Exhibit 10.2

 

EQUITY FINANCING AGREEMENT

 

This EQUITY FINANCING AGREEMENT (the “Agreement”), dated as of December 1, 2016
(the “Execution Date”), is entered into by and between Propanc Health Group
Corporation, a Delaware corporation with its principal executive office at 302,
6 Butler Street Camberwell, VIC 3124 Australia (the “Company”), and GHS
Investments LLC, a Nevada limited liability company, with offices at 200
Stonehinge Lane, Suite 3, Carle Place, NY 11514. (the “Investor”).

 

RECITALS:

 

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Investor shall invest up to Seven Million Dollars
($7,000,000) from time to time over the course of twenty-four (24) months after
an effective registration of the underlying shares to purchase the Company’s
common stock, par value $0.001 per share (the “Common Stock”);

 

WHEREAS, such investments will be made in reliance upon the exemption from
securities registration afforded by Section 4(a)(2) of the Securities Act of
1933, as amended (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 investments in Common Stock to be made hereunder; and

 

WHEREAS, 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 certain
registration rights under 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 I.

DEFINITIONS

 

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.

 

“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 2.5.

 

“Closing Date” shall have the meaning set forth in Section 2.5.

 

“Commitment” shall have the meaning set forth in Section 2.1.

 

“Commitment Note” shall have the meaning set forth in Section 2.8.

 

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

 

“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.

 

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

 

“Indemnified Liabilities” shall have the meaning set forth in Section 10.

 

“Indemnitees” shall have the meaning set forth in Section 10.

 

“Indemnitor” shall have the meaning set forth in Section 10.

 

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

 

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

 

“Investor’s Delay” shall have the meaning set forth in the Registration Rights
Agreement.

 

“Market Price” shall mean the average of the three (3) lowest volume weighted
average prices of the Company’s Common Stock during the Pricing Period.

 

“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.

 

“Open Period” shall mean the period beginning on and including the Trading Day
immediately following the Effective Date and ending on the earlier to occur of
(i) the date which is twenty four (24) months from the Effective Date; or (ii)
termination of the Agreement in accordance with Section 8.

 

“Pricing Period” shall mean the ten (10) consecutive Trading Days immediately
preceding the receipt of the applicable Put Notice.

 

“Principal Market” shall mean the principal Trading Market on which the Common
Stock is listed or quoted for trading on the date in question.

 

“Promissory Note” means the promissory note substantially in the form attached
hereto as Exhibit B, in exchange for which the Investor shall fund the Initial
Draw.

 

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“Purchase Price” shall mean eighty percent (80%) of the Market Price; provided
that in any event the Purchase Price shall not be less than the Put Floor.

 

“Put” shall have the meaning set forth in Section 2.3.

 

“Put Amount” shall have the meaning set forth in Section 2.3.

 

“Put Floor” shall have the meaning set forth in Section 2.9.

 

“Put Notice” shall mean a written notice substantially in the form attached
hereto as Exhibit C sent to the Investor by the Company in connection with a Put
and stating the Put Amount in U.S. dollars 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, as set forth below, on which the
Investor receives a Put Notice.

 

“Put Shares Due” shall mean, with respect to each Put, the number of Shares
equal to the quotient of (i) the Put Amount for such Put, divided by (ii) the
Purchase Price for such Put, as set forth in a Put Settlement Sheet
substantially in the form attached hereto as Exhibit D sent to the Company by
the Investor on the Put Notice Date.

 

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

 

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

 

“Registration Statement” means a registration statement of the Company filed
under the 1933 Act pursuant to the Registration Rights Agreement covering the
Registrable Securities.

 

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

 

“Resolutions” shall have the meaning set forth in Section 7.4.

 

“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 this Agreement.

 

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

 

“Short Sales” shall mean all “short sales” as defined in Rule 200 of Regulation
SHO 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.

 

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“Trading Market” shall mean any of the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question: the
New York Stock Exchange, the NYSE Amex, the Nasdaq Capital Market, the Nasdaq
Global Market, the Nasdaq Global Select Market, the OTC Markets or the OTC
Bulletin Board, whichever is the principal market.

