Exhibit 10.1

 

COMMON STOCK PURCHASE AGREEMENT

 

COMMON STOCK PURCHASE AGREEMENT (the “Agreement”), dated as of July 5, 2017, by
and between NET ELEMENT, INC., a Delaware corporation (the “Company”), and
COBBLESTONE CAPITAL PARTNERS, LLC, a New York limited liability company (the
“Buyer”). Capitalized terms used herein and not otherwise defined herein are
defined in Section 10 hereof.

 

WHEREAS:

 

Subject to the terms and conditions set forth in this Agreement, the Company
wishes to sell to the Buyer, and the Buyer wishes to buy from the Company, up to
Ten Million Dollars ($10,000,000) of the Company’s common stock, par value
$0.0001 (the “Common Stock”). The shares of Common Stock to be purchased
hereunder are referred to herein as the “Purchase Shares.”

 

NOW THEREFORE, the Company and the Buyer hereby agree as follows:

 

1.PURCHASE OF COMMON STOCK.

 

Subject to the terms and conditions set forth in this Agreement, the Company has
the right to sell to the Buyer, and the Buyer has the obligation to purchase
from the Company, Purchase Shares as follows:

 

(a)          Commencement of Purchases of Common Stock. After the Commencement
Date (as defined below), the purchase and sale of Purchase Shares hereunder
shall occur from time to time upon written notices by the Company to the Buyer
on the terms and conditions as set forth herein following the satisfaction of
the conditions (the “Commencement”) as set forth in Sections 6 and 7 below (the
date of satisfaction of such conditions, the “Commencement Date”).

 

(b)          The Company’s Right to Require Regular Purchases. Subject to the
terms and conditions of this Agreement, on any given Business Day after the
Commencement Date (as often as every other Business Day), the Company shall have
the right but not the obligation to direct the Buyer by its delivery to the
Buyer of a Purchase Notice from time to time, and the Buyer thereupon shall have
the obligation, to buy the number of Purchase Shares specified in such notice,
up to 200,000 Purchase Shares (with such amounts increasing as the Common Stock
price increases as set forth below), on such Business Day (as long as such
notice is delivered on or before 5:00 p.m. Eastern time on such Business Day)
(each such purchase, a “Regular Purchase”) at the Purchase Price on the Purchase
Date; provided, however, that in no event shall the Purchase Amount of a Regular
Purchase exceed One Million Dollars ($1,000,000) per Business Day; and provided,
further, that in the event the Company is delisted from its Principal Market,
such obligation of the Buyer shall be reduced to an obligation to purchase up to
100,000 Purchase Shares on such Business Day. The number of Purchase Shares for
each Regular Purchase may be increased to up to 750,000 Purchase Shares if the
Consolidated Closing Bid Price of the Common Shares is not below $0.50 per share
on the date of the applicable Purchase Notice and to up to 1,000,000 Purchase
Shares if the Consolidated Closing Bid Price of the Common Shares is not below
$1.00 per share on the date of the applicable Purchase Notice; provided,
however, that in the event the Company is delisted from its Principal Market,
such obligation of the Buyer shall be reduced to an obligation to purchase up to
375,000 Purchase Shares if the Consolidated Closing Bid Price of the Commons
Shares is not below $0.50 per share on the date of the applicable Purchase
Notice and up to 500,000 Purchase Shares if the Consolidated Closing Bid Price
of the Common Shares is not below $1.00 per share on the date of the applicable
Purchase Notice. The Company may deliver additional Purchase Notices to the
Buyer from time to time so long as the most recent purchase has been completed.
The share amounts set forth in this Section 1(b) shall be appropriately adjusted
for any reorganization, recapitalization, non-cash dividend, stock split,
reverse stock split, or other similar transaction.

 

 

 

 

(c)          VWAP Purchases. Subject to the terms and conditions of this
Agreement, in addition to the Company’s right to require Regular Purchases as
described in Section 1(b) above, with one Business Day’s prior written notice
(as long as such notice is delivered on or before 5:00 p.m. Eastern time on the
Business Day immediately preceding the VWAP Purchase Date), the Company shall
also have the right but not the obligation to direct the Buyer by the Company’s
delivery to the Buyer of a VWAP Purchase Notice from time to time, and the Buyer
thereupon shall have the obligation, to buy, at the VWAP Purchase Price, the
number of shares of Common Stock indicated by the Company in the applicable VWAP
Purchase Notice (such number to not exceed the lesser of (i) two (2) times the
maximum number of shares allowed to be sold for a Regular Purchase with
applicable Consolidated Closing Bid Prices or (ii) twenty percent (20%) of the
trading volume of the Common Stock on the Principal Market during normal trading
hours on the VWAP Purchase Date) (each such purchase, a “VWAP Purchase”). The
Company may deliver a VWAP Purchase Notice to the Buyer on or before 5:00 p.m.
Eastern time on a date on which the Company also submitted a Purchase Notice for
a Regular Purchase. Each VWAP Purchase Notice must be accompanied by
instructions to the Company’s Transfer Agent to immediately issue to the Buyer
an amount of Common Stock equal to the VWAP Purchase Share Estimate, a good
faith estimate by the Company of the number of Purchase Shares that the Buyer
shall have the obligation to buy pursuant to the VWAP Purchase Notice. In no
event shall the Buyer, pursuant to any VWAP Purchase, purchase a number of
Purchase Shares that exceeds the VWAP Purchase Share Estimate issued on the VWAP
Purchase Date in connection with such VWAP Purchase Notice. The Buyer will
immediately return to the Company any amount of Common Stock issued pursuant to
the VWAP Purchase Share Estimate that exceeds the number of Purchase Shares the
Buyer actually purchases in connection with such VWAP Purchase. Following each
VWAP Purchase Date, the Buyer shall submit to the Company a confirmation of the
VWAP Purchase in form and substance reasonably acceptable to the Company. The
Company may deliver additional VWAP Purchase Notices to the Buyer from time to
time so long as the most recent purchase has been completed and so long as the
Consolidated Closing Bid Price is not below $0.25 on the Purchase Date. The
Company may, by written notice to the Buyer, in its sole discretion at any time
after the date of this Agreement, suspend or terminate this Section 1(c) and its
right to direct the Buyer to make VWAP Purchases.

 

(d)          Payment for Purchase Shares. For each Regular Purchase, the Buyer
shall pay to the Company an amount equal to the Purchase Amount applicable to
such Regular Purchase as full payment for such Purchase Shares via wire transfer
of immediately available funds on the same Business Day that the Buyer receives
such Purchase Shares. For each VWAP Purchase, the Buyer shall pay to the Company
an amount equal to the VWAP Purchase Amount as full payment for such Purchase
Shares via wire transfer of immediately available funds on the third Business
Day following the VWAP Purchase Date. All payments made under this Agreement
shall be made in lawful money of the United States of America via wire transfer
of immediately available funds to such account as the Company may from time to
time designate by written notice in accordance with the provisions of this
Agreement. Whenever any amount expressed to be due by the terms of this
Agreement is due on any day that is not a Business Day, the same shall instead
be due on the next succeeding day that is a Business Day.

