INVESTMENT AGREEMENT

 

This INVESTMENT AGREEMENT (the “Agreement”), dated as of August 12, 2014 (the
“Execution Date”), is entered in to by and between Rich Pharmaceuticals, Inc., a
Nevada corporation (the “Company”),, a Nevada corporation (the “Company”), with
its principal executive office at9595 Wilshire Blvd, Suite 900, Beverly Hills,
CA 90212, and Macallan Partners, LLC, a Delaware limited liability company (the
“Investor”), with its principal executive office at 245 Main Street, Suite 302,
White Plains, New York 10601.

 

RECITALS:

 

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Investor shall invest up to Four Million Dollars
($4,000,000) to purchase the Company’s common stock, par value $0.0001 per
share(the “Common Stock”);

 

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.

 

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

 

“Certificate of Incorporation” 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.

 

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

 

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

 

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

 

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

 

“Drawdown Notice” shall mean a written notice sent to the Investor by the
Company stating the Drawdown 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.

 

“Drawdown Notice Date” shall mean the Trading Day, as set forth below, on which
the Investor receives a Drawdown Notice, however a Drawdown Notice shall be
deemed delivered on (a) the Trading Day it is received by facsimile or otherwise
by the Investor if such notice is received prior to 12:00 pm Eastern Time, or
(b) the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 pm Eastern Time on a Trading Day. No Drawdown Notice may
be deemed delivered on a day that is not a Trading Day.

 

 

 

 

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

 

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

 

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

 

“Financing Agreements” shall mean this Agreement and the Registration Rights
Agreement between the Company and the Investor as of the date herewith.

 

“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.

 

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

 

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

 

 “Market Price” shall mean the lesser of: (1) the lowest traded price of the
Company Common Stock during the Pricing Period or (2) closing bid price on the
day before the Drawdown Notice is submitted.

 

“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
(a) the date which is thirty-six (36) months from the Effective Date; or (b)
termination of the Agreement in accordance with Section 8.

 

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

 

“Pricing Period” shall mean ten (10) consecutive Trading Days prior to the
Drawdown Notice Date.

 

“Principal Market” shall mean the New York Stock Exchange, the NYSE MKT, 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 on which the Common Stock is listed.

 

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

 

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

“Purchase Price” shall mean sixty-five percent (65%) of the Market Price.

 

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

 

“Registration Statement” means the registration statement of the Company filed
under the 1933 Act covering the Securities issuable hereunder.

 

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

 

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

 

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

 

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

 

“Securities” shall mean the Shares issued pursuant to the terms of the
Agreement.

 

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

 

“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.

 

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 Amount of Four Million Dollars ($4,000,000).

 

2.2              DELIVERY OF DRAWDOWN NOTICES. Subject to the terms and
conditions of the Financing Agreements, and from time to time during the Open
Period, but no more than once every ten trading (10) days, the Company may, in
its sole discretion, deliver a Drawdown Notice to the Investor which states the
dollar amount (designated in U.S. Dollars), which the Company intends to sell to
the Investor on a Closing Date (the “Drawdown”). The Drawdown Notice shall be in
the form attached hereto as Exhibit B and incorporated herein by reference. The
maximum amount that the Company shall be entitled to Drawdown to the Investor
(the “Drawdown Amount”) shall be two hundred percent (200%) of average daily
trading volume (U.S. market only) of the Common Stock during the ten (10) days
preceding the Drawdown Notice, so long as such amount does render the Investor a
holder of more than 4.99% of the outstanding Shares of the Company.

 

2.3              CONDITIONS TO INVESTOR’S OBLIGATION TO PURCHASE SHARES.
Notwithstanding anything to the contrary in this Agreement, the Company shall
not be entitled to deliver a Drawdown Notice and the Investor shall not be
obligated to purchase any Shares at a Closing unless each of the following
conditions are satisfied:

 

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

 

                             ii.            at all times during the period
beginning on the related Drawdown 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 shall not have been suspended from trading
thereon for a period of two (2) consecutive Trading Days during the Open Period
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 in all
respects with its obligations and is otherwise not in breach of or in default
under this Agreement, the Registration Rights Agreement or any other agreement
executed in connection herewith which has not been cured prior to delivery of
the Investor’s Drawdown 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 stockholder 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
Drawdown Amount of Common Stock set forth in the applicable Drawdown Notice.