 

“Trading Period” shall have the meaning set forth in Section 2.5.

 

“Trading Period Shares” shall have the meaning set forth in Section 2.5.

 

“Transaction Documents” shall mean this Agreement, the Commitment Note, the
Promissory Note, the Registration Rights Agreement and supporting documents
between the Company and the Investor as of the date hereof.

 

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

 

SECTION II

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 Seven Million Dollars ($7,000,000) (the
“Commitment”).

 

2.2           INITIAL DRAW: Promptly upon the filing of the Registration
Statement on or before the thirtieth (30th) calendar day following the date
hereof, an initial two hundred and fifty thousand dollars ($250,000) shall be
paid by the Investor to the Company in immediately available funds (the “Initial
Draw”), and the Company shall deliver to the Investor the Promissory Note. The
Shares underlying the Promissory Note shall be included in the Registration
Statement pursuant to the Registration Rights Agreement.

 

2.3           DELIVERY OF PUT NOTICES. Subject to the terms and conditions
herein, at any time 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 dollar amount (designated in U.S. Dollars) of Shares (the “Put Amount”),
which the Company intends to sell to the Investor on a Closing Date (each, a
“Put” and collectively, the “Puts”). The timing and amounts of any Puts shall be
at the sole discretion of the Company. Prior to any Closing, the Company may, in
its sole discretion, withdraw any Put Notice. Unless approved by the Investor,
(i) the maximum dollar amount of any Put shall not exceed two (2) times the
average of the daily trading dollar volume for the Company’s Common Stock during
the ten (10) Trading Days preceding the Put Notice Date, (ii) the minimum Put
Amount in any Put Notice is twenty five thousand dollars ($25,000), and (iii)
the maximum Put Amount in any Put Notice is three hundred thousand dollars
($300,000). The price of the Shares sold to the Investor in each Put shall be
the Purchase Price set forth in the applicable Put Notice. During the Open
Period, the Company shall not be entitled to submit a Put Notice until after the
previous Closing has been completed or the previous Put Notice has been
withdrawn. There will be a minimum of ten (10) Trading Days between Put Notices
unless agreed to otherwise by the Investor in writing.

 

2.4           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:

 

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

 

ii.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 shall have
been listed or quoted for trading on the Principal Market, and the Common Stock
shall not have been suspended from trading thereon for a period of two (2)
consecutive Trading Days during the thirty (30) day period preceding the Put
Notice Date and the Company shall not have been notified of any pending or
threatened proceeding or other action to suspend the trading of the Common
Stock;

 

iii.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 Transaction Document, which has not been cured prior to the Put Notice
Date;

 

iv.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; and

 

v.the issuance of the Securities will not violate any shareholder approval
requirements of the Principal Market.

 

If any of the events described in clauses (i) through (v) above occurs during a
Pricing Period, then the Investor shall have no obligation to purchase the Put
Amount of Common Stock set forth in the applicable Put Notice.

 

