Form 8-K MINERALRITE Corp For: Jan 22
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
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Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported):���January 15, 2015
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MineralRite Corporation
(Exact name of Registrant as Specified in its Charter)
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���Nevada | 000-27739 | 90-0315909 |
��(State or Other Jurisdiction of Incorporation or Organization)� | (Commission file number) | (I.R.S. Employer Identification Number) |
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55 South Geneva Road
��Lindon, Utah �84042
�(Address of Principal Executive Offices including Zip Code)
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(801) 796-8944
�(Registrant�s Telephone Number, including Area Code)
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Former name or former address, if changed since last report
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Item 1.01 �Entry or Termination of a Material Definitive Agreement
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On or about January 10, 2015 MineralRite Corporation, a Nevada corporation (the �Company�) �entered into a convertible note purchase agreement (the �Loan Agreement�) with River North Equity, Inc., an Illinois corporation (�River North�) in the principal amount of $77,778 at an original issue discount of 10% maturing one year from the date of issuance. �The promissory note issued under the Loan Agreement (the �Note�) bears interest at a rate of 6% per annum and the principal and interest due thereunder are convertible into shares of the Company�s common stock at a 50% discount to market, as further defined in the Note, at any time beginning 180 days from the date of issuance until maturity. �The Note may not be prepaid without penalty and the Loan Agreement provides for certain registration rights and rights of first refusal in the event that the Company seeks further investment from other parties. The Note is secured by a pledge of preferred shares held by our CEO, Guy Peckham.
In addition to the Loan Agreement the Company entered into a Securities Purchase Agreement (the �Investment Agreement�) with River North. Pursuant to the Investment Agreement, and subject to certain restrictions and conditions, the Company may issue and sell to the River North, and River North shall purchase from the Company, up to that number of shares of the Company�s common stock having an aggregate purchase price of ten million dollars ($10,000,000), over a period of 24 months from the first trading day following the effectiveness of the registration statement registering the resale of shares purchased by River North pursuant to the Investment Agreement, but not more than 30 months from the date of the Investment Agreement.
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The Company may in its discretion draw on the facility from time to time, as and when the Company determines appropriate in accordance with the terms and conditions of the Investment Agreement. The maximum investment amount that the Company is entitled to draw down from River North in any one draw down notice is the �purchase price multiplied by the lesser of either: (i) 4.99% of the outstanding shares of common stock as of the closing trading day immediately preceeding the applicable commencement date and (ii) the average daily trading volume of the common stock during the draw down pricing period multiplied by three. However, the maximum investment amount shall not exceed $500,000.
The purchase price shall be set at seventy percent (70%) (60% in the case of a DTC Chill) of the lower of (i) the average closing bid price during the ten trading days preceeding the draw down notice delivery date or (ii) the Closing Price on the date the draw down notice is delivered to River North, in each case subject to adjustment for reverse splits etc.
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There are put restrictions applied on days between the draw down notice date and the closing date with respect to that particular put. During such time, the Company shall not be entitled to deliver another draw down notice. In addition, River North will not be obligated to purchase shares of the Company�s common stock if: (i) there is no effective registration statement to cover the resale of the shares of common stock; (ii) the common stock is suspended from trading or the Company is notified of any pending or threatened proceeding or other action to suspend the trading of the common stock; (iii) the Company has not complied with its obligations and is otherwise not in breach of or in default under the Investment Agreement or any other related agreement; (iv) certain other conditions described in the Investment Agreement are not met.
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The Investment Agreement also contains customary representations and warranties of each of the parties. The assertions embodied in those representations and warranties were made for purposes of the Investment Agreement and are subject to qualifications and limitations agreed to by the parties in connection with negotiating the terms of the Investment Agreement. The Investment Agreement further provides that the Company and the Investor are each entitled to customary indemnification from the other for, among other things, any losses or liabilities they may suffer as a result of any breach by the other party of any provisions of the Investment Agreement or Registration Rights Agreement (as defined below). Investors should read the Investment Agreement together with the other information concerning the Company that the Company publicly files in reports and statements with the Securities and Exchange Commission (the �SEC�).
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Pursuant to the terms of a Registration Rights Agreement dated January 10, 2015 between the Company and the Investor (the �Registration Rights Agreement�), the Company is obligated to file one or more registrations statements with the SEC to register the resale by River North of the shares of Common Stock issued or issuable under the Investment Agreement. In addition, the Company is obligated to use all commercially reasonable efforts to have the registration statement remain effective by the SEC as provided for in the Investment Agreement.
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The foregoing description of each of the Convertible Note Purchase Agreement, the Convertible Promissory Note, the Pledge and Security Agreement, the Investment Agreement and the Registration Rights Agreement is qualified in its entirety by reference to the full text of the forgoing, respectively, which are filed as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5 to this Report on Form 8-K and incorporated herein by reference.
��Item 9.01 Financial Statements and Exhibits
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(d) Exhibits
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Exhibit�No. | � | Description |
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10.1 | � | Convertible Note Purchase Agreement by and between MineralRite Corporation and River North equity, Inc. dated as of January 10, 2015 |
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10.2 | � | Convertible Promissory Note by and between MineralRite Corporation and River North equity, Inc. dated as of January 10, 2015 |
10.3 | � | Pledge and Security Agreement by and between Guy Peckham and River North Equity, Inc. dated January 10, 2015 |
10.4 | � | Securities Purchase Agreement by and between MineralRite Corporation and River North equity, Inc. dated as of January 10, 2015 |
10.5 | � | Registration Rights Agreement �by and between MineralRite Corporation and River North equity, Inc. dated as of January 10, 2015 |
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Dated:� January 22, 2015
MINERALRITE CORPORATION
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By: ���/s/ ��Guy Peckham���������������������������������������������
Name:�� Guy Peckham
Title:���� Chief Executive Officer
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Page 1 of 23
CONVERTIBLE NOTE PURCHASE AGREEMENT
This �CONVERTIBLE �NOTE �PURCHASE �AGREEMENT �(the �Agreement), �dated �January
__, �2015, �by �and �between �MineralRite �Corporation, �a �Nevada �corporation, �with �headquarters
located �at �55 �South �Geneva �Road, �Lindon, �Utah �84042 �(the �"Company"), �and �River �North
Equity, �Inc., �an �Illinois �corporation, �with �its �principal �place �of �business �at �360 �W. �Hubbard �St.,
Unit �2801, �Chicago, �Illinois �60654 �(the �"Buyer"), �(together �the �"Parties"). ��Capitalized �terms
used �in �this �Agreement �and �not �otherwise �defined �shall �have �the �meanings �ascribed �to �them �in
Article 1.
WHEREAS:
A. ��The Parties are executing and delivering this Agreement in reliance upon the exemption from
securities �registration �afforded �by �the �rules �and �regulations �as �promulgated �by �the �United
States �Securities �and �Exchange �Commission �(the �SEC) �under �the �Securities �Act �of �1933,
as amended (the 1933 Act) as described in this Agreement.
B. ��Buyer �desires �to �purchase �and �Company �desires �to �issue �and �sell, �upon �the �terms �and
conditions set forth in this Agreement a six percent (6%) convertible note of Company, in the
form �attached �hereto �as �Exhibit �A, �in �the �aggregate �principal �amount �of �$77,778 �(together
with �any �note(s) �issued �in �replacement �thereof �or �as �a �dividend �thereon �or �otherwise �with
respect �thereto �in �accordance �with �the �terms �thereof, �the �Note), �with �an �original �issue
discount �of �ten �percent �(10%), �convertible into �shares �of �common �stock �of �Company, �$0.001
������par value per share (the Common Stock) upon �the terms �and subject to �the limitations and
conditions set forth in such Note.
C. ��The �terms �and �conditions �contained �herein, �Buyer �wishes �to �purchase, �upon �the �terms �and
conditions �stated �in �this �Agreement, �such �principal �amount �of ��the �Note �as �is �set �forth
immediately below its name on the signature pages hereto.
NOW THEREFORE, Company and Buyer severally (and not jointly) hereby agree as follows:
1. ��Purchase and Sale of Note.
a.
Purchase �of �Note. ��On �the �Closing �Date �(as �defined �below), �Company �shall �issue �and
sell to Buyer and Buyer agrees to purchase from Company such principal amount of �the
Note as is set forth immediately below Buyers name on the signature pages hereto.
b. �����Form �of �Payment/Closing. ��On �the �Closing �Date, �(i) Buyer �shall �pay the �purchase �price
for �the �Note �to �be �issued �and �sold �to �it �at �the �Closing �(the �Purchase �Price) �by �wire
transfer �of �immediately �available �funds �to �Company, �in �accordance �with �Companys
written �wiring instructions, �against �delivery of �the �Note, �and �(ii) �Company shall �deliver
such �duly �executed �Note �on �behalf �of �Company, �to �Buyer, �against �delivery �of �such
Purchase Price. �Such event, the Closing.
Company ___________
Buyer ___________
Page 2 of 23
Closing �Date. ��Subject �to �the �satisfaction �(or �written �waiver) �of �the �conditions �set
forth �in �Section �6 �and �Section �7 �below, �the �date �and �time �of �the �issuance �and �sale �of �the
Note �pursuant �to �the �Agreement �(the �Closing �Date) �shall �be �on �or �about �January �__,
2015, �or �such �other �mutually �agreed �upon �time. ���The �Closing �to �occur �at �any �such
location as may be agreed to by the Parties.
2. ��Representations and Warranties of Buyer. �Buyer represents and warrants to Company that:
a.
Investment Purpose. �As of the date hereof, Buyer is purchasing the Note and the shares
of �Common �Stock �issuable �upon �full �conversion �of, �or �otherwise �pursuant �to, �the �Note
(including, �without �limitation, �such �additional �shares �of �Common �Stock, �if �any, �as �are
issuable �(i) �on �account �of �interest �on �the �Note, �and �(ii) �as �a �result �of �the �events
described �in �Sections �1.3 �and �1.4 �of �the �Note) �pursuant �to �this �Agreement, �such �shares
of �Common �Stock �being �collectively �referred �to �herein �as �the �Conversion �Shares
and, ��collectively ��with ��the ��Note, ��the ��Securities ��and ��any ��of ��the ��Securities, ��a
"Security") �for �its �own �account �and �not �with �a �present �view �towards �the �public �sale �or
distribution �thereof, �except �pursuant �to �sales �registered �or �exempted �from �registration
under �the �1933 �Act, �provided, �however, �that �by �making �the �representations �herein,
Buyer �does �not �agree �to �hold �any �Securities �for �a �minimum �or �other �specific �term �and
reserves the right to dispose of the Securities at any time in accordance with or pursuant
to a registration statement or an exemption under the 1933 Act.
b. �����Accredited �Investor �Status. ��Buyer �is �an �Accredited �Investor �as �that �term �is �defined
in Rule 501(a) of Regulation D.
c.
Reliance �on �Exemptions. ��Buyer �understands �that �the �Securities �are �being �offered �and
sold �to �it �in �reliance �upon �specific �exemptions �from �the �registration �requirements �of
United �States �federal �and �state �securities �laws �and �that �Company �is �relying �upon �the
truth �and �accuracy �of, �and �Buyers �compliance �with, �the �representations, �warranties,
agreements, acknowledgements and understandings of Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of �Buyer �to acquire the
Securities.
d. �����Information. ���Buyer �and �its �advisors, �if �any, �have �been, �and �for �so �long �as �the �Note
remains �outstanding �will �continue �to �be �furnished �with �all �publicly �made �materials
relating �to �the �business, �finances �and �operations �of �Company �and �materials �relating �to
the �offer �and �sale �of �the �Securities �which �have been �requested �by Buyer �or �its �advisors.
Buyer ��and ��its ��advisors, ��if ��any, ��have ��been, ��and ��for ��so ��long ��as ��the ��Note ��remains
outstanding �will �continue �to �be, �afforded �the �opportunity to �ask �questions �of �Company.
Notwithstanding �the �foregoing, �Company �has �not �disclosed �to �Buyer �any �material
nonpublic information and will not disclose such information unless such information is
disclosed to the public prior to or promptly following such disclosure to Buyer. �Neither
such �inquiries �nor �any �other �due �diligence �investigation �conducted �by �Buyer �or �any �of
its �advisors �or �representatives �shall �modify, �amend �or �affect �Buyers �right �to �rely �on
Companys ��representations ��and ��warranties ��contained ��in ��Section ��3 ��below. ����Buyer
understands �that �its �investment �in �the �Securities �involves �a �significant �degree �of �risk.
Company ___________
Buyer ___________
Page 3 of 23
Buyer �is �not �aware �of �any �facts �that �may �constitute �a �breach �of �any �of �Company's
representations and warranties made herein.
e.
Governmental Review. ��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.
f.
Transfer �or �Re-sale. ��Buyer �understands �that �the �sale �or �re-sale �of �the �Securities �has �not
been �and �is �not �being �registered �under �the �1933 �Act �or �any �applicable �state �securities
laws, �and �the �Securities �may �not �be �transferred �unless: �(a) �the �Securities �are �sold
pursuant �to �an �effective �registration �statement �under �the �1933 �Act; �(b) Buyer �shall �have
delivered �to �Company, �at �the �cost �of �Buyer, �an �opinion �of �counsel �to �the �effect �that �the
Securities �to �be �sold �or �transferred �may be sold �or �transferred �pursuant �to �an �exemption
from �such �registration; �(c) �the �Securities �are �sold �or �transferred �to �an �"affiliate" �(as
defined �in �Rule �144 �promulgated �under �the �1933 �Act �(or �a �successor �rule) �(Rule
144)) ��of ��Buyer ��who ��agrees ��to ��sell ��or ��otherwise ��transfer ��the ��Securities ��only ��in
accordance �with �this �Section �2(f) �and �who �is �an �Accredited �Investor; �(d) �the �Securities
are sold pursuant to Rule 144; (e) the Securities are sold pursuant to Regulation S under
the 1933 Act (or a successor rule) (Regulation S); (f) the Securities are sold pursuant
to �any �other �available �exemption �from �the �registration �requirements �under �the �1933
Act; ��(g) ��a ��restrictive ��legend ��is ��not ��required ��under ��applicable ��requirements ��of ��the
Securities �Act �(including �judicial �interpretations �and �pronouncements �issued �by �the
staff �of �the �Commission) �and �Buyer �shall �have �delivered �to �Company, �at �the �cost �of
Buyer, �an �opinion �of �counsel �that �shall �be �in �form, �substance �and �scope �customary �for
opinions ��of ��counsel ��in ��corporate ��transactions. ����Notwithstanding ��the ��foregoing ��or
anything ��else ��contained ��herein ��to ��the ��contrary, ��the ��Securities ��may �be ��pledged ��as
collateral �in �connection �with �a �bona �fide �margin �account �or �other �lending �arrangement
in compliance with applicable securities rules and regulations.
g.
Legends. ���Buyer �understands �that �the �Note, �and �until �such �time �as �the �Conversion
Shares �have �become �eligible �for transfer �pursuant �to �any of �the �alternatives �specified �in
Section 2(f) above, the Conversion Shares may bear a restrictive legend in �substantially
the following form:
NEITHER ����THE ����ISSUANCE ����AND ����SALE ����OF ����THE ����SECURITIES
REPRESENTED ��BY ��THIS ��CERTIFICATE ��NOR ��THE ��SECURITIES ��INTO
WHICH ����THESE ����SECURITIES ����ARE ����EXERCISABLE ����HAVE ����BEEN
REGISTERED �UNDER �THE �SECURITIES �ACT �OF �1933, �AS �AMENDED, �OR
APPLICABLE �STATE �SECURITIES �LAWS. ���THE �SECURITIES �MAY �NOT
BE �OFFERED �FOR �SALE, �SOLD, �TRANSFERRED �OR �ASSIGNED �(I) IN �THE
ABSENCE �OF �(A) �AN �EFFECTIVE �REGISTRATION �STATEMENT �FOR �THE
SECURITIES �UNDER �THE �SECURITIES �ACT �OF �1933, �AS �AMENDED, �OR
(B) �AN �OPINION �OF �COUNSEL �(WHICH �COUNSEL �SHALL �BE �SELECTED
BY ��THE ��HOLDER), ��IN ��A ��GENERALLY ��ACCEPTABLE ��FORM, ��THAT
REGISTRATION �IS �NOT �REQUIRED �UNDER �SAID �ACT �OR �(II) �UNLESS
SOLD ��PURSUANT ��TO ��RULE ��144 ��OR ��RULE ��144A ��UNDER ��SAID ��ACT.
Company ___________
Buyer ___________
Page 4 of 23
NOTWITHSTANDING ��THE ��FOREGOING, ��THE ��SECURITIES ��MAY ��BE
PLEDGED �IN �CONNECTION �WITH �A �BONA �FIDE �MARGIN �ACCOUNT �OR
OTHER ��LOAN ��OR ��FINANCING ��ARRANGEMENT ��SECURED ��BY ��THE
SECURITIES.
The legend �set �forth �above �shall �be �removed �from �a Security which �satisfied �any of �the
alternatives specified in Section 2(f) above �and Company shall cause its Transfer Agent
to �issue �a �certificate(s) �without �such �legend �upon �request �by �its �holder. �In �the �absence
of �a �registration �statement �covering �the �Security, �such �holder �shall �provide �an �opinion
of �counsel, �to �the �effect �that �a �public �sale �or �transfer �of �such �Security �may �be �made
without registration under the 1933 Act. ��In the event that Company does not accept the
opinion �of �counsel �provided �by �Buyer �by �the �Deadline, �it �will �be �considered �an �Event
of Default pursuant to Section 3.3 of the Note.
h. �����Authorization; �Enforcement. ���This �Agreement �has �been �duly �and �validly �authorized.
This �Agreement �has �been �duly �executed �and �delivered �on �behalf �of �Buyer, �and �this
Agreement ��constitutes ��a ��valid ��and ��binding ��agreement ��of ��Buyer ��enforceable ��in
accordance with its terms.
i.
Residency. ��Buyer �is �a �resident �of �the �jurisdiction �set �forth �immediately below �Buyers
name on the signature pages hereto.
3. ��Representations �and �Warranties �of �Company. ���Company �represents �and �warrants �to �Buyer
that:
a.
Organization �and �Qualification. ���Company �and �each �of �its �Subsidiaries �(as �defined
below), if any, is, or shall be, a corporation duly organized, validly existing and in good
standing �under �the �laws �of �the �jurisdiction �in �which �it �is �incorporated, �with �full �power
and �authority �(corporate �and �other) �to �own, �lease, �use �and �operate �its �properties �and �to
carry �on �its �business �as �and �where �now �owned, �leased, �used, �operated �and �conducted.
Schedule �3(a) �sets �forth �a �list �of �all �of the �Subsidiaries �of �Company and �the jurisdiction
in which each is incorporated. �Company and each of it Subsidiaries is duly qualified as
a �foreign �corporation �to �do �business �and �is �in �good �standing �in �every �jurisdiction �in
which �its �ownership �or �use �of �property �or �the �nature �of �the �business �conducted �by �it
makes �such �qualification �necessary �except �where �the �failure �to �be �so �qualified �or �in
good �standing �would �not �have �a �Material �Adverse �Effect. ��Material �Adverse �Effect
means ��any ��material ��adverse ��effect ��on ��the ��business, ��operations, ��assets, ��financial
condition �or �prospects �of �Company �or �its �Subsidiaries, �if �any, �taken �as �a �whole, �or �on
the �transactions �contemplated �hereby or �by the �agreements �or �instruments �to �be entered
into �in �connection �herewith. ���"Subsidiary" �or �Subsidiaries �(as �the �case �may �be)
means �any �corporation �or �other �organization, �whether �incorporated �or �unincorporated,
in �which �Company �owns, �directly �or �indirectly, �an �equity �majority �or �other �controlling
ownership interest.
b. �����Authorization; ��Enforcement. ����(i) ��Company ��has ��all ��requisite ��corporate ��power ��and
authority �to �enter �into �and �perform �this �Agreement, �the �Note �and �to �consummate �the
Company ___________
Buyer ___________
Page 5 of 23
transactions contemplated hereby and �thereby and �to issue the �Securities, in accordance
with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the
Note �by Company and �the �consummation �by it �of �the �transactions �contemplated �hereby
and thereby (including without limitation, the issuance of the Note and the issuance and
reservation �for �issuance �of �the �Conversion �Shares �issuable �upon �conversion �or �exercise
thereof) �have �been �duly �authorized �by �Companys �Board �of �Directors �and �no �further
consent �or �authorization �of �Company, �its �Board �of �Directors, �or �its �shareholders �is
required, �(iii) �this �Agreement �has �been �duly executed �and �delivered �by Company by its
authorized �representative, �and �such �authorized �representative �is �the �true �and �official
representative �with �the ��authority �to �sign �this �Agreement �and �the �other �documents
executed ��in ��connection ��herewith ��and ��bind ��Company ��accordingly, ��and ��(iv) ��this
Agreement �constitutes, and upon execution and delivery by Company of the Note, �each
of �such �instruments �will �constitute, �a �legal, �valid �and �binding �obligation �of �Company
enforceable against Company in accordance with its terms.
c.
Capitalization. ��As �of �the �date �hereof, �the �authorized �capital �stock �of �Company consists
of: �_______________ �shares �of �Common �Stock, �$0.001 �par �value �per �share, �of �which
_______________ shares are issued and outstanding as of _______________; except as
disclosed in �Companys �SEC Documents �(as defined herein), no shares �are reserved for
issuance �pursuant �to �Companys �stock �option �plans, �no �shares �are �reserved �for issuance
pursuant �to �securities �(other �than �the �Note) �exercisable �for, �or �convertible �into �or
exchangeable �for �shares �of �Common �Stock. ��All �of �such �outstanding �shares �of �capital
stock �are, �or �upon �issuance �will �be, �duly authorized, �validly issued, �fully paid �and �non-
assessable. ��No �shares �of �capital �stock �of �Company �are �subject �to �preemptive �rights �or
any �other �similar �rights �of �the �shareholders �of �Company �or �any �liens �or �encumbrances
imposed �through �the �actions �or �failure �to �act �of �Company. ���Except �as �disclosed �in
Companys �SEC �Documents �as �of �the �effective �date �of �this �Agreement, �(i) �there �are �no
outstanding �options, �warrants, �scrip, �rights �to �subscribe �for, �puts, �calls, �rights �of �first
refusal, �agreements, �understandings, �claims �or �other �commitments �or �rights �of �any
character whatsoever relating to, or securities or rights convertible into or exchangeable
for �any �shares �of �capital �stock �of �Company �or �any �of �its �Subsidiaries, �or �arrangements
by �which ��Company �or ��any �of ��its ��Subsidiaries ��is ��or ��may �become �bound ��to ��issue
additional shares of capital stock of Company or any of its Subsidiaries, (ii) there are no
agreements ��or ��arrangements ��under ��which ��Company ��or ��any ��of ��its ��Subsidiaries ��is
obligated to register the sale of any of its or their securities under the 1933 �Act and (iii)
there �are �no �anti-dilution �or �price �adjustment �provisions �contained �in �any �security
issued �by �Company �(or �in �any �agreement �providing �rights �to �security �holders) �that �will
be �triggered �by �the �issuance �of �the �Note �or �the �Conversion �Shares. ���Company �has
furnished �to �Buyer �via �email �links �to �Companys �SEC �Documents �true �and �correct
copies ��of ��Companys ��Certificate ��of ��Incorporation ��as ��in ��effect ��on ��the ��date ��hereof
(Certificate �of �Incorporation), �Companys �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 �of �Company �and �the �material �rights �of �the �holders �thereof �in �respect
thereto. ���Company �shall �provide �Buyer �with �a �written �update �of �this �representation
signed by Companys Chief Executive on behalf of Company as of the Closing Date.