2.4              MECHANICS OF PURCHASE OF SHARES BY INVESTOR. Subject to the
satisfaction of the conditions set forth in Sections 2.6, 7 and 8 of this
Agreement, the closing of the purchase by the Investor of the Securities (a
“Closing”) shall occur on the date (each a “Closing Date”), provided that, the
Company has delivered to the Investor pursuant to this Agreement, certificates
representing the Securities to be issued to the Investor on such date and
registered in the name of the Investor (the “Certificate”), together with any
necessary supporting documentation reasonably necessary to allow the Certificate
to be cleared for trading prior to 12:00 pm Eastern Time on such date. If the
Certificate is delivered for trading after 12:00 pm Eastern Time on a Trading
Day, the Closing shall occur on the next Trading Day. If the Investor notifies
the Company of a deficiency in delivery within four business days of receiving
such delivery, a Closing will be delayed by single consecutive Trading Days
until such deficiency is cured.  If, after the expiration of the four business
day period, the Investor is notified of a deficiency in the delivery and/or the
need of additional documentation to allow the Certificate to be cleared for
trading, upon notification from the Investor of the deficiency and/or necessary
additional documentation, the Company agrees to use its commercially reasonable
efforts to ensure that such deficiency is cured and all additional documentation
is delivered to the Investor. On the Closing Date, the Investor shall deliver to
the Company the Purchase Price to be paid for such Securities. In lieu of
delivering physical certificates representing the Securities and provided that
the Company’s transfer agent then is participating in The Depository Trust
Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon
request of the Investor, the Company shall use all commercially reasonable
efforts to cause its transfer agent to electronically transmit the Securities by
crediting the account of the Investor’s prime broker (as specified by the
Investor within a time reasonably in advance of the Investor’s notice) with DTC
through its Deposit Withdrawal Agent Commission (“DWAC”) system.

 

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

 

2.6              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 beneficially owned (as such term is defined under Section 13(d) and Rule
13d-3 of the 1934 Act), by the Investor, would exceed 4.99% of the number of
Shares outstanding on the Closing Date, as determined in accordance with Rule
13d-1(j) of the 1934 Act. 

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 (a) evaluating the merits and risks of an investment
in the Securities and making an informed investment decision; (b) protecting its
own interest; and (c) bearing the economic risk of such investment for an
indefinite period of time.

 

3.2              AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and
validly authorized, executed and delivered on behalf of the Investor and is a
valid and binding agreement of the Investor enforceable against the Investor in
accordance with its terms, subject 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 or
otherwise engage in hedging transactions regarding the stock, either directly or
indirectly through its affiliates, principals or advisors during the term of
this Agreement.

 

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

 

3.5              NO CONFLICTS. The execution, delivery and performance of the
Financing Agreements by the Investor and the consummation by the Investor of the
transactions contemplated hereby and thereby will not result in a violation of
Partnership Agreement or other organizational documents of the Investor.

 

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

 

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

 

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

 

3.9              ORGANIZATION; GOOD STANDING. The Investor is a Delaware limited
liability company, duly organized, validly existing and in good standing in the
States of Delaware and New York.

 

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

 

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

 

3.12          No Short Sales. No short sales shall be permitted by the Investor
or its affiliates during the period commencing on the Execution Date and
continuing through the termination of this Agreement.

 

3.13          ACKNOWLEDGEMENT OF RISK. The Investor agrees, acknowledges and
understands that its investment in the Securities involves a significant degree
of risk, including, without limitation that: (a) the Company is a development
stage business and may require substantial funds; (b) an investment in the
Company is highly speculative and only Persons who can afford the loss of their
entire investment should consider investing in the Company and the Securities;
(c) the Investor may not be able to liquidate its investment; (d)
transferability of the Securities is extremely limited; and (e) in the event of
a disposition of the Securities, the Investor can sustain the loss of its entire
investment. The Investor has considered carefully and understands the risks
associated with an investment in the Securities.

 

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3.14          RELIANCE ON REPRESENTATIONS. The Investor agrees, acknowledges and
understands that the Company and its counsel are entitled to rely on the
representations, warranties and covenants made by the Investor herein. The
Investor further represents and warrants that this Agreement does not contain
any untrue statement or a material fact or omit any material fact concerning the
Investor and that the Investor Questionnaire accompanying this Agreement in the
form attached hereto as Exhibit C does not contain any untrue statement or a
material fact or omit any material fact concerning the Investor.

