EXHIBIT 10.1

 

EQUITY PURCHASE AGREEMENT

 

This EQUITY PURCHASE AGREEMENT (the “Agreement”), dated as of September 16, 2015
(the “Execution Date”), is entered into by and between Graphite Corp., a Nevada
corporation (the “Company”), and Premier Venture Partners, LLC, a California
limited liability company (the “Investor”).

 

RECITALS

 

A. The parties desire that, upon the terms and subject to the conditions
contained herein, the Investor shall invest up to Two Million Dollars
($2,000,000) to purchase the Company’s common stock, no par value (the “Common
Stock”);

 

B. Such investments will be made in reliance upon the exemption from securities
registration afforded by Section 4(2) of the Securities Act of 1933, as amended
(the “1933 Act”), Rule 506 of Regulation D promulgated by the SEC under the 1933
Act, and/or upon such other exemption from the registration requirements of the
1933 Act as may be available with respect to any or all of the sales of shares
of the Common Stock made hereunder; and

 

C. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit A (the “Registration Rights
Agreement”) pursuant to which the Company has agreed to provide the Investor
certain rights to register shares of the Common Stock sold hereunder pursuant to
the 1933 Act, and the rules and regulations promulgated thereunder, and
applicable state securities laws.

 

NOW THEREFORE, in consideration of the foregoing recitals, which shall be
considered an integral part of this Agreement, the covenants and agreements set
forth hereafter, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Investor hereby
agree as follows:

 

SECTION 1
DEFINITIONS

 

1.1 For all purposes of and under this Agreement, the following terms shall have
the respective meanings below, and such meanings shall be equally applicable to
the singular and plural forms of such defined terms.

 

“1933 Act” shall have the meaning set forth in the recitals.

 

“1934 Act” shall mean the Securities Exchange Act of 1934, as amended, or any
similar federal statute, and the rules and regulations of the SEC thereunder,
all as the same will then be in effect.

 

“Additional Commitment Shares” shall mean $25,000 in restricted Shares of the
Company priced at the average VWAP of the Shares for the three trading days
prior to the date that Investor has purchased in the aggregate $500,000 in
Shares from the Company and issued to Investor pursuant to Section 10.1(b).

 

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“Affiliate” shall have the meaning set forth in Section 5.7.

 

“Agreement” shall have the meaning set forth in the preamble.

 

“Articles of Incorporation” shall have the meaning set forth in Section 4.3.

 

“By-laws” shall have the meaning set forth in Section 4.3.

 

“Closing” shall have the meaning set forth in Section 2.4.

 

“Closing Date” shall have the meaning set forth in Section 2.4.

 

“Common Stock” shall have the meaning set forth in the recitals.

 

“Commitment Shares” shall mean the Initial Commitment Shares and the Additional
Commitment Shares.

 

“Control” or “Controls” shall have the meaning set forth in Section 5.7.

 

“Effective Date” shall mean the date the SEC declares effective under the 1933
Act the Registration Statement covering the Securities.

 

“Environmental Laws” shall have the meaning set forth in Section 4.13.

 

“Execution Date” shall have the meaning set forth in the preamble.

 

“Indemnified Liabilities” shall have the meaning set forth in Section 9.

 

“Indemnitees” shall have the meaning set forth in Section 9.

 

“Indemnitor” shall have the meaning set forth in Section 9.

 

“Initial Commitment Shares” shall mean 3,424,657 Shares issued to Investor
pursuant to Section 10.1(a) and fully earned by Investor as of the Execution
Date.

 

“Ineffective Period” shall mean any period of time that the Registration
Statement or any supplemental registration statement becomes ineffective or
unavailable for use for the sale or resale, as applicable, of any or all of the
Registrable Securities (as defined in the Registration Rights Agreement) for any
reason (or in the event the prospectus under either of the above is not current
and deliverable) during any time period required under the Registration Rights
Agreement.

 

“Investor” shall have the meaning set forth in the preamble.

 

“Material Adverse Effect” shall have the meaning set forth in Section 4.1.

 

“Maximum Common Stock Issuance” shall have the meaning set forth in Section 2.6.

 

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“Open Period” shall mean the period beginning on and including the Tenth Trading
Day after the Effective Date and ending on the earlier to occur of (i) the date
which is thirty-six (36) months from the Effective Date; or (ii) termination of
the Agreement in accordance with Section 8.

 

“Pricing Period” shall mean, with respect to a particular Put Notice, the Five
(5) Trading Days immediately after the applicable Put Notice Date unless
extended pursuant to Section 2.7.

 

“Principal Market” shall mean the New York Stock Exchange, the NYSE Amex, the
Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, the OTCQB or the OTC Bulletin Board, whichever is the principal market
on which the Common Stock is listed.

 

“Prospectus” shall mean the prospectus, preliminary prospectus and supplemental
prospectus used in connection with the Registration Statement.

 

“Purchase Amount” shall mean the total amount being paid by the Investor on a
particular Closing Date to purchase the Securities.

 

“Purchase Price” shall have the meaning set forth in Section 2.5.

 

“Put” shall have the meaning set forth in Section 2.2.

 

“Put Amount” shall have the meaning set forth in Section 2.2.

 

“Put Notice” shall mean a written notice sent to the Investor by the Company
stating the Put Amount in Shares that the Company intends to sell to the
Investor pursuant to the terms of the Agreement and stating the current number
of Shares issued and outstanding on such date.

 

“Put Notice Date” shall mean the Trading Day on which the Investor receives a
Put Notice, determined as follows: a Put Notice shall be deemed delivered on (a)
the Trading Day it is received by facsimile or otherwise by the Investor if such
notice is received prior to 9:30 am Eastern Time, or (b) the immediately
succeeding Trading Day if it is received by facsimile or otherwise after 9:30 am
Eastern Time on a Trading Day. No Put Notice may be deemed delivered on a day
that is not a Trading Day.

 

“Put Restriction” shall mean the days between the beginning of the Pricing
Period and Closing Date for a particular Put Notice. During this time, the
Company shall not be entitled to deliver another Put Notice.

 

“Registration Rights Agreement” shall have the meaning set forth in the
recitals.

 

“Registration Statement” means the registration statement of the Company filed
under the 1933 Act covering the resale of the Securities issuable hereunder by
the Investor, in the manner described in such Registration Statement.

 

“Related Party” shall have the meaning set forth in Section 5.7.

 

“Resolutions” shall have the meaning set forth in Section 7.5.

 

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“SEC” shall mean the U.S. Securities and Exchange Commission.

 

“SEC Documents” shall have the meaning set forth in Section 4.6.

 

“Securities” shall mean the shares of Common Stock issued pursuant to the terms
of the Agreement.

 

“Shares” shall mean the shares of the Company’s Common Stock.

 

“Short Sale” shall have the meaning set forth in Regulation SHO Rule 200 under
the 1934 Act.

 

“Subsidiaries” shall have the meaning set forth in Section 4.1.

 

“Trading Day” shall mean any day on which the Principal Market for the Common
Stock is open for trading, from the hours of 9:30 am until 4:00 pm.

 

“Transaction Documents” shall mean this Agreement and the Registration Rights
Agreement between the Company and the Investor as of the date herewith, and any
other agreements between the Company and the Investor executed in conjunction
with this transaction.