 

(e)          Purchase Price Floor. The Company and the Buyer shall not effect
any sales under this Agreement on any Purchase Date where the Consolidated
Closing Bid Price is less than the Floor Price. “Floor Price” means $0.25 per
share of Common Stock.

 

(f)          Records of Purchases. The Buyer and the Company shall each maintain
records showing the remaining Available Amount at any given time and the dates
and purchase amounts for each purchase, or shall use such other method
reasonably satisfactory to the Buyer and the Company to reconcile the remaining
Available Amount.

 

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(g)          Taxes. The Company shall pay any and all transfer, stamp or similar
taxes that may be payable with respect to the issuance and delivery of any
shares of Common Stock to the Buyer made under this Agreement.

 

(h)          Compliance with Principal Market Rules. Notwithstanding anything in
this Agreement to the contrary, and in addition to the limitations set forth in
Section 1(e), the total number of shares of Common Stock that may be issued
under this Agreement, including the Commitment Shares (as defined in Section
4(e) hereof), shall be limited to such number of shares of Common Stock that
equals 19.99% of the Company’s outstanding shares of Common Stock as of the date
hereof (the “Exchange Cap”), unless stockholder approval is obtained to issue
more than such 19.99%. The Exchange Cap shall be appropriately adjusted for any
stock dividend, stock split, reverse stock split or similar transaction. The
foregoing limitation shall not apply if such stockholder approval has not been
obtained and at any time the Exchange Cap is reached and at all times thereafter
the average price paid for all shares of Common Stock issued under this
Agreement is equal to or greater than a price equal to the Consolidated Closing
Bid Price on the date hereof (the “Minimum Price”) (in such circumstance, for
purposes of the Principal Market, the transaction contemplated hereby would not
be “below market” and the Exchange Cap would not apply). Notwithstanding the
foregoing, the Company shall not be required or permitted to issue, and the
Buyer shall not be required to purchase, any shares of Common Stock under this
Agreement if such issuance would violate the rules or regulations of the
Principal Market.

 

(i)          Beneficial Ownership Limitation. The Company shall not issue and
the Buyer shall not purchase any shares of Common Stock under this Agreement if
such shares proposed to be issued and sold, when aggregated with all other
shares of Common Stock then owned beneficially (as calculated pursuant to
Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) by the
Buyer and its affiliates would result in the beneficial ownership by the Buyer
and its affiliates of more than 9.99% of the then issued and outstanding shares
of Common Stock.

 

2.BUYER’S REPRESENTATIONS AND WARRANTIES.

 

The Buyer represents and warrants to the Company that as of the date hereof and
as of the Commencement Date:

 

(a)          Investment Purpose. The Buyer is entering into this Agreement and
acquiring the Commitment Shares (as defined in Section 4(e) hereof) and the
Purchase Shares (the Purchase Shares and the Commitment Shares are collectively
referred to herein as the “Securities”), for its own account for investment only
and not with a view towards, or for resale in connection with, the public sale
or distribution thereof; provided however, by making the representations herein,
the Buyer does not agree to hold any of the Securities for any minimum or other
specific term.

 

(b)          Accredited Investor Status. The Buyer is either a “qualified
institutional buyer” as such term is defined in Rule 144A(a)(1) of the 1933 Act
or an institutional “accredited investor” as that term is defined in Rule
501(a)(3) of Regulation D of the 1933 Act.

 

(c)          Reliance on Exemptions. The Buyer understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.

 

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(d)          Information. The Buyer has been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities that have been reasonably
requested by the Buyer, including, without limitation, the SEC Documents (as
defined in Section 3(f) hereof). The Buyer understands that its investment in
the Securities involves a high degree of risk. The Buyer (i) is able to bear the
economic risk of an investment in the Securities including a total loss, (ii)
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the proposed investment in the
Securities and (iii) has had an opportunity to ask questions of and receive
answers from the officers of the Company concerning the financial condition and
business of the Company and other matters related to an investment in the
Securities. The Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.

 

(e)          No Governmental Review. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

 

(f)          Transfer or Sale. The Buyer understands that except as provided in
the Registration Rights Agreement (as defined in Section 4(a) hereof): (i) the
Securities have not been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder or (B) an exemption
exists permitting such Securities to be sold, assigned or transferred without
such registration; (ii) any sale of the Securities made in reliance on Rule 144
may be made only in accordance with the terms of Rule 144 and further, if Rule
144 is not applicable, any resale of the Securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register the Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption thereunder.

 

(g)          Organization. The Buyer is a limited liability company duly
organized and validly existing in good standing under the laws of the State of
New York, and has the requisite organizational power and authority to own its
properties and to carry on its business as now being conducted.

 

(h)          Validity; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable against the Buyer in accordance with
its terms, subject as to enforceability to (i) 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 and (ii) public policy underlying any
law, rule or regulation (including any federal or state securities law, rule or
regulation) with regards to indemnification, contribution or exculpation. The
execution and delivery of the Transaction Documents by the Buyer and the
consummation by it of the transactions contemplated hereby and thereby do not
conflict with the Buyer’s certificate of organization or operating agreement or
similar documents, and do not require further consent or authorization by the
Buyer, its managers or its members.

 

(i)          Residency. The Buyer is a resident of the State of New York.

 

(j)          No Prior Short Selling. The Buyer represents and warrants to the
Company that at no time prior to the date of this Agreement has any of the
Buyer, its agents, representatives or affiliates engaged in or effected, in any
manner whatsoever, directly or indirectly, any (i) “short sale” (as such term is
defined in Section 242.200 of Regulation SHO of the Securities Exchange Act of
1934, as amended (the “1934 Act”)) of the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to the Common
Stock or any other Company’s securities.

 

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3.REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company represents and warrants to the Buyer that as of the date hereof and
as of the Commencement Date:

 

(a)          Organization and Qualification. The Company and its “Subsidiaries”
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns more than 50% of the voting stock or capital stock
or other similar equity interests) are corporations or limited liability
companies duly organized and validly existing in good standing under the laws of
the jurisdiction in which they are incorporated or organized, and have the
requisite corporate or organizational power and authority to own their
properties and to carry on their business as now being conducted. Each of the
Company and its Subsidiaries is duly qualified as a foreign corporation or
limited liability company to do business and is 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 could not reasonably be
expected to have a Material Adverse Effect. As used in this Agreement, “Material
Adverse Effect” means any material adverse effect on any of: (i) the business,
properties, assets, operations, results of operations or financial condition of
the Company and its Subsidiaries, if any, taken as a whole, or (ii) the
authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined in Section 3(b) hereof).