Company ___________
Buyer ___________
Page 6 of 23
d. �����Issuance �of �Shares. ���The �Conversion �Shares �are �duly �authorized �and �reserved �for
issuance �and, �upon �conversion �of �the �Note �in �accordance �with �its �respective �terms, �will
be �validly �issued, �fully �paid �and �non-assessable, �and �free �from �all �taxes, �liens, �claims
and ��encumbrances ��with ��respect ��to ��the ��issue ��thereof ��and ��shall ��not ��be ��subject ��to
preemptive �rights �or �other �similar �rights �of �shareholders �of �Company �and �will �not
impose personal liability upon the holder thereof.
e.
Tag-Along ��Registration ��Rights ��of ��Conversion ��Shares. ��Company ��shall ��include ��the
Conversion �Shares �in �any �Registration �Statement �filed �with �the �SEC �following �the
Registration �Statement �which �shall �be �filed �in �connection �with �the �Securities �Purchase
Agreement dated January __, 2015.
f.
Acknowledgment of Dilution. ��Company understands and �acknowledges the potentially
dilutive �effect �to �the �Common �Stock �upon �the �issuance �of �the �Conversion �Shares �upon
conversion �of �the �Note. ���Company �further �acknowledges �that �its �obligation �to �issue
Conversion Shares upon conversion of the Note in accordance with this Agreement, the
Note �is �absolute �and �unconditional �regardless �of �the �dilutive �effect �that �such �issuance
may have on the ownership interests of other shareholders of Company.
g.
No Conflicts. ��The execution, delivery and performance of this Agreement, the Note by
Company �and �the �consummation �by Company �of �the �transactions �contemplated �hereby
and �thereby �(including, �without �limitation, �the �issuance �and �reservation �for �issuance �of
the Conversion Shares) will not (i) conflict with or result in a violation of any provision
of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in
a �breach �of �any �provision �of, �or �constitute �a �default �(or �an �event �which �with �notice �or
lapse �of �time �or �both �could �become �a �default) �under, �or �give �to �others �any �rights �of
termination, �amendment, �acceleration �or �cancellation �of, �any �agreement, �indenture,
patent, �patent �license �of �instrument �to �which �Company �or �any �of �its �Subsidiaries �is �a
party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree
(including �federal �and �state �securities �laws �and �regulations �and �regulations �of �any �self-
regulatory �organizations �to �which �Company �or �its �securities �are �subject) �applicable �to
Company �or �any �of �its �Subsidiaries �or �by �which �any �property �or �asset �of �Company �or
any ��of ��its ��Subsidiaries ��is ��bound ��or ��affected ��(except ��for ��such ��conflicts, ��defaults,
terminations, �amendments, �accelerations, �cancellations �and �violations �as �would �not,
individually �or �in �the �aggregate, �have �a �Material �Adverse �Effect). ��Neither �Company
nor �any �of �its �Subsidiaries �is �in �violation �of �its �Certificate �of �Incorporation, �By-laws �or
other �organizational �documents �and �neither �Company �nor �any �of �its �Subsidiaries �is �in
default �(and �no �event �has �occurred �which �the �notice �or �lapse �of �time �or �both �could �put
Company �or �any �of �its �Subsidiaries �in �default) �under, �and �neither �Company �nor �any �of
its �Subsidiaries �has �taken �any �action �or �failed �to �take �any �action �that �would �give �to
others ��any ��rights ��of ��termination, ��amendment, ��acceleration ��or ��cancellation ��of, ��any
agreement, �indenture �or �instrument �to �which �Company �or �any �of �its �Subsidiaries �is �a
party or by which any property or assets of Company or any of its Subsidiaries is bound
or �affected, �except �for �possible �defaults �as �would �not, �individually �or �in �the �aggregate,
have �a �Material �Adverse �Effect. ��The �businesses �of �Company �and �its �Subsidiaries, �if
any, �are �not �being conducted, �and �shall �be �conducted �so �long as �Buyer �owns �any of �the
Company ___________
Buyer ___________
Page 7 of 23
Securities, �in �violation �of �any �law, �ordinance �or �regulation �of �any �governmental �entity.
Except �as �specifically �contemplated �by �this �Agreement �and �as �required �under �the �1933
Act �and �any �applicable �state �securities �laws, �Company �is �not �required �to �obtain �any
consent, �authorization �or �order �of, �or �make �any �filing �or �registration �with �any �court,
governmental �agency, �regulatory �agency, �self-regulatory �organization �or �stock �market
or �any �third �party �in �order �for �it �to �execute, �deliver �or �perform �any �of �its �obligations
under �this �Agreement, �the �Note �in �accordance �with �the �terms �hereof �or �thereof �or �to
issue �and �sell �the �Note �in accordance with �the �terms �hereof �and �to �issue the Conversion
Shares �upon �conversion �of �the �Note. ��All �consents, �authorizations, �orders, �filings �and
registrations �which �Company �is �required �to �obtain �pursuant �to �the �preceding �sentence
have �been �obtained �or �effected �on �or �prior �to �the �date �hereof. ���Company �is �not �in
violation �of �the �listing �requirements �of �the �OTC �Pink �market �(the �"OTC �Pink")
operated �by OTC �Markets �Group, �a �financial �marketplace �platform �("OTC �Markets"),
it �will �be �current �with �its �SEC �reports �within �14 �days �of �the �date �hereof �and �does �not
reasonably �anticipate �that �in �the �foreseeable �future �such �current �status �will �be �lost �or
that �its �Common �Stock �will �be �delisted �from �the �OTC �Pink �or �that �a �"Stop" �or �"Yield"
sign will be placed on its trading symbol. �Company and its Subsidiaries are unaware of
any facts or circumstances, which might give rise to any of the foregoing.
h. �����SEC ��Documents: ��Financial ��Statements. �����Company ��has ��timely ��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 �Securities �Exchange �Act �of �1934, �as
amended �(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,
other ��than ��exhibits ��to ��such ��documents, ��incorporated ��by ��reference ��therein, ��being
hereinafter ��referred ��to ��herein ��as ��the ��SEC ��Documents). ��Upon ��written ��request
Company will deliver to Buyer true and complete copies of the SEC Documents, except
for �such �exhibits �and �incorporated �documents. ��As �of �their �respective �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,
contained �any �untrue �statement �of �a �material �fact �or �omitted �to �state �a �material �fact
required �to �be �stated �therein �or �necessary �in �order �to �make �the �statements �therein, �in
light �of �the �circumstances �under �which �they �were �made, �not �misleading. ��None �of �the
statements �made �in �any �such �SEC �Documents �is, �or �has �been, �required �to �be �amended
or �updated �under �applicable �law �(except �for �such �statements �as �have �been �amended �or
updated �in �subsequent �filings �prior �the �date �hereof, �or �pursuant �to �pending �comments
from �the �SEC. �As �of �their �respective �dates, �the �financial �statements �of �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
the ���United ���States ���Generally ���Accepted ���Accounting ���Principles ���("US ���GAAP"),
consistently �applied, �during �the �periods �involved �and �fairly �present �in �all �material
respects ��the ��consolidated ��financial ��position ��of ��Company ��and ��its ��consolidated
Subsidiaries �as �of �the �dates �thereof �and �the �consolidated �results �of �their �operations �and
cash �flows �for �the �periods �then �ended �(subject, �in �the �case �of �unaudited �statements, �to
Company ___________
Buyer ___________
Page 8 of 23
normal �year-end �audit �adjustments). ��Except �as �set �forth �in �the �financial �statements �of
Company �included �in �the �SEC �Documents, �Company �has �no �liabilities, �contingent �or
otherwise, �other �than �(i) �liabilities �incurred �in �the �ordinary �course �of �business, �and �(ii)
obligations ��under ��contracts ��and ��commitments ��incurred ��in ��the ��ordinary ��course ��of
business �and �not �required �under �US �GAAP �to �be reflected �in �such �financial �statements,
which, �individually �or �in �the �aggregate, �are �not �material �to �the �financial �condition �or
operating results of Company. ��Company is �subject to the �reporting requirements of the
1934 Act.
i.
Absence �of �Certain �Changes. ��Since �June �30, �2014, �there �has �been �no �material �adverse
change ��and ��no ��material ��adverse ��development ��in ��the ��assets, ��liabilities, ��business,
properties, �operations, �financial �condition, �results �of �operations, �prospects �or �1934 �Act
reporting status of Company or any of its Subsidiaries.
j.
Absence ��of ��Litigation. ����There ��is ��no ��action, ��suit, ��claim, ��proceeding, ��inquiry ��or
investigation �before �or �by �any �court, �public �board, �government �agency, �self-regulatory
organization ��or ��body ��pending ��or, ��to ��the ��knowledge ��of ��Company ��or ��any ��of ��its
Subsidiaries, �threatened �against �or �affecting �Company �of �any �of �its �Subsidiaries, �or
their �officers �or �directors �in �the �their �capacity �as �such, �that �could �have �a �Material
Adverse Effect. ��Schedule 3(j) �contains �a complete list and summary description of any
pending �or, �to �the �knowledge �of �Company �threatened �proceeding �against �or �affecting
Company or �any of its Subsidiaries, without regard to whether it would have a Material
Adverse ��Effect. �����Company ��and ��its ��Subsidiaries ��are ��unaware ��of ��any ��facts ��or
circumstances which might give rise to any of the foregoing.
k. �����Patents, Copyrights, etc. ��Company and �each of its Subsidiaries owns or possesses �or in
the �process �of �obtaining �ownership �of �the �requisite �licenses �or �rights �to �use �all �patents,
patent �applications, �patent �rights, �inventions, �know-how, �trade �secrets, �trademarks,
trademark ��applications, ��service �marks, ��service ��names, ��trade �names ��and ��copyrights
(Intellectual ��Property) ��necessary ��to ��enable ��it ��to ��conduct ��its ��business ��as ��now
operated �(and, �as �presently contemplated to �be operated �in the �future); there is no �claim
or ��action ��by ��any ��person ��pertaining ��to, ��or ��proceeding ��pending, ��or ��to ��Companys
knowledge �threatened, �which �challenges �the �right �of �Company �or �of �a �Subsidiary �with
respect to any Intellectual Property necessary to enable it to conduct its business as now
operated �(and, �as �presently �contemplated �to �be �operated �in �the �future); �to �the �best �of
Companys �knowledge, �Companys �or �its �Subsidiaries �current �and �intended �products,
services �and �processes �do �not �infringe �on �any �Intellectual �Property �or �other �rights �held
by �any �person; �and �Company �is �unaware �of �any �facts �or �circumstances �which �might
give �rise �to �any �of �the �foregoing. ���Company �and �each �of �its �Subsidiaries �have �taken
reasonable �security �measures �to �protect �the �secrecy, �confidentiality �and �value �of �their
Intellectual Property.
l.
No �Materially �Adverse �Contracts, �Etc. ��Neither �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 �Companys �officers �has �or �is
expected �in �the �future �to �have �a �Material �Adverse �Effect. ��Neither �Company �nor �any of
Company ___________
Buyer ___________
Page 9 of 23
its �Subsidiaries �is �a �party �to �any �contract �or �agreement, �which �in �the �judgment �of
Companys officers has or is expected to have a Material Adverse Effect.
m. ����Tax �Status. ��Company �and �each �of �its �Subsidiaries �has �made �or �filed �all �federal, �state
and �foreign �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 �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 �provisions �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
Company �know �of �no �basis �for �any �such �claim. ��Company �has �not �executed �a �waiver
with �respect �to �the �statute �of �limitations �relating �to �the �assessment �or �collection �of �any
foreign, �federal, �state �or �local �tax. ��None �of �Companys �tax �returns �are �presently �being
audited by any taxing authority.
n. �����Certain Transactions. ��Except for arms length transactions pursuant to which Company
or �any �of �its �Subsidiaries �makes �payments �in �the �ordinary �course �of �business �upon
terms no less favorable than Company or any of its Subsidiaries could obtain from third
parties ��and ��other ��than ��the ��grant ��of ��stock ��options ��disclosed ��in ��Companys ��SEC
Documents �and �on �Schedule �3(c), �none �of �the �officers, �directors, �or �employees �of
Company ��is ��presently ��a ��party ��to ��any ��transaction ��with ��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 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.
o. �����Disclosure. �����All ��information ��relating ��to ��or ��concerning ��Company ��or ��any ��of ��its
Subsidiaries set forth in this Agreement �and provided to Buyer pursuant �to �Section 2(d)
hereof �and �otherwise �in �connection �with �the �transactions �contemplated �hereby �is �true
and �correct �in �all �material �respects �and �Company �has �not �omitted �to �state �any �material
fact �necessary �in �order �to �make �the �statements �made �herein �or �therein, �in �light �of �the
circumstances �under �which �they were made, �not �misleading. ��No �event �or �circumstance
has �occurred �or �exists �with �respect �to �Company or �any of �its �Subsidiaries �or �its �or �their
business, ��properties, ��prospects, ��operations ��or ��financial ��conditions, ��which, ��under
applicable ��law, ��rule �or ��regulation, ��requires ��public �disclosure �or ��announcement ��by
Company but which has not been so publicly announced or disclosed (assuming for this
purpose that Companys �reports filed under the 1934 Act are being incorporated into an
effective registration statement filed by Company under the 1933 Act).
Company ___________
Buyer ___________
Page 10 of 23
p. �����Acknowledgment �Regarding �Buyers �Purchase �of �Securities. ��Company �acknowledges
and �agrees �that �Buyer �is �acting �solely �in �the �capacity �of �arms �length �purchasers �with
respect �to �this �Agreement �and �the �transactions �contemplated �hereby. ��Company �further
acknowledges �that �Buyer �is �not �acting �as �a �financial �advisor �or �fiduciary �of �Company
(or ��in ��any ��similar ��capacity) ��with ��respect ��to ��this ��Agreement ��and ��the ��transactions
contemplated ��hereby ��and ��any ��statement ��made ��by ��Buyer ��or ��any ��of ��its ��respective
representatives ��or ��agents ��in ��connection ��with ��this ��Agreement ��and ��the ��transactions
contemplated �hereby �is �not �advice �or �a �recommendation �and �is �merely �incidental �to
Buyers ��purchase ��of ��the ��Securities. ����Company ��further ��represents ��to ��Buyer ��that
Companys ��decision ��to ��enter ��into ��this ��Agreement ��has ��been ��based ��solely ��on ��the
independent evaluation of Company and its representatives.
q. �����No ��Integrated ��Offering. ����Assuming ��the ��accuracy ��of ��Buyers ��representations ��and
warranties �set �forth �in �Section �2, �neither �the �Company, �nor �any of �its �affiliates, �nor �any
Person �acting �on �its �or �their �behalf �has, �directly �or �indirectly, �made �any �offers �or �sales
of �any �security �or �solicited �any �offers �to �buy �any �security, �under �circumstances �that
would �cause �this �offering �of �the �Securities �to �be �integrated �with �prior �offerings �by �the
Company �for �purposes �of �the �Securities �Act �or �any �applicable �shareholder �approval
provisions �of �any �Trading �Market �on �which �any �of �the �Securities �of �the �Company �are
listed or designated.
r.
Permits; �Compliance. ���Company �and �each �of �its �Subsidiaries �is �in �possession �of �all
franchises, �grants, �authorizations, �licenses, �permits, �easements, �variances, �exemptions,
consents, �certificates, �approvals �and �orders �necessary �to �own, �lease �and �operate �its
properties �and �to �carry �on �its �business �as �it �is �now �being �conducted �(collectively, �the
Company ��Permits), ��and ��there ��is ��no ��action ��pending ��or, ��to ��the ��knowledge ��of
Company, �threatened �regarding suspension �or �cancellation �of �any of �Company Permits.
Neither �Company �nor �any �of �its ��Subsidiaries �is �in �conflict �with, �or �in �default �or
violation ��of, ��any �of ��Company �Permits, ��except ��for ��any �such ��conflicts, ��defaults ��or
violations �which, �individually or �in �the �aggregate, �would �not �reasonably be �expected �to
have �a �Material �Adverse �Effect. ��Since �June �30, �2014, �neither �Company �nor �any �of �its
Subsidiaries �has �received �any notification �with �respect �to �possible �conflicts, �defaults �or
violations �of �applicable �laws, �except �for �notices �relating �to �the �possible �conflicts,
defaults �or �violations, �which �conflicts, �defaults �or �violations �would �not �have �a �Material
Adverse Effect.
s.
Environmental Matters.
(i) �����There �are, �to �Companys �knowledge, �with �respect �to �Company �or �any �of �its
Subsidiaries �or �any �predecessor �of �Company, �no �past �or �present �violations �of
Environmental ��Laws ��(as ��defined ��below), ��releases ��of ��any ��material ��into ��the
environment, �actions �activities, �circumstances, �conditions, �events, �incidents, �or
contractual �obligations �which �may �give �rise �to �any �common �law �environmental
liability ��or ��any ��liability ��under ��the ��Comprehensive ��Environmental ��Response,
Compensation �and �Liability �Act �of �1980 �or �similar �federal, �state, �local �or �foreign
laws �and �neither �Company �nor �any �of �its �Subsidiaries �has �received �any �notice
Company ___________
Buyer ___________
Page 11 of 23
with �respect �to �any �of �the �foregoing, �nor �is �any �action �pending �or, �to �Companys
knowledge, ��threatened ��in ��connection ��with ��any ��of ��the ��foregoing. ����The ��term
Environmental �Laws �means �all �federal, �state, �local �or �foreign �laws �relating �to
pollution �or �protection �of �human �health �or �the �environment �(including, �without
limitation, �ambient �air, �surface �water, �groundwater, �land �surface �or �subsurface
strata), ��including, ��without ��limitation, ��laws ��relating ��to ��emissions, ��discharges,
releases �or �threatened �releases �of �chemicals, �pollutants �contaminants, �or �toxic �or
hazardous �substances �or �waste �(collectively, �Hazardous �Materials) �into �the
environment, �or �otherwise �relating �to �the �manufacture, �processing, �distribution,
use, �treatment, �storage, �disposal, �transport �or �handling �of �Hazardous �Materials, �as
well �as �all �authorizations, �codes, �decrees, �demands �or �demand �letters, �injunctions,
judgments, �licenses, �notices �or �notice �letters, �orders, �permits, �plans �or �regulations
issued, entered, promulgated or approved thereunder.
(ii) ����Other �than �those �that �are �or �were �stored, �used �or �disposed �of �in �compliance �with
applicable ��law, ��no ��Hazardous ��Materials ��are ��contained ��on ��or ��about ��any ��real
property �currently �owned, �leased �or �used �by �Company �or �any �of �its �subsidiaries,
and ��no ��Hazardous ��Materials ��were ��released ��on ��or ��about ��any ��real ��property
previously �owned, �leased �or �used �by �Company �or �any �of �its �Subsidiaries �during
the �period �the �property �was �owned, �leased �or �used �by �Company �or �any �of �its
Subsidiaries, except in the normal course of Companys or any of its Subsidiaries
business.
(iii) ��There �are �no �underground �storage �tanks �on �or �under �any �real �property �owned,
leased �or �used �by �Company �or �any �of �its �Subsidiaries �that �are �not �in �compliance
with applicable law.
t.
Title �to �Property. ��Company �and �its �Subsidiaries �have �good �and �marketable �title �in �fee
simple to all real property and �good �and marketable title to all personal property owned
by them which is material to the business of Company and its Subsidiaries, in each case
free �and �clear �of �all �liens, �encumbrances �and �defects �except �such �as �are �described �in
Schedule �3(t) �or �such �as �would �not �have �a �Material �Adverse �Effect. ��Any �real �property
and �facilities �held �under �lease �by Company and �its �Subsidiaries �are held �by them �under
valid, �subsisting �and �enforceable �leases �with �such �exceptions �as �would �not �have �a
Material Adverse Effect.
u.
Insurance. ��Company and �each �of �its �Subsidiaries �are �insured �by insurers �of �recognized
financial ��responsibility ��against ��such ��losses ��and ��risks ��and ��in ��such ��amounts ��as
management �of �Company �believes �to �be �prudent �and �customary �in �the �businesses �in
which �Company �and �its �Subsidiaries �are �engaged. ���Neither �Company �nor �any �such
Subsidiary �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. ���Upon �written �request �Company �will �provide �to
Buyer �true �and �correct �copies �of �all �policies �relating �to �the �directors �and �officers
Company ___________
Buyer ___________
Page 12 of 23
liability �coverage, �errors �and �omissions �coverage, �and �commercial �general �liability
coverage.
v.
Internal Accounting Controls. ��Company and each of its Subsidiaries maintain a system
of �internal �accounting �controls �sufficient, �in �the �judgment �of �Companys �board �of
directors, ��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 �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.
w.
Foreign �Corrupt �Practices. ���Neither �Company, �nor �any �of �its �Subsidiaries, �nor �any
director, �officer, �agent, �employee �or �other �person �acting �on �behalf �of �Company �or �any
Subsidiary �has, �in �the �course �of �his �actions �for, �or �on �behalf �of, �Company, �used �any
corporate �funds �for �any �unlawful �contribution, �gift, �entertainment �or �other �unlawful
expenses �relating �to �political �activity; �made �any �direct �or �indirect �unlawful �payment �to
any ��foreign ��or ��domestic ��government ��official ��or ��employee ��from ��corporate ��funds;
violated or is in violation of any provisions of the U.S. Foreign Corrupt Practices Act of
1977, �as �amended, �or �made �any �bribe, �rebate, �payoff, �influence �payment, �kickback �or
other unlawful payment to any foreign or domestic government official or employee.
x.
