enable such certificates
to be in such denominations or amounts, as the case may be, as the
Holders may reasonably request and registered in such names as the
Holders may request.
(o)
If requested by a
Holder, the Company shall as soon as practicable: (i) incorporate
in a prospectus supplement or post-effective amendment such
information as a Holder reasonably requests to be included therein
relating to the sale and distribution of Registrable Securities,
including, without limitation, information with respect to the
number of Registrable Securities being offered or sold, the
purchase price being paid therefor and any other terms of the
offering of the Registrable Securities to be sold in such offering;
(ii) make all required filings of such prospectus supplement or
post-effective amendment after being notified of the matters to be
incorporated in such prospectus supplement or post-effective
amendment; and (iii) supplement or make amendments to any
Registration Statement if reasonably requested by a Holder holding
any Registrable Securities.
(p)
The Company shall
use its commercially reasonable best efforts to cause the
Registrable Securities covered by a Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of
such Registrable Securities.
4.
Registration Expenses
. All fees
and expenses incident to the performance of or compliance with this
Agreement by the Company shall be borne by the Company whether or
not any Registrable Securities are sold pursuant to a Registration
Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration
and filing fees (including, without limitation, fees and expenses
(A) with respect to filings required to be made with any Trading
Market on which the Common Stock is then listed or quoted for
trading, (B) with respect to filings with FINRA by any
underwriter’s counsel for compensation review pursuant to
FINRA Rule 5110, and (C) in compliance with applicable state
securities or
Blue Sky laws),
(ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is reasonably
requested by a Holder), (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company,
(v) Securities Act liability insurance, if the Company so desires
such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement. In addition, the
Company shall be responsible for all of its internal expenses
incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit and
the fees and expenses incurred in connection with the listing of
the Registrable Securities on any securities exchange as required
hereunder. In no event shall the Company be responsible for any
broker or similar commissions incurred by any Holder or, except to
the extent provided for in the Transaction Documents (as defined in
the Purchase Agreement), any legal fees or other cost of the
Holders in connection with this Agreement.
5.
Indemnification
.
(a)
Indemnification by the Company
.
The Company shall, notwithstanding any termination of this
Agreement, indemnify and hold harmless each Holder, the officers,
directors, agents, investment advisors, partners, members and
employees of each of them, each Person who controls any such Holder
(within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent
permitted by applicable law, from and against any and all losses,
claims, damages, liabilities, costs (including, without limitation,
reasonable costs of preparation and reasonable attorneys' fees) and
expenses (collectively, “
Losses
”), as incurred, arising out
of or relating to any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, any
Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of
prospectus or supplement thereto, in light of the circumstances
under which they were made) not misleading, except to the extent,
but only to the extent, that (1) such untrue statements or
omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for
use therein, or to the extent that such information relates to such
Holder or such Holder's proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in
writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto (it being understood that the
Holder has approved
Annex
A
hereto for this purpose) or (2) in the case of an
occurrence of an event of the type specified in Section
3(c)(ii)-(v), the use by such Holder of an outdated or defective
Prospectus after the Company has notified the Holder in writing
that the Prospectus is outdated or defective and prior to the
receipt by such Holder of an Advice (as defined below) or an
amended or supplemented Prospectus, but only if and to the extent
that following the receipt of the Advice or the amended or
supplemented Prospectus the misstatement or omission giving rise to
such Loss would have been corrected. The Company shall notify the
Holders promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b)
Indemnification by Holders
.
Each Holder shall, severally and not jointly, indemnify and hold
harmless the Company, its directors, officers, agents and
employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable
law, from and against all Losses, as incurred, arising solely out
of or based solely upon: (x) such Holder's failure to comply with
the prospectus delivery requirements of the Securities Act or (y)
any untrue statement of a material fact contained in any
Registration Statement, any Prospectus, or any form of prospectus,
or in any amendment or supplement thereto, or arising solely out of
or based solely upon any omission of a material fact required to be
stated therein or necessary to make the statements therein not
misleading to the extent, but only to the extent that, (1) such
untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such
Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method
of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in
the Registration Statement (it being understood that the Holder has
approved
Annex A
hereto for this purpose), such Prospectus or such form of
Prospectus or in any amendment or supplement thereto or (2) in the
case of an occurrence of an event of the type specified in Section
3(c)(ii)-(v), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing
that the Prospectus is outdated or defective and prior to the
receipt by such Holder of an Advice or an amended or supplemented
Prospectus, but only if and to the extent that following the
receipt of the Advice or the amended or supplemented Prospectus the
misstatement or omission giving rise to such Loss would have been
corrected. In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification
obligation.