2.5           MECHANICS OF PURCHASE OF SHARES BY INVESTOR. Subject to
satisfaction of the conditions set forth in Sections 2.4, 6 and 7 of this
Agreement, the Closing of a Put (each, a “Closing” and collectively, the
“Closings”) shall occur upon the first Trading Day (the “Closing Date”)
following the receipt by Investor of a Put Notice. On each Closing Date, the
Company shall cause the Transfer Agent to electronically transmit the applicable
Put Shares Due by crediting the account of the Investor’s broker with DTC
through its Deposit Withdrawal Agent Commission (“DWAC”) system (or, if DWAC is
not available for the Put Shares Due on the applicable Closing Date, the Company
shall cause the Transfer Agent to deliver Investor a certificate representing
the Put Shares Due), against delivery by the Investor of the Put Amount
specified in the Put Notice to an account designated by the Company or, at the
Company’s option, by reduction in an amount equal to the Put Amount of the
amounts owed to the Investor under the Promissory Note. If the Put Shares Due
are received and approved by the Investor's broker by 9:30 am EST, the Investor
shall make payment to the Company’s designated account by wire transfer of
immediately available funds or, if the Put Shares Due are received and receipt
is confirmed by the Investor’s broker after 9:30 am EST, the Investor shall make
payment to the Company’s designated account by wire transfer of next day
available funds. In addition, on or prior to such Closing Date, each of the
Company and Investor shall deliver to each other all documents, instruments and
writings required to be delivered or reasonably requested by either of them
pursuant to this Agreement in order to implement and effect the transactions
contemplated herein. In the event that (i) the average of the three (3) lowest
volume-weighted average prices (the “VWAP”) of the Company’s Common Stock during
the ten (10) trading days following a Put Notice (the “Trading Period”) is less
than 85% of the Market Price used to determine the Purchase Price in connection
with the Put and (ii) as of the end of such Trading Period the Investor holds
Shares issued pursuant to such Put Notice (the “Trading Period Shares”), then
the Company shall issue such additional Shares as may be necessary to adjust the
Purchase Price for that portion of the Put represented by the Trading Period
Shares to equal the VWAP during the Trading Period.

 

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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 which 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
Shares that may be issuable without such shareholder approval (the “Maximum
Common Stock Issuance”). If such issuance of Shares could cause a delisting on
the Principal Market, then the Company shall be under no obligation to issue
Shares in excess of the Maximum Common Stock Issuance unless and until such
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. The parties understand and agree that the Company’s failure to seek, in
its sole discretion, 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, and that such approval pertains only to the
applicability of the Maximum Common Stock Issuance limitation provided in this
Section 2.6.

 

2.7           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 9.99% 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.

 

2.8           COMMITMENT FEE. Upon the execution of this Agreement, the Company
shall issue the Investor a $20,000 promissory note, payable 6 months from
issuance (the “Commitment Note”). Upon the Closing of each Put, the Company
shall pay three quarters of one percent (0.75%) of the applicable Put Amount to
the Investor, which amount shall be deducted by the Investor from each wire. The
Commitment Note shall be deemed earned upon the execution of this Agreement.

 

2.9           PUT FLOOR. Notwithstanding anything to the contrary herein, the
minimum Purchase Price in any Put shall be $0.01 (the “Put Floor”). The Parties
may, but shall not be obligated to, agree in writing to render the Put Floor
inoperative where the Company’s Common Stock has traded at or below $0.01 for
any two (2) Trading Days during a Pricing Period.

 

SECTION III

 

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. The execution and delivery of the
Transaction Documents and performance by Investor of the transactions
contemplated thereby have been duly and validly authorized by all necessary
limited liability company action. This Agreement and the other Transaction
Documents to which it is a party have been duly 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 as 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 to sell the Company’s stock short, either
directly or indirectly through its affiliates, principals or advisors during the
term of this Agreement.

 

3.4           ACCREDITED INVESTOR. At the time Investor was offered the
Securities, Investor was, and as of the date hereof it is, and as of each
Closing it will be, an “Accredited Investor” as that term is defined in Rule
501(a) of Regulation D of the 1933 Act.

 

3.5           GENERAL SOLICITATION. Investor is not, to Investor’s knowledge,
purchasing the Securities as a result of any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.

 

3.6           GOVERNMENTAL REVIEW. Investor understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities or an
investment therein.

 

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

 

3.8           PRINCIPAL PLACE OF BUSINESS. Investor’s principal place of
business is correctly set forth in Section 11.7 hereof.

 

3.9           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 the Investor’s Partnership Agreement or any other organizational documents of
the Investor.

 

3.10         OPPORTUNITY TO DISCUSS. The Investor acknowledges that it has had
the opportunity to review the Transaction Documents (including all exhibits and
schedules thereto) and the SEC Documents. The Investor has received all
materials relating to the Company’s business, finance and operations which it
has requested, and has had the opportunity to obtain such additional information
that the Company possesses or can acquire without unreasonable effort or expense
that is necessary to make an informed investment decision with respect to the
Securities. The Investor has had an opportunity to discuss the business,
management and financial affairs of the Company with the Company’s management.