Solvency. ��Company ��(after ��giving ��effect ��to ��the ��transactions ��contemplated ��by ��this
Agreement) �is �solvent �(i.e., �its �assets �have �a �fair �market �value �in �excess �of �the �amount
required �to �pay its �probable �liabilities �on its existing debts �as �they become �absolute �and
matured) �and �currently �Company �has �no �information �that �would �lead �it �to �reasonably
conclude �that �Company �would �not, �after �giving �effect �to �the �transaction �contemplated
by �this �Agreement, �have �the �ability �to, �nor �does �it �intend �to �take �any �action �that �would
impair �its �ability to, �pay its �debts �from �time �to �time �incurred �in �connection �therewith �as
such �debt �mature. ��Company �did �not �receive �a �qualified �opinion �from �its �auditors �with
respect �to �its �most �recent �fiscal �year �end �and, �after �giving �effect �to �the �transactions
contemplated �by �this �Agreement, �does �not �anticipate �or �know �of �any �basis �upon �which
its auditors might issue a qualified opinion in respect of its current fiscal year.
y.
No Investment Company. �Company is not, and upon the issuance and sale of Securities
as �contemplated �by this �Agreement, �will �not �be �an �Investment �Company required �to �be
registered �under �the �Investment �Company �Act �of �1940. ��Company �is �not �controlled �by
an Investment Company.
z.
Breach �of �Representations �and �Warranties �by �Company. ��If �Company �breaches �any �of
the �representations �or �warranties �set �forth �in �this �Section �3, �and �in �addition to �any other
remedies �available �to �Buyer �pursuant �to �this �Agreement, �it �will �be �considered �an �Event
of Default under Section 3.4 of the Note.
Company ___________
Buyer ___________
Page 13 of 23
4. ��Covenants.
a. ���Best �Efforts. ����The �Parties �shall �use �their �best ��efforts �to ��timely �satisfy �each �of �the
conditions described in Section 6 and 7 of this Agreement.
b. ��Use �of �Proceeds. ��$70,000 �of �the �proceeds �to �the �Company �pursuant �to �this �Agreement
shall �be �used �only �as �follows: �Peder �Davisson �- �$10,000; �Jr �Reuben �acctg �- �$10,000; �SEC
Filers �- �$2,500; �Nevada �Transfer �- �$10,000; �Davisson �Trust �for �SEC �- �$5,000; �State �of
Nevada - $3,500; 3 months of operations (including legal, accounting, filing etc.) - $30,000.
c. ���Right �of �First �Refusal. ��The �Company �shall �deliver �to �Buyer, �at �least �seventy �two �(72)
hours �prior �to �the �closing �of �a �Future �Offering �(as �defined �herein), �written �notice �describing
the �proposed �Future �Offering, �including �the �terms �and �conditions �thereof �and �proposed
definitive �documentation �to �be �entered �into �in �connection �therewith, �and �providing �Buyer �an
option �during the �seventy two �(72) hour �period �following delivery of �such �notice to �purchase
the securities being offered in the Future Offering on the same terms as contemplated by such
Future �Offering �(the �limitations �referred �to �in �this �sentence �and �the �preceding �sentence �are
collectively �referred �to �as �the �Right �Of �First �Refusal) �(and �subject �to �the �exceptions
described �below). ����In �the �event �the �terms �and �conditions �of �proposed ��equity �financing
(including debt with an �equity component) (Future Offerings) are amended in any respect
after delivery of the notice to Buyer concerning the proposed Future Offering, Company shall
deliver �a �new �notice �to �Buyer �describing �the �amended �terms �and �conditions �of �the �proposed
Future �Offering �and �Buyer �thereafter �shall �have �an �option �during �the �seventy �two �(72) �hour
period �following �delivery �of �such �new �notice �to �purchase �its �pro �rata �share �of �the �securities
being �offered �on �the �same �terms �as �contemplated �by �such �proposed �Future �Offering, �as
amended. ��The �foregoing �sentence �shall �apply �to �successive �amendments �to �the �terms �and
conditions �of �any �proposed �Future �Offering. ��The �Right �Of �First �Refusal �shall �not �apply �to
any �transaction �involving �(i) �issuances �of �securities �in �a �firm �commitment �underwritten
public �offering �(excluding �a �continuous �offering �pursuant �to �rule �415 �under �the �1933 �Act) �or
(ii) �issuances �of �securities �as �consideration �for �a �merger, �consolidation �or �purchase �of �assets,
or in connection with any strategic partnership or joint venture (the primary purpose of which
is �not �to �raise �equity �capital), �or �in �connection �with �the �disposition �or �acquisition �of �a
business, �product �or �license �by �Company. ��The �Right �of �First �Refusal �also �shall �not �apply to
������the �issuance �of �securities �upon �exercise �or �conversion �of �Companys �options, �warrants �or
other �convertible �securities �outstanding �as �of �the �date �hereof �or �to �the �grant �of �additional
options or warrants, or the issuance of additional securities, under any Company stock option
or restricted stock plan approved by the shareholders of Company.
d. ��Financial �Information. ��Upon written �request �by Buyer, �Company agrees �to send or �make
available �by facsimile �(with �receipt �confirmation �by recipient) �or �email �the �following �reports
to �Buyer �until �Buyer �transfers, �assigns, �or �sells �all �of �the �Securities; �(i) �within �ten �(10) �days
after the filing with the SEC, a copy of its Annual Report on Form 10-K, its Quarterly reports
on �Form �10-Q �and �any �Current �Reports �on �Form �8-K; �(ii) �within �one �(1) �day �after �release,
copies ��of ��all ��press ��releases ��issued ��by ��Company ��or ��any ��of ��its ��Subsidiaries; ��and ��(iii)
contemporaneously �with �the �making �available �or �giving �to �the �shareholders �of �Company,
Company ___________
Buyer ___________
Page 14 of 23
copies �of �any �notices �or �other �information �Company �makes �available �or �gives �to �such
shareholders.
e. ���Listing. ���Company �shall �promptly �secure �the �listing �of �the �Conversion �Shares �on �each
national �securities �exchange �or �automated �quotation �system, �if �any, �on �which �shares �of
Common �Stock �are �then �listed �and, �so �long �as �Buyer �owns �any �of �the �Securities, �shall
maintain such listing of �all Conversion Shares �from time to time issuable upon conversion of
the �Note. ��Company �will �obtain �and, �so �long �as �Buyer �owns �any �of �the �Securities, �maintain
the �listing �and �trading �of �its �Common �Stock �on �the �OTCBB, �OTCQB, �OTCQX �or �the �OTC
Pink �(provided �that �if �it �is �listed �on �the �OTC �Pink �it �must �maintain �its �SEC �current �reporting
status), �the �NASDAQ �Stock �Market, �the �New �York �Stock �Exchange, �or �the �NYSE �MKT
f/k/a ��the ��American ��Stock ��Exchange ��(collectively, ��the ��"Trading ��Markets" ��and ��each, ��a
"Trading �Market") �and �will �comply �in �all �respects �with �Companys �reporting, �filing �and
other �obligations �under �the �bylaws �or �rules �of �the �Financial �Industry �Regulatory �Authority
(FINRA) �and �such �Trading �Markets, �as �applicable. ��Company �shall �promptly �provide �to
Buyer copies of any notices it receives �from the �OTC Pink and any other �Trading Markets �or
quotation ��systems ��on ��which ��the ��Common ��Stock ��is ��then ��listed ��regarding �the ��continued
eligibility of the Common Stock for listing on such Trading Markets and quotation systems.
f. ���Corporate �Existence. ���So �long �as �Buyer �beneficially �owns �any �Note, �Company �shall
������maintain its corporate existence and shall not sell all or substantially all of Companys assets,
except ��in ��the ��event ��of ��a ��merger ��or ��consolidation ��or ��sale ��of ��all ��or ��substantially �all ��of
Company's �assets, �where �the �surviving �or �successor �entity �in �such �transaction �(i) �assumes
������Companys �obligations �hereunder �and �under �the �agreements �and �instruments �entered �into �in
connection �herewith �and �(ii) �is �a �publicly �traded �corporation �whose �Common �Stock �is �listed
for trading on a Trading Market.
g. ��No �Integration. ���The �Company �shall �not �sell, �offer �for �sale �or �solicit �offers �to �buy �or
otherwise �negotiate �in �respect �of �any �security �(as �defined �in �Section �2 �of �the �Securities �Act)
that �would �be �integrated �with �the �offer �or �sale �of �the �Securities �in �a �manner �that �would
require �the �registration �under �the �Securities �Act �of �the �sale �of �the �Securities �to �the �Buyer �or
that �would �be �integrated �with �the �offer �or �sale �of �the �Securities �for �purposes �of �the �rules �and
regulations �of �any �Trading �Market �such �that �it �would �require �shareholder �approval �prior �to
the �closing �of �such �other �transaction �unless �shareholder �approval �is �obtained �before �the
closing of such subsequent transaction.
h. ��Breach of Covenants. ��If �Company breaches any of the covenants set forth in this Section
4, and in addition to any other remedies available to Buyer pursuant to this Agreement, it will
be considered an event of default under Section 3.4 of the Note.
i. ���Failure �to �Comply �with �the �1934 �Act. ���So �long �as �Buyer �beneficially �owns �the �Note,
Company shall �comply �with �the �reporting �requirements �of �the �1934 �Act; �and �Company shall
continue to be subject to the reporting requirements of the 1934 Act.
Company ___________
Buyer ___________
Page 15 of 23
j. ���Trading �Activities. ���Neither �Buyer �nor �its �affiliates �has �an �open �short �position �in �the
common �stock �of �Company �and �Buyer �agrees �that �it �shall �not, �and �that �it �will �cause �its
affiliates not to, engage in any short sales with respect to the common stock of Company.
5. ��Transfer �Agent �Instructions. ���Company �shall �issue �irrevocable �instructions �to �its �transfer
agent to issue certificates, registered �in the name of Buyer or its nominee, �for the Conversion
Shares ��in ��such ��amounts ��as ��specified ��from ��time ��to ��time ��by ��Buyer ��to ��Company ��upon
conversion of the Note in accordance with the terms �set forth in Exhibit B (the Irrevocable
Transfer �Agent �Instructions). ���In �the �event �that �the �Borrower �proposes �to �replace �its
transfer �agent, �the �Borrower �shall �provide, �prior �to �the �effective �date �of �such �replacement, �a
fully ��executed ��Irrevocable ��Transfer ��Agent ��Instructions ��in ��a ��form ��as ��initially ��delivered
pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably
reserve �shares �of �Common �Stock �in �the �Reserved �Amount) �signed �by �the �successor �transfer
agent to Borrower and the Borrower. �Prior to registration of the Conversion Shares under the
1933 �Act �or �the �date �on �which �the �Conversion �Shares �may �be �sold �without �any �restriction
pursuant �to �Rule �144 �or �any �available �exemption �under �the �1933 �Act, �all �such �certificates
shall �bear �the �restrictive �legend �specified �in �Section �2(g) �of �this �Agreement. ���Company
warrants ��that; ��(i) ��no ��instruction ��other ��than ��the ��Irrevocable ��Transfer ��Agent ��Instructions
referred to in this Section 5, and stop transfer instructions to give effect to Section 2(f) hereof
(in �the �case �of �the �Conversion �Shares, �prior �to �registration �of �Conversion �Shares �under �the
1933 �Act �or �the �date �on �which �the �Conversion �Shares �may �be �sold �pursuant �to �Rule �144 �or
any �available �exemption �under �the �1933 �Act, �without �any �restriction), �will �be �given �by
Company to its transfer agent �and that the Securities shall otherwise be freely transferable on
the �books �and �records �of �Company �as �and �to �the �extent �provided �in �this �Agreement �and �the
Note; �(ii) �it �will �not �direct �its �transfer �agent �not �to �transfer �or �delay, �impair, �and/or �hinder �its
transfer agent in transferring (or issuing), electronically or in certificated form, any certificate
for Conversion �Shares �to �be �issued �to �Buyer �upon �conversion �of �or �otherwise �pursuant �to �the
Note �as �and �when �required �by �the �Note �and �this �Agreement; �and �(iii) �it �will �not �fail �to
remove, �or �direct �its �transfer �agent �not �to �remove �or �impair, �delay, �and/or �hinder �its �transfer
agent �from �removing, �any �restrictive �legend, �or �to �withdraw �any �stop �transfer �instructions �in
respect ��thereof, ��on ��any ��certificate ��for ��any ��Conversion ��Shares ��issued ��to ��Buyer ��upon
conversion �of �or �otherwise �pursuant �to �the �Note �as �and �when �required �by �the �Note �and �this
Agreement. ����Nothing ��in ��this ��Section ��shall ��affect ��in ��any ��way ��Buyers ��obligations ��and
agreement set forth in Section 2(g) hereof. ��If Buyer provides Company, at �the cost of Buyer,
with �(i) �an �opinion �of �counsel �in �form, �substance �and �scope �customary �for �opinions �in
comparable �transactions, �to �the �effect �that �a �public �sale �or �transfer �of �such �Securities �may be
made ��without ��registration ��under ��the ��1933 ��Act ��pursuant ��to ��Rule ��144 ��or ��any ��available
exemption �under �the �1933 �Act, �Company �shall �permit �the �transfer, �and, �in �the �case �of �the
Conversion �Shares, �promptly instruct �its �transfer �agent �to �issue �one �or �more �certificates, �free
from �restrictive �legend, �in �such �name �and �in �such �denominations �as �specified �by �Buyer.
Company acknowledges �that a breach �by it of its obligations hereunder will cause irreparable
harm �to �Buyer, �by �vitiating �the �intent �and �purpose �of �the �transactions �contemplated �hereby.
Accordingly, �Company �acknowledges �that �the �remedy �at �law �for �a �breach �of �its �obligations
under �this �Section �5 �may �be �inadequate �and �agrees, �in �the �event �of �a �breach �or �threatened
breach �by Company of �the provisions of this Section, that Buyer shall be entitled, in addition
to ��all ��other ��available ��remedies, ��to ��an ��injunction ��restraining ��any ��breach ��and ��requiring
Company ___________
Buyer ___________
Page 16 of 23
immediate �transfer, �without �the �necessity of �showing economic loss �and �without �any bond �or
other security being required.
6. ��Conditions to Companys Obligation to Sell. ���The obligation of Company hereunder to issue
and �sell �the �Note �to �Buyer �at �the �Closing �is �subject �to �the �satisfaction, �at �or �before �the
Closing Date of each of the following conditions thereto:
a. ���Buyer shall have executed this Agreement and delivered the same to Company.
b. ��Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.
c. ���The �representations �and �warranties �of �Buyer �shall �be �true �and �correct �in �all �material
respects as of the date when made and as of the Closing Date as though made at that time
(except �for �representations �and �warranties �that �speak �as �of �a �specific �date), �and �Buyer
shall �have �performed, �satisfied �and �complied �in �all �material �respects �with �the �covenants,
agreements �and �conditions �required �by �this �Agreement �to �be �performed, �satisfied �or
complied with by Buyer at or prior to the Closing Date.
d. ��No �litigation, �statute, �rule, �regulation, �executive �order, �decree, �ruling �or �injunction �shall
have �been �enacted, �entered, �promulgated �or �endorsed �by �or �in �any �court �or �governmental
authority �or �competent �jurisdiction �or �any �self-regulatory �organization �having �authority
over �the �matters �contemplated �hereby �which �prohibits �the �consummation �of �any �of �the
transactions contemplated by this Agreement.
7. ��Conditions ��to ��Buyers ��Obligation ��to ��Purchase. ����The ��obligation ��of ��Buyer ��hereunder ��to
purchase the Note at the Closing is subject to the satisfaction, at or before the Closing date of
each of the following conditions:
a. ���Company shall have executed this Agreement and delivered the same to Buyer.
b. ��Company �shall �have �delivered �to �Buyer �the �duly �executed �Note �in �accordance �with
Section 1(b) above.
c. ���The �Irrevocable �Transfer �Agent �Instructions, �in �form �and �substance �satisfactory �to �the
Buyer, �shall have been �delivered to �and acknowledged �in writing by Companys Transfer
Agent.
d. ��The �representations �and �warranties �of �Company �shall �be �true �and �correct �in �all �material
respects �as �of �the �date �when �made �and �as �of �the �Closing �Date �as �though �made �at �such
time �(except �for �representations �and �warranties �that �speak �as �of �a �specific �date) �and
Company �shall �have �performed, �satisfied �and �complied �in �all �material �respects �with �the
covenants, ��agreements ��and �conditions �required ��by �this ��Agreement �to ��be �performed,
satisfied �or �complied �with �by Company at �or �prior to �the �Closing Date. ��Buyer �shall �have
received �a �certificate �or �certificates, �executed �by �the �chief �executive �officer �of �Company,
dated �as �of �the �Closing �Date, �to �the �foregoing �effect �and �as �to �such �other �matters �as �may
be reasonably requested �by Buyer including, but not limited to certificates �with respect to
Company ___________
Buyer ___________
Page 17 of 23
Companys �Certificate �of �Incorporation, �By-laws �and �Board �of �Directors �resolutions
relating to the transactions contemplated hereby.
e. ���No �litigation, �statute, �rule, �regulation, �executive �order, �decree, �ruling �or �injunction �shall
have �been �enacted, �entered, �promulgated �or �endorsed �by �or �in �any �court �or �governmental
authority �or �competent �jurisdiction �or �any �self-regulatory �organization �having �authority
over �the �matters �contemplated �hereby �which �prohibits �the �consummation �of �any �of �the
transactions contemplated by this Agreement.
f. ���No �event �shall �have �occurred �which �could �reasonably �be �expected �to �have �a �Material
Adverse �Effect �on �Company �including �but �not �limited �to �a �change �in �the �1934 �Act
reporting �status �of �Company �or �the �failure �of �Company �to �be �timely �in �its �1934 �Act
reporting obligations.
g. ��Trading in the Company's Common Stock shall not have been suspended �by the SEC and
a �"Stop" �sign �shall �not �have �been �placed �on �the �Company's �trading �symbol �by �OTC
Markets.
h. �Par value of Company's Common Stock shall have been set at $0.00001.
i. ���Buyer �shall �have �received �an �officers �certificate �described �in �Section �3(c) �above, �dated
as of the Closing Date.
8. ��Governing Law; Indemnity; Miscellaneous.
a. ���Governing Law. ��This Agreement shall be governed by and �construed �in accordance �with
the �laws �of �the �State �of �Illinois �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 �Illinois �or �in �the �federal
courts �located �in �the �state �and �county �of �Cook. ��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. ��Company �and �Buyer �waive �trial �by �jury. ��The �prevailing
party �shall �be �entitled �to �recover �from �the �other �party �its �reasonable �attorneys �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 �serviced �in
any suit, action or proceeding in connection with this Agreement or any other Transaction
Document 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
Company ___________
Buyer ___________
Page 18 of 23
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.
b. ��Counterparts. ���This �Agreement �may �be �executed �in �one �or �more �counterparts, �each �of
which �shall �be �deemed �an �original �but �all �of �which �shall �constitute �one �and �the �same
agreement �and �shall �become �effective �when �counterparts �have �been �signed �by �each �party
and delivered to the other party.
c. ���Headings. ��The �headings �of �this �Agreement �are �for �convenience �of �reference �only �and
shall not form part of, or affect the interpretation of, this Agreement.
d. ��Severability. �����In ��the ��event ��that ��any ��provision ��of ��this ��Agreement ��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 �provision �hereof �which �may
prove ��invalid ��or ��unenforceable ��under ��any ��law ��shall ��not ��affect ��the ��validity ��or
enforceability of any other provision hereof.
e. ���Entire �Agreement; �Amendments. ��This �Agreement �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 �Company �nor
Buyer �makes �any �representation, �warranty, �covenant �or �undertaking �with �respect �to �such
matters. ��No �provision �of �this �Agreement �may �be �waived �or �amended �other �than �by �an
instrument in writing signed by the majority in interest of Buyer.
f. ���Notices. ��All �notices, �demands, �requests, �consents, �approvals, �and �other �communications
required or permitted hereunder shall be in writing and, unless otherwise specified herein,
shall �be �(i) �personally �served, �(ii) �deposited �in �the �mail, �registered �or �certified, �return
receipt �requested, �postage �prepaid, �(iii) �delivered �by �reputable �air �courier �service �with
charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as
set �forth �below �or �to �such �other �address �as �such �party �shall �have �specified �most �recently
by �written �notice. ��Any �notice �or �other �communication �required �or �permitted �to �be �given
hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate �confirmation �generated �by �the �transmitting �facsimile �machine, �at �the �address �or
number �designated �below �(if �delivered �on �a �business �day �during �normal �business �hours
where �such �notice �is �to �be �received), �or �the �first �business �day �following �such �delivery �(if
delivered other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing by express
courier �service, �fully �prepaid, �addressed �to �such �address, �or �upon �actual �receipt �of �such
mailing, whichever shall first occur. The addresses for such communications shall be:
If to Company:
MineralRite Corporation
55 South Geneva Road
Lindon, Utah 84042
Company ___________
Buyer ___________
Page 19 of 23
Phone: �801-796-8944
Email: [email protected]
If to Buyer:
River North Equity, Inc.
360 W. Hubbard St., Unit 2801
Chicago, IL 60654
Phone: �(312) 643-0280
Email: [email protected]
Each party shall provide notice to the other party of any change in address.
g. ��Successors �and �Assigns. ��This �Agreement �shall �be �binding �upon �and �inure �to �the �benefit
of �the �Parties �and �their �successors �and �assigns. ��Neither �Company nor �Buyer �shall �assign
this Agreement or any rights or obligations hereunder without the prior written consent of
the �other. ��Notwithstanding �the �foregoing, �subject �to �Section �2(f), �Buyer �may �assign �its
rights �hereunder �to �any �person �that �purchases �Securities �in �a �private �transaction �from
Buyer �or �to �any �of �its �affiliates �as �that �term �is �defined �under �the �1934 �Act, �without �the
consent of Company.
h. ��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. ���Survival. ����The �representations �and �warranties ��of �Company �and ��the ��agreements ��and
covenants set forth in this Agreement shall survive the closing hereunder notwithstanding
any due diligence investigation conducted by or on behalf of Buyer.
j. ���Indemnity. ��Company agrees to indemnify and �hold harmless Buyer and �all their officers,
directors, �employees �and �agents �for loss �or �damage arising as �a �result �of �or �related �to �any
breach �or �alleged �breach �by �Company �of �any �of �its �representations, �warranties �and
covenants �set �forth �in �this �Agreement �or �any �of �its �covenants �and �obligations �under �this
Agreement, including advancement of expenses as they are incurred.
k. ��Publicity. �Company, and Buyer shall have the right to review a reasonable period of time
before �issuance �of �any press �releases, �SEC, �OTC �Markets �or �FINRA �filings, �or �any other
public ��statements ��with ��respect ��to ��the ��transactions ��contemplated ��hereby; ��provided,
however, �that �Company �shall �be �entitled, �without �the �prior �approval �of �Buyer, �to �make
any ��press ��release ��or ��SEC, ��OTC ��Markets ��or ��FINRA ��filings ��with ��respect ��to ��such
transactions �as �is �required �by �applicable �law �and �regulations �(although �Buyer �shall �be
consulted �by �Company �in �connection �with �any �such �press �release �prior �to �its �release �and
shall be provided with a copy thereof and be given an opportunity to comment thereon).