 

“VWAP” means the volume weighted average price (the aggregate sales price of all
trades of Common Stock during a Trading Day divided by the total number of
shares of Common Stock traded during such Trading Day) of the Common Stock
during a Trading Day.

 

SECTION 2
PURCHASE AND SALE OF COMMON STOCK

 

2.1 Purchase and Sale Of Common Stock. Subject to the terms and conditions set
forth herein, the Company shall issue and sell to the Investor, and the Investor
shall purchase from the Company, up to that number of Shares having an aggregate
Purchase Price of Two Million Dollars ($2,000,000).

 

2.2 Delivery of Put Notices. Subject to the terms and conditions of the
Transaction Documents, and from time to time during the Open Period, the Company
may, in its sole discretion, deliver a Put Notice to the Investor which states
the number of Shares that the Company intends to sell to the Investor on a
Closing Date (the “Put”). The Put Notice shall be in the form attached hereto as
Exhibit B and shall include a copy of a legal opinion from the Company’s legal
counsel addressed to Company’s transfer agent confirming that the Shares being
sold pursuant to such Put Notice have been properly registered and may be
delivered to Investor without restrictive legend. The amount of Shares that the
Company shall be entitled to Put to the Investor per any applicable Put Notice
(the “Put Amount”) shall not exceed 200% of the average daily trading volume of
Company’s common stock on the five Trading Days prior to the date the Put Notice
is received by Investor (the “Maximum Put Amount”). In addition, the minimum Put
Amount (the “Minimum Put Amount”) shall not be less than the number of Shares
that, when multiplied by the VWAP of the Shares immediately prior to such Put
Notice Date, is at least $4,000. If the Maximum Put Amount is less than the
Minimum Put Amount, the Company may not deliver a Put Notice. During the Open
Period, the Company shall not be entitled to submit a subsequent Put Notice
until after the previous Closing has been completed.

 

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2.3 Conditions to Investor’s Obligation to Purchase Shares. Notwithstanding
anything to the contrary in this Agreement, the Company shall not be entitled to
deliver a Put Notice and the Investor shall not be obligated to purchase any
Shares at a Closing unless each of the following conditions are satisfied:

 

(a) a Registration Statement shall have been declared effective and shall remain
effective and available for the resale of all the Registrable Securities (as
defined in the Registration Rights Agreement) at all times until the Closing
with respect to the subject Put Notice;

 

(b) at all times during the period beginning on the related Put Notice Date and
ending on and including the related Closing Date, the Common Stock (i) shall
have been listed or quoted for trading on the Principal Market, (ii) shall not
have been suspended from trading thereon, and (iii) the Company shall not have
been notified of any pending or threatened proceeding or other action to suspend
the trading of the Common Stock;

 

(c) the Company has complied with its obligations and is otherwise not in breach
of or in default under, this Agreement, the Registration Rights Agreement or any
other agreement executed in connection herewith which has not been cured prior
to delivery of the Investor’s Put Notice Date;

 

(d) no injunction shall have been issued and remain in force, or action
commenced by a governmental authority which has not been stayed or abandoned,
prohibiting the purchase or the issuance of the Securities;

 

(e) the issuance of the Securities will not violate any shareholder approval
requirements of the Principal Market; and

 

(f) the highest bid price for the Shares is greater than $.001.

 

If any of the events described in clauses (a) through (f) above is not satisfied
during a Pricing Period, then the Investor shall have no obligation to purchase
the Put Amount of Shares set forth in the applicable Put Notice.

 

2.4 Mechanics of Purchase Of Shares By Investor. Subject to the satisfaction of
the conditions set forth in Sections 2.5, 7 and 8 of this Agreement, the closing
of the purchase by the Investor of Shares (a “Closing”) shall occur on the date
which is the sixth (6) Trading Day following the applicable Put Notice Date
(each a “Closing Date”).Upon each such Closing Date, the Company shall use all
commercially reasonable efforts to cause its transfer agent to electronically
transmit the Securities by crediting the account of the Investor’s prime broker
(as specified by the Investor within a time reasonably in advance of the
Investor’s notice) with DTC through its Deposit Withdrawal Agent Commission
(“DWAC”) system. Within one business day after receipt of the Securities, the
Investor shall deliver to the Company the Purchase Price to be paid for such
shares, determined as set forth in Section 2.5. Notwithstanding the preceding
sentence, to the extent that the Purchase Price for any particular Put would
exceed $100,000, then the amount over $100,000 may be paid by the Investor
within 16 Trading Days after Investor’s receipt of the Securities.

 

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2.5 Purchase Price. The Purchase Price for the Securities for each Put shall be
the Put Amount multiplied by seventy five percent (75%) of the lowest individual
daily VWAP of the Shares during the Pricing Period.

 

2.6 Overall limit on common stock issuable. Notwithstanding anything contained
herein to the contrary, if during the Open Period the Company becomes listed on
an exchange that limits the number of shares of Common Stock that may be issued
without shareholder approval, then the number of Shares issuable by the Company
and purchasable by the Investor, shall not exceed that number of the shares of
Common Stock that may be issuable without shareholder approval (the “Maximum
Common Stock Issuance”). If such issuance of shares of Common Stock could cause
a delisting on the Principal Market, then the Maximum Common Stock Issuance
shall first be approved by the Company’s shareholders in accordance with
applicable law and the By-laws and the Articles of Incorporation of the Company,
if such issuance of shares of Common Stock could cause a delisting on the
Principal Market. The parties understand and agree that the Company’s failure to
seek or obtain such shareholder approval shall in no way adversely affect the
validity and due authorization of the issuance and sale of Securities or the
Investor’s obligation in accordance with the terms and conditions hereof to
purchase a number of Shares in the aggregate up to the Maximum Common Stock
Issuance limitation, and that such approval pertains only to the applicability
of the Maximum Common Stock Issuance limitation provided in this Section 2.6.

 

2.7 Failure to Deliver Shares. If after one Trading Day following any Closing
Date, the Company has failed to deliver any Securities pursuant to this
Agreement (and such failure is not caused by the Investor), then the Pricing
Period for such Put Notice shall be extended from the fifth Trading Day
following a Put Notice until the date which is the Trading Day immediately prior
to the date which the Securities are actually received by the Investor.

 

2.8 Limitation on Amount of Ownership. Notwithstanding anything to the contrary
in this Agreement, in no event shall the Investor be entitled to purchase that
number of Shares, which when added to the sum of the number of shares of Common
Stock beneficially owned (as such term is defined under Section 13(d) and Rule
13d-3 of the 1934 Act), by the Investor, would exceed 4.99% of the number of
shares of Common Stock outstanding on the Closing Date, as determined in
accordance with Rule 13d-1(j) of the 1934 Act.

 

SECTION 3
INVESTOR’S REPRESENTATIONS, WARRANTIES AND COVENANTS

 

The Investor represents and warrants to the Company, and covenants, that:

 

3.1 Sophisticated Investor. The Investor has, by reason of its business and
financial experience, such knowledge, sophistication and experience in financial
and business matters and in making investment decisions of this type that it is
capable of (i) evaluating the merits and risks of an investment in the
Securities and making an informed investment decision; (ii) protecting its own
interest; and (iii) bearing the economic risk of such investment for an
indefinite period of time.