 

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3.11         INVESTMENT PURPOSES. Investor understands that the Securities are
“restricted securities” and have not been registered under the 1933 Act or any
applicable state securities law. 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; provided that the Company shall have received
an opinion of its counsel that shall be in form, substance and scope customary
for counsel in comparable transactions to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption from
such registration). Investor is acquiring the Securities hereunder in the
ordinary course of its business.

 

3.12         NO REGISTRATION AS A DEALER. The Investor is not 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, any other Transaction
Document, or otherwise.

 

3.13         NO BROKERS. No brokerage or finder’s fees or commissions are or
will be payable by Investor or its Affiliates to any broker, financial advisor
or consultant, placement agent, investment banker, bank or other person with
respect to the transactions contemplated by the Transaction Documents.

 

3.14         GOOD STANDING. The Investor is a limited liability company, duly
organized, validly existing and in good standing in the State of Nevada.

 

3.15         TAX LIABILITIES. The Investor understands that it is liable for its
own tax liabilities.

 

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

 

3.17         No Short Sales. The Investor covenants that neither it nor its
Affiliates will execute or effect any Short Sales during the period commencing
on the Execution Date and continuing through the termination of this Agreement.

 

SECTION IV

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
Delaware, 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.

 

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4.2           AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS.

 

i.The Company has the requisite corporate power and authority to enter into and
perform Transaction Documents, and to issue the Securities in accordance with
the terms hereof and thereof.

 

ii.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,
its Board of Directors, or its shareholders.

 

iii.The Transaction Documents have been duly and validly executed and delivered
by the Company.

 

iv.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 2,000,000,000 shares of the Common Stock, of
which as of November 28, 2016, 845,862,475 shares are issued and outstanding.
All of such outstanding shares have been, or upon issuance will be, validly
issued and are fully paid and nonassessable. Except as disclosed in the SEC
Documents or as otherwise set forth on Schedule 4.3:

 

i.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;

 

ii.there are no outstanding debt securities;

 

iii.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;

 

iv.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);

 

v.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;

 

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vi.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;

 

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

 

viii.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. The Company has reserved the amount of Shares
included in the Company’s Registration Statement for issuance pursuant to the
Transaction Documents, which 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 register 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.

 

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,
other than such consents, authorizations, permits, orders, filings and
registrations which 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; MATERIAL NON-PUBLIC
INFORMATION. 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. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents,
neither the Company nor any of its Subsidiaries or any of their officers,
directors, employees or agents have provided the Investor with any material,
non-public information which was not publicly disclosed prior to the date hereof
and any material, non-public 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.

 

 11 

 

 

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.

 

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 Investor 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 and except for the transactions
contemplated by 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 and which has not been publicly
announced.

 

4.11         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, trade secrets and rights necessary to
conduct their respective businesses as now conducted. Except as set forth in the
SEC Documents or as otherwise set forth on Schedule 4.11, none of the Company’s
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, 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, 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.

 

 12 

 

 

4.12         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.

 

4.13         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 management has 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 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.

 

4.14         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.

 

4.15         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.

 

4.16         EXCLUSIVITY. The Company shall not pursue a similar Equity
Financing transaction with any other party unless and until good faith
negotiations have terminated between the Investor and the Company or until such
time as the registration statement has been declared effective by the SEC.

 

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.

 

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4.18         TAX STATUS. Except as otherwise set forth on Schedule 4.18, 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.
Except as otherwise set forth on Schedule 4.18, 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.

 

4.19         CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents
filed at least ten (10) days prior to the date hereof or as otherwise set forth
on Schedule 4.19 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, 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.

 

SECTION V

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.

 

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/or acquisitions of assets, businesses or operations and/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 non-public information.

 

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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 Company’s 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 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.

 

5.7           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.