(c)
Conduct of Indemnification
Proceedings
. If any Proceeding shall be brought or asserted
against any Person entitled to indemnity hereunder (an
“
Indemnified
Party
”), such Indemnified Party shall promptly notify
the Person from whom indemnity is sought (the “
Indemnifying Party
”) in writing,
and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred
in connection with defense thereof;
provided
, that the failure of
any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced
the Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party or Parties unless: (1) the Indemnifying
Party has agreed in writing to pay such fees and expenses; (2) the
Indemnifying Party shall have failed promptly to assume the defense
of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and
such Indemnified Party shall have been advised by counsel that
a
conflict of
interest is likely to exist if the same counsel were to represent
such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of
the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at
the expense of the Indemnifying Party);
provided
, that the Indemnifying
Party shall pay for no more than one separate set of counsel for
all Indemnified Parties and such legal counsel shall be selected by
the Required Holders. The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its
written consent, which consent shall not be unreasonably withheld.
No Indemnifying Party shall, without the prior written consent of
the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party,
unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject
matter of such Proceeding.
All
fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner
not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten Trading Days of written
notice thereof to the Indemnifying Party (regardless of whether it
is ultimately determined that an Indemnified Party is not entitled
to indemnification hereunder;
provided
, that the Indemnifying
Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to
indemnification hereunder).
(d)
Contribution
. If a claim for
indemnification under Section 5(a) or 5(b) is unavailable to an
Indemnified Party (by reason of public policy or otherwise), then
each Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as
is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact
or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct
or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to
include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred
by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such
party in accordance with its terms.
The
parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not
take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of
this Section 5(d), (i) no Person involved in the sale of
Registrable Securities which Person is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) in connection with
such sale shall be
entitled to contribution from any Person involved in such sale of
Registrable Securities who was not guilty of fraudulent
misrepresentation; and (ii) no Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Holder from the sale
of the Registrable Securities subject to the Proceeding exceeds the
amount of any damages that such Holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
The
indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6.
Reports Under the Exchange Act
.
With a view to making available to the Holders the benefits of Rule
144 or any other similar rule or regulation of the SEC that may at
any time permit the Holders to sell Registrable Securities of the
Company to the public without registration, the Company agrees, for
so long as Registrable Securities are outstanding and held by the
Holders, to:
(a)
make and keep
public information available, as those terms are understood,
defined and required in Rule 144;
(b)
file with the SEC
in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act so long as
the Company remains subject to such requirements and the filing of
such reports and other documents is required for the applicable
provisions of Rule 144; and
(c)
furnish to each
Holder so long as such Holder owns Registrable Securities, promptly
upon request, such information as may be reasonably and customarily
requested to permit the Holders to sell such securities pursuant to
Rule 144 without registration.
7.
Assignment of Registration
Rights
. The rights under this Agreement shall be
automatically assignable by the Investors to any permitted
transferee of all or any portion of such Investor’s
Registrable Securities if: (i) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within five (5) Trading
Days after such assignment; (ii) the Company is, within five (5)
Trading Days after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii)
immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is
restricted under the Securities Act or applicable state securities
laws; (iv) at or before the time the Company receives the written
notice contemplated by clause (ii) of this sentence the transferee
or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein; and (v) such transfer shall
have been made in accordance with the applicable requirements of
the Purchase Agreement.
8.
Miscellaneous
.