 

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3.2 Authorization; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Investor and is a valid and
binding agreement of the Investor enforceable against the Investor in accordance
with its terms, subject to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.

 

3.3 Section 9 of the 1934 Act. During the term of this Agreement, the Investor
will comply with the provisions of Section 9 of the 1934 Act, and the rules
promulgated thereunder, with respect to transactions involving the Common Stock.
The Investor agrees not engage in any Short Sale of the Shares, either directly
or indirectly through its affiliates, principals, advisors or other parties
during the term of this Agreement.

 

3.4 Accredited Investor. Investor is an “Accredited Investor” as that term is
defined in Rule 501(a) of Regulation D of the 1933 Act.

 

3.5 No conflicts. The execution, delivery and performance of the Transaction
Documents by the Investor and the consummation by the Investor of the
transactions contemplated hereby and thereby will not result in a violation of
operating agreement or other organizational documents of the Investor.

 

3.6 Opportunity to Discuss. The Investor has received all materials relating to
the Company’s business, finance and operations, which it has requested. The
Investor has had an opportunity to discuss the business, management and
financial affairs of the Company with the Company’s management.

 

3.7 Investment Purposes. The Investor is purchasing the Securities for its own
account for investment purposes and not with a view towards distribution and
agrees to resell or otherwise dispose of the Securities solely in accordance
with the registration provisions of the 1933 Act (or pursuant to an exemption
from such registration provisions).

 

3.8 No Registration as a Dealer. The Investor is not and will not be required to
be registered as a “dealer” under the 1934 Act, either as a result of its
execution and performance of its obligations under this Agreement or otherwise.

 

3.9 Good Standing. The Investor is a limited liability company, duly organized,
validly existing and in good standing in the State of California.

 

3.10 Tax Liabilities. The Investor understands that it is liable for its own tax
liabilities.

 

3.11 Regulation M. The Investor will comply with Regulation M under the 1934
Act, if applicable.

 

3.12 Short Sale. During the term of this Agreement, Investor agrees not engage
in any Short Sale of the Shares.

 

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SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in the Schedules attached hereto, or as disclosed on the
Company’s SEC Documents, the Company represents and warrants to the Investor
that:

 

4.1 Organization and Qualification. The Company is a corporation duly organized
and validly existing in good standing under the laws of the State of Nevada, and
has the requisite corporate power and authorization to own its properties and to
carry on its business as now being conducted. Both the Company and the companies
it owns or controls (“Subsidiaries”) are duly qualified to do business and are
in good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this Agreement, “Material
Adverse Effect ” means a change, event, circumstance, effect or state of facts
that has had or is reasonably likely to have, a material adverse effect on the
business, properties, assets, operations, results of operations, financial
condition or prospects of the Company and its Subsidiaries, if any, taken as a
whole, or on the transactions contemplated hereby or by the agreements and
instruments to be entered into in connection herewith, or on the authority or
ability of the Company to perform its obligations under the Transaction
Documents.

 

4.2 Authorization; Enforcement; Compliance with Other Instruments.

 

(a) The Company has the requisite corporate power and authority to enter into
and perform this Investment Agreement and the Registration Rights Agreement
(collectively, the “Transaction Documents”), and to issue the Securities in
accordance with the terms hereof and thereof.

 

(b) The execution and delivery of the Transaction Documents by the Company and
the consummation by it of the transactions contemplated hereby and thereby,
including without limitation the issuance of the Securities pursuant to this
Agreement, have been duly and validly authorized by the Company’s Board of
Directors and no further consent or authorization is required by the Company and
its Board of Directors, and no further consent or authorization is currently
required by its shareholders.

 

(c) The Transaction Documents have been duly and validly executed and delivered
by the Company.

 

(d) The Transaction Documents constitute the valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors’
rights and remedies.

 

4.3 Capitalization. As of the date hereof, the authorized capital stock of the
Company consists of, 300,000,000 shares of the Common Stock, $0.0001 par value,
of which as of the date hereof, there are at least 195,000,000 shares issued and
outstanding. All of such outstanding shares have been, or upon issuance will be,
validly issued and are fully paid and nonassessable.

 

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 Except as disclosed in the Company’s publicly available filings with the SEC or
as otherwise set forth on Schedule 4.3:

 

(a) no shares of the Company’s capital stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company;

 

(b) there are no outstanding debt securities;

 

(c) there are no outstanding shares of capital stock, options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries 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 or any of its Subsidiaries;

 

(d) there are no agreements or arrangements under which the Company or any of
its Subsidiaries is obligated to register the sale of any of their securities
under the 1933 Act (except the Registration Rights Agreement);

 

(e) there are no outstanding securities of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries;

 

(f) there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities as described
in this Agreement;

 

(g) the Company does not have any stock appreciation rights or “phantom stock”
plans or agreements or any similar plan or agreement; and

 

(h) there is no dispute as to the classification of any shares of the Company’s
capital stock.

 

The Company has furnished to the Investor, or the Investor has had access
through EDGAR to, true and correct copies of the Company’s Articles of
Incorporation, as in effect on the date hereof (the “Articles of
Incorporation”), and the Company’s By-laws, as in effect on the date hereof (the
“By-laws”), and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect thereto.

 

4.4 Issuance of Shares. As of the Effective Date, the Company will have reserved
the amount of Shares included in the Registration Statement for issuance
pursuant to the Transaction Documents, which will have been duly authorized and
reserved (subject to adjustment pursuant to the Company’s covenant set forth in
Section 5.5 below) pursuant to this Agreement. Upon issuance in accordance with
this Agreement, the Securities will be validly issued, fully paid for and
non-assessable and free from all taxes, liens and charges with respect to the
issuance thereof. In the event the Company cannot reserve a sufficient number of
Shares for issuance pursuant to this Agreement, the Company will use its best
efforts to authorize and reserve for issuance the number of Shares required for
the Company to perform its obligations hereunder as soon as reasonably
practicable.

 

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4.5 No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby will not (i) result in a violation of the
Articles of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock of the Company or the
By-laws; or (ii) conflict with, or constitute a material default (or an event
which with notice or lapse of time or both would become a material default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, contract, indenture mortgage,
indebtedness or instrument to which the Company or any of its Subsidiaries is a
party, or to the Company’s knowledge result in a violation of any law, rule,
regulation, order, judgment or decree (including United States federal and state
securities laws and regulations and the rules and regulations of the Principal
Market or principal securities exchange or trading market on which the Common
Stock is traded or listed) applicable to the Company or any of its Subsidiaries
or by which any property or asset of the Company or any of its Subsidiaries is
bound or affected. Neither the Company nor its Subsidiaries is in violation of
any term of, or in default under, the Articles of Incorporation, any Certificate
of Designations, Preferences and Rights of any outstanding series of preferred
stock of the Company or the By-laws or their organizational charter or by-laws,
respectively, or any contract, agreement, mortgage, indebtedness, indenture,
instrument, judgment, decree or order or any statute, rule or regulation
applicable to the Company or its Subsidiaries, except for possible conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
that would not individually or in the aggregate have or constitute a Material
Adverse Effect. The business of the Company and its Subsidiaries is not being
conducted, and shall not be conducted, in violation of any law, statute,
ordinance, rule, order or regulation of any governmental authority or agency,
regulatory or self-regulatory agency, or court, except for possible violations
the sanctions for which either individually or in the aggregate would not have a
Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required under the 1933 Act or any securities laws of any states, to the
Company’s knowledge, the Company is not required to obtain any consent,
authorization, permit or order of, or make any filing or registration (except
the filing of a registration statement as outlined in the Registration Rights
Agreement between the parties) with, any court, governmental authority or
agency, regulatory or self-regulatory agency or other third party in order for
it to execute, deliver or perform any of its obligations under, or contemplated
by, the Transaction Documents in accordance with the terms hereof or thereof.
All consents, authorizations, permits, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof and are in full force and
effect as of the date hereof. The Company and its Subsidiaries are unaware of
any facts or circumstances, which might give rise to any of the foregoing. The
Company is not, and will not be, in violation of the listing requirements of the
Principal Market as in effect on the date hereof and on each of the Closing
Dates and is not aware of any facts which would reasonably lead to delisting of
the Common Stock by the Principal Market in the foreseeable future.