 

(b)          Authorization; Enforcement; Validity. (i) The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement and each of
the other agreements entered into by the parties on the Commencement Date and
attached hereto as exhibits to this Agreement (collectively, the “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 Commitment Shares and
the reservation for issuance and the issuance of the Purchase Shares issuable
under this Agreement, have been duly authorized by the Company’s Board of
Directors or duly authorized committee thereof, do not conflict with the
Company’s Amended and Restated Articles of Incorporation (as amended through the
date hereof) or Bylaws (as mended through the date hereof), and do not require
further consent or authorization by the Company, its Board of Directors or its
stockholders (other than as contemplated by Section 1(h) hereof), (iii) this
Agreement has been, and each other Transaction Document shall be on the
Commencement Date, duly executed and delivered by the Company and (iv) this
Agreement constitutes, and each other Transaction Document upon its execution on
behalf of the Company, shall 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 (y) general principles of equity
or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies and (z) public policy underlying any law, rule or regulation
(including any federal or states securities law, rule or regulation) with
regards to indemnification, contribution or exculpation. The Board of Directors
of the Company or duly authorized committee thereof has approved the resolutions
(the “Signing Resolutions”) substantially in the form as set forth as Exhibit A
attached hereto to authorize this Agreement and the transactions contemplated
hereby. The Signing Resolutions are valid, in full force and effect and have not
been modified or supplemented in any material respect.

 

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(c)          Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of (i) 400,000,000 shares of Common Stock, par value
$0.0001, of which as of the date hereof, 18,015,040 shares are issued and
outstanding, and (ii) 1,000,000 shares of preferred stock, of which as of the
date hereof no shares are issued and outstanding. All of such outstanding shares
have been, or upon issuance will be, validly issued and are fully paid and
non-assessable. Except as disclosed in SEC Documents (as defined below), 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 of the Company or any of
its Subsidiaries, (iii) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or 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 material 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 or
instruments 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, (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 and (vii) the Company does not
have any stock appreciation rights or “phantom stock” plans or agreements or any
similar plan or agreement. The Company will furnish to the Buyer upon Buyer’s
written request copies of the Company’s Amended and Restated Certificate of
Incorporation, as amended and as in effect on the date hereof (the “Certificate
of Incorporation”), and the Company’s Bylaws, as amended and as in effect on the
date hereof (the “Bylaws”).

 

(d)          Issuance of Securities. The Commitment Shares have been duly
authorized and, upon issuance in accordance with the terms hereof, the
Commitment Shares shall be (i) validly issued, fully paid and non-assessable and
(ii) free from all taxes, liens and charges with respect to the issuance
thereof. At least an additional 20,000,000 shares of Common Stock have been duly
authorized and reserved for issuance upon future purchase as Purchase Shares
under this Agreement. Upon issuance and payment therefore in accordance with the
terms and conditions of this Agreement, such Purchase Shares shall be validly
issued, fully paid and non-assessable and free from all taxes, liens and charges
with respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock.

 

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(e)          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 (including, without limitation, the
reservation for issuance and issuance of the Purchase Shares) will not (i)
result in a violation of the Certificate of Incorporation, including any
Certificate of Designations, Preferences and Rights of any outstanding series of
preferred stock of the Company, or the Bylaws or (ii) constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party, or result, to the Company’s knowledge, in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and the rules and regulations
of the Principal Market 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, except in the case of defaults, terminations, amendments,
accelerations, cancellations and violations under clause (ii), which could not
reasonably be expected to result in a Material Adverse Effect. Except as
disclosed in Schedule 3(e), neither the Company nor its Subsidiaries is in
violation of any term of or in default under its Certificate of Incorporation,
including any Certificate of Designation, Preferences and Rights of any
outstanding series of preferred stock of the Company, or Bylaws or their
organizational charter or bylaws, respectively. Except as disclosed in Schedule
3(e), neither the Company nor any of its Subsidiaries is in violation of any
term of or is in default under any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its Subsidiaries, except for
possible violations, defaults, terminations or amendments that could not
reasonably be expected to have 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, ordinance, or regulation of any governmental entity,
except for possible violations, the sanctions for which either individually or
in the aggregate could not reasonably be expected to have a Material Adverse
Effect. Except as specifically contemplated by this Agreement, reporting
obligations under the 1934 Act or as required under the 1933 Act or applicable
state securities laws or the filing of a Listing of Additional Shares
Notification Form with the Principal Market, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or
self-regulatory agency 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. Except for reporting obligations under the
1934 Act, all consents, authorizations, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence shall be
obtained or effected on or prior to the Commencement Date. The Company is not
subject to any notices or actions from or to the Principal Market, except as
disclosed in the Current Report on Form 8-K filed by the Company with the SEC on
December 30, 2016 and other than routine matters incident to listing on the
Principal Market and not involving a violation of the rules of the Principal
Market. To the Company’s knowledge, except as disclosed in the Current Reports
on Form 8-K filed by the Company with the SEC on December 30, 2016 and on July
3, 2017, the Principal Market has not commenced any delisting proceedings
against the Company.

 

(f)          SEC Documents; Financial Statements. The Company filed current Form
10 information with the SEC over 12 months ago. The Company has filed all
reports and other materials required to be filed by Section 13 or 15(d) of the
1934 Act, as applicable, during the preceding 12 months (other than certain Form
8-K reports) (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements, notes and schedules thereto
and documents incorporated by reference therein being hereinafter referred to as
the “SEC Documents”).

 

(g)          Absence of Certain Changes. Since December 31, 2016, there has been
no material adverse change in the business, properties, operations, financial
condition or results of operations of the Company or its Subsidiaries taken as a
whole.

 

(h)          Acknowledgment Regarding Buyer’s Status. The Company acknowledges
and agrees that the Buyer is acting solely in the capacity of arm’s length
purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby. The Company further acknowledges that the Buyer
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 Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to the Buyer’s
purchase of the Securities. The Company further represents to the Buyer 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 and
advisors.

 

(i)          Intellectual Property Rights. To the Company’s knowledge, the
Company and its Subsidiaries own or possess adequate rights or licenses to use
all material trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and other intellectual
property rights (collectively, “Intellectual Property”) necessary to conduct
their respective businesses as now conducted, or to the extent that the failure
to own, possess, license or otherwise hold adequate rights to use Intellectual
Property would not, individually or in the aggregate, have a Material Adverse
Effect. To the Company’s knowledge, none of the Company’s active and registered
Intellectual Property will expire or terminate by the terms and conditions
thereof within two years from the date of this Agreement which could reasonably
be expected to have a Material Adverse Effect. The Company and its Subsidiaries
do not have any knowledge of any infringement by the Company or its Subsidiaries
of any Intellectual Property of others and 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 Intellectual
Property, which could reasonably be expected to have a Material Adverse Effect.

 

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(j)          Environmental Laws. To the Company’s knowledge, the Company and its
Subsidiaries (i) are in material compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of the
environment or human health and safety and with respect to hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii)
have received all material permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii) are in material compliance with all terms and conditions of any such
permit, license or approval, except where, in each of the three foregoing
clauses, the failure to so comply or receive such approvals could not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.

 

(k)          Title. The Company has good and marketable title to all personal
property owned by them that is material to the business of the Company free and
clear of all liens, encumbrances and defects except 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 could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
Any real property and facilities held under lease by the Company, to the
Company’s knowledge, 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.