Company ___________
Buyer ___________
Page 20 of 23
l. ���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.
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. ��Remedies. ��Company �acknowledges �that �a �breach �by �it �of �its �obligations �hereunder �will
cause �irreparable �harm �to �Buyer �by �vitiating �the �intent �and �purpose �of �the �transaction
contemplated �hereby. ��Accordingly, �Company acknowledges �that �the �remedy at �law �for a
breach of its obligations under this Agreement will be inadequate and agrees, in the event
of �a �breach �or �threatened �breach �by �Company �of �the �provisions �of �this �Agreement, �that
Buyer �shall be �entitled, in addition to all �other available remedies �at law or in equity, �and
in �addition �to �the �penalties �assessable �herein, �to �an �injunction �or �injunctions �restraining,
preventing �or �curing �any �breach �of �this �Agreement �and �to �enforce �specifically �the �terms
and �provisions �hereof, �without �the �necessity �of �showing �economic �loss �and �without �any
bond or other security being required.
[REMAINDER OF DOCUMENT INTENTIONALLY LEFT BLANK]
Company ___________
Buyer ___________
Page 21 of 23
IN �WITNESS �WHEREOF, �the �undersigned �Buyer �and �Company have �caused �this �Agreement �to
be duly executed as of the date first above written.
SIGNED by: �Edward M. Liceaga
Signature: ______________________
for and on behalf of:
RIVER NORTH EQUITY, INC.
Principal Amount of Note:
$77,778.00
SIGNED by: ____________________
Signature: ______________________
for and on behalf of:
MINERALRITE CORPORATION
Company ___________
Buyer ___________
Page 22 of 23
EXHIBIT B: �IRREVOCABLE INSTRUCTIONS
Nevada Agency & Transfer Company
50 W. Liberty St., Suite 880
Reno, NV 89501
775-322-0626
RE: �����IRREVOCABLE INSTRUCTIONS
MineralRite Corporation
To whom it may concern:
River �North �Equity, �Inc. �(the �Holder) �is �the �holder �of �a �$77,778 �Convertible �Note �(the
Note) �and �________ �shares �of �common �stock �issued �by �MineralRite �Corporation �(the
Company).
Nevada ��Agency ��& ��Trust ��Company ��(the ��Transfer ��Agent ��or ��you) ��is ��hereby
irrevocably �authorized �and �directed �to �issue �the �shares �of �Common �Stock �(the �Shares)
of �the �Company �within �three �(3) �business �days �upon �your �receipt �from �the �Holder �of �a
notice of conversion ("Conversion Notice") executed by the Holder, as well as �an opinion
of �counsel, �in �form, �substance �and �scope �customary �for �opinions �of �counsel �in �comparable
transactions, �according �to �which �the �Shares �are �not �restricted �securities �pursuant �to �rule
144 �under �the �Securities �Act �of �1933, �as �amended �(the �"Act"), �any �other �available
exemption under the Act, or an effective registration with the SEC.
A �copy of �the �Note �is �attached �hereto. �The �Shares �to �be �issued �are �to �be �registered �in �the
name of the registered holder of the securities submitted for conversion or exercise.
So long as you have previously received a Conversion notice and a confirmation from the
Companys �or �Holders �counsel �that �the �Shares �have �been �registered �under �the �1933 �Act
or otherwise may be sold �without any restriction, including pursuant to Rule 144, �and the
number �of �Shares �to �be �issued �in �any �one �conversion �are �less �than �9.99% �of �the �total
issued and outstanding common stock of the Company, such Shares should be transferred
via �DWAC �or, �if �DWAC �is �unavailable, �via �unrestricted �certificate(s) �issued �to �the
Holder, �pursuant �to �the �instructions �provided �by �the �Holder �on �the �Conversion �Notice �or
as otherwise instructed by the Holder.
You ���are ���instructed ���to ���reserve ���for ���issuance ���to ���the ���Holder ���a ���minimum ���of
____________________________ �shares �of �common �stock �of �the �Company, �as �may �be
increased �upon �advice �from �the �Company �(the �Share �Reserve). �The �Share �Reserve
shall �neither �act �to �increase �the �number �of �Shares �to �be �issued �pursuant �to �the �Note �nor
shall �the �Share �Reserve �articulated �herein �create �or �be �deemed �to �be �a �cap �on �the �number
of �Shares �to �be �issued �to �the �Holder. �All �such �shares �shall �remain �in �reserve �with �the
Transfer �Agent �until �the �Holder �provides �the �Transfer �Agent �instructions �that �the �shares
or �any �part �of �them �shall �be �taken �out �of �reserve �and �shall �no �longer �be �subject �to �the
terms of these instructions. Until such �time �as the �Holder issues �any such instruction, and
subject �to �the �ownership �percentage �limitation �in �the �preceding �paragraph, �the �Holder
Company ___________
Buyer ___________
Page 23 of 23
shall �have �no �beneficial �interest �in �the �Shares �so �reserved �and �no �rights �attendant �to
ownership, including, but not limited to, the right to vote, sell or hypothecate the reserved
shares.
The �Company �shall �indemnify �you �and ��your �officers, �directors, �principals, �partners,
agents �and �representatives, �and �hold �each �of �them �harmless �from �and �against �any �and �all
loss, liability, damage, claim or expense (including the reasonable fees and disbursements
of �its �attorneys) �incurred �by �or �asserted �against �you �or �any �of �them �arising �out �of �or �in
connection ��with ��the ��instructions ��set ��forth ��herein, ��the ��performance ��of ��your ��duties
hereunder �and �otherwise �in �respect �hereof, �including the �costs �and �expenses �of �defending
yourself �or �themselves �against �any �claim �or �liability hereunder, �except �that �the �Company
shall �not �be �liable �hereunder �as �to �matters �in �respect �of �which �it �is �determined �that �you
have acted with gross negligence or in bad faith. �Transfer Agent shall have no liability to
the �Company �in �respect �to �any �action �taken �or �any �failure �to �act �in �respect �of �this �if �such
action �was �taken �or �omitted �to �be �taken �in �good �faith, �and �you �shall �be �entitled �to �rely in
this regard on the advice of counsel.
The �Company �hereby �requests �that �the �Transfer �Agent �act �immediately, �without �delay
and �without �the �need �for �any �action �or �confirmation �by �the �Company �with �respect �to �the
issuance ��of ��Common ��Stock ��pursuant ��to ��any �Conversion ��Notices ��received ��from ��the
Holder. �Transfer �Agent �will �not �delay in �processing a �duly valid �Conversion �Notice from
the Holder.
The �Company �agrees �that �in �the �event �that �the �Transfer �Agent �resigns �as �the �Companys
transfer �agent, �the �Company �shall �engage �a �suitable �replacement �transfer �agent �that �will
agree �to �serve ��as �transfer ��agent �for �the ��Company �and �be �bound �by �the �terms ��and
conditions �of �these �Irrevocable �Instructions �within �five �(5) �business �days, �and �that �the
obligations, ���indemnifications ���and ���representations ���contained ���in ���these ���irrevocable
instructions �will �assign �to �each �and �every replacement �transfer �agent, �without �any further
action by the Company.
The Holder �is �intended �to �be �and �is �a third-party beneficiaries �hereof, �and �no �amendment
or �modification �to �the �instructions �set �forth �herein �may �be �made �without �the �consent �of
the Holder.
SIGNED by: ____________________
Accepted and Agreed
Siganture: _____________________
By: ___________________
for and on behalf of:
Signature: _________________
MineralRite Corporation
Nevada Agency & Transfer
Company
Company ___________
Buyer ___________
Page 1 of 21
EXHIBIT A
CONVERTIBLE PROMISSORY NOTE
NEITHER �THE �ISSUANCE �AND �SALE �OF �THE �SECURITIES �REPRESENTED �BY �THIS
CERTIFICATE ���NOR ���THE ���SECURITIES ���INTO ���WHICH ���THESE ���SECURITIES ���ARE
CONVERTIBLE �HAVE �BEEN �REGISTERED �UNDER �THE �SECURITIES �ACT �OF �1933,
AS ��AMENDED, ��OR ��APPLICABLE ��STATE ��SECURITIES ��LAWS. ��THE ��SECURITIES
MAY �NOT �BE �OFFERED �FOR �SALE, �SOLD, �TRANSFERRED �OR �ASSIGNED �(I) �IN
THE ��ABSENCE ��OF ��(A) ��AN ��EFFECTIVE ��REGISTRATION ��STATEMENT ��FOR ��THE
SECURITIES ��UNDER ��THE ��SECURITIES ��ACT ��OF ��1933, ��AS ��AMENDED, ��OR ��(B) ��AN
OPINION �OF �COUNSEL �(WHICH �COUNSEL �SHALL �BE �SELECTED �BY �TIIE �HOLDER),
IN �A �GENERALLY �ACCEPTABLE �FORM, �THAT �REGISTRATION �IS �NOT �REQUIRED
UNDER SAID ACT OR �(11) �UNLESS SOLD �P U R S U A N T �T O ��R U L E ��1 4 4 ��O R ��R U L E
1 4 4 A �U N D E R ��S A I D �A C T. ��NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAYBE �PLEDGED �IN �CONNECTION ��WITH �A �BONA �FIDE ��MARGIN �ACCOUNT ��OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Issue Date: �January __, 2015
Principal Amount: �$77,778.00
Original Issue Discount: �10%
Interest Rate: �6% per annum
Maturity Date: �January __, 2016
CONVERTIBLE PROMISSORY NOTE
FOR VALUE �RECEIVED, �MineralRite �Corporation, �a �Nevada �corporation �(hereinafter �called �the
"Borrower"), ��hereby �promises ��to ��pay �to ��the ��order ��of ��River ��North ��Equity ��Inc., ��an ��Illinois
corporation, �or �its �registered �assigns �(the �"Holder") �the �sum �of �$77,778.00 �together �with �any
interest �as �set �forth �herein, �on �January __, �2016 �(the �"Maturity �Date"), �and �to �pay interest �on �the
unpaid �principal �balance �hereof �at �the �rate �of �six �percent �(6%) �per �annum �(the �"Interest �Rate")
from �the �date �hereof �(the �"Issue �Date") �until �the �same �becomes �due �and �payable, �whether �at �the
Maturity Date �or �upon �acceleration or by prepayment �or �otherwise. �This �Note �may �not �be �prepaid
in �whole �or �in �part �except �as �otherwise �explicitly �set �forth �herein. �Any �amount �of �principal �or
interest on this Note, which �is �not paid �when due, shall �bear �interest �at �the �rate �of �sixteen �percent
(16%) �per �annum �from �the �due �date �thereof �until �the �same �is �paid �("Default �Interest") �and �shall
be �subject �to �a �partial �penalty �at �the �rate �of �five �percent �(5%) �on �the �outstanding �principal �and
accrued interest under this Note ("Partial Penalty Payment"). �Interest shall commence accruing
on �the �date �that �the �Note �is �fully paid �by the �Holder �and �shall �be �computed �on �the �basis �of �a 365-
day �year �and �the �actual �number �of �days �elapsed. �All �payments �due �hereunder �(to �the �extent �not
converted into common stock, $0.001 par value per share (the "Common Stock")) in accordance
with �the �terms �hereof �shall �be �made �in �lawful �money �of �the �United �States �of �America. �All
payments �shall �be �made �at �such �address, �as �Holder �shall �hereafter �give �to �Borrower �by �written
notice made in accordance with the provisions of this Note. Whenever any amount expressed to be
due by the terms of this Note is due on any day which is not a business day, the same shall instead
Borrower _______________
Holder _______________
Page 2 of 21
be due on the next succeeding day which is a business day and in the case of any interest payment
date which is not the date on which �this �Note �is �paid �in �full, �the �extension �of �the �due date thereof
shall �not �be �taken �into �account �for �purposes �of �determining �the �amount �of �interest �due �on �such
date. �As �used �in �this �Note, �the �term �"business �day" �shall �mean �any �day �other �than �a �Saturday,
Sunday �or �a �day �on �which �commercial �banks �in �the �city �of �New York, �New York �are �authorized
or �required �by �law �or �executive �order �to �remain �closed. �Each �capitalized �term �used �herein, �and
not �otherwise �defined, �shall �have �the �meaning �ascribed �thereto �in �that �certain �Convertible �Note
Purchase �Agreement �dated �the �date �hereof, �by �and �between �Borrower �and �Holder, �pursuant �to
which this �Note was originally issued �(the �"Purchase Agreement").
This �Note �is �free �from �all �taxes, �liens, �claims �and �encumbrances �with �respect �to �the �issue �thereof
and shall not be subject to preemptive rights or other similar rights of shareholders of Borrower and
will not impose personal liability upon Holder thereof.
The following terms shall apply to this Note:
ARTICLE I. CONVERSION RIGHTS
1.1 �Conversion �Right. �180 days after the Issue Date and until this Note is no longer outstanding,
this �Note �shall �be �convertible, �in �whole �or �in �part, �into �shares �of �Common �Stock �(as �such
Common �Stock �exists �on �the �Issue �Date, �or �any �shares �of �capital �stock �or �other �securities �of
Borrower �into �which �such �Common �Stock �shall �hereafter �be �changed �or �reclassified) �at �the
option ��of ��the ��Holder, ��at ��any ��time ��and ��from ��time ��to ��time, ��at ��the ��conversion ��price ��(the
"Conversion ��Price") ��determined ��as ���provided ���herein ���(a ���"Conversion"); ���provided,
however, �that �in �no �event �shall �Holder �be �entitled �to �convert �any �portion �of �this �Note �in
excess �of �that �portion �of �this �Note �upon �conversion �of �which �the �sum �of �(1) �the �number �of
shares �of �Common �Stock �beneficially �owned �by �Holder �and its affiliates (other than �shares �of
Common ��Stock ��which �may �be ��deemed ��beneficially �owned ��through ��the ��ownership ��of ��the
unconverted �portion �of �the �Notes �or �the �un-exercised �or �unconverted �portion �or �any �other
security �of ��Borrower ��subject �to ��a �limitation ��on �conversion ��or ��exercise ��analogous ��to ��the
limitations �contained �herein) �and �(2) �the �number �of �shares �of �Common �Stock �issuable �upon
the �conversion �of �the �portion �of �this �Note �with �respect �to �which �the �determination �of �this
proviso �is �being �made, �would �result �in �beneficial �ownership �by �Holder �and �its �affiliates �of
more �than �9.99% �of �the �outstanding �shares �of �Common �Stock. �For �purposes �of �the �proviso �to
the �immediately �preceding �sentence, �beneficial �ownership �shall �be �determined �in �accordance
with �Section �13(d) �of �the �Securities �Exchange �Act �of �1934, �as �amended �(the �"Exchange
Act"), �and �Regulations �13D �thereunder, �except �as �otherwise ��provided �in �clause �(1) �of
such �proviso, �provided, �further, �however �that �the �limitations �on �conversion �may �be �waived
by �Holder �upon, �at �the �election �of �Holder, �not �less �than �61 �days' �prior �notice �to �Borrower, �and
the �provisions �of �the �conversion �limitation �shall �continue �to �apply �until �such �61st �day �(or �such
later �date, �as �determined �by �Holder, �as �may �be �specified �in �such �notice �of �waiver). �Should
Borrower �fail �to �eliminate �any �prohibitions �under �applicable �law �or �the �rules �or �regulations �of
any �stock �exchange, �inter-dealer �quotation �system �or �other �self-regulatory �organization �with
jurisdiction �over �Borrower �or �any �of �its �securities �on �Borrower's �ability �to �issue �shares �of
Common Stock, in lieu of any right to convert this Note as described in this Section 1.1, this will be
considered an Event of Default under Section 3.2 of the Note.
Borrower _______________
Holder _______________
Page 3 of 21
The �number �of �shares �of �Common �Stock �to �be �issued �upon �each �conversion �of �this �Note �shall
be �determined �by �dividing �the �Conversion �Amount �(as �defined ��below) �by �the �applicable
Conversion �Price �then �in �effect �on �the �date �specified �in �the �notice �of �conversion, �in �the �form
attached �hereto �as �Exhibit �C �(the �"Conversion �Notice"), �delivered �to �Borrower �by �Holder �in
accordance �with �Section �1.4 �below; �provided �that �the ��Conversion �Notice �is �submitted �by
facsimile �or �e-mail �(or �by �other �means �resulting �in, �or �reasonably ��expected �to �result �in,
notice) �to �Borrower �before �6:00 �pm �New �York, �New �York �time �on �such �conversion �date �(the
"Conversion �Date"). �The �term �Conversion Amount" �means, �with �respect �to �any �conversion
of �this �Note, �the �sum �of �(1) �the �principal �amount �of �this �Note �to �be �converted �in �such
conversion �plus �(2) �at �Borrower's �option, �accrued �and �unpaid �interest, �if �any, �on �such �principal
amount ��at ��the ��interest ��rates ��provided ��in ��this ��Note ��to ��the ��Conversion ��Date, ��plus ��(3) ��at
Borrower's ��option, ��Default ��Interest ��and ��Partial �Penalty �Payment, ��if ��any, ��on ��the �amounts
referred �to �in �the �immediately �preceding �clauses �(1) �and/or �(2) �plus �(3) �at �Holder's �option, �any
amounts owed �to Holder pursuant to Sections 1.3 and 1.4(g) hereof.
1.2 Conversion Price
1.2(a) �Calculation �of �Conversion �Price: ���The �Conversion �Price �shall �equal
the Variable �Conversion �Price �(as �defined �herein) �(subject �to �equitable �adjustments �for
stock �splits, �stock �dividends �or �rights �offerings �by �Borrower �relating �to �Borrower's
securities ���or ���the ���securities ���of ���any ���subsidiary ���of ���Borrower, ���combinations,
recapitalization, �reclassifications, �extraordinary distributions �and �similar �events). As �used
in this Agreement, the �"Variable Conversion �Price" �shall mean �50% multiplied by the
Formula �Price �(representing �a �discount ��rate �of ��50%). �The �term ��"Formula ��Price"
means �the lower of: (i) the �Market Price (as defined herein); and (ii) the �closing bid price
on �the �Conversion �Date, �subject �to �adjustment �for �reverse �and �forward �stock �splits, �stock
dividends, �stock �combinations �and �other �similar �transactions �of �the �Common �Stock �that
occur �after �the �date �hereof. �Market �Price �means �the �average �Trading �Price �of �the
Common �Stock �during the �10 �Trading Days �immediately preceding the �Conversion �Date.
"Trading �Price" �means, �for �any �security �as �of �any �date, �the �closing �bid �price �on �the
OTC ��Pink, ��or ��other ��applicable ��Trading ��Market ��(as ��such ��term ��is ��defined ��in ��the
Convertible �Note �Purchase �Agreement �dated �January �__, �2015 �pursuant �to �which �this
Note �is �issued �(the �"Purchase Agreement")), �as �reported �by a �reliable �reporting �service
designated �by �Holder �(e.g. �Bloomberg �LP), �or �if �no �closing �bid �price �of �such �security �is
available �in �any �of �the �foregoing �manners, �the �average �of �the �closing �bid �prices �of �any
market �makers �for �such �security �that �are �listed �on �the �OTC �Markets. �If �the �Trading
Price cannot �be calculated �for such �security �on such date in the manner provided above,
the Trading Price shall be the fair market �value as �mutually determined by Borrower and
Holders �of �a �majority �in �interest �of �the �Notes �being �converted �for �which �the �calculation
of �the �Trading �Price �is �required �in �order �to �determine �the �Conversion �Price �of �such
Notes. �"Trading �Day" �shall �mean �any �day �on �which �the �Common �Stock �is �tradable
for �any �period �on �the �OTC �Pink, �or �any �other �Trading �Market �on �which �the �Common
Stock is then being traded.
1.2(b)
Conversion ��Price ��During ��Major ��Announcements: ��Notwithstanding
Borrower _______________
Holder _______________
Page 4 of 21
anything �contained �in �Section �1.2(a) �to �the �contrary, �in �the �event �Borrower �(i) �makes �a
public �announcement �that �it �intends �to �consolidate �or �merge �with �any �other �corporation
(other �than �a �merger �in �which �Borrower �is �the �surviving �or �continuing �corporation �and �its
capital �stock �is �unchanged) �or �sell �or �transfer �all �or �substantially �all �of �the �assets �of
Borrower �or �(ii) �any �person, �group �or �entity �(including �Borrower) �publicly �announces �a
tender �offer to �purchase �50% or more of Borrower's Common Stock (or any other takeover
scheme) �(the �date �of �the �announcement �referred �to �in �clause �(i) �or �(ii) �is �hereinafter
referred �to �as �the �"Announcement �Date"), �then �the �Conversion �Price �shall, �effective
upon �the �Announcement �Date �and �continuing �through �the �Adjusted �Conversion �Price
Termination �Date �(as �defined �below), �be �equal �to �the �lower �of �(x) �the �Conversion �Price
which would have been applicable for a Conversion occurring �on the Announcement Date
and �(y) �the �Conversion �Price �that �would �otherwise �be �in �effect. �From �and ��after �the
Adjusted �Conversion �Price �Termination �Date, �the �Conversion �Price �shall �be �determined
as �set �forth �in �this �Section �1.2(b). �For �purposes �hereof, �"Adjusted �Conversion �Price
Termination �Date" �shall �mean, �with �respect �to �any �proposed �transaction �or �tender
offer �(or �takeover �scheme) �for �which �a �public �announcement �as �contemplated �by �this
Section �1.2(b) �has �been �made, �the �date �upon �which �Borrower �(in �the �case �of �clause �(i)
above) �or �the �person, �group �or �entity �(in �the �case �of �clause �(ii) �above) �consummates �or
publicly �announces �the ��termination �or �abandonment �of �the �proposed �transaction �or
tender �offer �or �takeover �scheme) �which caused this Section 1.2(b) to become operative.