 

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4.6 SEC Documents; Financial Statements. As of the date hereof, the Company has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC pursuant to the reporting requirements of the 1934
Act (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein, and amendments thereto, being hereinafter
referred to as the “SEC Documents”). The Company has delivered to the Investor
or its representatives, or they have had access through EDGAR to, true and
complete copies of the SEC Documents. As of their respective filing dates, the
SEC Documents complied in all material respects with the requirements of the
1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC or the time they were amended, if amended, contained any
untrue statement of a material fact or omitted 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. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, by a firm that is a member of the
Public Companies Accounting Oversight Board (“PCAOB”) consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other written
information provided by or on behalf of the Company to the Investor which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 4.3 of this Agreement, contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstance under which they are or
were made, not misleading. Neither the Company nor any of its Subsidiaries or
any of their officers, directors, employees or agents have provided the Investor
with any material, nonpublic information which was not publicly disclosed prior
to the date hereof and any material, nonpublic information provided to the
Investor by the Company or its Subsidiaries or any of their officers, directors,
employees or agents prior to any Closing Date shall be publicly disclosed by the
Company prior to such Closing Date.

 

4.7 Absence of Certain Changes. Except as otherwise set forth in the SEC
Documents, the Company does not intend to change the business operations of the
Company in any material way. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or its Subsidiaries have any knowledge or
reason to believe that its creditors intend to initiate involuntary bankruptcy
proceedings.

 

4.8 Absence of litigation and/or Regulatory Proceedings. Except as set forth in
the SEC Documents, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
executive officers of Company or any of its Subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the Company’s Subsidiaries or
any of the Company’s or the Company’s Subsidiaries’ officers or directors in
their capacities as such, in which an adverse decision could have a Material
Adverse Effect.

 

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4.9 Acknowledgment Regarding Investor’s Purchase of Shares. The Company
acknowledges and agrees that the Investor is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further acknowledges
that the Investor is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby and any advice given by the
Investor or any of its respective representatives or agents in connection with
the Transaction Documents and the transactions contemplated hereby and thereby
is merely incidental to the Investor’s purchase of the Securities, and is not
being relied on by the Company. The Company further represents to the Investor
that the Company’s decision to enter into the Transaction Documents has been
based solely on the independent evaluation by the Company and its
representatives.

 

4.10 No Undisclosed Events, Liabilities, Developments or Circumstances. Except
as set forth in the SEC Documents or required with respect to the Transaction
Documents, as of the date hereof, no event, liability, development or
circumstance has occurred or exists, or to the Company’s knowledge is
contemplated to occur, with respect to the Company or its Subsidiaries or their
respective business, properties, assets, prospects, operations or financial
condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.

 

4.11 Employee Relations. Neither the Company nor any of its Subsidiaries is
involved in any union labor dispute nor, to the knowledge of the Company or any
of its Subsidiaries, is any such dispute threatened. Neither the Company nor any
of its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that relations with their employees are
good. No executive officer (as defined in Rule 501(f) of the 1933 Act) has
notified the Company that such officer intends to leave the Company’s employ or
otherwise terminate such officer’s employment with the Company.

 

4.12 Intellectual Property Rights. The Company and its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted. Except as set forth in the SEC Documents, none of the Company’s
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
government authorizations, trade secrets or other intellectual property rights
necessary to conduct its business as now or as proposed to be conducted have
expired or terminated, or are expected to expire or terminate within two (2)
years from the date of this Agreement. The Company and its Subsidiaries do not
have any knowledge of any infringement by the Company or its Subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service mark registrations, trade secret
or other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others and, except as set
forth in the SEC Documents, there is no claim, action or proceeding being made
or brought against, or to the Company’s knowledge, being threatened against, the
Company or its Subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
mark registrations, trade secret or other infringement; and the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its Subsidiaries have taken commercially
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties.

 

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4.13 Environmental Laws. The Company and its Subsidiaries (i) are, to the
knowledge of the management and directors of the Company and its Subsidiaries,
in compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”); (ii) have, to the knowledge of the
management and directors of the Company, received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses; and (iii) are in compliance, to the knowledge of the
management and directors of the Company, with all terms and conditions of any
such permit, license or approval where, in each of the three (3) foregoing
cases, the failure to so comply would have, individually or in the aggregate, a
Material Adverse Effect.

 

4.14 Title. The Company and its Subsidiaries have good and marketable title to
all personal property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in the SEC Documents or
such as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company or any
of its Subsidiaries. Any real property and facilities held under lease by the
Company or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.

 

4.15 Insurance. The Company and each of its Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as management of the Company reasonably believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any of its Subsidiaries has been refused any
insurance coverage sought or applied for and neither the Company nor its
Subsidiaries has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.

 

4.16 Regulatory Permits. The Company and its Subsidiaries have in full force and
effect all certificates, approvals, authorizations and permits from the
appropriate federal, state, local or foreign regulatory authorities and
comparable foreign regulatory agencies, necessary to own, lease or operate their
respective properties and assets and conduct their respective businesses, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
approval, authorization or permit, except for such certificates, approvals,
authorizations or permits which if not obtained, or such revocations or
modifications which, would not have a Material Adverse Effect.

 

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4.17 Internal Accounting Controls. Except as otherwise set forth in the SEC
Documents, the Company and each of its Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles by a firm with membership to the PCAOB and to maintain
asset accountability; (iii) access to assets is permitted only in accordance
with management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company’s management has determined that the Company’s internal accounting
controls were not effective as of the date of this Agreement as further
described in the SEC Documents.

 

4.18 No Materially Adverse Contracts, Etc. Neither the Company nor any of its
Subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the judgment of the
Company’s officers has or is expected in the future to have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement, which in the judgment of the Company’s officers has or is
expected to have a Material Adverse Effect.

 

4.19 Tax Status. The Company and each of its Subsidiaries has made or filed all
United States federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.

 

4.20 Certain Transactions. Except as set forth in the SEC Documents filed at
least ten (10) days prior to the date hereof and except for arm’s length
transactions pursuant to which the Company makes payments in the ordinary course
of business upon terms no less favorable than the Company could obtain from
disinterested third parties and other than the grant of stock options disclosed
in the SEC Documents, none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, such that disclosure would be required in the SEC Documents.