 

5.8           CORPORATE EXISTENCE. The Company shall use all commercially
reasonable efforts to preserve and continue the corporate existence of the
Company.

 

5.9           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
Registration Statement, related prospectus or documents so that, in the case of
a Registration Statement, 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 not misleading, and that in the case of
the related prospectus, 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 the light of the circumstances
under which they were made, not misleading; and (v) the Company’s reasonable
determination that a post-effective amendment or supplement to the Registration
Statement would be appropriate, and the Company shall promptly make available to
Investor any such supplement or amendment to the related prospectus. The Company
shall not deliver to Investor any Put Notice during the continuation of any of
the foregoing events in this Section 5.9.

 

 15 

 

 

5.10         TRANSFER AGENT. Upon effectiveness of the Registration Statement,
and for so long as the Registration Statement is effective, following delivery
of a Put Notice, the Company shall, in connection with any Closing, deliver
instructions to its transfer agent to issue Shares to the Investor that are
covered for resale by the Registration Statement free of restrictive legends.

 

5.11         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 VI

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           The representations and warranties of the Investor 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 Investor 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
Investor on or before such Closing Date.

 

6.3           The Investor shall have delivered to the Company the Put Amount
for the Securities being purchased by the Investor at such Closing.

 

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

 

SECTION VII

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.

 

 16 

 

 

7.2           The representations and warranties of the Company shall be true
and correct as of the date when made and the representation contained in Section
4.3 shall be true and correct 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.

 

7.3           The Company shall have executed and delivered to the Investor the
certificates representing, or have executed electronic book-entry transfer of,
the Securities (in such denominations as the Investor shall request) being
purchased by the Investor at such Closing.

 

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

 

7.5           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.

 

7.6           The Registration Statement shall be effective in accordance with
the Registration Rights Agreement 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.

 

7.7           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.

 

7.8           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 applicable law and the Company’s
Articles of Incorporation and By-laws.

 

7.9           The conditions to such Closing set forth in Section 2.4 shall have
been satisfied on or before such Closing Date.

 

7.10         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.

 

 17 

 

 

SECTION VIII

TERMINATION

 

This Agreement shall terminate upon any of the following events:

 

8.1           when the Investor has purchased an aggregate of Seven Million
Dollars ($7,000,000) in the Common Stock of the Company pursuant to this
Agreement; or

 

8.2           on the date which is twenty-four (24) months after the Effective
Date; or

 

8.3           upon 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

 

8.4           seven (7) calendar days from the date of Company’s written notice
of termination.

 

Any and all Shares and/or amounts due under this Agreement prior to the
termination date, but not yet paid and/or delivered, shall be immediately
payable and due upon termination of this Agreement.

 

SECTION IX

SUSPENSION

 

This Agreement shall be suspended upon any of the following events, and shall
remain suspended until such event is rectified:

 

i.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

 

ii.The Common Stock ceases to be quoted, listed or traded on a Trading Market
or, the Registration Statement is no longer effective (except as permitted
hereunder or as a result of any Investor’s Delay).

 

iii.Immediately upon the occurrence of one of the above-described events, the
Company shall send written notice of such event to the Investor, unless such
information is material non-public information in which case the Company shall
file a current report on Form 8-K within four business days.

 

SECTION X

INDEMNIFICATION

 

In consideration of the parties mutual obligations set forth in the Transaction
Documents, the Company ( the “Indemnitor”) shall defend, protect, indemnify and
hold harmless the Investor and all of the investor’s shareholders, officers,
directors, employees, counsel, 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 in the Transaction Documents; (II) any breach of
any covenant, agreement or obligation of the Indemnitor contained in the
Transaction Documents; 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 (unless such action, suit or claim is based upon a breach of
Investor’s representations, warranties or covenants under the Transaction
Documents or any conduct by such Indemnitees which constitutes fraud, gross
negligence, willful misconduct or malfeasance), 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.

 

 18 

 

 

SECTION XI

MISCELLANEOUS

 

11.1         Law Governing this Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York 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 or federal courts located in the City and
State of New York. 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. 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.