SECTION IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

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

4.1              ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly organized and validly existing in good standing under the laws of the State
of Nevada, and has the requisite corporate power and authorization to own its
properties and to carry on its business as now being conducted. Both the Company
and the companies it owns or controls (“Subsidiaries”) are duly qualified to do
business and are in good standing in every jurisdiction in which its ownership
of property or the nature of the business conducted by it makes such
qualification necessary. 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, an 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 Financing Agreements; provided,
however, that none of the following, individually or in the aggregate, shall be
taken into account in determining whether a Material Adverse Effect has occurred
or insofar as reasonably can be foreseen would likely occur: (a) changes in
conditions in the U.S. or global capital, credit or financial markets generally,
including changes in the availability of capital or currency exchange rates; (b)
any effect of the announcement of, or the consummation of the transactions
contemplated by, this Agreement and the other Financing Agreements on the
Company’s relationships, contractual or otherwise, with customers, suppliers,
vendors, bank lenders, strategic venture partners or employees; and (c) the
receipt of any notice that the Common Stock may be ineligible to continue
listing or quotation on the Trading Market, other than a final and
non-appealable notice that the listing or quotation of the Common Stock on the
Trading Market shall be terminated on a date certain.

 

4.2              AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS.

 

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

 

                              ii.            The execution and delivery of the
Financing Agreements 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
stockholders.

 

                            iii.            The Financing Agreements have been
duly and validly executed and delivered by the Company.

 

                            iv.            The Financing Agreements 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 3,700,000,000 shares of the Common Stock of which, as of
August 4, 2014, 420,463,772 shares are issued and outstanding, and 6,000,000
shares of preferred stock are issued and outstanding. To the knowledge of the
executive officers of the Company, 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 Company’s 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;

 

                           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;

 

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                          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 Investor has had access through EDGAR to, true and correct copies of the
Company’s Second Amended and Restated Certificate of Incorporation, as in effect
on the date hereof (the “Certificate of Incorporation”), and the Company’s
Amended and Restated 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 SECURITIES. The Company has reserved 100,000,000
Shares for issuance pursuant to the Financing Agreements, 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 Securities for issuance pursuant to this
Agreement, the Company will use its commercially reasonable efforts to authorize
and reserve for issuance the number of Securities 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
Financing Agreements 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 Certificate 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 Certificate 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 Financing Agreements in
accordance with the terms hereof or thereof. Except for state blue sky filings
and filings required as a result of the transactions contemplated herein
pursuant to the federal securities laws or regulation, all consents,
authorizations, permits, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof and are in full force and effect as of
the date hereof. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company is not,
and will not be, in violation of the listing requirements of the Principal
Market as in effect on the date hereof and on each of the Closing Dates and is
not aware of any facts which would reasonably lead to delisting of the Common
Stock by the Principal Market in the foreseeable future.

 

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

 

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

 

4.8              ABSENCE OF LITIGATION AND/OR REGULATORY PROCEEDINGS. Except as
set forth in the SEC Documents, there is no material 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.

 

6

 

4.9              ACKNOWLEDGMENT REGARDING INVESTOR’S PURCHASE OF SHARES. The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of an arm’s length purchaser with respect to the Financing Agreements
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 Financing
Agreements 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 Financing Agreements 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
Financing Agreements 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, as of the date hereof, no event,
liability, development or circumstance has occurred or exists, or to the
Company’s knowledge is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, assets, prospects,
operations or financial condition, that would be required to be disclosed by the
Company under applicable securities laws on a registration statement filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.

 

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

 

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

 

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

 

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

 

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

 

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

 

4.17          INTERNAL ACCOUNTING CONTROLS. Except as otherwise set forth in the
SEC Documents, the Company maintains 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 executive officers have determined
that the Company’s internal accounting controls were effective as of the date of
this Agreement as further described in the SEC Documents.

 

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

 

7

 

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

 

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

 

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

 

4.22          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 the Investor as set
forth in this Agreement.

 

4.23          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.