 

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4.21 Dilutive Effect. The Company understands and acknowledges that the number
of shares of Common Stock issuable upon purchases pursuant to this Agreement
will increase in certain circumstances including, but not necessarily limited
to, the circumstance wherein the trading price of the Common Stock declines
during the period between the Effective Date and the end of the Open Period. The
Company’s executive officers and directors have studied and fully understand the
nature of the transactions contemplated by this Agreement and recognize that
they have a potential dilutive effect on the shareholders of the Company. The
Board of Directors of the Company has concluded, in its good faith business
judgment, and with full understanding of the implications, that such issuance is
in the best interests of the Company. The Company specifically acknowledges
that, subject to such limitations as are expressly set forth in the Transaction
Documents, its obligation to issue shares of Common Stock upon purchases
pursuant to this Agreement is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
shareholders of the Company.

 

4.22 Lock-Up. The Company shall cause its officers, insiders, directors, and
affiliates or other related parties under control of the Company, to refrain
from selling Common Stock during each Pricing Period.

 

4.23 No general solicitation. Neither the Company, nor any of its affiliates,
nor any person acting on its behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with the offer or sale of the Common Stock to be offered as set forth
in this Agreement.

 

4.24 No brokers, finders or financial advisory fees or commissions. No brokers,
finders or financial advisory fees or commissions will be payable by the
Company, its agents or Subsidiaries, with respect to the transactions
contemplated by this Agreement

 

4.25 FAST/ DWAC. The Company’s transfer agent is participating in The Depository
Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program and
the Securities are eligible for inclusion in the FAST program.

 

SECTION 5
COVENANTS OF THE COMPANY

 

5.1 Best efforts. The Company shall use all commercially reasonable efforts to
timely satisfy each of the conditions set forth in Section 7 of this Agreement.

 

5.2 Reporting status. Until one of the following occurs, the Company shall file
all reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status, or take an action or fail to take any
action, which would terminate its status as a reporting company under the 1934
Act: (i) this Agreement terminates pursuant to Section 8 and the Investor has
the right to sell all of the Securities without restrictions pursuant to Rule
144 promulgated under the 1933 Act, or such other exemption, or (ii) the date on
which the Investor has sold all the Securities and this Agreement has been
terminated pursuant to Section 8.

 

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5.3 Use of proceeds. The Company will use the proceeds from the sale of the
Shares (excluding amounts paid by the Company for fees as set forth in the
Transaction Documents) for general corporate and working capital purposes and
acquisitions or assets, businesses or operations or for other purposes that the
Board of Directors, in its good faith deem to be in the best interest of the
Company.

 

5.4 Financial information. During the Open Period, the Company agrees to make
available to the Investor via EDGAR or other electronic means the following
documents and information on the forms set forth: (i) within five (5) Trading
Days after the filing thereof with the SEC, a copy of its Annual Reports on Form
10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and
any Registration Statements or amendments filed pursuant to the 1933 Act; (ii)
copies of any notices and other information made available or given to the
shareholders of the Company generally, contemporaneously with the making
available or giving thereof to the shareholders; and (iii) within two (2)
calendar days of filing or delivery thereof, copies of all documents filed with,
and all correspondence sent to, the Principal Market, any securities exchange or
market, or the Financial Industry Regulatory Association, unless such
information is material nonpublic information.

 

5.5 Reservation of Shares. The Company shall take all action necessary to, at
all times, have authorized and reserved the amount of Shares included in the
Registration Statement for issuance pursuant to the Transaction Documents. In
the event that the Company determines that it does not have a sufficient number
of authorized shares of Common Stock to reserve and keep available for issuance
as described in this Section 5.5, the Company shall use all commercially
reasonable efforts to increase the number of authorized shares of Common Stock
by seeking shareholder approval for the authorization of such additional shares.

 

5.6 Listing. The Company shall promptly secure and maintain the listing of all
of the Registrable Securities (as defined in the Registration Rights Agreement)
on the Principal Market and each other national securities exchange and
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, such listing
of all Registrable Securities from time to time issuable under the terms of the
Transaction Documents. Neither the Company nor any of its Subsidiaries shall
take any action, which would be reasonably expected to result in the delisting
or suspension of the Common Stock on the Principal Market (excluding suspensions
of not more than one (1) Trading Day resulting from business announcements by
the Company). The Company shall promptly provide to the Investor copies of any
notices it receives from the Principal Market regarding the continued
eligibility of the Common Stock for listing on such automated quotation system
or securities exchange. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 5.6.

 

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5.7 Transactions with Affiliates. The Company shall not enter into, amend,
modify or supplement, or permit any Subsidiary to enter into, amend, modify or
supplement, any agreement, transaction, commitment or arrangement with any of
its or any Subsidiary’s officers, directors, persons who were officers or
directors at any time during the previous two (2) years, shareholders who
beneficially own 5% or more of the Common Stock, or Affiliates or with any
individual related by blood, marriage or adoption to any such individual or with
any entity in which any such entity or individual owns a 5% or more beneficial
interest (each a “Related Party”), except for (i) customary employment
arrangements and benefit programs on reasonable terms, (ii) any agreement,
transaction, commitment or arrangement on an arms-length basis on terms no less
favorable than terms which would have been obtainable from a disinterested third
party other than such Related Party, or (iii) any agreement, transaction,
commitment or arrangement which is approved by a majority of the disinterested
directors of the Company. For purposes hereof, any director who is also an
officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. “Affiliate” for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a 5% or more equity interest in that person or entity, (ii) has 5% or
more common ownership with that person or entity, (iii) controls that person or
entity, or (iv) is under common control with that person or entity. “Control” or
“Controls” for purposes hereof means that a person or entity has the power,
directly or indirectly, to conduct or govern the policies of another person or
entity.

 

5.8 Filing of form 8-K. On or before the date which is four (4) Trading Days
after the Execution Date, the Company shall file a Current Report on Form 8-K
with the SEC describing the terms of the transaction contemplated by the
Transaction Documents in the form required by the 1934 Act, if such filing is
required.

 

5.9 Corporate existence. The Company shall use all commercially reasonable
efforts to preserve and continue the corporate existence of the Company.

 

5.10 Notice of Certain Events Affecting Registration; Suspension of Right To
Make a Put. The Company shall promptly notify the Investor upon the occurrence
of any of the following events in respect of a Registration Statement or related
prospectus in respect of an offering of the Securities: (i) receipt of any
request for additional information by the SEC or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the Registration Statement or related
prospectus; (ii) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of any
Registration Statement or the initiation of any proceedings for that purpose;
(iii) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Securities for sale
in any jurisdiction or the initiation or notice of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in such
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registrable Securities from time
to time issuable under the terms of the Transaction Documents. Neither the
Company nor any of its Subsidiaries shall take any action, which would be
reasonably expected to result in the delisting or suspension of the Common Stock
on the Principal Market (excluding suspensions of not more than one (1) Trading
Day resulting from business announcements by the Company). The Company shall
promptly provide to the Investor copies of any notices it receives from the
Principal Market regarding the continued eligibility of the Common Stock for
listing on such automated quotation system or securities exchange. The Company
shall pay all fees and expenses in connection with satisfying its obligations
under this Section 5.10.