 

(l)          Application of Takeover Protections. The Company and its board of
directors have taken or will take prior to the Commencement Date all necessary
action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Certificate of
Incorporation or the laws of the state of its incorporation which is or could
become applicable to the Buyer as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company’s issuance of the
Securities and the Buyer’s ownership of the Securities.

 

4.COVENANTS.

 

(a)          Filing of Form 8-K and Registration Statement. The Company agrees
that it shall, within the time required under the 1934 Act, file a Current
Report on Form 8-K disclosing this Agreement and the transaction contemplated
hereby. The Company shall use reasonable commercial efforts to file with the SEC
within Ten (10) Business Days from the date hereof a new registration statement
covering the sale of the Securities by the Buyer in accordance with the terms of
the Registration Rights Agreement between the Company and the Buyer, dated as of
the date hereof (“Registration Rights Agreement”).

 

(b)          Blue Sky. The Company shall take such action, if any, as is
reasonably necessary in order to obtain an exemption for or to qualify (i) the
initial issuance of the Securities to the Buyer under this Agreement and (ii)
any subsequent sale of the Securities by the Buyer, in each case, under
applicable securities or “Blue Sky” laws of the states of the United States in
such states as is reasonably requested by the Buyer from time to time, and shall
provide evidence of any such action so taken to the Buyer at its written
request.

 

-8- 

 

 

(c)          Listing. The Company shall promptly secure the listing of all of
the Securities upon each national securities exchange and automated quotation
system that requires an application by the Company for listing, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance) or traded (including, if at any time applicable, the OTC Bulletin
Board, or the OTCQB or OTCQX market places of the OTC Markets) and shall
maintain such listing, so long as any other shares of Common Stock shall be so
listed. The Company shall use its reasonable commercial efforts to maintain the
Common Stock’s listing on the Principal Market in accordance with the
requirements of the Registration Rights Agreement. Neither the Company nor any
of its Subsidiaries shall take any action that would be reasonably expected to
result in the delisting or suspension of the Common Stock on the Principal
Market, unless the Common Stock is immediately thereafter traded on the New York
Stock Exchange, the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global
Market, the OTC Bulletin Board, or the OTCQB or OTCQX market places of the OTC
Markets. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section.

 

(d)          Limitation on Short Sales and Hedging Transactions. The Buyer
agrees that beginning on the date of this Agreement and ending on the date of
termination of this Agreement as provided in Section 10(k), the Buyer and its
agents, representatives and affiliates shall not in any manner whatsoever enter
into or effect, directly or indirectly, any (i) “short sale” (as such term is
defined in Section 242.200 of Regulation SHO of the 1934 Act) of the Common
Stock or (ii) hedging transaction, which establishes a net short position with
respect to the Common Stock or any other Company’s securities.

 

(e)          Issuance of Commitment Shares. Upon the earlier of (i) on or one
(1) Business Day after the date when the registration statement covering the
sale of the Securities by the Buyer shall have been declared effective under the
1933 Act by the SEC and no stop order with respect to the registration statement
shall be pending or threatened by the SEC or (ii) six months after the date of
this Agreement, the Company shall issue to the Buyer as consideration for the
Buyer entering into this Agreement such number of shares of Common Stock that
would have a value equivalent to Two Hundred Thousand Dollars ($200,000)
calculated using the average of volume weighted average price for the Common
Stock traded on the Principal Market during normal trading hours during the
three (3) Trading Days period immediately preceding the date of issuance of such
shares (the “Commitment Shares”). Upon Buyer’s execution and delivery of this
Agreement, the Buyer’s irrevocable commitment pursuant to Section 1 hereof to
purchase the Purchase Shares shall be deemed full and sufficient consideration
for the Commitment Shares, and the Commitment Shares shall vest and be deemed to
be earned as of the date that all parties enter into all Transaction Documents.

 

(f)          Due Diligence. The Buyer shall have the right, from time to time as
the Buyer may reasonably deem appropriate, to perform reasonable due diligence
on the Company during normal business hours and subject to reasonable prior
notice to the Company. The Company and its officers and employees shall provide
information and reasonably cooperate with the Buyer in connection with any
reasonable request by the Buyer related to the Buyer’s due diligence of the
Company, including, but not limited to, any such request made by the Buyer in
connection with (i) the filing of the registration statement described in
Section 4(a) hereof and (ii) the Commencement; provided, however, that at no
time is the Company required or permitted to disclose material nonpublic
information to the Buyer or breach any obligation of confidentiality or
non-disclosure to a third party or make any disclosure that could cause a waiver
of attorney-client privilege. Except as may be required by law, court order or
governmental authority, each party hereto agrees not to disclose any
Confidential Information of the other party to any third party and shall not use
the Confidential Information of such other party for any purpose other than in
connection with, or in furtherance of, the transactions contemplated hereby.
Each party hereto acknowledges that the Confidential Information shall remain
the property of the disclosing party and agrees that it shall take all
reasonable measures to protect the secrecy of any Confidential Information
disclosed by the other party.

 

-9- 

 

 

(g)          Disposition of Securities. The Buyer shall not sell any Securities
except as provided in this Agreement, the Registration Rights Agreement and the
“Plan of Distribution” section of the prospectus included in the Registration
Statement. The Buyer shall not transfer any Securities except pursuant to sales
described in the “Plan of Distribution” section of the prospectus included in
the Registration Statement or pursuant to Rule 144 under the 1933 Act. In the
event of any sales of Securities pursuant to the Registration Statement, the
Buyer will (i) effect such sales pursuant to the “Plan of Distribution” section
of the prospectus included in the Registration Statement, and (ii) will comply
with all applicable prospectus delivery requirements.

 

(h)          The Company agrees that, without prior consent of the Buyer, during
the lesser of (i) thirty (30) months from the date hereof or (ii) the period
when the Buyer still owns the Commitment Shares and Purchase Shares, the Company
will not issue any floating conversion rate or variable priced securities
convertible into Common Stock if such convertible securities shall have no floor
price associated therewith. Nothing contained in this Section 4(h) or otherwise
shall restrict the Company in effecting any at-the-market offerings with a
registered broker-dealer.

 

5.TRANSFER AGENT INSTRUCTIONS.

 

So long as the Buyer complies with its obligations in Section 4(g), all of the
Purchase Shares to be issued under this Agreement shall be issued without any
restrictive legend unless the Buyer expressly consents otherwise. The Company
shall issue irrevocable instructions to the Transfer Agent, and any subsequent
transfer agent, to issue Common Stock in the name of the Buyer for the Purchase
Shares (the “Irrevocable Transfer Agent Instructions”). On or promptly after the
date when the registration statement covering the sale of the Securities by the
Buyer shall have been declared effective under the 1933 Act by the SEC and no
stop order with respect to the registration statement shall be pending or
threatened by the SEC, the Company shall deliver to the Transfer Agent an
instruction with respect to the issuance of the Commitment Shares.