(a)
Third Party Beneficiary
. The
Placement Agent is an intended third party beneficiary of this
Agreement and have all of the rights of an “Investor”
under this Agreement and the Placement Agent Warrant Shares (and
any capital stock of the Company issued or
issuable, with
respect to the warrants issued to Placement Agent in connection
with the financing that is the subject of the Purchase Agreement,
as a result of any stock split, stock dividend, recapitalization,
exchange, anti-dilution adjustment or similar event or otherwise,
without regard to any limitations on exercises of the Warrants, if
any) constitute Registrable Securities for all purposes of this
Agreement.
(b)
Remedies
. In the event of a
breach by the Company or by a Holder, of any of their 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, will
be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages
would not provide adequate compensation for any losses incurred by
reason of a breach by it of any of the provisions of this Agreement
and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(c)
No Piggyback on Registrations
.
Neither the Company nor any of its security holders (other than the
Holders in such capacity pursuant hereto) may include securities of
the Company in a Registration Statement other than the Registrable
Securities, and the Company shall not during the Effectiveness
Period enter into any agreement providing any such right to any of
its security holders without the prior written consent of the
Required Holders, which shall not be unreasonably
withheld.
(d)
Compliance
. Each Holder
covenants and agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the
Registration Statement.
(e)
Discontinued Disposition
. Each
Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence
of any event of the kind described in Section 3(c), such Holder
will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement or until it is advised in writing (the
“Advice”
) by the
Company that the use of the applicable Prospectus may be resumed,
and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration
Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph.
(f)
Piggy-Back Registrations
. If at
any time during the Effectiveness Period there is not an effective
Registration Statement covering all of the Registrable Securities
and the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its
own account or the account of others under the Securities Act of
any of its equity securities, other than on Form S-4 or Form S-8
(each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other
employee benefit plans, then the Company shall send to each Holder
written notice of such determination and, if within fifteen
calendar days after receipt
of such
notice, any such Holder shall so request in writing, the Company
shall include in such registration statement all or any part of
such Registrable Securities such holder requests to be registered,
subject to customary underwriter cutbacks applicable to all holders
of registration rights.
(g)
Amendments and Waivers.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written
consent of the Company and the Required Holders. Any amendment or
waiver effected in accordance with this Section 8(g) shall be
binding upon each Investor and the Company. No such amendment shall
be effective to the extent that it applies to less than all of the
Holders. No consideration shall be offered or paid to any Person to
amend or consent to a waiver or modification of any provision of
this Agreement unless the same consideration also is offered to all
of the parties to this Agreement. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of certain
Holders and that does not directly or indirectly affect the rights
of other Holders may be given by Holders of at least a majority of
the Registrable Securities to which such waiver or consent
relates.
(h)
Notices
. Any notices, consents,
waivers or other communications required or permitted to be given
under the terms of this Agreement must be in writing and will be
deemed to have been delivered if delivered in accordance with
Section 6.3 of the Purchase Agreement.
(i)
Successors and Assigns
. This
Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of each of the parties and shall
inure to the benefit of each Holder. The Company may not assign its
rights or obligations hereunder without the prior written consent
of the Required Holders,
provided
, that in the event
that the Company is a party to a merger, consolidation, share
exchange or similar business combination transaction in which the
Common Stock is converted into the equity securities of another
Person, from and after the effective time of such transaction, such
Person shall, by virtue of such transaction, be deemed to have
assumed the obligations of the Company hereunder, the term
“Company” shall be deemed to refer to such Person and
the term “Registrable Securities” shall be deemed to
include the securities received by the Investors in connection with
such transaction unless such securities are otherwise freely
tradable by the Investors after giving effect to such transaction.
Each Holder may assign their respective rights hereunder in the
manner and to the Persons as permitted under the Purchase
Agreement.
(j)
Execution and Counterparts
.
This Agreement may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and,
all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by
facsimile or email transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect
as if such facsimile or email signature were the original
thereof.
(k)
Governing Law
. All questions
concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed
and
enforced in
accordance with the internal laws of the State of Nevada, without
regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this
Agreement (whether brought against a party hereto or its respective
Affiliates, employees or agents) will be commenced in the Nevada
Courts. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the Nevada Courts for the adjudication of
any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any Proceeding, any
claim that it is not personally subject to the jurisdiction of any
Nevada Court, or that such Proceeding has been commenced in an
improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to
process being served in any such 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 Agreement 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. Each
party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in
any Proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence a
Proceeding to enforce any provisions of this Agreement, then the
prevailing party in such 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 Proceeding.