 

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5.11 Transfer Agent, Prime Broker. Upon the Effective Date, and for so long as
the Registration Statement is effective, the Company shall deliver instructions
to its transfer agent to issue shares to the Investor that are covered for
resale by the Registration Statement, and the Company shall ensure that upon
delivery to the transfer agent of evidence of the sale of any such Shares in
accordance with the Plan of Distribution section of the then current prospectus
relating to such Registration Statement, such Shares shall be issued to the
purchaser electronically or if in certificate form, free of restrictive legends
in accordance with Section 3.11 of the Registration Rights Agreement. In
addition, upon the Effective Date and upon any Put Notice Date, Company’s legal
counsel shall, at Investor’s request, provide an opinion letter addressed to the
Company’s transfer agent and any Prime Broker of Investor’s choosing, opining as
to the availability of the sale of such Shares covered by the Registration
Statement by Investor.

 

5.12 Acknowledgement of terms. The Company hereby represents and warrants to the
Investor that: (i) it is voluntarily entering into this Agreement of its own
freewill, (ii) it is not entering this Agreement under economic duress, (iii)
the terms of this Agreement are reasonable and fair to the Company, and (iv) the
Company has had independent legal counsel of its own choosing review this
Agreement, advise the Company with respect to this Agreement, and represent the
Company in connection with this Agreement.

 

SECTION 6
CONDITIONS OF THE COMPANY’S OBLIGATION TO SELL

 

The obligation hereunder of the Company to issue and sell the Securities to the
Investor is further subject to the satisfaction, at or before each Closing Date,
of each of the following conditions set forth below. 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 The Investor shall have executed this Agreement and the Registration Rights
Agreement and delivered the same to the Company.

 

6.2 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 which prohibits the
consummation of any of the transactions contemplated by this Agreement.

 

SECTION 7
FURTHER CONDITIONS OF THE INVESTOR’S OBLIGATION TO PURCHASE

 

The obligation of the Investor hereunder to purchase Securities is subject to
the satisfaction, on or before each Closing Date, of each of the following
conditions set forth below.

 

7.1 The Company shall have executed the Transaction Documents and delivered the
same to the Investor.

 

7.2 The Common Stock shall be authorized for quotation on the Principal Market
and trading in the Common Stock shall not have been suspended by the Principal
Market or the SEC, at any time beginning on the date hereof and through and
including the respective Closing Date (excluding suspensions of not more than
one (1) Trading Day resulting from business announcements by the Company,
provided that such suspensions occur prior to the Company’s delivery of the Put
Notice related to such Closing).

 

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7.3 The representations and warranties of the Company shall be true and correct
as of the date when made and as of the applicable Closing Date as though made at
that time and the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company on or before such Closing
Date. The Investor may request an update as of such Closing Date regarding the
representation contained in Section 4.3.

 

7.4 The Company shall have executed and delivered to the Investor the Securities
being purchased by the Investor at each Closing.

 

7.5 The Board of Directors of the Company shall have adopted resolutions
consistent with Section 4.2(b) (the “Resolutions”) and such Resolutions shall
not have been amended or rescinded prior to such Closing Date.

 

7.6 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 which prohibits the
consummation of any of the transactions contemplated by this Agreement.

 

7.7 The Registration Statement shall be effective on each Closing Date and no
stop order suspending the effectiveness of the Registration statement shall be
in effect or to the Company’s knowledge shall be pending or threatened.
Furthermore, on each Closing Date (i) neither the Company nor the Investor shall
have received notice that the SEC has issued or intends to issue a stop order
with respect to such Registration Statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of such Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless the
SEC’s concerns have been addressed), and (ii) no other suspension of the use or
withdrawal of the effectiveness of such Registration Statement or related
prospectus shall exist.

 

7.8 At the time of each Closing, the Registration Statement (including
information or documents incorporated by reference therein) and any amendments
or supplements thereto shall 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 not misleading or which would require public
disclosure or an update supplement to the prospectus.

 

7.9 If applicable, the shareholders of the Company shall have approved the
issuance of any Shares in excess of the Maximum Common Stock Issuance in
accordance with Section 2.6 or the Company shall have obtained appropriate
approval pursuant to the requirements of Nevada law and the Company’s Articles
of Incorporation and By-laws.

 

7.10 The conditions to such Closing set forth in Section 2.3 shall have been
satisfied on or before such Closing Date.

 

7.11 The Company shall have certified to the Investor the number of Shares of
Common Stock outstanding when a Put Notice is given to the Investor. The
Company’s delivery of a Put Notice to the Investor constitutes the Company’s
certification of the existence of the necessary number of shares of Common Stock
reserved for issuance.

 

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SECTION 8
TERMINATION

 

8.1 This Agreement shall terminate upon any of the following events:

 

(a) when the Investor has purchased an aggregate of Two Million Dollars
($2,000,000) in the Common Stock of the Company pursuant to this Agreement;

 

(b) on the date which is thirty-six (36) months after the Effective Date;

 

(c) if at any time after the Effective Date, the Registration Statement is no
longer in effect;

 

(d) the trading of the Common Stock is suspended by the SEC, the Principal
Market or FINRA for a period of two (2) consecutive Trading Days during the Open
Period; or,

 

(e) the Common Stock ceases to be registered under the 1934 Act or listed or
traded on the Principal Market or the Registration Statement is no longer
effective (except as permitted hereunder)..

 

(f) if a Material Adverse Effect occurs during the Open Period.

 

(g) Immediately upon the occurrence of one of the above-described events, the
Company shall send written notice of such event to the Investor.

 

8.2 Any and all shares, or penalties, if any, due under this Agreement shall be
immediately payable and due upon termination of this Agreement.

 

SECTION 9
INDEMNIFICATION

 

In consideration of the parties mutual obligations set forth in the Transaction
Documents, each of the parties (in such capacity, an “Indemnitor”) shall defend,
protect, indemnify and hold harmless the other and all of the other party’s
shareholders, officers, directors, employees, counsel, and direct or indirect
investors and any of the foregoing person’s agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and reasonable expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (i)
any misrepresentation or breach of any representation or warranty made by the
Indemnitor or any other certificate, instrument or document contemplated hereby
or thereby; (ii) any breach of any covenant, agreement or obligation of the
Indemnitor contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby; or (iii) any cause of
action, suit or claim brought or made against such Indemnitee by a third party
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, except insofar as any such
misrepresentation, breach or any untrue statement, alleged untrue statement,
omission or alleged omission is made in reliance upon and in conformity with
information furnished to Indemnitor which is specifically intended for use in
the preparation of any such Registration Statement, preliminary prospectus,
prospectus or amendments to the prospectus. To the extent that the foregoing
undertaking by the Indemnitor may be unenforceable for any reason, the
Indemnitor shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities, which is permissible under applicable
law. The indemnity provisions contained herein shall be in addition to any cause
of action or similar rights Indemnitor may have, and any liabilities the
Indemnitor or the Indemnitees may be subject to.