 

6.CONDITIONS TO THE COMPANY’S RIGHT TO COMMENCE SALES OF SHARES OF COMMON STOCK
UNDER THIS AGREEMENT.

 

The right of the Company hereunder to commence sales of the Purchase Shares is
subject to the satisfaction of each of the following conditions on or before the
Commencement Date (the date that the Company may begin sales of Purchase
Shares):

 

(a)The Buyer shall have executed each of the Transaction Documents to which the
Buyer is a party and delivered the same to the Company; and

 

(b)A registration statement covering the sale of the Securities by the Buyer
shall have been declared effective under the 1933 Act by the SEC and no stop
order with respect to the registration statement shall be pending or threatened
by the SEC.

 

7.CONDITIONS TO THE BUYER’S OBLIGATION TO MAKE PURCHASES OF SHARES OF COMMON
STOCK.

 

The obligation of the Buyer to buy Purchase Shares under this Agreement is
subject to the satisfaction of each of the following conditions on or before the
Commencement Date (the date that the Company may begin sales of Purchase Shares)
and once such conditions have been initially satisfied, there shall not be any
ongoing obligation to satisfy such conditions after the Commencement has
occurred:

 

(a)          The Company shall have executed each of the Transaction Documents
to which the Company is a party and delivered the same to the Buyer;

 

-10- 

 

 

(b)          The Company shall have issued to the Buyer the Commitment Shares;

 

(c)          The Common Stock shall be authorized for quotation on the Principal
Market;

 

(d)          The Board of Directors of the Company or a duly authorized
committee thereof shall have adopted resolutions substantially in the form
attached hereto as Exhibit A, which shall be in full force and effect without
any amendment or supplement thereto as of the Commencement Date;

 

(e)          As of the Commencement Date, the Company shall have reserved out of
its authorized and unissued Common Stock, solely for the purpose of effecting
future purchases of Purchase Shares hereunder, 20,000,000 shares of Common
Stock;

 

(f)          The Irrevocable Transfer Agent Instructions, in form acceptable to
the Buyer, shall have been signed by the Company and the Buyer and have been
delivered to the Transfer Agent;

 

(g)          A registration statement covering the sale of (i) all of the
Commitment Shares and (ii) such number of additional Purchase Shares as
reasonably determined by the Company shall have been declared effective under
the 1933 Act by the SEC and no stop order with respect thereto shall be pending
or threatened by the SEC. The Company shall have prepared and delivered to the
Buyer a final and complete form of prospectus, dated and current as of the
Commencement Date, to be used by the Buyer in connection with any sales of any
Securities, and to be filed by the Company one (1) Business Day after the
Commencement Date pursuant to Rule 424(b). The Company shall have made all
filings under all applicable federal and state securities laws necessary to
consummate the issuance of the Commitment Shares and the Purchase Shares
pursuant to this Agreement in compliance with such laws;

 

(h)          No Event of Default has occurred and is continuing, or any event
which, after notice and/or lapse of time, would become an Event of Default has
occurred; and

 

(i)          On or prior to the Commencement Date, the Company shall take all
necessary action, if any, and such actions as reasonably requested by the Buyer,
in order to render inapplicable any control share acquisition, business
combination, stockholder rights plan or poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Certificate of Incorporation or the laws of the state of its incorporation, that
is or could become applicable to the Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and the Buyer's ownership of the Securities.

 

8.EVENTS OF DEFAULT.

 

An “Event of Default” shall be deemed to have occurred at any time as the
following events occurs:

 

(a)          while any registration statement is required to be maintained
effective pursuant to the terms of the Registration Rights Agreement, the
effectiveness of such registration statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is unavailable to the Buyer
for the sale of all of the Registrable Securities (as defined in the
Registration Rights Agreement), and such lapse or unavailability continues for a
period of thirty ten (10) consecutive Business Days or for more than an
aggregate of thirty (30) Business Days in any 365-day period, which is not in
connection with a post-effective amendment to any such registration statement or
the filing of a new registration statement; provided, however, that in
connection with any post-effective amendment to such registration statement or
filing of a new registration statement that is required to be declared effective
by the SEC, such lapse or unavailability may continue for a period of no more
than sixty (60) consecutive Business Days, which such period shall be extended
for up to an additional thirty (30) Business Days if the Company receives a
comment letter from the SEC in connection therewith;

 

-11- 

 

  

(b)          the suspension of the Common Stock from trading for a period of one
(1) trading day;

 

(c)          the delisting of the Common Stock from the Principal Market, and
the Common Stock is not promptly thereafter trading on the New York Stock
Exchange, the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global
Market, the OTB Bulletin Board or the OTCQB marketplace or OTCQX marketplace of
the OTC Markets Group;

 

(d)          the Company’s breach of any representation or warranty (as of the
dates made), covenant or other term or condition under any Transaction Document
if such breach could reasonably be expected to have a Material Adverse Effect
and except only if such breach continues uncured for a period of at least twenty
(20) Business Days;

 

(e)          if the Company pursuant to or within the meaning of any Bankruptcy
Law; (A) commences a voluntary case, (B) consents to the entry of an order for
relief against it in an involuntary case, (C) consents to the appointment of a
Custodian of it or for all or substantially all of its and its Subsidiaries’
property, or (D) makes a general assignment for the benefit of its creditors;

 

(f)          a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that (A) is for relief against the Company in an involuntary
case, (B) appoints a Custodian of the Company or for all or substantially all of
its and its Subsidiaries’ property, or (C) orders the liquidation of the
Company;

 

(g)          if the Company is listed on a national exchange or market
(excluding the OTC Markets, OTC Bulletin Board or comparable market), if at any
time after the Commencement Date, the Exchange Cap is reached unless and until
stockholder approval is obtained pursuant to Section 1(h) hereof. The Exchange
Cap shall be deemed to be reached at such time if, upon submission of a Purchase
Notice or VWAP Purchase Notice under this Agreement, the issuance of such shares
of Common Stock would exceed that number of shares of Common Stock which the
Company may issue under this Agreement without breaching the Company’s
obligations under the rules or regulations of the Principal Market; or

 

(h)          the Company ceases for more than one (1) Business Day to be
eligible, through its Transfer Agent, to issue and transfer shares of Common
Stock electronically to third parties via the DTC FAST Program of DTC’s DWAC
system.

 

So long as an Event of Default has occurred and is continuing, or so long as the
Consolidated Closing Bid Price is below the Floor Price, the Company may not
require and the Buyer shall not be obligated or permitted to purchase any shares
of Common Stock under this Agreement.

 

9.CERTAIN DEFINED TERMS.

 

For purposes of this Agreement, the following terms shall have the following
meanings:

 

(a)          “1933 Act” means the Securities Act of 1933, as amended.

 

(b)          “Available Amount” means initially Ten Million Dollars
($10,000,000) in the aggregate which amount shall be reduced by the Purchase
Amount each time the Buyer purchases shares of Common Stock pursuant to Section
1 hereof.

 

(c)          “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal
or state law for the relief of debtors.