(l)
Cumulative Remedies
. The
remedies provided herein are cumulative and not exclusive of any
remedies provided by law.
(m)
Entire Agreement
. This
Agreement, the other Transaction Documents and the instruments
referenced herein and therein constitute the entire agreement among
the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and
therein. This Agreement, the other Transaction Documents and the
instruments referenced herein and therein supersede all prior
agreements and understandings among the parties hereto with respect
to the subject matter hereof and thereof.
(n)
Severability
. If any term,
provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable efforts to find
and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
(o)
Headings
. The headings in this
Agreement are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.
(p)
Independent Nature of Holders'
Obligations and Rights
. The obligations of each Holder under
this Agreement are several and not joint with the obligations of
each other Holder, and no Holder shall be responsible in any way
for the performance of the obligations of any other Holder under
this Agreement. Nothing contained herein or in any Transaction
Document, and no action taken by any Holder pursuant thereto, shall
be deemed to constitute the Holders as a partnership, an
association, a joint venture or any other kind of entity, or create
a presumption that the Holders are in any way acting in concert or
as a group with respect to such obligations or the transactions
contemplated by this Agreement or any other Transaction Document.
Each Holder acknowledges that no other Holder will be acting as
agent of such Holder in enforcing its rights under this Agreement.
Each Holder 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 Holder
to be joined as an additional party in any Proceeding for such
purpose. The Company acknowledges that each of the Holders has been
provided with the same Registration Rights Agreement for the
purpose of closing a transaction with multiple Holders and not
because it was required or requested to do so by any
Holder.
(signature page follows)
IN WITNESS WHEREOF
, the parties have
executed this Registration Rights Agreement as of the date first
written above.
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COMPANY:
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KNOW LABS, INC.
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By:
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Name:
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Title:
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INVESTORS:
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The
Investors executing the Signature Page in the form attached hereto
as Annex C and delivering the same to the Company or its agents
shall be deemed to have executed this Agreement and agreed to the
terms hereof.
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Annex
A
Plan
of Distribution
The
Selling Stockholders and any of their pledgees, donees,
transferees, assignees and successors-in-interest may, from time to
time, sell any or all of their shares of common stock on any stock
exchange, market or trading facility on which the shares are traded
or quoted or in private transactions. These sales may be at fixed
or negotiated prices. The Selling Stockholders may use any one or
more of the following methods when selling shares:
ordinary brokerage
transactions and transactions in which the broker-dealer solicits
Investors;
block
trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
purchases by a
broker-dealer as principal and resale by the broker-dealer for its
account; an exchange distribution in accordance with the rules of
the applicable exchange; privately negotiated
transactions;
through
the writing of options on the shares;
to
cover short sales made after the date that this Registration
Statement is declared effective by the Commission;
broker-dealers may
agree with the Selling Stockholders to sell a specified number of
such shares at a stipulated price per share; and
a
combination of any such methods of sale.
The
selling stockholders may also sell shares under Rule 144 of the
Securities Act of 1933, as amended (the “Securities
Act”), if available, rather than under this prospectus. The
selling stockholders shall have the sole and absolute discretion
not to accept any purchase offer or make any sale of shares if it
deems the purchase price to be unsatisfactory at any particular
time.
The
selling stockholders or their respective pledgees, donees,
transferees or other successors in interest, may also sell the
shares directly to market makers acting as principals and/or
broker-dealers acting as agents for themselves or their customers.
Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders
and/or the purchasers of shares for whom such broker-dealers may
act as agents or to whom they sell as principal or both, which
compensation as to a particular broker-dealer might be in excess of
customary commissions. Market makers and block purchasers
purchasing the shares will do so for their own account and at their
own risk. It is possible that a selling stockholder will attempt to
sell shares of common stock in block transactions to market makers
or other purchasers at a price per share which may be below the
then existing market price. We cannot assure that all or any of the
shares offered in this prospectus will be issued to, or sold
by,
the selling
stockholders. The selling stockholders and any brokers, dealers or
agents, upon effecting the sale of any of the shares offered in
this prospectus, may be deemed to be “underwriters” as
that term is defined under the Securities Act, the Exchange Act and
the rules and regulations of such acts. In such event, any
commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed
to be underwriting commissions or discounts under the Securities
Act.
We are
required to pay all fees and expenses incident to the registration
of the shares, including fees and disbursements of counsel to the
selling stockholders, but excluding brokerage commissions or
underwriter discounts.
The
selling stockholders, alternatively, may sell all or any part of
the shares offered in this prospectus through an underwriter. The
selling stockholders have not entered into any agreement with a
prospective underwriter and there is no assurance that any such
agreement will be entered into.
The
selling stockholders may pledge their shares to their brokers under
the margin provisions of customer agreements. If a selling
stockholder defaults on a margin loan, the broker may, from time to
time, offer and sell the pledged shares. The selling stockholders
and any other persons participating in the sale or distribution of
the shares will be subject to applicable provisions of the Exchange
Act, and the rules and regulations under such act, including,
without limitation, Regulation M. These provisions may restrict
certain activities of, and limit the timing of purchases and sales
of any of the shares by, the selling stockholders or any other such
person. In the event that any of the selling stockholders are
deemed an affiliated purchaser or distribution participant within
the meaning of Regulation M, then the selling stockholders will not
be permitted to engage in short sales of common stock. Furthermore,
under Regulation M, persons engaged in a distribution of securities
are prohibited from simultaneously engaging in market making and
certain other activities with respect to such securities for a
specified period of time prior to the commencement of such
distributions, subject to specified exceptions or exemptions. In
addition, if a short sale is deemed to be a stabilizing activity,
then the selling stockholders will not be permitted to engage in a
short sale of our common stock. All of these limitations may affect
the marketability of the shares.
If a
selling stockholder notifies us that it has a material arrangement
with a broker-dealer for the resale of the common stock, then we
would be required to amend the registration statement of which this
prospectus is a part, and file a prospectus supplement to describe
the agreements between the selling stockholder and the
broker-dealer.
Annex
B
KNOW
LABS, INC.
Selling
Securityholder Notice and Questionnaire
The
undersigned beneficial owner of common stock (the
“Common Stock”
), of Know
Labs, Inc., a Nevada corporation (the
“Company”
), understands that
the Company has filed or intends to file with the Securities and
Exchange Commission (the
“Commission”
) a Registration
Statement for the registration and resale of the Registrable
Securities, in accordance with the terms of the Registration Rights
Agreement, dated as of [
], 2019 (the
“Registration Rights
Agreement”
), among the Company and the Investors named
therein. A copy of the Registration Rights Agreement is available
from the Company upon request at the address set forth below. All
capitalized terms used and not otherwise defined herein shall have
the meanings ascribed thereto in the Registration Rights
Agreement.
The
undersigned hereby provides the following information to the
Company and represents and warrants that such information is
accurate:
QUESTIONNAIRE
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1.
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Name.
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(a)
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Full Legal Name of
Selling Securityholder
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(b)
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Full Legal Name of
Registered Holder (if not the same as (a) above) through which
Registrable Securities Listed in Item 3 below are
held:
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(c)
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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 the questionnaire):
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2.
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Address
for Notices to Selling Securityholder:
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Telephone:
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Fax:
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Contact
Person:
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3.
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Beneficial
Ownership of Registrable Securities:
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Type and Principal
Amount of Registrable Securities beneficially
owned:
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4.
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Broker-Dealer
Status:
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(a)
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Are you a
broker-dealer?
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Yes ☐ No
☐
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Note:
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If yes, the
Commission’s staff has indicated that you should be
identified as an underwriter in the Registration
Statement.
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(b)
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Are you an
affiliate of a broker-dealer?
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Yes ☐ No
☐
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(c)
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If you are an
affiliate of a broker-dealer, do you certify that you bought 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?