 

11.2         LEGAL FEES; AND MISCELLANEOUS FEES. Except as otherwise set forth
in the Transaction Documents (including but not limited to Section V of the
Registration Rights Agreement), each party shall pay the fees and expenses of
its advisers, counsel, 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.

 

11.3         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.

 

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11.4         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.

 

11.5         SEVERABILITY. 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.

 

11.6         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. No provision of this Agreement may be amended other than by an
instrument in writing signed by the Company and the Investor, and no provision
hereof may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought. The execution and delivery of the
Transaction Documents shall not alter the force and effect of any other
agreements between the Parties, and the obligations under those agreements.

 

11.7         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 facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (III) one (1) 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:   Propanc Health Group Corporation     Attn: James
Nathanielsz, CEO     302, 6 Butler Street     Camberwell, VIC 3124     Australia
    Fax: +6139882-9969       With a copy to   Harter Secrest & Emery LLP (which
shall not constitute notice):   Attn: Alexander R. McClean, Esq.     1600 Bausch
& Lomb Place     Rochester, New York 14604     Fax: (585) 232-2152       If to
the Investor:   GHS Investments, LLC     200 Stonehinge Lane,     Suite 3    
Carle Place, NY 11514     Fax: (212) 574-3326

 

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

 

11.8         NO ASSIGNMENT. This Agreement may not be assigned.

 

11.9         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.

 

11.10       SURVIVAL. The representations, warranties and covenants of the
Company and the Investor contained in Sections 3, 4, 5 and 12, and the
indemnification provisions set forth in Section 10, shall survive each of the
Closings and the termination of this Agreement.

 

11.11       PUBLICITY. 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.

 

11.12       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.

 

11.13       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.

 

11.14       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.

 

11.15       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.

 

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11.16       PRICING OF COMMON STOCK. For purposes of this Agreement, the price
of the Common Stock shall be as reported in the principal consolidated
transaction reporting system for the Common Stock or, if unavailable, as
reported by Bloomberg, L.P.

 

SECTION XII

NON-DISCLOSURE OF NON-PUBLIC INFORMATION

 

Except with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company shall not disclose
material non-public information to the Investor, its advisors, or its
representatives unless prior thereto the Investor shall have consented in
writing.

 

Except as expressly provided otherwise in this Agreement, nothing herein shall
require the Company to disclose material non-public information to the Investor
or its advisors or representatives. Nothing contained in this Section 12 shall
be construed to mean that the advisors and representatives of the Investor (and
the Investor with the written consent of the Investor prior to disclosure of
such information) may not obtain material non-public information in the course
of conducting due diligence in accordance with the terms of this Agreement, and
nothing herein shall prevent any such persons or entities from notifying the
Company of their opinion that based on such due diligence by such persons or
entities, that the Registration Statement contains an untrue statement of
material fact or omits a material fact required to be stated in the Registration
Statement or necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading.

 

SECTION XIII

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 engage in any Short
Sales of the Company’s securities at any time during this Agreement; (ii) the
Company shall, by 9:30 a.m. EST on the fourth Trading Day following the date
hereof, file a current report on Form 8-K disclosing the material terms of the
transactions contemplated hereby and in the other Transaction Documents; (iii)
except with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, 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 (other than any Short Sales of the Company’s securities).

 

[Signature page follows]

 

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Your signature on this Signature Page evidences your agreement to be bound by
the terms and conditions of the Agreement as of the date first written above.
The undersigned signatory hereby certifies that he has read and understands the
Agreement, and the representations made by the undersigned in this Agreement are
true and accurate, and agrees to be bound by its terms.

 

  GHS INVESTMENTS, LLC         By:     Name: ____________   Title: _____________
        PROPANC HEALTH GROUP CORPORATION         By:     Name:  James
Nathanielsz   Title: Chief Executive Officer

 

[SIGNATURE PAGE OF EQUITY FINANCING AGREEMENT]

 

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