1.3 ��Authorized ��Shares. ��Borrower ��covenants ��that ��during ��the ��period ��the ��conversion ��right
exists, �Borrower �will �reserve �from �its �authorized �and �unissued �Common �Stock �a �sufficient
number of shares, free from preemptive rights, to �provide for the issuance of Common Stock �for
the �entire �principal �amount �of �this �Note, �plus �all �accrued �and �unpaid �interest �thereon, �plus �any
liquidated ��damages ��as ��per ��Section ��1.4(g) ��below ��(the ��"Reserved ��Amount"). ��Borrower
represents �that �upon �issuance, �such �shares �will �be duly and �validly �issued, �fully �paid �and �non-
assessable. �In �addition, �if �Borrower �shall �issue �any �securities �or �make �any �change �to �its
capital �structure �which �would �change �the �number �of �shares �of �Common �Stock �into �which �the
Notes shall be convertible at the then current Conversion Price, �Borrower �shall �at �the �same time
make �proper �provision �so �that �thereafter �there �shall �be �a �sufficient �number �of �shares �of
Common �Stock �authorized �and �reserved, �free �from �preemptive �rights, �for �conversion �of �the
outstanding �Notes. �Borrower �(i) �acknowledges �that �it �has �irrevocably �instructed �its �transfer
agent �to �issue �certificates �for the �Common �Stock �issuable upon �conversion �of �this �Note, �and �(ii)
agrees �that �its �issuance �of �this �Note �shall �constitute �full �authority �to �its �officers �and �agents �who
are �charged �with �the �duty �of �executing �stock �certificates �to �execute �and �issue �the �necessary
certificates �for �shares �of �Common �Stock �in �accordance �with �the �terms �and �conditions �of �this
Note. ��If, at any time �Borrower �does not maintain the Reserved Amount it will be �considered an
Event of Default under Section 3.2 of the Note.
1.4 Method of Conversion.
(a) ����Mechanics �of �Conversion. �Subject �to �Section �1.1, �this �Note �may �be �converted �by �Holder
in �whole �or �in �part �at �any �time �from �time to �time �after �the �Issue Date, �by �(a) �submitting �to
Borrower a Conversion �Notice by facsimile (with receipt confirmation �from �recipient), �e-
mail �or �other �reasonable �means �of �communication �dispatched �on �the �Conversion �Date
Borrower _______________
Holder _______________
Page 5 of 21
prior �to �6:00 �p.m., �Eastern �Standard �Time �and �(b) �subject �to �Section �1.4(b), surrendering
this Note at the principal office of �Borrower.
(b) ����Surrender �of �Note �Upon �Conversion. �Notwithstanding �anything �to �the �contrary �set �forth
herein, upon conversion of this Note in accordance with the terms hereof, �Holder shall not be
required �to �physically �surrender �this �Note �to �Borrower �unless �the �entire �unpaid �principal
amount �of �this �Note �is �so �converted. �Holder �and �Borrower �shall �maintain records showing
the �principal �amount �so �converted �and �the �dates �of �such �conversions �or �shall �use �such �other
method, ��reasonably �satisfactory �to ��Holder ��and �Borrower, ��so ��as ��not ��to ��require �physical
surrender of this �Note �upon �each �such �conversion. �in the �event �of �any dispute or �discrepancy,
such records of Borrower shall, prima-facie, be controlling and determinative in the absence
of manifest error. Notwithstanding the foregoing, if any portion of this Note is �converted as
aforesaid, �Holder �may �not �transfer �this �Note �unless �Holder �first �physically �surrenders �this
Note �to �Borrower, �whereupon �Borrower �will �forthwith �issue �and �deliver �upon �the �order �of
Holder �a �new �Note �of �like �tenor, �registered �to �Holder �(upon �payment �by �Holder �of �any
applicable �transfer �taxes) �representing �in �the �aggregate �the �remaining �unpaid �principal
amount �of �this �Note. �Holder �and �any �assignee �who �is �an �"accredited �investor" �as �defined
under Rule �501(a), by acceptance of this �Note, �acknowledge and �agree that, by reason of the
provisions �of �this �paragraph, �following �conversion �of �a �portion �of �this �Note, �the �unpaid �and
unconverted �principal �amount �of �this �Note �represented �by �this �Note �may �be �less �than �the
amount stated on the face hereof.
(c) ����Payment �of �Taxes. �Borrower �shall �not �be �required �to �pay �any �tax �which �may �be �payable �in
respect �of �any �transfer �involved �in �the �issue �and �delivery �of �shares �of �Common �Stock �or
other �securities �or �property �on �conversion �of �this �Note �in �a �name �other �than �that �of �Holder
(or in street name), and Borrower shall not be required to issue or deliver any such shares or
other �securities �or �property unless �and �until �the �person �or �persons �(other than �Holder �or �the
custodian �in �whose �street �name �such �shares �are �to �be �held �for �Holder's �account) �requesting
the �issuance �thereof �shall �have �paid �to �Borrower �the �amount �of �any �such �tax �or �shall �have
established to the satisfaction of Borrower that such tax has been paid.
(d) ����Delivery of �Common �Stock �upon �Conversion. �Upon �receipt �by �Borrower �from �Holder �of �a
facsimile ��transmission ��(with ��receipt ��confirmation ��from ��recipient) ��or ��e-mail ��(or ��other
reasonable �means �of �communication) �of �a �Conversion �Notice �meeting �the �requirements �for
conversion �as �provided �in �this �Section �1.4, �Borrower �shall �issue �and �deliver �or �cause �to �be
issued �and �delivered �to �or �upon �the �order �of �Holder �certificates �for �the �Common �Stock
issuable �upon �such �conversion �within �two �(2) �business �days �after �such �receipt �(but �in �no
event ��later ��than ��the ��fourth ��(4th) ��business ��day ��being ��hereinafter ��referred ��to ��as ��the
"Deadline") �(and, �solely �in �the �case �of �conversion �of �the �entire �unpaid �principal �amount
hereof, �surrender �of �this �Note) �in �accordance �with �the �terms �hereof �and �the �Purchase
Agreement.
(e) ����Obligation ��of ��Borrower ��to ��Deliver ��Common ��Stock. ��Upon ��receipt ��by ��Borrower ��of ��a
Conversion �Notice, �Holder �shall �be �deemed �to �be �Holder �of �record �of �the �Common �Stock
issuable ��upon ��such ��conversion, ��the ��outstanding ��principal ��amount ��and ��the ��amount ��of
accrued �and �unpaid �interest �on �this �Note �shall �be �reduced �to �reflect �such �conversion, �and,
Borrower _______________
Holder _______________
Page 6 of 21
unless �Borrower �defaults on �its �obligations �under this Article �I, �all �rights �with �respect to the
portion �of �this �Note �being �so �converted �shall �forthwith �terminate �except �the right �to �receive
the �Common �Stock �or �other �securities, �cash �or �other �assets, �as �herein �provided, �on �such
conversion. ��If ��Holder ��shall ��have ��given ��a ��Conversion ��Notice ��as ��provided ��herein,
Borrower's �obligation �to �issue �and �deliver �the �certificates �for �Common �Stock �shall �be
absolute �and �unconditional, �irrespective �of �the �absence �of �any �action �by ��Holder �to
enforce �the �same, �any �waiver �or �consent �with �respect �to �any �provision �thereof, �the
recovery �of �any �judgment �against �any �person �or �any �action �to �enforce �the �same, �any
failure �or �delay �in �the �enforcement �of �any �other �obligation �of �Borrower �to �Holder �of
record, ��or ��any ��setoff; ��counterclaim, ��recoupment, ��limitation ��or ��termination, ��or ��any
breach �or �alleged �breach �by �Holder �of �any �obligation �to �Borrower, �and �irrespective �of
any �other �circumstance �which �might �otherwise ��hint �such �obligation �of �Borrower �to
Holder ��in ��connection ��with ��such ��conversion. ��The ��Conversion ��Date ��specified ��in ��the
Conversion �Notice �shall �be �the �Conversion �Date �so �long �as �the �Conversion �Notice �is
received by Borrower �before 6:00 �p.m., �Eastern �Standard Time, on such date.
(f) ����Delivery �of �Common �Stock �by �Electronic �Transfer. ��In �lieu �of �delivering �physical
certificates ��representing ��the ��Common ��Stock ��issuable ��upon ��conversion, ��provided
Borrower ���is ���participating ���in ���the ���Depository ���Trust ���Company ���( "DTC") ���Fast
Automated ��Securities ��Transfer ���("FAST") ��program, ���upon ���request ��of ���Holder,
Borrower �shall �use �its �best �efforts �to �cause �its �transfer �agent �to �electronically �transmit �the
Common �Stock �issuable �upon �conversion �to �Holder �by �crediting �the �account �of �Holder's
Prime �Broker �with �DTC �through �its �Deposit �Withdrawal Agent �Commission �("DWAC")
system.
(g) ����Failure ��to ��Deliver ��Common ��Stock ��Prior ��to ��Deadline; ��Partial ��Liquidated ��Damages.
Without �in �any �way �limiting �Holder's �right �to �pursue �other �remedies, �including �actual
damages �and/or �equitable �relief, �the �parties �agree �that �if �delivery �of �the �Common �Stock
issuable �upon �conversion �of �this �Note �is �not �delivered �by �the �Deadline, �Borrower �shall
pay �to �Holder �$500 �per �day �in �cash, �for �each �day �beyond �the �Deadline �that �Borrower
fails �to �deliver �such �Common �Stock. �Such �cash �amount �shall �be �paid �to �Holder �on �the
business �day �immediately �following �delivery �of �the �Common �Stock �or, �at �the �option �of
Holder �(by �written �notice �to �Borrower), �shall �be �added �to �the �principal �amount �of �this
Note, �in �which �event �interest �shall �accrue �thereon �in �accordance �with �the �terms �of �this
Note �and �such �additional �principal �amount �shall �be �convertible �into �Common �Stock �in
accordance �with �the �terms �of �this �Note. �Borrower �agrees �that �the �right �to �convert �is �a
valuable �right �to �Holder. �The �damages �resulting �from �a �failure, �attempt �to �frustrate �or
interference ��with ��such ��conversion ��right ��are ��difficult ��if ��not ��impossible ��to ��qualify.
Accordingly, �the �parties �acknowledge �that �the �partial �liquidated �damages �provision
contained in this Section 1.4(g) are justified.
1.5 �Concerning �the �Shares. �Buyer �understands �that �the �Note, �and �until �such �time �as �the
Conversion �Shares �have �become �eligible �for �transfer �pursuant �to �any �of �the �alternatives
specified �in �Section �2(f) �of �the �Purchase �Agreement, �the �Conversion �Shares �may �bear �a
restrictive legend in substantially the following form:
Borrower _______________
Holder _______________
Page 7 of 21
" N E I T H E R ���T H E ���I S S U A N C E ���A N D ���S A L E ���O F ���T H E ���S E C U R I T I E S
REPRESENTED ��BY ��THIS ��CERTIFICATE ��NOR ��THE ��SECURITIES ��INTO
W H I C H ���T H E S E ���S E C U R I T I E S ���A R E ���E X E R C I S A B L E ���H AV E ���B E E N
REGISTERED �UNDER �THE �SECURITIES �ACT �OF �1933, �AS �AMENDED, �OR
APPLICABLE �STATE �SECURITIES �LAWS. �THE �SECURITIES �MAY �NOT �BE
OFFERED �FOR �SALE, �SOLD, �TRANSFERRED �OR �ASSIGNED �(I) �IN �THE
ABSENCE �OF �(A) �AN �EFFECTIVE �REGISTRATION �STATEMENT �FOR �THE
SECURITIES �UNDER �THE �SECURITIES �ACT �OF �1933, �AS �AMENDED, �OR �(B)
AN �OPINION �OF �COUNSEL �(WHICH �COUNSEL �SHALL �BE �SELECTED �BY
H O L D E R ) , �����I N �����A �����GE N E R A L LY ����A C C E PTA B L E �����F O R M , �����T H AT
REGISTRATION �IS �NOT �REQUIRED �UNDER �SAID �ACT �OR ��(II) �UNLESS
SOLD ��PURSUANT ��TO ��RULE ��144 ��OR ��RULE ��144A ��UNDER ��SAID ��ACT,
NOTWITHSTANDING ��THE ��FOREGOING, ��THE ��SECURITIES ��MAY ��BE
PLEDGED �IN �CONNECTION �WITH �A �BONA �FIDE �MARGIN �ACCOUNT �OR
OTHER ��LOAN ��OR ��FINANCING ��ARRANGEMENT ��SECURED ��BY ��THE
SECURITIES."
The �legend �set �forth �above �shall �be �removed �from �a �Security �which �satisfied �any �of �the
alternatives �specified �in �Section �2(f) �of �the �Purchase �Agreement �and �Company �shall
cause �its �Transfer �Agent �to �issue �a �certificate(s) �without �such �legend �upon �request �by �its
holder. �In �the �absence �of �a �registration �statement �covering �the �Security, �such �holder �shall
provide �an �opinion �of �counsel, �to �the �effect �that �a �public �sale �or �transfer �of �such �Security
may �be �made �without �registration �under �the �1933 �Act. ��In �the �event �that �Company �does
not ��accept ��the ��opinion ��of ��counsel ��provided ��by ��Buyer ��by ��the ��Deadline, ��it ��will ��be
considered an Event of Default pursuant to Section 3.2 of the Note.
1.6 Effect of Certain Events.
(a) ����Effect �of �Merger, �Consolidation, �Etc. �At �the �option �of �Holder, �the �sale, �conveyance �or
disposition �of �all �or �substantially �all �of �the �assets �of ��Borrower, �the �effectuation �by
Borrower �of �a �transaction �or �series �of �related �transactions �in �which �more �than �50% �of �the
voting �power �of �Borrower �is �disposed �of, �or �the �consolidation, �merger �or �other �business
combination �of �Borrower �with �or �into �any �other �Person �(as �defined �below) �or �Persons
when �Borrower �is �not �the �survivor �shall �either: �(i) �be �deemed �to �be �an �Event �of �Default
(as �defined �in �Article �III) �pursuant �to �which �Borrower �shall �be �required �to �pay �to �Holder
upon �the �consummation �of �and �as �a �condition �to �such �transaction �an �amount �equal �to �the
Default �Amount �(as �defined �in �Article �III) �or �(ii) �be �treated �pursuant �to �Section �1.6(b)
hereof. �"Person" �shall �mean �any �individual, �corporation, �limited �liability �company,
partnership, �association, trust or other entity or organization
(b) ����Adjustment �Due �to �Merger, �Consolidation, �Etc. �If, �at �any �time �when �this �Note �is �issued
and �outstanding �and �prior �to �conversion �of �all �of �the �Notes, �there �shall �be �any �merger,
consolidation, ��exchange ��of ��shares, ��recapitalization, ��reorganization, ��or ��other ��similar
event, �as �a �result �of �which �shares �of �Common �Stock �of �Borrower �shall �be �changed �into
the �same �or �a �different �number �of �shares �of �another �class �or �classes �of �stock �or securities
Borrower _______________
Holder _______________
Page 8 of 21
of �Borrower �or �another �entity, �or �in �case �of �any �sale �or �conveyance �of �all �or �substantially
all ��of ��the ��assets ��of ��Borrower ��other ��than ��in ��connection ��with ��a ��plan ��of ��complete
liquidation �of ��Borrower, �then �Holder �of �this �Note �shall �thereafter �have �the �right �to
receive �upon �conversion �of �this �Note, �upon �the �basis �and �upon �the �terms �and �conditions
specified �herein �and �in �lieu �of �the �shares �of �Common �Stock �immediately �theretofore
issuable �upon �conversion, �such �stock, �securities or assets which �Holder would have been
entitled �to �receive �in �such �transaction �had �this �Note �been �converted �in �full �immediately
prior ��to ��such ��transaction ��(without ��regard ��to ��any ��limitations ��on ��conversion ��set ��forth
herein), �and �in �any �such �case �appropriate �provisions �shall �be �made �with �respect �to �the
rights ��and ��interests ��of ��Holder ��of ��this ��Note ��to ��the ��end ��that ��the ��provisions ��hereof
(including, �without �limitation, �provisions �for �adjustment �of �the �Conver sion �Price �and �of
the ��number ��of ��shares ��issuable ��upon ��conversion ��of ��the ��Note) ��shall ��thereafter ��be
applicable, ��as ��nearly ��as ��may ��be ��practicable ��in ��relation ��to ��any ��securities ��or ��assets
thereafter ��deliverable ��upon ��the ��conversion ��hereof. ��Borrower ��shall ��not ��affect ��any
transaction ��described ��in ��this ��Section ��1.6(b) ��unless ��(a) ��it ��first ��gives, ��to ��the ��extent
practicable, �thirty �(30) �days �prior �written �notice �(but �in �any �event �at �least �fifteen �(15)
days �prior �written �notice) �of �the �record �date �of �the �special �meeting �of �shareholders �to
approve, ��or ��if ��there �is ��no ��such ��record ��date, ��the ��consummation ��of, ��such ��merger,
consolidation, �exchange �of �shares, �recapitalization, ��reorganization �or �other �similar
event �or �sale �of �assets �(during �which �time �Holder �shall �be �entitled �to �convert �this �Note)
and �(b) �the �resulting �successor �or �acquiring �entity �(if �not �Borrower) �assumes �by �written
instrument �the �obligations �of �this �Section �1.6(b). �The �above �provisions �shall �similarly
apply to successive consolidations, mergers, sales, transfers or share exchanges.
(c) ����Adjustment �due �to �Distribution. �If �Borrower �shall �declare �or �make �any �distribution �of �its
assets �(or �rights �to �acquire �its �assets) �to �holders �of �Common �Stock �as �a �dividend, �stock
repurchase, �by way of �return �of �capital �or �otherwise �(including any dividend �or �distribution �to
Borrower's �shareholders �in �cash �or �shares �(or �rights �to �acquire �shares) �of �capital �stock �of �a
subsidiary �(i.e., �a �spin-off)) �(a �"Distribution"), �then �Holder �of �this �Note �shall �be �entitled,
upon any conversion of this Note after the date of record for determining shareholders entitled
to �such �Distribution, �to �receive �the �amount �of �such �assets �which �would �have �been �payable �to
Holder �with �respect �to �the �shares �of �Common �Stock �issuable �upon �such �conversion �had �such
Holder �been �Holder �of �such �shares �of �Common Stock �on �the �record �date �for the �determination
of shareholders entitled to such Distribution.
(d) ����Adjustment ��due ��to ��Dilutive ��Issuance. ��If, ��at ��any ��time ��when ��any ��Notes ��are ��issued ��and
outstanding, Borrower issues or sells more than 5% of its then outstanding common shares, or
in �accordance �with �this �Section �1.6(d) �hereof �is �deemed �to �have �issued �or �sold, any shares of
Common �Stock �for �no �consideration �or �for �a �consideration �per �share �(before �deduction �of
reasonable �expenses �or �commissions �or �underwriting �discounts �or �allowances �in �connection
therewith) �less �than �the �Conversion �Price �in �effect �on �the �date �of �such �issuance �(or �deemed
issuance) of �such shares of �Common Stock (a �"Dilutive Issuance"), then immediately, �upon
the ��Dilutive ��Issuance, ��the ��Conversion ��Price ��will ��be ��reduced ��to ��the ��amount ��of ��the
consideration �per �share �received �by �Borrower �in �such �Dilutive �Issuance. ��Borrower �shall �be
deemed to have issued or sold shares of Common Stock if Borrower in any manner issues �or
grants �any �warrants, �rights �or �options �(not �including �employee �stock �option �plans), �whether
Borrower _______________
Holder _______________
Page 9 of 21
or �not �immediately �exercisable, �to �subscribe �for �or �to �purchase �Common �Stock �or �other
securities �convertible �into �or �exchangeable �for �Common �Stock �("Convertible �Securities")
(such �warrants, �rights �and �options �to �purchase �Common �Stock �or �Convertible �Securities �are
hereinafter �referred �to �as �"Options") �and �the �price �per �share �for �which �Common �Stock �is
issuable �upon �the �exercise �of �such �Options �is �less �than �the �Conversion �Price �then �in �effect,
then �the �Conversion �Price �shall �be �equal �to �such �price �per �share. �For �purposes �of �the
preceding �sentence, �the �"price �per �share �for �which �Common �Stock �is �issuable �upon �the
exercise �of �such �Options" �is �determined �by dividing �(i) �the �total �amount, �if �any, �received or
receivable �by Borrower �as �consideration �for �the �issuance �or �granting �of �all �such �Options, �plus
the �minimum �aggregate �amount �of �additional �consideration, �if �any, �payable �to �Borrower �upon
the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the
exercise ��of ��such ��Options, ��the ��minimum ��aggregate ��amount ��of ��additional ��consideration
payable �upon the �conversion or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total number of shares of Common
Stock �issuable �upon the �exercise �of �all �such �Options �(assuming full �conversion �of �Convertible
Securities, �if �applicable). �No �further �adjustment �to �the �Conversion �Price �will �be �made upon
the �actual �issuance �of �such �Common �Stock �upon �the �exercise �of �such �Options �or �upon �the
conversion or exchange of Convertible Securities issuable upon exercise of such Options.
Additionally, �Borrower shall be deemed to have issued or sold shares �of Common Stock if
Borrower ��in ��any �manner ��issues ��or �sells ��any �Convertible �Securities, ��whether ��or ��not
immediately �convertible �(other �than �where �the �same �are �issuable �upon �the �exercise �of
Options), ��and ��the ��price ��per ��share ��for ��which ��Common ��Stock ��is ��issuable ��upon ��such
conversion ��or ��exchange ��is ��less ��than ��the ��Conversion ��Price ��then ��in ��effect, ��then ��the
Conversion �Price �shall �be �equal �to �such ��price �per �share. ����For �the �purposes �of �the
preceding �sentence, �the �"price �per �share �for �which �Common �Stock �is �issuable �upon �such
conversion �or �exchange" is �determined by dividing (i) the total amount, if any, received or
receivable �by �Borrower �as �consideration �for �the �issuance �or �sale �of �all �such �Convertible
Securities, �plus �the �minimum �aggregate �amount �of �additional �consideration, �if �an y,
payable ��to ��Borrower ��upon ��the ��conversion ��or ��exchange ��thereof ��at ��the ��time ��such
Convertible �Securities �first �become �convertible �or �exchangeable, �by �(ii) �the �maximum
total �number �of �shares �of �Common �Stock �issuable �upon �the �conversion �or �exchange �of
all �such �Convertible �Securities. �No �further �adjustment �to �the �Conversion �Price �will �be
made �upon �the �actual �issuance �of �such �Common �Stock �upon �conversion �or �exchange �of
such Convertible Securities.
(e) ����Purchase �Rights. �If, �at �any �time �when �any �Notes �are �issued �an d �outstanding, �Borrower
issues �any �convertible �securities �or �rights �to �purchase �stock, �warrants, �securities �or �other
property �(the �"Purchase �Rights") �pro �rata �to �the �record �holders �of �any �class �of �Common
Stock, �then �Holder �of �this �Note �will �be �entitled �to �acquire, �upon �the �terms �applicable
to �such �Purchase �Rights, �the �aggregate �Purchase �Rights �which �such �Holder �could �have
acquired �if �such �Holder �had �held �the �number �of �shares �of �Common �Stock �acquirable
upon �complete �conversion �of �this �Note �(without �regard �to �any �limitations �on �conversion
contained �herein) �immediately �before �the �date �on �which �a �record �is �taken �for �the �grant,
issuance �or �sale �of �such �Purchase �Rights �or, �if �no �such �record �is �taken, �the �date �as �of
which �the �record �holders �of �Common �Stock �are �to �be �determined �for �the �grant, �issue �or
sale of such Purchase Rights.