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Yes ☐ No
☐
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Note:
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I
f no, the
Commission’s staff has indicated that you should be
identified as an underwriter in the Registration
Statement
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5.
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Beneficial
Ownership of Other Securities of the Company Owned by the Selling
Securityholder.
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Except as set forth below in this Item 5, the undersigned is not
the beneficial or registered owner of any securities of the Company
other than the Registrable Securities listed above in Item
3.
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Type and Amount of
Other Securities beneficially owned by the Selling
Securityholder:
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6.
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Relationships
with the Company:
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Except as set forth below, neither the undersigned nor any of its
affiliates, 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.
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State any
exceptions here:
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7.
The
Company has advised each Selling Stockholder that it is the view of
the Commission that it may not use shares registered on the
Registration Statement to cover short sales of Common Stock made
prior to the date on which the Registration Statement is declared
effective by the Commission, in accordance with 1997 Securities and
Exchange Commission Manual of Publicly Available Telephone
Interpretations Section A.65. If a Selling Stockholder uses the
prospectus for any sale of the Common Stock, it will be subject to
the prospectus delivery requirements of the Securities Act. The
Selling Stockholders will be responsible to comply with the
applicable provisions of the Securities Act and Exchange Act, and
the rules and regulations thereunder promulgated, including,
without limitation, Regulation M, as applicable to such Selling
Stockholders in connection with resales of their respective shares
under the Registration Statement.
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 and prior to the Effective Date
for the Registration Statement.
Certain
legal consequences arise from being named as a Selling
Securityholder in the Registration Statement and related
prospectus. Accordingly, the undersigned is advised to consult
their own securities law counsel regarding the consequence of being
named or not being named as a Selling Securityholder in the
Registration Statement and the related prospectus.
By
signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items 1 through 6
and the inclusion of such information in the Registration Statement
and the related prospectus. 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. The undersigned hereby elects to include the
Registrable Securities owned by it and listed above in Item 3
(unless otherwise specified in Item
3) in the
Registration Statement.
IN
WITNESS WHEREOF the undersigned, by authority duly given, has
caused this Notice and Questionnaire to be executed and delivered
either in person or by its duly authorized agent.
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Dated:
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Beneficial
Owner
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By: Name:
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Title:
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PLEASE
EMAIL A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE
TO:
KNOW
LABS, INC.
Attention: Ron
Erickson
Email:
ron@knowlabs.co
Annex
C
Registration
Rights Agreement Investor Counterpart Signature Page
The
undersigned, desiring to: (i) enter into this Registration Rights
Agreement, dated as of [_______________ ], 2019 (the
“
Agreement
”),
between the undersigned, Know Labs, Inc., a Nevada corporation (the
“
Company
”), and
the other parties thereto, in or substantially in the form
furnished to the undersigned and (ii) purchase the securities of
the Company appearing below, hereby agrees to purchase such
securities from the Company as of the Closing and further agrees to
join the Agreement as a party thereto, with all the rights and
privileges appertaining thereto, and to be bound in all respects by
the terms and conditions thereof.
IN WITNESS WHEREOF
, the undersigned has
executed the Agreement as of [______________ ], 2019.
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Name and Address, Fax No. and Social Security No./EIN of
Investor
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Fax No.
__________________________________
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Soc. Sec. No./EIN:
_________________________
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If a partnership, corporation, trust or other business
entity
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By:
Name:
Title:
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If an individual
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Signature
____________________________________
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Investment
Amount: _______________________________
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Amount
of Units to be
Purchased:
_______________________
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ADDRESS
FOR NOTICE
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c/o:
____________________________________________
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Street:
____________________________________________
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City/State/Zip:
____________________________________________
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Attention:
____________________________________________
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Tel:
____________________________________________
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Fax:
____________________________________________
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DELIVERY
INSTRUCTIONS
(if
different from above)
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c/o:
____________________________________________
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Street:
____________________________________________
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City/State/Zip:
____________________________________________
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Attention:
____________________________________________
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Tel:
____________________________________________
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Schedule
A
SCHEDULE
OF INVESTORS
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Name
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Investment
Amount
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TOTALS
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