 

-12- 

 

 

(d)          “Business Day” means any day on which the Principal Market is open
for trading during normal trading hours (i.e., 9:30 a.m. to 4:00 p.m. Eastern
Time), including any day on which the Principal Market is open for trading for a
period of time less than the customary time.

 

(e)          “Consolidated Closing Bid Price” means the consolidated closing bid
price for the Common Stock on the Principal Market as reported by the Principal
Market.

 

(f)           “Confidential Information” means any information disclosed by
either party to the other party, either directly or indirectly, in writing,
orally or by inspection of tangible objects (including, without limitation,
documents, prototypes, samples, plant and equipment), which is designated as
"Confidential," "Proprietary" or some similar designation. Confidential
Information may also include information disclosed to a disclosing party by
third parties. Confidential Information shall not, however, include any
information which (i) was publicly known and made generally available in the
public domain prior to the time of disclosure by the disclosing party; (ii)
becomes publicly known and made generally available after disclosure by the
disclosing party to the receiving party through no action or inaction of the
receiving party; (iii) is already in the possession of the receiving party at
the time of disclosure by the disclosing party as shown by the receiving party’s
files and records immediately prior to the time of disclosure; (iv) is obtained
by the receiving party from a third party without a breach of such third party’s
obligations of confidentiality; (v) is independently developed by the receiving
party without use of or reference to the disclosing party’s Confidential
Information, as shown by documents and other competent evidence in the receiving
party’s possession; or (vi) is required by law to be disclosed by the receiving
party, provided that the receiving party gives the disclosing party prompt
written notice of such requirement prior to such disclosure and assistance in
obtaining an order protecting the information from public disclosure.

 

(g)          “Custodian” means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.

 

(h)          “Maturity Date” means the date that is thirty (30) months from the
Commencement Date.

 

(i)           “Person” means an individual or entity including any limited
liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.

 

(j)           “Principal Market” means the Nasdaq Capital Market; provided
however, that in the event the Company’s Common Stock is ever listed or traded
on the New York Stock Exchange, the NYSE MKT, the Nasdaq Global Select Market,
the Nasdaq Global Market, the OTC Bulletin Board or either of the OTCQB
marketplace or the OTCQX marketplace of the OTC Markets Group, then the
“Principal Market” shall mean such other market or exchange on which the
Company’s Common Stock is then listed or traded.

 

(k)          “Purchase Amount” means, with respect to any particular purchase
made hereunder, the portion of the Available Amount to be purchased by the Buyer
pursuant to Section 1 hereof as set forth in a valid Purchase Notice or VWAP
Purchase Notice which the Company delivers to the Buyer.

 

(l)           “Purchase Date” means with respect to any Regular Purchase made
hereunder, the Business Day of receipt by the Buyer of a valid Purchase Notice
that the Buyer is to buy Purchase Shares pursuant to Section 1(b) hereof.

-13- 

 

 

(m)        “Purchase Notice” shall mean an irrevocable written notice from the
Company to the Buyer directing the Buyer to buy Purchase Shares pursuant to
Section 1(b) hereof as specified by the Company therein at the applicable
Purchase Price on the Purchase Date.

 

(n)          “Purchase Price” means the lesser of (i) the Consolidated Closing
Bid Price on the Purchase Date or (ii) the arithmetic average of the three (3)
lowest Consolidated Closing Bid Prices for the Common Stock during the ten (10)
consecutive Business Days ending on the Business Day immediately preceding such
Purchase Date (to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split, reverse stock split or other
similar transaction).

 

(o)          “Sale Price” means any trade price for the shares of Common Stock
on the Principal Market during normal trading hours, as reported by the
Principal Market.

 

(p)          “SEC” means the United States Securities and Exchange Commission.

 

(q)          “Transfer Agent” means the transfer agent of the Company as set
forth in Section 10(f) hereof or such other person who is then serving as the
transfer agent for the Company in respect of the Common Stock.

 

(r)          “VWAP Purchase Amount” means, with respect to any particular VWAP
Purchase Notice, the portion of the Available Amount to be purchased by the
Buyer pursuant to Section 1(c) hereof as set forth by the Company in the
applicable VWAP Purchase Notice.

 

(t)           “VWAP Purchase Date” means, with respect to any VWAP Purchase made
hereunder, the Business Day following the receipt by the Buyer of a valid VWAP
Purchase Notice that the Buyer is to buy Purchase Shares pursuant to Section
1(c) hereof.

 

(u)          “VWAP Purchase Notice” shall mean an irrevocable written notice
from the Company to the Buyer directing the Buyer to buy Purchase Shares on the
VWAP Purchase Date pursuant to Section 1(c) hereof as specified by the Company
therein at the applicable VWAP Purchase Price with the applicable the number of
the shares of Common Stock specified therein pursuant to Section 1(c) hereof.

 

(v)          “VWAP Purchase Price” means the lesser of (i) the Consolidated
Closing Bid Price on the VWAP Purchase Date; or (ii) ninety-five percent (95%)
of volume weighted average price for the Common Stock traded on the Principal
Market during normal trading hours on the VWAP Purchase Date (to be
appropriately adjusted for any reorganization, recapitalization, non-cash
dividend, stock split, reverse stock split or other similar transaction).

 

(w)         “VWAP Purchase Share Estimate” means the number of shares of Common
Stock that the Company has in its sole discretion irrevocably instructed its
Transfer Agent to issue to the Buyer via the Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program in connection with a VWAP Purchase
Notice pursuant to Section 1(c) hereof and issued to the Buyer’s or its
designee’s balance account with DTC through its Deposit Withdrawal At Custodian
(DWAC) system on the VWAP Purchase Date (to be appropriately adjusted for any
reorganization, recapitalization, non-cash dividend, stock split, reverse stock
split or other similar transaction).

 

-14- 

 

 

10.MISCELLANEOUS.

 

(a)          Governing Law; Jurisdiction; Jury Trial. The corporate laws of the
State of Delaware shall govern all issues concerning the relative rights of the
Company and its stockholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the other
Transaction Documents shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of
New York. Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in the County of New York, Florida, for the
adjudication of any dispute hereunder or under the other Transaction Documents
or in connection herewith or therewith, or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.

 

(b)          Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile or pdf (or
other electronic reproduction) signature shall be considered due execution and
shall be binding upon the signatory thereto with the same force and effect as if
the signature were an original, not a facsimile or PDF (or other electronic
reproduction) signature.

 

(c)          Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

 

(d)          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.

 

(e)          Entire Agreement. This Agreement and the Registration Rights
Agreement supersede all other prior oral or written agreements between the
Buyer, the Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement, the other
Transaction Documents and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor the Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. The Company acknowledges and agrees
that is has not relied on, in any manner whatsoever, any representations or
statements, written or oral, other than as expressly set forth in this
Agreement.

 

(f)           Notices. Any notices, consents 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); (iii) upon receipt, when sent by electronic message (provided
the recipient responds to the message and confirmation of both electronic
messages are kept on file by the sending party); or (iv) one (1) Business Day
after timely 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:

 

-15- 

 

 

If to the Company:

 

Net Element, Inc.