Borrower _______________
Holder _______________
Page 10 of 21
(f) �����Notice �of �Adjustments. �Upon �the �occurrence �of �each �adjustment �or �readjustment �of �the
Conversion �Price �as �a �result �of �the �events �described �in �this �Section �1.6, �Borrower, �at �its
expense, ��shall ��promptly ��compute �such ��adjustment ��or ��readjustment ��and ��prepare ��and
furnish �to �Holder �a �certificate �setting �forth �such �adjustment �or �readjustment �and �showing
in �detail �the �facts �upon �which �such �adjustment �or �readjustment �is �based. �Borrower �shall,
upon �the �written �request �at �any �time �of �Holder, �furnish �to �such �Holder �a �like �certificate
setting �forth �(i) �such �adjustment �or �readjustment, �(ii) �the �Conversion �Price �at �the �time �in
effect �and �(iii) �the �number �of �shares �of �Common �Stock �and �the �amount, �if �any, �of �other
securities or �property which at the time would be received upon conversion of the Note.
1.7 �Status �as �Shareholder. �Upon �submission �of �a �Conversion �Notice �by �a �Holder, �(i) �the �shares
covered thereby (provided the Reserved Amount fully covers the dollar amount being converted and
that �such �shares �meet �the �conditions �set �forth �in �Section �1.1 �above) �shall �be �deemed �converted into
shares �of Common �Stock �and �(ii) �Holder's �rights �as �a �Holder �of �such �converted �portion �of �this �Note
shall cease and terminate, excepting only the right to receive certificates (or electronic transmissions
into �Holder's �broker �account) �for �such �shares �of �Common �Stock �and �to �any �remedies �provided
herein �or �otherwise �available �at �law �or �in �equity to �such �holder �because of �a �failure �by Borrower �to
comply �with �the �terms �of �this �Note. �Notwithstanding �the �foregoing, �if �a �Holder �has �not �received
certificates �(or �transfer �in �the �form �of �electronic �transmission �into �Holder's �broker �account) �for �all
shares �of �Common �Stock �prior �to �the �tenth �(10th) �business �day �after �the �expiration �of �the �Deadline
with �respect �to �a �conversion �of �any �portion �of �this �Note �for �any �reason, �then �(unless �Holder
otherwise �elects �to �retain �its �status �as �a �holder �of Common Stock by so notifying �Borrower) �Holder
shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note
and Borrower shall, as soon as �practicable, �return �such �unconverted �Note to �Holder �or, �if �the �Note
has �not �been �surrendered, �adjust �its �records �to �reflect �that �such �portion �of �this �Note �has �not �been
converted. �In �all �cases, �Holder �shall �retain �all �of �its �rights �and �remedies �(including, �without
limitation �the �right �to �receive �liquidated �damages �pursuant �to �Section �1.4(g), �to �the �extent �required
thereby, for Borrower's failure to convert this Note.
1.8 �Prepayment �Notwithstanding �anything �to �the �contrary �contained �in �this �Note, �so �long �as
Borrower �has �not �received �a �Conversion �Notice �from �Holder, �then �at �any �time �during �the �period
beginning �on �the �Issue �Date, �Borrower �shall �have �the �right, �exercisable �on �not �less �than �three
(3) �Trading �Days �prior �written �notice �to �Holder �of �the �Note �to �prepay �the �outstanding �Note
(principal �and �accrued �interest), �in �full, �in �accordance �with �this �Section �1.9. �Any �notice �of
prepayment �hereunder �(an �"Optional �Prepayment �Notice") �shall �be �delivered �to �Holder �of �the
Note at its registered addresses by facsimile (with receipt confirmation by recipient) or email and
shall �state: �(i) �that �Borrower �is �exercising �its �right �to �prepay �the �Note, �and �(ii) �the �date �of
prepayment �which �shall �be �not �more �than �three �(3) �Trading �Days �from �the �date �of �the �Optional
Prepayment �Notice. �On �the �date �fixed �for �prepayment �(the �"Optional �Prepayment �Date"),
Borrower �shall �make �payment �of �the �Optional �Prepayment Amount �(as �defined �below) �to �or �upon
the �order �of �Holder �as �specified �by �Holder �in �writing �to �Borrower �at �least �one �(1) �business �day
prior �to �the �Optional �Prepayment �Date. �If �Borrower �exercises �its �right �to �prepay �the �Note,
Borrower �shall �make �payment �to �Holder �of �an �amount �in �cash �(the �"Optional �Prepayment
Amount") ��equal ��to ��105%, ��multiplied ��by �the ��sum ��of ��(w) �the �then ��outstanding ��principal
amount �of �this �Note �plus �(x) �accrued �and �unpaid �interest �on �the �unpaid �principal �amount �of
Borrower _______________
Holder _______________
Page 11 of 21
this ��Note ��to ��the ��Optional ��Prepayment ��Date ��plus ��(y) ��Default ��Interest ��and ��Partial ��Penalty
Payment, �if �any, �on the �amounts referred to in clauses (w) and (x) �plus �(iv) any amounts owed to
Holder �pursuant �to �Sections �1.4 �and �3.2 �hereof. �If �Borrower �delivers �an �Optional �Prepayment
Notice and �fails to pay the Optional Prepayment Amount due to Holder of the Note within two (2)
business days �following the �Optional �Prepayment �Date, �Borrower �shall �forever �forfeit �its �right �to
prepay the Note pursuant to this Section 1.8.
ARTICLE �II. �CERTAIN �COVENANTS
2.1 �Distributions �on �Capital �Stock. �So �long �as �Borrower �shall �have �any �obligation under this
Note, �Borrower shall �not �without �Holder's �written �consent �(a) �pay, �declare �or �set �apart �for �such
payment, �any �dividend �or �other �distribution �(whether �in �cash, �property �or �other �securities) �on
shares �of �capital �stock �other �than �dividends �on �shares �of �Common �Stock �solely �in �the �form �of
additional �shares �of �Common �Stock �or �(b) �directly �or �indirectly �or �through �any �subsidiary
make �any �other �payment �or �distribution �in �respect �of �its �capital �stock �except �for �distributions
pursuant �to �any �shareholders' �rights �plan �which �is �approved �by �a �majority �of ��Borrower's
disinterested directors.
2.2 �Restriction �on �Stock �Repurchases. �So �long �as �Borrower �shall �have �any �obligation �under
this �Note, �Borrower �shall �not �without �Holder's �written �consent �redeem, �repurchase �or �otherwise
acquire �(whether �for �cash �or �in �exchange �for �property �or �other �securities �or �otherwise) �in �any
one �transaction �or �series �of �related �transactions �any �shares �of �capital �stock �of �Borrower �or �any
warrants, rights or options to purchase or acquire any such shares.
2.3 �Par �Value �of �Common �Stock. �So �long �as �Borrower �shall �have �any �obligation �under �this
Note, �Borrower �covenants �that �at �any time when �Holder shall �deliver �a Conversion �Notice, �the
par ��value ��of ��Borrower's ��Common ��Stock ��shall ��not ��be ��higher ��than ��the ��Conversion ��Price
applicable to such Conversion �Notice.
2.4 �Mandatory �Reverse �Stock �Split. �So �long �as �Borrower �shall �have �any �obligation �under �this
Note, �should �there �be �no �bid �on �the �Trading �Market �where �the �Company's �Common �Stock �is
listed �or �traded �for �3 �consecutive �trading �days, �the �Company �shall �immediately �have �its
Common Stock �undergo �a reverse stock �split �at �a ratio of 100-to-1.
2.5 �Current �status �of �SEC �Reports. �14 �days �of �the �date �hereof �the �Company �shall �cease �being
delinquent with its SEC �filings �and shall �regain �current �status �with �respect to such �filings.
2.6 �Borrowings. �So �long �as �Borrower �shall �have �any �obligation �under �this �Note, �Borrower
shall �not, �without �giving �Holder �notice �of �his �Right �Of �First �Refusal, �in �accordance �with �Section
4(c) �of �the �Purchase �Agreement �written �consent, �create, �incur, �assume �guarantee, ��endorse,
contingently �agree ��to �purchase �or ��otherwise �become �liable �upon �the ��obligation ��of ��any
person, ��firm, ��partnership, ��joint ��venture ��or ��corporation, ��except ��by ��the ��endorsement ��of
negotiable �instruments �for �deposit �or �collection, �or �suffer �to �exist �any �liability �for �borrowed
money, �except �(a) �borrowings �in �existence �or �committed �on �the �date �hereof �and �of �which
Borrower �has �informed �Holder �in �writing �prior �to �the �date �hereof, �(b) �indebtedness �to �trade
creditors ��or ��financial ��institutions ��incurred ��in ��the ��ordinary ��course ��of ��business ��or ��(c)
Borrower _______________
Holder _______________
Page 12 of 21
borrowings, the proceeds of which shall be used �to repay this Note.
2.7 �Sale �of �Assets. �So �long �as �Borrower �shall �have �any �obligation �under �this �Note, �Borrower
shall �not, �without �Holder's �written �consent, �sell, �lease �or �otherwise �dispose �of �any �significant
portion �of �its �assets �outside �the �ordinary �course �of �business. �Any �consent �to �the �disposition �of
any assets may be conditioned on a specified use of the proceeds of disposition.
2.8 �Advances �and �Loans. �So �long �as �Borrower �shall �have �any �obligation �under �this �Note,
Borrower shall �not, without �Holder's written �consent, lend money, �give �credit �or make advances
to ��any ��person, ��firm, ��joint ��venture ��or ��corporation, ��including, ��without ��limitation, ��officers,
directors, ��employees, ��subsidiaries ��and ��affiliates ��of ��Borrower, ��except ��loans, ��credits ��or
advances �(a) �in �existence �or �committed �on �the �date �hereof �and �which �Borrower �has �informed
Holder �in �writing �prior �to �the �date �hereof, �(b) �made �in �the �ordinary �course �of �business �or �(c)
not in excess of $150,000.
ARTICLE III. EVENTS OF DEFAULT/INDEMNITY
If �any �of �the �following �events �occur �(each, �an �"Event �of �Default"), �the �Holder �shall �be
entitled �to �consider �the �Borrower �to �be �in �default �and �this �Note �shall �become �immediately �due
and payable:
3.1 �Failure �to �Pay �Principal �or �Interest. ��Borrower �fails �to �pay �the �principal �hereof �or �interest
thereon when �due on this Note, �whether at �the Maturity Date, �upon �acceleration �or �otherwise.
3.2 �Conversion �and �the �Shares. ��Borrower �fails �to �issue �shares �of Common �Stock �to �Holder �(or
announces �or �threatens �in �writing �that �it �will �not �honor �its �obligation �to �do �so) �upon �exercise
by �Holder �of �the �conversion �rights �of �Holder �in �accordance �with �the �terms �of �this �Note, �fails �to
transfer ��or ��cause ��its ��transfer ��agent ��to ��transfer ��or ��issue ��any ��certificate ��(or ��electronic
transmission) �for �shares �of �Common �Stock �issued �to �Holder �upon �conversion �of �or �otherwise
pursuant �to �this �Note �as �and �when �required �by �this �Note, �Borrower �directs �its �transfer �agent
not �to �transfer �or �delays, �impairs, �and/or �hinders �its �transfer �agent �in �transferring �(or �issui ng)
(electronically �or �in �certificated �form) �the �shares �of �Common �Stock �to �be �issued �to �Holder
upon �conversion �of �or �otherwise �pursuant �to �this �Note �as �and �when �required �by �this �Note, �or
fails �to �remove �(or �directs �its �transfer �agent �not �to �remove �or �impairs, �delays, �and/or �hinders
its �transfer �agent �from �removing) �any �restrictive ��legend �(or �to �withdraw �any �stop �transfer
instructions �in �respect �thereof) �on �any �certificate �for �any �shares �of �Common �Stock �issued �to
Holder �upon �conversion �of �or �otherwise �pursuant �to �this �Note �as �and �when �required �by �this
Note �(or �makes �any �written �announcement, �statement �or �threat �that �it �does �not �intend �to �honor
the �obligations �described �in �this �paragraph) �and �any �such �failure �shall �continue �uncured �(or
any �written ��announcement, �statement �or �threat �not �to �honor �its ��obligations �shall �not �be
rescinded ��in ��writing) ��for ��three ��(3) ��business ��days ��after ��Holder ��shall ��have ��delivered ��a
Conversion Notice.
3.3 �Breach �of �Covenants. ��Borrower �breaches �any �material �covenant �or �other �material �term �or
condition �contained �in �this �Note �and �any �collateral �documents �including �but �not �limited �to �the
Purchase Agreement and such breach �continues �for a period �of ten �(10) days �after �written �notice
Borrower _______________
Holder _______________
Page 13 of 21
thereof to �Borrower from �Holder.
3.4 �Breach �of �Representations �and �Warranties. ���Any �representation �or �warranty �of �Borrower
made ��herein ��or ��in ��any ��agreement, ��statement ��or ��certificate ��given ��in ��pursuant ��hereto ��or ��in
connection �herewith �(including, �without �limitation, �the �Purchase Agreement), �shall �be �false �or
misleading �in �any �material �respect �when �made �and �the �breach �of �which �has �(or �with ��the
passage of time will have) a material adverse effect on the rights of �Holder with respect to this Note
or the Purchase Agreement.
3.5 �Receiver �or Trustee. ��Borrower �or �any subsidiary of �Borrower �shall �make an assignment for the
benefit �of �creditors, �or �apply for �or �consent �to �the �appointment �of �a �receiver �or �trustee �for �it �or �for �a
substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
3.6 �Judgments. ���Any �money �judgment, �writ �or �similar �process �shall �be �entered �or �filed �against
Borrower or any subsidiary of Borrower or any of its property or other assets for more than $50,000,
and shall remain unvacated, unbonded or unstayed �for a period of twenty (20) �days unless otherwise
consented to by Holder, which consent will not be unreasonably withheld.
3.7 �Bankruptcy. �Bankruptcy, ��insolvency, ��reorganization �or �liquidation ��proceedings �or �other
proceedings, voluntary or involuntary, for relief under any bankruptcy law or �any law �for �the �relief
of debtors shall be instituted by or against Borrower or any subsidiary of Borrower.
3.8 �Delisting �of �Common �Stock. ��Borrower �shall �fail �to �maintain �the �listing �of �the �Common �Stock
on a Trading Market.
3.9 �Failure �to �Comply �with �the �Exchange �Act. ��Borrower �shall �fail �to �comply �with �the �reporting
requirements �of �the �Exchange �Act; �and/or �Borrower �shall �cease �to �be �subject �to �the �reporting
requirements of the Exchange Act.
3.10 �Liquidation. ��Any �dissolution, �liquidation, �or �winding �up �of �Borrower �or �any �substantial
portion of its business.
3.11 Cessation of Operations. ��Any �cessation �of �operations �by �Borrower �or �Borrower �admits �it �is
otherwise �generally unable �to �pay its �debts �as �such �debts �become �due, �provided, �however, �that �any
disclosure �of �Borrower's �ability �to �continue �as �a �"going �concern" �shall �not �be �an �admission �that
Borrower cannot pay its debts as they become due.
3.12 �Maintenance �of �Assets. ���The �failure �by �Borrower �to �maintain �any �material �intellectual
property �rights, �personal, �real �property �or �other �assets �which �are �necessary �to �conduct �its �business
(whether now or in the future).
3.13 Financial Statement Restatement.
The �restatement �of �any �financial �statements �filed �by
Borrower �with �the �SEC �for �any date �or �period �from �two �(2) �years �prior �to �the �Issue �Date �and �until
this �Note �is �no �longer �outstanding, �if �the �result �of �such �restatement �would, �by comparison �to �the
unrestated �financial �statement, �have �constituted �a �material �adverse �effect �on �the �rights �of �Holder
with respect to this Note or the Purchase Agreement.
Borrower _______________
Holder _______________
Page 14 of 21
3.14 Reverse Splits. ��Borrower �effectuates �a �reverse �split �of �its �Common Stock without twenty
(20) days prior written notice to Holder, unless such reverse split is done pursuant to Section 2.4 of
this Note.
3.15 �Replacement �of �Transfer Agent. ��In �the �event �that �Borrower �proposes �to �replace �its �transfer
agent, Borrower fails to provide, prior to the effective date of such replacement, a fully executed
Irrevocable �Transfer Agent �Instructions �in �a �form �as �initially �delivered �pursuant �to �the �Purchase
Agreement �(including �but �not �limited �to �the �provision �to �irrevocably �reserve �shares �of �Common
Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and Borrower.
3.16 �Cross-Default. ��Notwithstanding anything to �the �contrary contained �in �this �Note or the other
related or companion documents, a breach or default by Borrower of any covenant or other term or
condition contained in any of the Other Agreements, after the passage of all applicable notice and
cure �or �grace �periods, �shall, �at �the �option �of �Holder, �be �considered �a default under this Note and
the Other Agreements, in which event �Holder shall �be entitled �(but �in �no �event �required) �to �apply
all �rights �and �remedies �of �Holder �under �the �terms �of �this �Note �and �the �Other �Agreements �by
reason �of �a �default �under �said �Other �Agreement �or �hereunder. �"Other �Agreements" �means,
collectively, �all �agreements �and �instruments �between, �among �or �by: �(i) �Borrower �or �Pledgor,
and, �or �for �the �benefit �of, �(ii) �Holder �and �any �affiliate �of �Holder, �including, �without �limitation,
the �Purchase �Agreement, �Stock �Pledge �Agreement, �and �any �promissory �notes. �Each �of �the �loan
transactions will be cross-defaulted with each other loan transaction and with all other existing and
future �debt �of �Borrower to �Holder. ��Upon �the �occurrence �of �an �Event �of �Default �under Article �III,
exercisable �through �the �delivery �of �written �notice �to �Borrower �by �such �Holders �(the �"Default
Notice"), �the �Note �shall �become �immediately �due �and �payable �and �Borrower �shall �pay �to
Holder, �in �full �satisfaction �of �its �obligations �hereunder, �an �amount �equal �to �the �greater �of: �(i)
150% �times �the �sum �of �(w) �the �then �outstanding �principal �amount �of �this �Note ��plus �(x)
accrued �and �unpaid �interest �on �the �unpaid �principal ��amount �of �this ��Note �to �the �date �of
payment �(the �"Mandatory �Prepayment �Date") �plus �(y) �Default �Interest �and �Partial �Penalty
Payment, �if �any, �on �the �amounts �referred �to �in �clauses �(w) �and/or �(x) �plus �(z) �any �amounts
owed �to �Holder �pursuant �to �Section �1.4(g) hereof (the then outstanding principal amount of this
Note �to �the �date �of �payment �plus �the �amounts �referred �to �in �clauses �(x), �(y) �and �(z) �shall
collectively �be �known �as �the �"Default �Sum") �and �(ii) �the �"parity �value" �of �the �Default �Sum
to �be �prepaid, �where �parity �value �means: �(a) �the �highest �number �of �shares �of �Common �Stock
issuable �upon �conversion �of �or �otherwise �pursuant �to �such �Default �Sum �in �accordance �with
Article �I, �treating �the Trading �Day �immediately �preceding �the �Mandatory �Prepayment �Date �as
the �Conversion �Date �for �purposes �of �determining �the �lowest �applicable �Conversion �Price,
unless �the �Event �of �Default �arises �as �a �result �of �a �breach �in �respect �of �a �specific �Conversion
Date �in �which �case �such �Conversion �Date �sha ll �be �the �Conversion �Date), �multiplied �by �(b)
the highest Closing Price for the Common Stock during the �period �beginning on the date of first
occurrence �of �the �Event �of �Default �and �ending �one �day �prior �to �the �Mandatory �Prepayment
Date �(the �"Default �Amount") �and �all �other �amounts �payable �hereunder �shall �immediately
become �due �and �payable, �all �without �demand, �presentment �or �notice, �all �of �which �hereby �are
expressly ��waived, ��together ��with ��all ��costs, ��including, ��without ��limitation, ��legal ��fees ��and
expenses, �of �collection, �and �Holder �shall �be �entitled �to �exercise �all �other �rights �and �remedies
available �at �law �or �in �equity. �If �Borrower �fails �to �pay �the �Default �Amount �within �five �(5)
Borrower _______________
Holder _______________
Page 15 of 21
business days �of written �notice �that such amount is due and payable, then �Holder shall have the
right at any time, so long as �Borrower remains in default (and so long and to the extent that there
are �sufficient �authorized �shares), �to �require �Borrower, �upon �written �notice, �to �immediately issue,
in �lieu �of �the �Default �Amount �(or �any �part �thereof), �the �number �of �shares �of �Common �Stock �of
Borrower �equal �to �the �Default �Amount �(or �any �part �thereof) �divided �by �the �Conversion �Price
then in effect.
3.17 �Par �Value �of �Common �Stock. �Borrower �shall �fail �to �have �the �appropriate �Common �Stock
par value in accordance with Section 2.3 of this Note.
3.18 �Mandatory �Reverse �Stock �Split. �Borrower �shall �fail �to �have �its �Common �Stock �undergo �a
reverse stock split in accordance with Section 2.4 of this Note.
3.19 Current status of SEC reports. Borrower shall fail �to regain current status with respect to its
SEC reports within 14 days of the date hereof.
3.20 ��Indemnification �of �Holder. ���In �addition �to �any �other �remedies �available �to �the �Holder,
Borrower ��will, ��at ��all ��times, ��indemnify, ��save, ��and ��hold ��harmless ��Holde r ��and ��its ��officers,
directors, ��employees, ��and �agents ��from �and �against ��all �sums ��and ��expenses, ��claims, �costs,
charges, �legal �fees, �collection �fees, �disbursements, �and �expenses �of �very �kind �and �nature
associated �with �a �breach �of �this �Agreement �by �Borrower, �including, �but �not �limited �to, �any
breach of a representation, warranty, or covenant �made by Borrower.
ARTICLE IV. �MISCELLANEOUS
4.1 �Failure �or �Indulgence �Not �Waiver. �No �failure �or �delay �on �the �part �of �Holder �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 �privileges. �All �rights �and �remedies
existing �hereunder �are �cumulative �to, �and �not �exclusive �of, �any �rights �or �remedies �otherwise
available.