SECTION V

COVENANTS OF THE COMPANY

 

5.1              REASONABLE 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 Securities (excluding amounts paid by the Company for fees as set
forth in the Financing Agreements) for general corporate and working capital
purposes and acquisitions or assets, businesses or operations or for other
purposes that the board of directors, in its good faith deem to be in the best
interest of the Company.

 

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

 

5.5              RESERVATION OF SHARES. The Company shall take all action
necessary to at all times have authorized, and reserved the amount of Shares,
included in the Company’s registration statement for issuance pursuant to the
Financing Agreements. In the event that the Company determines that it does not
have a sufficient number of authorized Shares 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 by
seeking stockholder approval for the authorization of such additional Shares.

 

5.6              LISTING. The Company shall promptly secure and maintain the
listing of all of the Registrable Securities (as defined in the Registration
Rights Agreement) on the Principal Market and each other national securities
exchange and automated quotation system, if any, upon which Shares 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
Financing Agreements. 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 two (2) Trading Days 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.

 

8

 

 

5.7              TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall
cause each of its Subsidiaries not to, enter into, amend, modify or supplement,
or permit any Subsidiary to enter into, amend, modify or supplement, any
agreement, transaction, commitment or arrangement with any of its or any
Subsidiary’s officers, directors, persons who were officers or directors at any
time during the previous two (2) years, stockholders who beneficially own 5% or
more of the Common Stock, or Affiliates or with any individual related by blood,
marriage or adoption to any such individual or with any entity in which any such
entity or individual owns a 5% or more beneficial interest (each a “Related
Party”), except for (i) customary employment arrangements and benefit programs
on reasonable terms, (ii) any agreement, transaction, commitment or arrangement
on an arms-length basis on terms no less favorable than terms which would have
been obtainable from a disinterested third party other than such Related Party,
(iii) any agreement, transaction, commitment or arrangement which is approved by
a majority of the disinterested directors of the Company, or (iv) as set forth
in the SEC Documents. For purposes hereof, any director who is also an officer
of the Company or any Subsidiary of the Company shall not be a disinterested
director with respect to any such agreement, transaction, commitment or
arrangement. “Affiliate” for purposes hereof means, with respect to any person
or entity, another person or entity that, directly or indirectly, (i) has a 10%
or more equity interest in that person or entity, (ii) has 10% or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) is under common control with that person or entity. “Control” or “Controls”
for purposes hereof means that a person or entity has the power, directly or
indirectly, to conduct or govern the policies of another person or entity.

 

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

 

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

 

5.10          NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF
RIGHT TO MAKE A DRAWDOWN. 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 Drawdown Notice during the continuation of any
of the foregoing events in this Section 5.10.

 

5.11          TRANSFER AGENT. Upon effectiveness of the Registration Statement,
and for so long as the Registration Statement is effective, following delivery
of a Drawdown Notice, the Company shall 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.

 

5.12          DTC Program. If the Company is eligible for DTC’s “FAST” program,
it will, for a period of at least two (2) years from the Execution Date, use its
best efforts to employ as the transfer agent for the Securities a participant in
the DTC’s Automated Securities Transfer Program that is eligible to deliver
shares via the DWAC System.

 

5.13          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 the Financing Agreements and
delivered the same to the Company.

 

6.2              The Investor shall have delivered to the Company the Purchase
Price for the Securities being purchased by the Investor between the end of the
Pricing Period and the Closing Date via a Drawdown Settlement Sheet (hereto
attached as Exhibit D). After receipt of confirmation of delivery and clearance
for trading of such Securities to the Investor, the Investor, by wire transfer
of immediately available funds pursuant to the wire instructions provided by the
Company will disburse the funds constituting the Purchase Amount. The Investor
shall have no obligation to disburse the Purchase Amount until the Company
delivers the Securities pursuant to a Drawdown Notice.

 

6.3              No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.

9

 

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 Financing Agreements and
delivered the same to the Investor.

 

7.2                 The Common Stock shall be authorized for quotation on the
Principal Market and trading in the Common Stock shall not have been suspended
by the Principal Market or the SEC, at any time beginning on the date hereof and
through and including the respective Closing Date (excluding suspensions of not
more than two (2)Trading Days resulting from business announcements by the
Company, provided that such suspensions occur prior to the Company’s delivery of
the Drawdown Notice related to such Closing).