3363 NE 163rd Street, Suite 705

North Miami Beach, FL 33160

Telephone:(786) 923-0515

Facsimile:(786) 272-0696

E-mail:swolberg@netelement.com

Attention:Chief Legal Officer

 

If to the Buyer:

 

COBBLESTONE CAPITAL PARTNERS, LLC

42 Patriot Hill Drive
Baskin Ridge, NJ 07920

Telephone:___________

Facsimile:___________

Attention:Dahlia Harmon

Email:dahlia1128@icloud.com

 

If to the Transfer Agent:

 

Continental Stock Transfer & Trust Company

17 Battery Place, 8th Floor

New York, NY 10004
Telephone: (212) 845-3217

E-mail: mmullings@continentalstock.com

Attention: Michael G. Mullings

 

or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party one (1) Business Day prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent or other communication, (B) mechanically or electronically generated by
the sender’s facsimile machine containing the time, date, and recipient
facsimile number, (C) electronically generated by the sender’s electronic mail
containing the time, date and recipient email address or (D) provided by a
nationally recognized overnight delivery service, shall be rebuttable evidence
of receipt in accordance with clause (i), (ii), (iii) or (iv) above,
respectively.

 

(g)          Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Buyer, including by merger or
consolidation. The Buyer may not assign its rights or obligations under this
Agreement.

 

(h)          No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

 

(i)           Public Disclosure. The Company shall be entitled, without the
prior approval of the Buyer, to make any press release or other public
disclosure (including any filings with the SEC) with respect to the transactions
contemplated hereby as is required by applicable law and regulations.

 

-16- 

 

 

(j)          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.

 

(k)          Termination. This Agreement may be terminated only as follows:

 

(i)          If pursuant to or within the meaning of any Bankruptcy Law, the
Company commences a voluntary case, a Custodian is appointed for the Company or
for all or substantially all of its and its Subsidiaries’ property, or the
Company makes a general assignment for the benefit of its creditors (any of
which would be an Event of Default as described in Sections 8(e) and 8(f)
hereof), the Buyer will have the right, by delivering a prior five (5) Business
Days’ notice to the Company, terminate this Agreement.

 

(ii)         The Company shall have the option to terminate this Agreement for
any reason or for no reason upon sending to the Buyer a one (1) Business Day
prior notice without any liability whatsoever of either party to the other party
under this Agreement.

 

(iii)         This Agreement shall automatically terminate on the date that the
Company sells and the Buyer purchases the full Available Amount as provided
herein, without any action or notice on the part of any party and without any
liability whatsoever of any party to any other party under this Agreement.

 

(iv)        If by the Maturity Date for any reason or for no reason the full
Available Amount under this Agreement has not been purchased as provided for in
Section 1 of this Agreement, this Agreement shall automatically terminate on the
Maturity Date, without any action or notice on the part of any party and without
any liability whatsoever of any party to any other party under this Agreement.

 

(v)         Except as set forth in Sections 10(k)(iii) and 10(k)(iv), any
termination of this Agreement pursuant to this Section 10(k) shall be effected
by written notice from the Company to the Buyer, or the Buyer to the Company, as
the case may be, setting forth the basis for the termination hereof.

 

(vi)        No termination of this Agreement shall affect the Company’s or the
Buyer’s rights or obligations under this Agreement with respect to pending
purchases and the Company and the Buyer shall complete their respective
obligations with respect to any pending purchases under this Agreement.

 

(l)          No Financial Advisor, Placement Agent, Broker or Finder. The
Company represents and warrants to the Buyer that it has not engaged any
financial advisor, placement agent, broker or finder in connection with the
transactions contemplated hereby. The Buyer represents and warrants to the
Company that it has not engaged any financial advisor, placement agent, broker
or finder in connection with the transactions contemplated hereby. Each party
shall be responsible for the payment of any fees or commissions, if any, of any
financial advisor, placement agent, broker or finder engaged by such party
relating to or arising out of the transactions contemplated hereby. Each party
shall pay, and hold the other party harmless against, any liability, loss or
expense (including, without limitation, attorneys' fees and out of pocket
expenses) arising in connection with any such claim.

 

-17- 

 

 

(m)         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.

 

(n)          Failure or Indulgence Not Waiver. No failure or delay in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.

  

[Signatures are on next page.]

 

-18- 

 

 

IN WITNESS WHEREOF, the Buyer and the Company have caused this Common Stock
Purchase Agreement to be duly executed as of the date first written above.

 

  THE COMPANY:       NET ELEMENT, INC.       By: /s/ Oleg Firer     Name: Oleg
Firer     Title: CEO  

 

  BUYER:       COBBLESTONE CAPITAL PARTNERS, LLC       By: /s/ Dahlia Harman    
Name:   Dahlia Harman     Title: Managing Member  

 

-19- 

 

 

EXHIBIT A

 

FORM OF COMPANY RESOLUTIONS

FOR SIGNING PURCHASE AGREEMENT

AND APPROVING REGISTRATION STATEMENT

 

WHEREAS, management has reviewed with the Board of Directors the background,
terms and conditions of the transactions subject to the Common Stock Purchase
Agreement (the “Purchase Agreement”) by and between the Company and COBBLESTONE
CAPITAL PARTNERS LLC (“Cobblestone”), including all materials terms and
conditions of the transactions subject thereto, providing for the purchase by
Cobblestone of up to Ten Million Dollars ($10,000,000) of the Company’s common
stock, par value $0.0001 per share (the “Common Stock”); and

 

WHEREAS, after careful consideration of the Purchase Agreement, the documents
incident thereto and other factors deemed relevant by the Board of Directors,
the Board of Directors has determined that it is advisable and in the best
interests of the Company to engage in the transactions contemplated by the
Purchase Agreement, including, but not limited to, the issuance to Cobblestone
as a commitment fee of such number of shares of Common Stock that would have a
value equivalent to $200,000 calculated using the average of volume weighted
average price for the Common Stock traded during normal trading hours during the
three (3) trading days period immediately preceding the date of issuance of such
shares (the “Commitment Shares”) and the issuance and sale of shares of Common
Stock to Cobblestone up to the available amount under the Purchase Agreement
(the “Purchase Shares,” and together with the Commitment Shares, the
“Cobblestone Shares”).

 

WHEREAS, in connection with the transactions contemplated pursuant to the
Purchase Agreement, the Company has agreed to file a registration statement with
the Securities and Exchange Commission (the “Commission”) registering the
Commitment Shares (as defined in the Purchase Agreement) and the Purchase Shares
(as defined in the Purchase Agreement) and to list the Commitment Shares and
Purchase Shares on the Nasdaq Capital Market;

 

WHEREAS, the management of the Company has prepared an initial draft of a
Registration Statement on Form S-3 (the “Registration Statement”) in order to
register the sale of the Purchase Shares and the Commitment Shares
(collectively, the “Securities”) by Cobblestone; and

 

WHEREAS, the Board of Directors has determined to approve the Registration
Statement and to authorize the appropriate officers of the Company to take all
such actions as they may deem appropriate to effect the offering.