 

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SECTION 10
MISCELLANEOUS

 

10.1 Fees. Except as otherwise set forth below or elsewhere in the Transaction
Documents (including but not limited to Section 5 of the Registration Rights
Agreement), each party shall pay the fees and expenses of its advisers, the
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. Any attorneys’ fees and expenses incurred by
either the Company or the Investor in connection with the preparation,
negotiation, execution and delivery of any amendments to this Agreement or
relating to the enforcement of the rights of any party, after the occurrence of
any breach of the terms of this Agreement by another party or any default by
another party in respect of the transactions contemplated hereunder, shall be
paid on demand by the party which breached the Agreement and/or defaulted, as
the case may be. The Company shall pay all stamp and other taxes and duties
levied in connection with the issuance of any Securities.

 

(a) Initial Commitment Shares. In consideration for the Investor’s execution and
delivery of this Agreement, concurrently with the execution and delivery of this
Agreement on the Execution Date, the Company shall deliver irrevocable
instructions to its transfer agent to issue to the Investor, not later than 4:00
p.m. (New York City time) on the third Trading Day immediately following the
Execution Date, a certificate representing the Initial Commitment Shares in the
name of the Investor or its designee (in which case such designee name shall
have been provided to the Company prior to the Execution Date). Such certificate
shall be delivered to the Investor by overnight courier at its address set forth
in Section 10.7 hereof. For the avoidance of all doubt, all of the Initial
Commitment Shares shall be fully earned as of the Execution Date, regardless of
whether the Company is successful in getting the Registration Statement declared
effective by the SEC or whether any Put Notices are issued by the Company or
settled hereunder. The Initial Commitment Shares shall be issued subject to
Section 10.1(g) below. Upon issuance, the Initial Commitment Shares shall
constitute “restricted securities” as such term is defined in Rule 144(a)(3)
under the Securities Act and subject to the provisions of subsection (e) of this
Section 10.1shall bear the restrictive legend set forth below in subsection (d)
of this Section 10.1. The Initial Commitment Shares shall constitute Registrable
Securities and shall be included in the Registration Statement in accordance
with the terms of the Registration Rights Agreement. The Company shall deliver a
copy of the Company’s issuance resolution authorizing the issuance of the
Initial Commitment Shares to the Investor contemporaneously with issuance of the
Initial Commitment Shares.

 

  21

 

 

(b) Additional Commitment Shares. Upon which Investor has purchased in the
aggregate $500,000 in Shares from the Company, the Company shall deliver
irrevocable instructions to its transfer agent to issue to the Investor not
later than 4:00 p.m. (New York City time) on the third business day immediately
following the Effective Date, a certificate representing the Additional
Commitment Shares in the name of the Investor or its designee (in which case
such designee name shall have been provided to the Company prior to the
Effective Date). Such certificate shall be delivered to the Investor by
overnight courier at its address set forth in Section 10.7 hereof. For the
avoidance of doubt, all of the Additional Commitment Shares shall be fully
earned as of the date required for delivery above, regardless of whether any
subsequent Put Notices are issued by the Company or settled hereunder. The
Additional Commitment Shares shall be issued subject to Section 10.1(g) below.
Upon issuance, the Additional Commitment Shares shall constitute “restricted
securities” as such term is defined in Rule 144(a)(3) under the Securities Act
and subject to the provisions of subsection (e) of this Section 10.1shall bear
the restrictive legend set forth below in subsection (d) of this Section 10.1.
The Additional Commitment Shares shall not constitute Registrable Securities and
shall not be included in the Registration Statement in accordance with the terms
of the Registration Rights Agreement. The Company shall deliver a copy of the
Company’s issuance resolution authorizing the issuance of the Additional
Commitment Shares to the Investor contemporaneously with issuance of the
Additional Commitment Shares.

 

(c) Intentionally Omitted.

 

(d) Legends. The certificate(s) representing the Commitment Shares, except as
set forth below, shall bear a restrictive legend in substantially the following
form:

 

 

THE OFFER AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

 

 

  22

 

 

(e) Removal of Legend. From and after the Effective Date, the Company shall, no
later than two Trading Days following the delivery by the Investor to the
Company or the Company’s transfer agent (with notice to the Company) of a
legended certificate representing the Initial Commitment Shares (endorsed or
with stock powers attached, signatures guaranteed, and otherwise in form
necessary to affect the reissuance and/or transfer, if applicable), as directed
by the Investor, either: (A) issue and deliver (or cause to be issued and
delivered) to the Investor a certificate representing such Commitment Shares
that is free from all restrictive and other legends or (B) cause the Company’s
transfer agent to credit the Investor’s or its designee’s account at DTC through
its Deposit/Withdrawal at Custodian (DWAC) system with a number of shares of
Common Stock equal to the number of Initial Commitment Shares represented by the
certificate so delivered by the Investor (the date by which such certificate is
required to be delivered to the Investor or such credit is so required to be
made to the account of the Investor or its designee at DTC pursuant to the
foregoing is referred to herein as the “Required Delivery Date”). If the Company
fails on or prior to the Required Delivery Date to either (i) issue and deliver
(or cause to be issued and delivered) to the Investor a certificate representing
the Commitment Shares that is free from all restrictive and other legends or
(ii) cause the Company’s transfer agent to credit the balance account of the
Investor or its designee at DTC through its Deposit/Withdrawal at Custodian
(DWAC) system with a number of shares of Common Stock equal to the number of
Commitment Shares represented by the certificate delivered by the Investor
pursuant hereto, then, in addition to all other remedies available to the
Investor, the Company shall not be able to issue a Put Notice to Investor. In
addition, to the extent applicable or necessary, the Company shall cooperate
with Investor to provide, at Company’s expense, any legal opinions required to
sell any Commitment Shares pursuant to Rule 144 under the 1933 Act.

 

(f) Intentionally Omitted.

 

(g) Limitation on Ownership of Commitment Shares. To the extent that at the time
of issuance of the Initial Commitment Shares or the Additional Commitment
Shares, such issuance of Shares together with all other Shares beneficially
owned by Investor would exceed 4.99% of the issued and outstanding Shares of the
Company, then the Company shall issue a reduced amount of Shares so that such
beneficial ownership will equal 4.99% and issue the remaining Shares required to
be issued when such issuance will not cause Purchaser to own more than 4.99% of
the issued and outstanding Shares of the Company.

 

10.2 Law governing this agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of California without regard
to principles of conflicts of laws. Any action brought by either party against
the other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of California or in the federal courts located
in Los Angeles County, California. The parties to this Agreement hereby
irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens. The parties executing
this Agreement and other agreements referred to herein or delivered in
connection herewith on behalf of the Company agree to submit to the in personam
jurisdiction of such courts and hereby irrevocably waive trial by jury. The
prevailing party shall be entitled to recover from the other party its
reasonable attorney’s fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision, which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process and consents to
process being served in any suit, action or proceeding in connection with this
Agreement or any other Transaction Documents 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 other manner permitted by law.

 

  23

 

 

10.3 Counterparts. This Agreement may be executed in any number of counterparts
and by the different signatories hereto on separate counterparts, each of which,
when so executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument. This Agreement may be executed by
facsimile transmission, PDF, electronic signature or other similar electronic
means with the same force and effect as if such signature page were an original
thereof.

 

10.4 Headings; Singular/Plural. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. Whenever required by the context of this
Agreement, the singular shall include the plural and masculine shall include the
feminine.