 

7.3                 The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of the
applicable Closing Date as though made at that time and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by the Financing Agreements to be performed,
satisfied or complied with by the Company on or before such Closing Date, or
shall have cured any such non-performance or non-compliance on or before such
Closing Date. The Investor may request an update as of such Closing Date
regarding the representation contained in Section 4.3.

 

7.4                 The Company shall have executed and delivered to the
Investor the 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.

 

7.5                 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.

 

7.6                 No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.

 

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

 

7.8                 At the time of each Closing, the Registration Statement
(including information or documents incorporated by reference therein) and any
amendments or supplements thereto shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading or which would
require public disclosure or an update supplement to the prospectus.

 

7.9                 If applicable, the stockholders of the Company shall have
approved the issuance of any Shares in excess of the Maximum Common Stock
Issuance in accordance with Section 2.5 or the Company shall have obtained
appropriate approval pursuant to the requirements of Nevada law and the
Company’s Certificate of Incorporation and By-laws.

 

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

 

7.11             The Company shall have certified to the Investor the number of
Shares of Common Stock outstanding when a Drawdown Notice is given to the
Investor. The Company’s delivery of a Drawdown Notice to the Investor
constitutes the Company’s certification of the existence of the necessary number
of Shares reserved for issuance and that the representations contained herein
are and remain true.

SECTION VIII

TERMINATION

This Agreement shall terminate upon any of the following events:

8.1              when the Investor has purchased an aggregate of Four Million
Dollars ($4,000,000) in the Common Stock of the Company pursuant to this
Agreement; or

 

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

 

8.3              at such time that the Registration Statement is no longer in
effect, not including such periods as the effectiveness may be temporarily
suspended in order to amend or update the Registration Statement or as otherwise
permitted under the terms of the Registration Rights Agreement.

 

10

 

 

Any and all Shares or penalties, if any, due under this Agreement shall be
immediately payable and due upon termination of this Agreement. Notwithstanding
anything in this Agreement to the contrary, no termination of this Agreement by
any party affect any rights of any holder thereof,

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
registered under the 1934 Act or listed or traded on the Principal Market or the
Registration Statement is no longer effective (except as permitted hereunder).
Immediately upon the occurrence of one of the above-described events, the
Company shall send written notice of such event to the Investor.

SECTION X

INDEMNIFICATION

 

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

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 courts of New York or in the federal courts
located in the state and county 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. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process and consents to
process being served in any suit, action or proceeding in connection with this
Agreement or any other Financing Agreements 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 Financing Agreements (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. All legal expenses, other than underwriting
discounts and commissions and other than as set forth in this Agreement,
incurred in connection with registrations including comments, filings or
qualifications pursuant to Sections 2 and 3 of the Registration Rights
Agreement, including, without limitation, all registration, listing and
qualifications fees, printing fees, and the legal fees of Investor’s counsel of
$5,000, shall be paid by the Company from the first Drawdown 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.

 

11

 

 

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. 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.

 

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
Financing Agreements 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:

 

 

 

 

Rich Pharmaceuticals, Inc.

995 Wilshire Blvd, Suite 900

Beverly Hills, CA 90212

Attn: Ben Chang

Facsimile: [fax number]

 

With a copy to:

 

name

[address]

Attn: name

Facsimile:

 

If to the Investor:

Macallan Partners, LLC

245 Main Street, Suite 302

White Plains, New York 10601

Attn: Rick Stilitino

Facsimile: 212-xxx-xxxx

    With a copy to:

Szaferman Lakind Blumstein & Blader, PC

101 Grovers Mill Road, Suite 200

Lawrenceville, NJ 08648

Attn: Gregg E. Jaclin, Esq.

Facsimile: 609-557-0969

 

 

iHookup Social, Inc.

125 E. Campbell Avenue

Campbell, CA 95008

Attn: [name]

Facsimile: [fax number]

 

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.

 

12

 

 

11.10      SURVIVAL. The representations and warranties of the Company and the
Investor contained in Sections 3 and 4, the agreements and covenants set forth
in Sections 5 and 6, and the indemnification provisions set forth in Section 10,
shall survive until the termination of the Agreement.