 

Transaction Documents

 

NOW, THEREFORE, BE IT RESOLVED, that the transactions described in the Purchase
Agreement are hereby approved and the Chief Executive Officer, Chief Legal
Officer and Chief Financial Officer (the “Authorized Officers”) are severally
authorized to execute and deliver the Purchase Agreement, and any other
agreements or documents contemplated thereby including, without limitation, a
registration rights agreement (the “Registration Rights Agreement”) providing
for the registration of the shares of the Company’s Common Stock issuable in
respect of the Purchase Agreement on behalf of Cobblestone, with such
amendments, changes, additions and deletions as the Authorized Officers may deem
to be appropriate and approve on behalf of, the Company, such approval to be
conclusively evidenced by the signature of an Authorized Officer thereon; and

 

 

 

 

FURTHER RESOLVED, that the terms and provisions of the Registration Rights
Agreement by and among the Company and Cobblestone are hereby approved and the
Authorized Officers are authorized to execute and deliver the Registration
Rights Agreement (pursuant to the terms of the Purchase Agreement), with such
amendments, changes, additions and deletions as the Authorized Officer may deem
appropriate and approve on behalf of, the Company, such approval to be
conclusively evidenced by the signature of an Authorized Officer thereon; and

 

FURTHER RESOLVED, that the Authorized Officers are authorized to execute and
deliver the transfer agent instructions pursuant to the terms of the Purchase
Agreement, with such amendments, changes, additions and deletions as the
Authorized Officers may deem appropriate and approve on behalf of, the Company,
such approval to be conclusively evidenced by the signature of an Authorized
Officer thereon; and

 

Execution of Purchase Agreement

 

FURTHER RESOLVED, that the Company be and it hereby is authorized to execute the
Purchase Agreement providing for the purchase of common stock of the Company
having an aggregate value of up to $10,000,000; and

 

Issuance of Common Stock

 

FURTHER RESOLVED, that the Company is hereby authorized to issue the Commitment
Shares to Cobblestone as Commitment Shares and that upon issuance of the
Commitment Shares pursuant to the Purchase Agreement, the Commitment Shares
shall be duly authorized, validly issued, fully paid and non-assessable; and

 

FURTHER RESOLVED, that the Company is hereby authorized to issue shares of
Common Stock upon the purchase of Purchase Shares up to the available amount
under the Purchase Agreement in accordance with the terms of the Purchase
Agreement and that, upon issuance of the Purchase Shares pursuant to the
Purchase Agreement, the Purchase Shares will be duly authorized, validly issued,
fully paid and non-assessable; and

 

FURTHER RESOLVED, that the Corporation shall initially reserve 20,000,000 shares
of Common Stock for issuance as Purchase Shares under the Purchase Agreement;
and

 

Listing of Shares on the Nasdaq Capital Market

 

FURTHER RESOLVED, that the officers of the Company be, and each of them hereby
is, authorized and directed to take all necessary steps and do all other things
necessary and appropriate to effect the listing of the Cobblestone Shares on the
Nasdaq Capital Market; and

 

Approval of Registration Statement

 

RESOLVED, that the officers and directors of the Company be, and each of them
hereby is, authorized and directed to prepare, execute and file with the
Commission the Registration Statement, which Registration Statement shall be
filed substantially in the form presented to the Board of Directors, with such
changes therein as the Chief Executive Officer, Chief Legal Officer or Chief
Financial Officer of the Company shall deem desirable and in the best interest
of the Company and its stockholders (such officer’s execution thereof including
such changes shall be deemed to evidence conclusively such determination); and

 

FURTHER RESOLVED, that the officers of the Company be, and each of them hereby
is, authorized and directed to prepare, execute and file with the Commission all
amendments, including post-effective amendments, and supplements to the
Registration Statement, and all certificates, exhibits, schedules, documents and
other instruments relating to the Registration Statement, as such officers shall
deem necessary or appropriate (such officer’s execution and filing thereof shall
be deemed to evidence conclusively such determination); and

 

 

 

 

FURTHER RESOLVED, that the execution of the Registration Statement and of any
amendments and supplements thereto by the officers of the Company be, and the
same hereby is, specifically authorized either personally or by the Authorized
Officers as such officer’s true and lawful attorneys-in-fact and agents; and

 

FURTHER RESOLVED, that the officers of the Company be, and each of them hereby
is, authorized and directed to cause the Company to pay all fees, costs and
expenses that may be incurred by the Company in connection with the Registration
Statement; and

 

FURTHER RESOLVED, that it is desirable and in the best interest of the Company
that the Securities be qualified or registered for sale in various states; that
the officers of the Company be, and each of them hereby is, authorized to
determine the states in which appropriate action shall be taken to qualify or
register for sale all or such part of the Securities as they may deem advisable;
that said officers be, and each of them hereby is, authorized to perform on
behalf of the Company any and all such acts as they may deem necessary or
advisable in order to comply with the applicable laws of any such states, and in
connection therewith to execute and file all requisite papers and documents,
including, but not limited to, applications, reports, surety bonds, irrevocable
consents, appointments of attorneys for service of process and resolutions; and
the execution by such officers of any such paper or document or the doing by
them of any act in connection with the foregoing matters shall conclusively
establish their authority therefor from the Company and the approval and
ratification by the Company of the papers and documents so executed and the
actions so taken; and

 

FURTHER RESOLVED, that if, in any state where the securities to be registered or
qualified for sale to the public, or where the Company is to be registered in
connection with the public offering of the Securities, a prescribed form of
resolution or resolutions is required to be adopted by the Board of Directors,
each such resolution shall be deemed to have been and hereby is adopted, and the
Secretary is hereby authorized to certify the adoption of all such resolutions
as though such resolutions were now presented to and adopted by the Board of
Directors; and

 

Approval of Actions

 

FURTHER RESOLVED, that, without limiting the foregoing, the Authorized Officers
are, and each of them hereby is, authorized and directed to proceed on behalf of
the Company and to take all such steps as deemed necessary or appropriate to
cause the Company to consummate the agreements referred to herein and to perform
its obligations under such agreements;

 

FURTHER RESOLVED, that the Authorized Officers be, and each of them hereby is,
authorized, empowered and directed on behalf of and in the name of the Company,
to take or cause to be taken all such further actions and to execute and deliver
or cause to be executed and delivered all such further agreements, amendments,
documents, certificates, reports, schedules, applications, notices, letters and
undertakings and to incur and pay all such fees and expenses as in their
judgment shall be necessary, proper or desirable to carry into effect the
purpose and intent of any and all of the foregoing resolutions, and that all
actions heretofore taken by any officer or director of the Company in connection
with the transactions contemplated by the agreements described herein are hereby
approved, ratified and confirmed in all respects; and

 

FURTHER RESOLVED, that any and all actions heretofore or hereinafter taken on
behalf of the Company by any of said persons or entities within the terms of the
foregoing resolutions are hereby approved, ratified and confirmed in all
respects as the acts and deeds of the Company.