 

10.5 Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

 

10.6 Entire agreement; amendments. This Agreement is the final agreement between
the Company and the Investor with respect to the terms and conditions set forth
herein, and, the terms of this Agreement may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the Parties.

 

10.7 Notices. Any notices 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 (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by electronic mail (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) business day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:

 

If to the Company:

 

Graphite Corp.,  

Attn: Mark Radom 616 Corporate Way, Suite 2-9011 

Valley Cottage, NY 10989

 

With a copy to mark@graphenz.com

 

  24

 

 

If to the Investor:

 

Premier Venture Partners, LLC
4221 Wilshire Blvd., Suite 355 

Los Angeles, CA 90010 

Fax: (323) 315-2273

 

Each party shall provide five (5) days prior written notice to the other party
of any change in address or facsimile number.

 

10.8 No assignment. This Agreement may not be assigned.

 

10.9 No third party beneficiaries. This Agreement is intended for the benefit of
the parties hereto and is not for the benefit of, nor may any provision hereof
be enforced by, any other person, except that the Company acknowledges that the
rights of the Investor may be enforced by its general partner.

 

10.10 Survival. The representations and warranties of the Company and the
Investor contained in Sections 3 and 4, the agreements and covenants set forth
in Sections 5 and 6, and the indemnification provisions set forth in Section 9,
shall survive each of the Closings and the termination of this Agreement.

 

10.11 Publicity. The Company and the Investor shall consult with each other in
issuing any press releases or otherwise making public statements with respect to
the transactions contemplated hereby and no party shall issue any such press
release or otherwise make any such public statement without the prior consent of
the other party, which consent shall not be unreasonably withheld or delayed,
except that no prior consent shall be required if such disclosure is required by
law, in which such case the disclosing party shall provide the other party with
prior notice of such public statement. The Investor acknowledges that this
Agreement and all or part of the Transaction Documents may be deemed to be
“material contracts” as that term is defined by Item 601(b)(10) of Regulation
S-K, and that the Company may therefore be required to file such documents as
exhibits to reports or registration statements filed under the 1933 Act or the
1934 Act. The Investor further agrees that the status of such documents and
materials as material contracts shall be determined solely by the Company, in
consultation with its counsel.

 

10.12 Further assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

 

10.13 No strict construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party, as the parties
mutually agree that each has had a full and fair opportunity to review this
Agreement and seek the advice of counsel on it.

 

  25

 

 

10.14 Remedies. The Investor shall have all rights and remedies set forth in
this Agreement and the Registration Rights Agreement and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which the Investor has by law. Any person having
any rights under any provision of this Agreement shall be entitled to enforce
such rights specifically (without posting a bond or other security), to recover
damages by reason of any default or breach of any provision of this Agreement,
including the recovery of reasonable attorneys fees and costs, and to exercise
all other rights granted by law.

 

10.15 Payment set aside. To the extent that the Company makes a payment or
payments to the Investor hereunder or under the Registration Rights Agreement or
the Investor enforces or exercises its rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.

 

10.16 Pricing of common stock. For purposes of this Agreement, the VWAP of the
Common Stock shall be as reported on Bloomberg, L.P., Quotestream, or other
applicable service.

 

SECTION 11
NON-DISCLOSURE OF NON-PUBLIC INFORMATION

 

The Company shall not disclose non-public information to the Investor, its
advisors, or its representatives.

 

Nothing in the Transaction Documents shall require or be deemed to require the
Company to disclose non-public information to the Investor or its advisors or
representatives, and the Company represents that it does not disseminate
non-public information to any investors who purchase stock in the Company in a
public offering, to money managers or to securities analysts, provided, however,
that notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, immediately notify the advisors and representatives of the
Investor and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed in
the prospectus included in the Registration Statement would cause such
prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein, in light
of the circumstances in which they were made, not misleading. In addition,
neither the Company or any of its Subsidiaries, nor any of their respective
directors, officers, employees or agents shall disclose any material non-public
information about the Company to the Investor, unless a simultaneous public
announcement thereof is made by the Company in the manner contemplated by
Regulation FD. In the event of a breach of the foregoing covenant by the Company
or any of its Subsidiaries, or any of their respective directors, officers,
employees and agents (as determined in the reasonable good faith judgment of the
Investor), (i) the Investor shall promptly provide written notice of such breach
to the Company and (ii) after such notice has been provided to the Company and
in addition to any other remedy provided herein or in the other Transaction
Documents, the Investor shall have the right to make a public disclosure, in the
form of a press release, public advertisement or otherwise, of such material,
non-public information without the prior approval by the Company, any of its
Subsidiaries, or any of their respective directors, officers, employees or
agents; provided that the Company shall have failed to publicly disclose such
material, non-public information within 24 hours following such demand by the
Investor. The Investor shall not have any liability to the Company, any of its
Subsidiaries, or any of their respective directors, officers, employees,
stockholders or agents, for any such disclosure.

 

  26

 

 

SECTION 12
ACKNOWLEDGEMENTS OF THE PARTIES

 

Notwithstanding anything in this Agreement to the contrary, the parties hereto
hereby acknowledge and agree to the following: (i) the Investor makes no
representations or covenants that it will not engage in trading in the
securities of the Company, other than the Investor will not short the Common
Stock at any time during the Open Period; (ii) the Company shall comply with its
obligations under Section 5.8 in a timely manner; (iii) the Company has not and
shall not provide material non-public information to the Investor unless prior
thereto the Investor shall have executed a written agreement regarding the
confidentiality and use of such information; and (iv) the Company understands
and confirms that the Investor will be relying on the acknowledgements set forth
in clauses (i) through (iii) above if the Investor effects any transactions in
the securities of the Company.

 

(Signature page immediately follows)

 

  27

 

 

IN WITNESS WHEREOF, the parties have caused this Equity Purchase Agreement to be
duly executed by their respective authorized representatives as of the Execution
Date.

 

“COMPANY”:

 

“INVESTOR”:

 

 

 

 

 

 

Graphite Corp.,
a Nevada corporation

 

Premier Venture Partners, LLC,
a California limited liability company

 

 

 

 

 

 

By:

 

By:

 

Name:

 

Name:

 

Title:

 

Title:

 

 

  28

 

 

LIST OF EXHIBITS

 

Exhibit A

Registration Rights Agreement

  Exhibit B

Put Notice

 

  29

 

 

EXHIBIT A

 

REGISTRATION RIGHTS AGREEMENT

 

(Attached)

 

 

 

  30

 

 

EXHIBIT B

 

FORM OF PUT NOTICE

 

Date: ___________

 

Premier Venture Partners, LLC
4221 Wilshire Blvd., Suite 355 

Los Angeles, CA 90010

 

RE: Put Notice Number ____

 

Dear Mr.__________,

 

This is to inform you that as of today, Graphite Corp., a Nevada corporation
(the “Company”), hereby elects to exercise its right pursuant to the Investment
Agreement to require Premier Venture Partners, LLC to purchase shares of its
common stock. The Company hereby certifies that:

 

The amount of Common Shares to be purchased: _____________.

 

The current number of shares of common stock issued and outstanding is:
_________________.

 

The number of shares currently available for issuance on the S-1 is:
_____________________.

 

Regards,

 

Graphite Corp.,

 

      By

 

Name:

 

Title:

 

 

 

31

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