 

11.11      PUBLICITY. The Company and the Investor shall consult with each other
in issuing any press releases or otherwise making public statements with respect
to the transactions contemplated hereby and no party shall issue any such press
release or otherwise make any such public statement without the prior consent of
the other party, which consent shall not be unreasonably withheld or delayed,
except that no prior consent shall be required if such disclosure is required by
law, in which such case the disclosing party shall provide the other party with
prior notice of such public statement. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of the Investor without the prior
consent of the Investor, except to the extent required by law. The Investor
acknowledges that this Agreement and all or part of the Financing Agreements 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. NEITHER PARTY NOR ANY OF ITS
AFFILIATES SHALL BE LIABLE IN CONTRACT, TORT, NEGLIGENCE, BREACH OF STATUTORY
DUTY OR OTHERWISE FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT OR PUNITIVE DAMAGES
OR FOR LOSS OF PROFITS SUFFERED BY THE OTHER PARTY.

 

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.

 

11.16      PRICING OF COMMON STOCK. For purposes of this Agreement, the bid
price of the Common Stock shall be as reported on Quotestream.

 

SECTION XII

NON-DISCLOSURE OF NON-PUBLIC INFORMATION

 

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

 

Nothing herein shall require the Company to disclose non-public information to
the Investor or its advisors or representatives, and the Company represents that
it does not disseminate non-public information to any investors who purchase
stock in the Company in a public offering, to money managers or to securities
analysts, provided, however, that notwithstanding anything herein to the
contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements,
therein, in light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 12 shall be construed to mean that such
persons or entities other than the Investor (without the written consent of the
Investor prior to disclosure of such information) may not obtain 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 short or engage in
hedging transactions with regard to, the Company’s Common Stock at any time
during this Agreement; (ii) the Company shall, by 8:30 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 Financing Agreements; (iii) the Company has not and shall not provide
material non-public information to the Investor unless prior thereto the
Investor shall have executed a written agreement regarding the confidentiality
and use of such information; and (iv) the Company understands and confirms that
the Investor will be relying on the acknowledgements set forth in clauses (i)
through (iii) above if the Investor effects any transactions in the securities
of the Company.

[Signature page follows]

 

13

 

 

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

RICH PHARMACEUTICALS, INC.

 

By: /s/ Ben Chang

Name: Ben Chang

Title: Chief Executive Officer

 

 

Macallan Partners, LLC

 

 

By: /s/ authorized signatory

Name:

Title:

  

[SIGNATURE PAGE OF INVESTMENT AGREEMENT]

14

 

 

LIST OF EXHIBITS

 

EXHIBIT A Registration Rights Agreement

EXHIBIT B Form of Drawdown Notice

EXHIBIT C Investor Questionnaire

EXHIBIT D Drawdown Settlement Sheet

15

 

 

EXHIBIT A

REGISTRATION RIGHTS AGREEMENT

See attached.

16

 

 

EXHIBIT B

FORM OF DRAWDOWN NOTICE

 

Date:

RE: Drawdown Notice Number __

Dear _____________,

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

The amount of this Drawdown is $__________.

The Pricing Period runs from _______________ until _______________.

The Purchase Price is: $_______________

The number of Drawdown Shares Due:___________________.

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

The number of shares currently available for issuance on the Registration
Statement on Form S-1 is: ________________________.

 

Regards,

Rich Pharmaceuticals, Inc.

 

 

By: __________________________________

Name:

Title:

 

17

 

 

EXHIBIT C

Form of Investor Questionnaire

18

 

 

EXHIBIT D

DRAWDOWN SETTLEMENT SHEET

Date: ________________

Dear _____________,

Pursuant to the Drawdown given by Rich Pharmaceuticals, Inc. (the “Company”) to
Macallan Partners, LLC (the “Investor”) on _________________ 201_, we are now
submitting the amount of common shares for you to issue to the Investor.

Please have a certificate bearing no restrictive legend totaling __________
shares issued to Investor immediately and send via its Deposit Withdrawal Agent
Commission (“DWAC”) system to the following account:

[INSERT]

If not DWAC eligible, please send FedEx Priority Overnight to:

[INSERT ADDRESS]

Once these shares are received by us, we will have the funds wired to the
Company.

Regards,

MACALLAN PARTNERS, LLC

 

 

By: _________________________________

Name:

Title:

 

19