4.2 ���Notices. ���All ����notices, ����demands, ����requests, ����consents, ����approvals, ����and ����other
communications ��required ��or ��permitted ��hereunder ��shall ��be ��in ��writing ��and, ��unless
otherwise ��specified ��herein, ��shall ��be ��(i) ��personally ��served, ��(ii) ��deposited ��in ��the ��mail,
registered ��or ��certified, ��return ��receipt ��requested, ��postage ��prepaid, ��(iii) ��delivered ��by
reputable �air �courier �service �with �charges �prepaid, �or �(iv) �transmitted �by �hand �delivery,
telegram, �or �facsimile, �addressed �as �set �forth �below �or �to �such �other �address �as �such �party
shall �have �specified �most �recently �by �written �notice. �Any �notice �or �other �communication
required �or �permitted �to �be �given �hereunder �shall �be �deemed �effective �(a) �upon �hand �delivery
or �delivery �by �facsimile, �with �accurate �confirmation �generated �by �the �transmitting �facsimile
machine, �at �the �address �or �number �designated �below �(if �delivered �on �a �business �day �during
normal �business �hours �where �such �notice �is �to �be �received), �or �the �first �business �day �following
such �delivery �(if �delivered �other �than �on �a �business �day �during �normal �business �hours �where
such �notice �is �to �he �received) �or �(b) �on �the �second �business �day �following �the �date �of �mailing
Borrower _______________
Holder _______________
Page 16 of 21
by �express �courier �service, �fully �prepaid, �addressed �to �such �address, �or �upon �actual �receipt
of such �mailing, �whichever �shall �first �occur.
The addresses �for �such communications shall be:
If to Borrower, to:
MineralRite Corporation
55 South Geneva Road
Lindon, Utah 84042
Attn: Guy Peckham
Telephone: �801-796-8944
Email: [email protected]
If to Holder, to:
River North Equity, Inc.
360 W. Hubbard St., Unit 2801
Chicago, Illinois 60654
Attn: �Edward Liceaga
Telephone: �(312)-643-0280
E-mail: [email protected]
4.3 �Amendments. �This �Note �and �any �provision �hereof �may �only �be �amended �by �an �instrument
in �writing �signed �by �Borrower �and �Holder. �The �term �"Note" �and �all �reference �thereto, �as
used throughout this instrument, shall mean this instrument (and the other �Notes issued pursuant
to �the �Purchase �Agreement) �as �originally executed, �or �if �later �amended �or �supplemented, �then �as
so amended or supplemented.
4.4 �Assignability. �This �Note �shall �be �binding �upon �Borrower �and �its �successors �and
assigns, ��and ��shall ��inure ��to ��the ��benefit ��of ��Holder ��and ��its ��successors ��and ��assigns. ��Each
transferee �of �this �Note �must �be �an �"accredited �investor" �as �defined �in �Rule �501(a) �of �the �1933
Act. �Notwithstanding �anything �in �this �Note �to �the �contrary, �this �Note �may �be �pledged �as
collateral �in �connection �with �a �bona �fide �margin �account �or �other �lending �arrangement ��in
compliance with applicable securities rules and regulations.
4.5 �Cost �of �Collection. �If �default �is �made �in �the �payment �of �this �Note, �Borrower �shall �pay
Holder hereof all costs of collection, including reasonable attorneys' fees.
4.6 �Governing �Law. �This �Note �shall �be �governed �by �and �construed �in �accordance �with �the �laws
of �the �State �of �Illinois �without �regard �to �principles �of �conflicts �of �laws. Any �action �brought �by
either �party �against �the �other �concerning �the �transactions �contemplated �by �this �Note �shall �be
brought �only �in �the �state �courts �of �Illinois �or �in �the �federal �courts �located �in �Cook �County. The
parties �to �this �Note �hereby �irrevocably �waive �any �objection �to �jurisdiction �and �venue �of �any
Borrower _______________
Holder _______________
Page 17 of 21
action �instituted �hereunder �and �shall �not �assert �any �defense �based �on �lack �of �jurisdiction �or
venue �or �based �upon �forum �non �conveniens. �Borrower �and �Holder �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 �Note �or �any �other �agreement �delivered �in
connection �herewith �is �invalid �or �unenforceable �under �any �applicable �statute �or �rule �of �law,
then �such �provisions �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 �Note, �or �any �other �agreement/document �related �to �it, �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 �pr ocess �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.
4.7 �Convertible �Note �Purchase �Agreement. �By �its �acceptance �of �this �Note, �each �party �agrees �to
be �bound �by �the �applicable �terms �of �the �Convertible �Note �Purchase �Agreement �dated �January
__, 2015.
4.8 �Notice of Corporate Events. �Except �as �otherwise provided �below, �Holder �of this �Note shall
have �no �rights �as �a �Holder �of �Common �Stock �unless �and �only to �the �exte nt �that �it �converts �this
Note �into �Common ��Stock. ��Borrower ��shall ��provide ��Holder ��with ��prior �notification ��of �any
meeting �of �Borrower's �shareholders �(and �copies �of �proxy �materials �and �other �information �sent
to �shareholders). �In �the �event �of �any taking �by �Borrower �of �a �record �of �its �shareholders �for �the
purpose �of �determining �shareholders �who �are �entitled �to �receive �payment �of �any �dividend �or
other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of
merger, �consolidation, �reclassification �or �recapitalization) �any �share �of �any �class �or �any �other
securities or property, or to receive any other right, or for the purpose of determining shareholders
who �are �entitled �to �vote �in �connection �with �any �proposed �sale, �lease �or �conveyance �of �all �or
substantially �all �of �the �assets �of �Borrower �or �any �proposed �liquidation, �dissolution �or �winding
up �of �Borrower, �Borrower �shall �mail �a �notice �to �Holder, �at �least �twenty �(20) �days �prior �to �the
record �date �specified �therein �(or thirty (30) �days �prior to �the �consummation �of �the �transaction �or
event, whichever is earlier), �of the date on which any such �record is to �be taken �for the purpose
of �such �dividend, �distribution, �right �or �other �event, �and �a �brief �statement �regarding �the �amount
and �character �of �such �dividend, �distribution, �right �or �other �event �to �the �extent �known �at �such
time. �Borrower �shall �make �a �public �announcement �of �any �event ��requiring ��notification ��to
Holder �hereunder �substantially �simultaneously �with �the �notification �to �Holder �in �accordance
with the terms of this Section 4.9.
4.9 �Remedies. �Borrower �acknowledges �that �a �breach �by �it �of �its �obligations �hereunder
will �cause �irreparable �harm �to �Holder, �by �vitiating �the �intent �and �purpose �of �the �transaction
contemplated �hereby. Accordingly, �Borrower �acknowledges �that �the remedy at law for a breach
of �its �obligations �under �this �Note �will �be �inadequate �and �agrees, �in �the �event �of �a �breach �or
threatened �breach �by �Borrower �of �the �provisions �of �this �Note, �that �Holder �shall �be �entitled, �in
Borrower _______________
Holder _______________
Page 18 of 21
addition �to �all �other �available �remedies �at �law �or �in �equity, �and �in �addition �to �the �penalties
assessable �herein, �to �an �injunction �or �injunctions �restraining, �preventing �or �curing �any �breach
of �this �Note �and �to �enforce �specifically �the �terms �and �provisions �thereof, �without �the �necessity
of showing economic loss and without any bond or other security being �required.
[THE �REMAINDER �OF �THIS �PAGE �HAS �DELIBERATELY �BEEN �LEFT
BLANK]
Borrower _______________
Holder _______________
Page 19 of 21
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
SIGNED by: Edward M. Liceaga
|
for and on behalf of
|
River North Equity, Inc.
|
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Signature: ____________________
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|
SIGNED by: ____________________
|
for and on behalf of
|
MineralRite Corporation
Signature: ____________________
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|
|
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Borrower _______________
Holder _______________
Page 20 of 21
EXHIBIT C: �NOTICE OF CONVERSION
The �undersigned �hereby �elects �to �convert �$[ �____________] �of �the �Note �(defined �below) �into �the
number �of �shares �of �Common �Stock �of �MineralRite �Corporation �(the �"Borrower") �to �be �issued
pursuant �to �the �conversion �of �the �Note �as �set �forth �below �according �to �the �conditions �of �the
Convertible �Promissory �Note �of �Borrower �dated �January �__, �2015 �(the �"Note"). �No �fee �will �be
charged to Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
�The �Borrower �shall �electronically �transmit �the �Common �Stock �issuable �pursuant ��to �this
Conversion �Notice �to �the �account �of �the �undersigned �or �its �nominee �with �DTC �through �its
Deposit Withdrawal Agent Commission system ("DWAC �Transfer"). This election shall only
be �effective �if �the �Company's �transfer �agent �is �a �participating �member �of �DTC's �DWAC
program and the Borrower is DWAC eligible.
Name of DTC Prime Broker:
Account Number:
�The �undersigned �hereby �requests �that �the �Borrower �issue �a �certificate �or �certificates for
the �number �of �shares �of �Common �Stock �set �forth �below �(which �numbers �are �based �on �the
Holder's ��calculation ��attached ��hereto) ��in ��the ��name(s) ��specified ��immediately �below ��or, ��if
additional space is necessary, on an attachment hereto:
River North Equity, Inc.
360 W. Hubbard St., Unit 2801
Chicago, Illinois 60654
T (312)-643-0280
Date of Conversion: �________________
Applicable Conversion Price: �________________
Number of Shares of Common Stock to be Issued: �________________
Pursuant to Conversion of the Notes:
Amount of Principal Balance Due remaining under the Note after this conversion:
Borrower _______________
Holder _______________
Page 21 of 21
River North Equity, Inc.
By: �___________________________
Name: Edward M. Liceaga
Title: �President
Date: __________________________
Borrower _______________
Holder _______________
STOCK PLEDGE AGREEMENT
This �STOCK �PLEDGE �AGREEMENT �(this �Agreement) �made as �of �January __, �2015 �by and
between ��River ��North ��Equity, ��Inc., ��an ��Illinois ��corporation ��(River ��North), ��and ��Mr. ��Guy
Pekham, �CEO �of �MineralRite �Corporation, �a �Nevada �Corporation �(Pledgor �and �"Company",
respectively).
RECITALS
A.
Pledgor ��is ��the ��record ��and ��beneficial ��owner ��of ��105,000 ��Preferred ��A ��shares ��of
Company, which have 3,000 votes per share and 13,500 Preferred B shares, which are
convertible into 13,500,000 shares of common stock, $.001 par value, of Company.
B.
Pledgor �has �agreed �to �secure, �to �the �extent �hereinafter �set �forth, �the �payment �in �full
and �the �performance �of �the �obligations �of �Company �under �the �Purchase �Agreement
and the Note (as defined below).
C.
In �connection �with �River �North �extending a loan �to �Company, �Company has �signed �a
Convertible ��Note ��Purchase ��Agreement ��dated ��January ��__, ��2015 ��(the ��"Purchase
Agreement") �and issued �that certain �Convertible �Promissory Note �(the Note) �dated
January �__, �2015 �payable �to �the �order �of �River �North �in �the �principal �amount �of
seventy-seven thousand and seven-hundred seventy eight Dollars ($77,778).
D.
Such �Note �is �secured �by �the �Pledged �Shares �(as �defined �below) �and �other �collateral
upon the terms set forth in this Agreement.
NOW, THEREFORE, it is hereby agreed as follows:
1. ��Grant of Security Interest. �Pledgor hereby grants and pledges for the benefit of River North a
security interest �in, �and �assigns, �transfers �to �and �pledges �with �the �Company's �Transfer �Agent �for
the ��benefit ��of ��River ��North, ��the ��following ��securities ��and ��other ��property ��(collectively, ��the
Collateral):
(i) ���105,000 �Preferred �A �shares �and �13,500 �Preferred �B �shares �of �Company issued �in �the
name of Pledgor (the Pledged Shares) to be served as Collateral for the Note, delivered to and
deposited �with �the �Company's �Transfer �Agent, �guaranteed �and �stamped �by �a �Medallion �Stock
Power �signed �by �a �participant �of �the �Securities �Transfer �Agents �Medallion �Program �(STAMP)
which �is �recognized �by �the �Company's �Transfer �Agent. �Such �Medallion �Stock �Power �shall
authorize ��the ��immediate ��transfer ��and ��assignment ��of ��the ��Collateral ��to ��River ��North ��upon
occurrence �of �an �Event �of �Default �pursuant �to �Section �9 �of �this �Agreement. �The �Collateral
transferred and assigned to River North shall be used by River North freely, at its own discretion,
without �any �limitation �whatsoever �(for �purposes �of �this �Agreement, �common �stock �shall �refer �to
the common stock of the Pledgor);
(ii) ��any �and �all �new, �additional �or �different �securities �or �other �property �subsequently
distributed or issued to �Pledgor, �any members of �his household or any business owned by him or
by �any �member ��of ��his ��household, ��in ��connection ��with ��the ��Pledged ��Shares ��or ��without ��any
connection to the Pledged Shares, which are to be delivered to and deposited with �the Company's
Transfer Agent pursuant to the requirements of Section 3 of this Agreement;
(iii) �any �and �all �other �property �and �money �which �is �delivered �to �or �comes �into �the
possession of the Company's Transfer Agent pursuant to the terms of this Agreement; and
(iv) �the �proceeds �of �any �sale, �exchange �or �disposition �of �the �property �and �securities
described in subsections (i), (ii) or (iii) above.
2. ���Warranties. ��Pledgor �hereby �warrants �that �Pledgor �is �the �owner �of �the �Collateral �and �has �the
right �to �pledge �the �Collateral �and �that �the �Collateral �is �free �from �all �liens, �adverse �claims �and
other security interests (other than those created hereby).
3. ����Duty �to �Deliver. ��Any �new, �additional �or �different �securities �or �other �property �(other �than
regular �cash �dividends) �which �may �now �or �hereafter �become �distributable �with �respect �to �the
Collateral by reason of (i) any stock split, stock dividend, recapitalization, combination of shares,
exchange �of �shares �or �other �change �affecting �the �Pledged �Shares �as �a �class �and �(ii) �any �merger,
consolidation �or �other �reorganization �affecting �the �capital �structure �of �the �Company �shall, �upon
receipt �by �Pledgor, �be �promptly �delivered �to �and �deposited �with �the �Company's �Transfer �Agent
as �part �of �the �Collateral �hereunder. �And �in �addition, �all �securities �issued �by �the �Company �to
Pledgor, �any members �of �his �household �or �any business �owned �by him �or �by �any member �of �his
household ��and ��any ��new, ��additional ��or ��different ��securities ��or ��other ��property ��distributed ��in
connection �with �such �issued �securities, �for �as �long �as �the �Company �shall �have �any �obligation
under the Note, shall become part of the Collateral. All securities described in this Section 3 shall
be delivered �to and deposited with the Company's �Transfer Agent �and �be accompanied by one or
more properly-endorsed stock power assignments as described in section 1(i) above.
4. ����Payment �of �Taxes �and �Other �Charges. ��For �as �long �as �the �Collateral �secures �the �Note, �all
taxes, �liens, �assessments �and �other �charges �against �the �Collateral, �and �in �the �event �of �Pledgors
failure �to �do �so, �River �North �may �at �its �election �pay �any �or �all �of �such �taxes �and �other �charges
without �contesting �the �validity �or �legality �thereof. ��The �payments �so �made �shall �become �part �of
the �indebtedness �secured �hereunder �and �until �paid �shall �bear �interest �at �the �minimum �per �annum
rate, �compounded �semi-annually, �required �to �avoid �the �imputation �of �interest �income �to �River
North and compensation income to Pledgor under the Federal tax laws.
5. ����Shareholder �Rights. ���So �long �as �there �exists �no �event �of �default �under �Section �9 �of �this
Agreement, Pledgor may exercise all shareholder �voting rights and be entitled to receive �any and
all �regular �cash �dividends �paid �on �the �Collateral �and �all �proxy �statements �and �other �shareholder
materials pertaining to the Collateral.
6. ���Rights and Powers of River North. ��River North may, without obligation to do so, exercise at
any �time �and �from �time �to �time �one �or �more �of �the �following �rights �and �powers �with �respect �to
any or all of the Collateral:
(i)
subject �to �the �applicable �limitations �of �Section �8, �accept �in �its �discretion �other
property �of �Pledgor �in �exchange �for �all �or �part �of �the �Collateral �and �cause �the �Company's
Transfer �Agent �to �release �Collateral �to �Pledgor �to �the �extent �necessary �to �effect �such �exchange,
and �in �such �event �the �other �property received �in �the �exchange shall �become �part �of �the �Collateral
hereunder;
(ii) ���perform �such �acts �as �are �necessary �to �preserve �and �protect �the �Collateral �and �the
rights, powers and remedies granted with respect to such Collateral by this Agreement; and
(iii) ���transfer �record �ownership �of �the �Collateral �to �River �North �or �its �nominee �and
receive, �endorse �and �give �receipt �for, �or �collect �by �legal �proceedings �or �otherwise, �dividends �or
other distributions made or paid with respect to the Collateral, provided and only if there exists at
the �time �an �outstanding �event �of �default �under �Section �9 �of �this �Agreement. �Any �cash �sums
which �River �North �may �so �receive �shall �be �applied �to �the �payment �of �the �Note �and �any �other
indebtedness �secured �hereunder, �in �such �order �of �application �as �River �North �deems �appropriate.
Any �remaining �cash �shall �be �paid �over �to �Pledgor. ��Any �action �by �River �North �pursuant �to �the
provisions �of �this �Section �6 �may �be �taken �without �notice �to �Pledgor. ���Expenses �reasonably
incurred �in �connection �with �such �action �shall �be �payable �by �Pledgor �and �form �part �of �the
indebtedness secured hereunder as provided in Section 11.
7. ���Transfer of Collateral. ��In connection with the transfer or assignment of the Note (whether by
negotiation, �discount �or �otherwise), �River �North �may �instruct �the �Company's �Transfer �Agent �to
keep �holding �the �Collateral �for �the �benefit �of �the �transferee �or �assignee �and �such �transferee �or
assignee �shall �thereupon �succeed �to �all �the �rights, �powers �and �remedies �granted �to �River �North
hereunder �with �respect �to �the �Collateral �so �transferred. ��Upon �such �transfer, �River North �shall �be
fully discharged from all liability and responsibility for the transferred Collateral, if any.
8. ����Release �of �Collateral. ��Provided �all �indebtedness �secured �hereunder �shall �at �the �time �have
been �paid �in �full �and �there �does �not �otherwise �exist �any �event �of �default �under �Section �9 �of �this
Agreement, �the �Pledged �Shares, �together �with �any �additional �Collateral �which �may �hereafter �be
pledged �and �deposited �hereunder, �shall �be �released �from �pledge �and �returned �to �Pledgor �in
accordance with the following provisions:
(i) ����Upon �payment �or �prepayment �of �principal �under �the �Note, �along with �any accrued
interest �to �date �on �the �principal �amount �so �paid �or �prepaid, �one �or �more �of �the �Pledged �Shares
held as Collateral hereunder shall �(subject �to the �applicable limitations of �Section 8(iii) �and 8(iv)
below) �be �released �at �the �time �of �such �payment �or �prepayment. �The �number �of �shares �to �be �so
released �shall �be �equal �to �the �number �obtained �by �multiplying �(i) �the �total �number �of �Pledged
Shares �held �under �this �Agreement �at �the �time �of �payment �or �prepayment, �by �(ii) �a �fraction, �the
numerator �of �which �shall �be �the �amount �of �principal �together �with �any �accrued �interest �paid �or
prepaid �and �the �denominator �of �which �shall �be �the �unpaid �principal �balance �of �the �Note �together
with �all �accrued �interest �thereunder �immediately �prior �to �such �payment �or �prepayment. ���In �no
event, however, shall any fractional shares be released.
(ii) ���Any �additional �Collateral �which �may �hereafter �be �pledged �and �deposited �with �the
Company's �Transfer �Agent �(pursuant �to �the �requirements �of �Section �3) �with �respect �to �the
Pledged �Shares �shall �be �released �at �the �same �time �the �particular �shares �to �which �the �additional
Collateral relates are to be released in accordance with the applicable provisions of Section 8(i).
(iii) ����Under ��no ��circumstances, ��however, ��shall ��any ��Pledged ��Shares ��or ��any ��other
Collateral ��be ��released ��if ��previously ��applied ��to ��the ��payment ��of ��any ��indebtedness ��secured
hereunder. �In �addition, �in �no �event �shall �any �Pledged �Shares �or �other �Collateral �be �released
pursuant to the provisions of Section 8(i) or 8(ii) if, and to the extent, the fair market value of the
shares �and �all �other �Collateral �which �would �otherwise �remain �in �pledge �hereunder �after �such
release �were �effected �would �be �less �than �the �unpaid �principal �and �accrued �interest �under �the
Note.
(iv) �For �all �valuation �purposes �under �this �Agreement, �the �fair �market �value �per �share �of
common stock on any relevant date shall be determined as follows: the fair market value shall be
the �closing bid �price per �share �of �common �Stock on �the �applicable �Trading Market �(as �such �term
is defined in the Purchase Agreement) on the date �in question. ��If there is no reported closing bid
price �for �the �common �Stock �on �the �date �in �question, �then �the �closing �bid �price �on �the �last
preceding date for which such quotation exists shall be determinative of fair market value.
9. ���Events �of �Default. �Each �of �the �following �occurrences �shall �constitute �an �Event �of �Default
under ��this ��Agreement: ��(i) ��Pledgor ��shall ��fail ��to ��observe ��or ��perform ��any �material ��covenant
applicable �to �such �Pledgor �under �this �Agreement �and �such �failure �shall �continue �for �a �period �of
thirty (30) �consecutive days �after �written notice by �River North; (ii) �any default by the Company
under �the �Note �which �is not �timely cured �by the �Company or �Pledgor; �(iii) �the �occurrence of �any
other �acceleration �event �specified �in �the �Note; �(iv) �the �failure �of �the �Company �to �perform �any
obligation imposed upon it by reason of the Purchase Agreement and the Note (including, but not
limited �to, �honoring �conversion �of �the �Note); �or �(v) �the �breach �of �any �warranty �of �Pledgor
contained in this Agreement.
Upon the occurrence of any such event of default, River North may, at its election, declare the
Note �and �all �other �indebtedness �secured �hereunder �to �become �immediately �due �and �payable �and
may exercise any or all of the rights and remedies granted to a secured party under the provisions
of �the �Illinois �Uniform �Commercial �Code �(as �now �or �hereafter �in �effect), �including �(without
limitation) �the �power �to �dispose �of �the �Collateral �by �public �or �private �sale �or �to �accept �the
Collateral in full payment of the Note and all other indebtedness secured hereunder.
Any �proceeds �realized �from �the �disposition �of �the �Collateral �pursuant �to �the �foregoing �power
of �sale �shall �be �applied �first �to �the �payment �of �expenses �incurred �by �River �North �in �connection
with �the �disposition, �then �to �the �payment �of �the �Note �and �finally �to �any �other �indebtedness
secured �hereunder. ��Any �surplus �proceeds �shall �be �paid �over �to �Pledgor. ��However, �in �the �event
such �proceeds �prove �insufficient �to �satisfy �all �obligations �of �the �Company �under �the �Note, �then
Pledgor shall remain personally liable for the resulting deficiency.
10. ��Other �Remedies. ��The rights, �powers �and �remedies �granted �to �River North �pursuant �to
the �provisions �of �this �Agreement �shall �be �in �addition �to �all �rights, �powers �and �remedies �granted
to River North under any statute or rule of law. Any forbearance, failure or delay by River North
in �exercising �any �right, �power �or �remedy �under �this �Agreement �shall �not �be �deemed �to �be �a
waiver �of �such �right, �power �or �remedy. �Any �single �or �partial �exercise �of �any �right, �power �or
remedy �under �this �Agreement �shall �not �preclude �the �further �exercise �thereof, �and �every �right,
power �and �remedy �of �River �North �under �this �Agreement �shall �continue �in �full �force �and �effect
unless �such �right, �power �or �remedy �is �specifically �waived �by �an �instrument �executed �by �River
North.
11. ���Costs �and �Expenses. ���All �costs �and �expenses �(including �reasonable �attorneys' �fees)
incurred �by River �North �in �the �exercise �or �enforcement �of �any right, �power �or �remedy granted �to
it �under �this �Agreement �shall �become �part �of �the �indebtedness �secured �hereunder �and �shall
constitute �a �personal �liability of �Pledgor �payable �immediately �upon �demand �and �bearing �interest
until �paid �at �the �minimum �per �annum �rate, �compounded �semi-annually, �required �to �avoid �the
imputation �of �interest �income �to �River �North �and �compensation �income �to �Pledgor �under �the
Federal tax laws.
12. ��Applicable �Law. ��This �Agreement �shall �be �governed �by and �construed �in �accordance
with �the �laws �of �the �State �of �Illinois �without �resort �to �that �States �conflict-of-laws �rules. �The
parties �hereby �submit �to �the �exclusive �jurisdiction �of, �and �waive �any �venue �objections �against
any �superior, �municipal, �or �other �state �court �located �in �Cook �County �in �Illinois �or �any �federal
court for the Northern District of Illinois in any litigation arising under or in connection with this
Agreement. �The parties hereby consent to the exclusive jurisdiction of the above listed courts.
13. �Successors. �This Agreement shall be binding upon River North �and its successors and
assigns and upon Pledgor and the executors, heirs and legatees of Pledgors estate.
14. ��Severability. ��If �any provision of this Agreement is held to be �invalid under applicable
law, �then �such �provision �shall �be �ineffective only to �the �extent �of �such �invalidity, �and �neither �the
remainder �of �such �provision �nor ��any �other �provisions �of �this �Agreement �shall �be �affected
thereby.
IN �WITNESS �WHEREOF, �this �Agreement �has �been �executed �by Pledgor �and �River �North �as �of
January __, 2015.
SIGNED by: Edward M. Liceaga
Signature: _____________________
for and on behalf of
River North Equity, Inc.
SIGNED by: Guy Pekham
Signature: _____________________
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR ����VALUE ����RECEIVED, ����________________________________________________
hereby ��sell(s), ��assign(s) ��and ��transfer(s) ��to ��River ��North ��Equity, ��Inc. ��(River ��North),
_____________________ �(__________) �Preferred �A �shares �of �MineralRite �Corporation �(the
Company) �standing �in �his �name �on �the �books �of �the �Company, �represented �by �Certificate �No.
_______ �herewith �and �do(e)s �hereby �irrevocably �constitute �and �appoint �Nevada �Agency �&
Transfer �Company �to �transfer �the �said �stock �on �the �books �of �the �Company �with �full �power �of
substitution in the premises.
Dated: __________________________
Signature:________________________
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR ����VALUE ����RECEIVED, ����________________________________________________
hereby ��sell(s), ��assign(s) ��and ��transfer(s) ��to ���River ��North ��Equity, ��Inc. ��(River ��North),
_____________________ �(__________) �Preferred �B �shares �of �MineralRite �Corporation �(the
Company) �standing �in �his �name �on �the �books �of �the �Company, �represented �by �Certificate �No.
_______ �herewith �and �do(e)s �hereby �irrevocably �constitute �and �appoint ��Nevada �Agency �&
Transfer �Company �to �transfer �the �said �stock �on �the �books �of �the �Company �with �full �power �of
substitution in the premises.
Dated: __________________________
Signature:________________________
SECURITIES PURCHASE AGREEMENT
This �SECURITIES �PURCHASE �AGREEMENT �(the �"Agreement"), �dated �January �__, �2015, �by
and �between �MineralRite �Corporation, �a �Nevada �corporation, �with �headquarters �located �at �55
South �Geneva �Road, �Lindon, �Utah �84042 �(the �"Company"), �and �River �North �Equity, �Inc., �an
Illinois �corporation, �with �its �principal �place �of �business �at �360 �W. �Hubbard �St., �Unit �2801,
Chicago, �Illinois �60654 �(the �"Buyer"), �(together �the �"Parties"). ��Capitalized �terms �used �in �this
Agreement and not otherwise defined shall have the meanings ascribed to them in Article 1.
WHEREAS, the Parties desire that, upon the terms and subject to the conditions contained
herein, �the �Company �shall �have �the �right �to �issue �and �sell �to �the �Buyer �from �time �to �time �as
provided �herein, �and �the �Buyer �shall �be �obligated �to �purchase �from �the �Company �up �to �Ten
Million �Dollars �($10,000,000) �of �the �Companys �Common �Stock �with �a �par �value �of �$0.001 �per
share �on �a �private �placement �basis �pursuant �to �the �provisions �of �regulation �D �of �the �Securities
Act, �and/or �upon �such �other �exemption �from �the �registration �requirements �of �the �Securities �Act
as may be available with respect to any or all of the investments to be made hereunder; and
WHEREAS, �the �Buyer �shall �be �entitled �to �resell �shares �of �Common �Stock �acquired
hereunder �pursuant �to �a �resale �registration �statement �established �by the �Company pursuant �to �the
terms of the Registration Rights Agreement between the Company and the �Buyer, which shall be
declared effective by the Commission prior to the delivery of the first Draw Down Notice.
NOW, �THEREFORE, �in �consideration �of �the �foregoing �premises, �and �the �promises �and
covenants herein contained, the receipt and sufficiency of which are hereby acknowledged by the
parties hereto, the parties, intending to be legally bound, hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1
Definitions. ��In �addition �to �the �terms �defined �elsewhere �in �this �Agreement, �for �all
purposes of this Agreement, the following terms have the meanings indicated in this Section 1.1:
Action shall have the meaning ascribed to such term in Section 3.1(i).
Affiliate �means �any �Person �that, �directly �or �indirectly �through �one �or �more
intermediaries, �controls �or �is �controlled �by �or �is �under �common �control �with �a �Person �as
such �terms �are �used �in �and �construed �under �Rule �144 �under �the �Securities �Act. ���With
respect �to �the �Buyer, �any �investment �fund �or �managed �account �that �is �managed �on �a
discretionary basis by the same investment manager as �the Buyer will be deemed to be an
Affiliate of the Buyer.
Business �Day �means �any �day �except �Saturday, �Sunday, �any �day �which �shall �be
a �federal �legal �holiday �in �the �United �States �or �any �day �on �which �banking �institutions �in
the �State �of �New �York �are �authorized �or �required �by law �or �other �governmental �action �to
close.
Buyer Party shall have the meaning ascribed to such term in Section 4.7.
1
Closing �Price �means �on �any �particular �date �(a) the �last �reported �closing �bid
price �per �share �of �Common �Stock �on �such �date �on �the �Trading �Market �(as �reported �by
Bloomberg �L.P. �at �4:15 �PM �(New �York �time)), �or �(b) �if �there �is �no �such �price �on �such
date, �then �the �closing �bid �price on �the �Trading Market �on �the �date �nearest �preceding such
date (as reported by Bloomberg L.P. at 4:15 PM (New York time)), or (c) if the Common
Stock �is �not �then �listed �or �quoted �on �the �Trading �Market �and �if �prices �for �the �Common
Stock �are �then �reported �over-the-counter �and �published �by �OTC �Markets �Group, �Inc. �(or
a �similar �organization �or �agency succeeding to �its functions �of �reporting prices), �the �most
recent �bid �price �per �share �of �the �Common �Stock �so �reported, �or �(d) �if �the �shares �of
Common �Stock �are not �then �publicly traded, �the �fair �market �value of �a share of �Common
Stock as determined by an appraiser selected in good faith by the Buyer.
Commission means the Securities and Exchange Commission.
Commencement �Date �shall �mean �the �Trading �Day �on �which �the �applicable
Draw Down Notice is delivered to the Buyer.
Commitment �Amount �shall �have �the �meaning �assigned �to �such �term �in �Section
2.1 hereof.
Commitment ��Period ��shall ��mean ��the ��period ��of ��24 ��consecutive ���months
commencing immediately after the Effective Date �but in no event later than the 30-month
anniversary of the date hereof.
Common Stock means the common stock of the Company, par value $0.001 per
share, �and �any �other �class �of �securities �into �which �such �securities �may �hereafter �be
reclassified or changed into.
Common ��Stock ��Equivalents ��means ��any ��securities ��of ��the ��Company ��or ��the
Subsidiaries �which �would �entitle �the �holder �thereof �to �acquire �at �any �time �Common
Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or
other instrument that is at any time convertible into �or exercisable or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.
Company �Counsel �means �_________________________, �with �offices �located
at ____________________________________.
Consolidation ��Event ��shall ��mean ��a ��sale ��of ��all ��or ��substantially ��all ��of ��the
Companys �assets �or �a �merger �pursuant �to �which �the �holders �of �the �voting �securities �of
the �Company �prior �to �the �merger �do �not �own �a �majority �of �the �voting �securities �of �the
surviving entity.
Disclosure ��Schedules ��means ��the ��Disclosure ��Schedules ��of ��the ��Company
delivered concurrently herewith.
Discussion Time shall �have the meaning assigned to such term in Section 3.2(f)
hereof.
2
Draw �Down �shall �have �the �meaning �assigned �to �such �term �in �Section �6.1(a)
hereof.
Draw �Down �Cushion �shall �mean �the �mandatory �ten �(10) �Trading �Days �between
Draw Down Notices.
Draw �Down �Notice �shall �have �the �meaning �assigned �to �such �term �in �Section
6.1(c) hereof.
Draw �Down �Pricing �Period �shall �mean �the �ten �(10) �Trading �Days �immediately
preceding the date on which the applicable Draw Down Notice is delivered to the Buyer.
Draw �Down �Shares �shall �mean �the �shares �of �Common �Stock �issuable �pursuant
to a Draw Down.
DTC shall have the meaning assigned to such term in Section 6.1(g).
DWAC shall have the meaning assigned to such term in Section 6.1(g).
Effective Date means the date that the initial Registration Statement filed by the
Company pursuant �to �the �Registration �Rights �Agreement �is �first �declared �effective by the
Commission.
Equity �Conditions �shall �mean, �during �the �period �in �question, �(i) �all �liquidated
damages �and �other �amounts �owing �to �the �Buyer �pursuant �to �the �Transaction �Documents
have �been �paid, �(ii) �there �is �an �effective �Registration �Statement �pursuant �to �which �the
Buyer �is �permitted �to �utilize �the �prospectus �thereunder �to �resell �all �of �the �Draw �Down
Shares �(issued �and �to �be �issued �pursuant �to �the �applicable �Draw �Down) �and �the �Shares
(and ��the ��Company ��believes, ��in ��good ��faith, ��that ��such ��effectiveness ��will ��continue
uninterrupted �for �the �foreseeable �future), ��(iii) �the �Common �Stock �is �trading �on �the
Trading �Market �and �all �of �the �shares �issuable �pursuant �to �the �Transaction �Documents �are
listed �or �quoted �(if �applicable) �for �trading �on �a �Trading �Market �(and �the �Company
believes, �in �good �faith, �that �trading �of �the �Common �Stock �on �a �Trading �Market �will
continue �uninterrupted �for �the �foreseeable �future), �(iv) �there �is �a �sufficient �number �of
authorized �but �unissued �and �otherwise �unreserved �shares �of �Common �Stock �for �the
issuance �of �all �of �the �Draw �Down �Shares �(issued �and �to �be �issued �pursuant �to �the
applicable �Draw �Down) �and �the �Shares, �(v) �the �issuance �of �the �Draw �Down �Shares
subject to the applicable Draw Down would not violate the limitations set forth in Section
4.12, (vi) the daily trading volume for each Trading Day during such period shall equal or
exceed �$5,000 �of �Common �Stock �(based �on �the �Closing �Price �on �the �applicable �day) �and
(vii) �the �Company, �directly �or �indirectly, �has �not �provided �the �Buyer �with �any �material,
non-public ��information ��that ��has ��not ��been ��made ��publicly ��available ��in ��a ��widely
disseminated release.
Evaluation Date shall have the meaning ascribed to such term in Section 3.1(q).
Exchange Act means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
3
Exempt �Issuance �means �the �issuance of �(a) �shares �of �Common �Stock �or options
to �employees, �officers �or �directors �of �the �Company �pursuant �to �any �stock �or �option �plan
duly �adopted �by �a �majority �of �the �non-employee �members �of �the �Board �of �Directors �of
the �Company �or �a �majority �of �the �members �of �a �committee �of �non-employee �directors
established ��for ��such ��purpose, ��(b) ��securities ��upon ��the ��exercise ��or ��exchange ��of ��or
conversion �of �any �Securities �issued �hereunder ��and/or �other �securities �exercisable �or
exchangeable �for �or �convertible �into �shares �of �Common �Stock �issued �and �outstanding �on
the date of this Agreement, provided that such securities have not been amended since the
date �of �this �Agreement �to �increase �the �number �of �such �securities �or �to �decrease �the
exercise, �exchange �or �conversion �price �of �any �such �securities, �and �(c) �securities �issued
pursuant ��to ��acquisitions ��or ��strategic ��transactions ��approved ��by ��a ��majority ��of ��the
disinterested �directors, �provided �any �such �issuance �shall �only �be �to �a �Person �which �is,
itself �or �through �its �subsidiaries, �an �operating �company in �a �business �synergistic �with �the
business �of �the �Company �and �in �which �the �Company �receives �benefits �in �addition �to �the
investment �of �funds, �but �shall �not �include �a �transaction �in �which �the �Company �is �issuing
securities �primarily �for �the �purpose �of �raising �capital �or �to �an �entity �whose �primary
business is investing in securities.
Formula �Price �means �the �lower �of: �(i) �the �Market �Price; �and �(ii) �the �Closing
Price �on �the �Commencement �Date, �subject �to �adjustment �for �reverse �and �forward �stock
splits, �stock �dividends, �stock �combinations �and �other similar �transactions �of �the �Common
Stock that occur after the date of this Agreement.
GAAP shall have the meaning ascribed to such term in Section 3.1(h).
Initial �Closing �shall �have �the �meaning �assigned �to �such �term �in �Section �2.2
hereof.
Initial Closing Date shall have the meaning assigned to such term in Section �2.2
hereof.
Intellectual �Property �Rights �shall �have �the �meaning �ascribed �to �such �term �in
Section 3.1(n).
Investment �Amount �shall �have �the �meaning �assigned �to �such �term �in �Section
6.1(c) hereof.
Legend �Removal �Date �shall �have �the �meaning �ascribed �to �such �term �in �Section
4.1(c).
Liens means a lien, �charge, security interest, encumbrance, right of �first �refusal,
preemptive right or other restriction.
Market �Price �means, �with �respect �to �a �Draw �Down, �the �average �closing �bid
price �of �the �Common �Stock �during �the �Draw �Down �Pricing �Period �applicable �to �such
Draw Down.
4
Material ��Adverse ��Effect ��shall ��have ��the ��meaning ��assigned ��to ��such ��term ��in
Section 3.1(b).
Material Permits shall have the meaning ascribed to such term in Section 3.1(l).
Person �means �an �individual �or �corporation, �partnership, �trust, �incorporated �or
unincorporated �association, joint venture, limited �liability company, joint �stock company,
government (or an agency or subdivision thereof) or other entity of any kind.
Proceeding ���means ���an ���action, ���claim, ���suit, ���investigation ���or ���proceeding
(including, ��without ��limitation, ��an ��investigation ��or ��partial ��proceeding, ��such ��as ��a
deposition), whether commenced or threatened.
"Buyer's �Ownership �Limitation" �shall �have �the �meaning �ascribed �to �such �term �in
Section 4.12.
Purchase ��Price ��shall ��mean, ��with ��respect ��to ��Draw ��Down ��Shares ��purchased
pursuant �to �a �Draw �Down �Notice, �70% �of �the �Formula �Price. ��In �case �a �DTC �Chill �order
is placed on the Common Stock of the Company, and as long as this order is in effect, the
Purchase Price shall mean 60% of the Formula Price.
Registration ��Rights ��Agreement ��means ��the ��Registration ��Rights ��Agreement,
dated �the �date �hereof, �between �the �Company �and �the �Buyer, �in �the �form �of �Exhibit �A
attached hereto.
Registration Statement �means a registration statement meeting the �requirements
set forth in the Registration Rights Agreement and covering the resale by the Buyer of the
Draw Down Shares and the Shares.
Required �Approvals �shall �have �the �meaning �ascribed �to �such �term �in �Section
3.1(e).
Rule �144 �means �Rule �144 �promulgated �by �the �Commission �pursuant �to �the
Securities �Act, �as �such �Rule �may �be �amended �from �time �to �time, �or �any �similar �rule �or
regulation �hereafter �adopted �by �the �Commission �having �substantially �the �same �effect �as
such Rule.
Rule �424 �means �Rule �424 �promulgated �by �the �Commission �pursuant �to �the
Securities �Act, �as �such �Rule �may �be �amended �from �time �to �time, �or �any �similar �rule �or
regulation �hereafter �adopted �by �the �Commission �having �substantially �the �same �effect �as
such Rule.
SEC Reports shall have the meaning ascribed to such term in Section 3.1(g).
Securities means the Draw Down Shares and the Shares.
Securities �Act �means �the �Securities �Act �of �1933, �as �amended, �and �the �rules �and
regulations promulgated thereunder.
5
Settlement �shall �mean �the �delivery �of �the �Draw �Down �Shares �into �the �Buyers
DTC account via DTCs DWAC system in exchange for payment therefor.
Settlement Date shall have the meaning assigned to such term in Section 6.1(f).
Shares �shall �mean �the �shares �of �Common �Stock �delivered �to �the �Buyer �at �the
Initial �Closing �and �any �additional �shares �of �Common �Stock �issued �pursuant �to �Section
2.3.
Subsidiary shall have the meaning ascribed to such term in Section 3.1(a).
Short �Sales �shall �include �all �short �sales �as �defined �in �Rule �200 �of �Regulation
SHO under the Exchange Act.
Subsidiary �means �any �subsidiary �of �the �Company �as �set �forth �on �Schedule
3.1(a).
Trading �Day �means �a �day �on �which �the �Common �Stock �is �traded �on �a �Trading
Market.
Trading ��Market ��means ��the ��following ��markets ��or ��exchanges ��on ��which ��the
Common �Stock �is �listed �or �quoted �for �trading �on �the �date �in �question: �the �Nasdaq �Stock
Market, ��the ��New ��York ��Stock ��Exchange, ��NYSE ��MKT ��or ��the ��OTC ��Bulletin ��Board,
OTCQX, �OTCQB �and �OTC �Pink �(provided �that �if �the �Company is �listed �on �OTC �Pink �it
must maintain its SEC current reporting status).
Transaction ��Documents ��means ���this ��Agreement, ���the ��Registration ���Rights
Agreement �and �any �other �documents �or �agreements �executed �in �connection �with �the
transactions contemplated hereunder.
ARTICLE II.
PURCHASE AND SALE
2.1
Purchase �and �Sale �of �Draw �Down �Shares. ���Upon �the �terms �and �subject �to �the
conditions �of �this �Agreement, �the �Company may �sell �and �issue �to �the �Buyer �and �the �Buyer �shall
be ��obligated ��to ��purchase ��from ��the ��Company, ��up ��to ��an ��aggregate ��of ��ten ��million ��Dollars
($10,000,000) worth of Common Stock (the Commitment Amount).
2.2
Initial �Closing. ���The �execution �and �delivery �of �this �Agreement �and �the �other
agreements �referred �to �herein �(the �Initial �Closing) �shall �take �place �at �such �date �as �the �Buyer
and �the �Company �may �agree �upon �(the �Initial �Closing �Date). ���Each �party �shall �deliver �the
following documents, instruments and writings at or prior to the Initial Closing:
(a)
the �Company �shall �deliver �or �cause �to �be �delivered �to �the ��Buyer �the
following:
(i)
this Agreement duly executed by the Company;
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(ii)
a �legal �opinion �of �Company �counsel �in �the �form �of �Exhibit �B
attached hereto;
(iii)
a �stock �certificate �evidencing �a �number �of �shares �of �Company's
Common �Stock �representing �immediately �post �issuance �9.99% �of �Company's
outstanding shares of Common Stock.
(iv)
the Registration Rights Agreement duly executed by the Company.
(b)
the �Buyer �shall �deliver �or �cause �to �be �delivered �to �the �Company �the
following:
(i)
this Agreement duly executed by the Buyer; and
(ii)
the Registration Rights Agreement duly executed by the Buyer.
2.3 Additional Shares.
(a) �After �the �Registration �Statement �to �be �filed �with �the �SEC �pursuant �to �this
Agreement �goes �effective, �upon �reaching �a �market �cap �of �$800,000 �or �more �(and �should �by �the
time �the �Registration �Statement �becomes �effective such �market �cap �is �reached, �then �immediately
upon effective notice from the SEC) the Company shall immediately issue to the Buyer shares of
its Common Stock representing 9.99% of its outstanding shares of Common Stock post issuance.
Should �the �Buyer �own �any �shares �of �the �Company's �Common �Stock �at �the �time �of �issuance, �the
shares �already owned �by �the �Buyer �together �with �the �shares �to �be �issued �pursuant �to �this �Section
2.3(a) ��shall ��represent ��9.99% ��of ��the ��Company's ��outstanding �shares ��of ��Common ��Stock ��post
issuance. �The �Buyer �shall �be �entitled �to �have �the �Company, �at �Buyer's �sole �discretion, �delay �the
issuance of Common Stock pursuant to this Section 2.3(a) for a period not to exceed 90 days.
(b) �After �the �Registration �Statement �to �be �filed �with �the �SEC �pursuant �to �this
Agreement �goes effective, upon reaching a market cap of $2,000,000 or more (and should by the
time �the �Registration �Statement �becomes �effective such �market �cap �is �reached, �then �immediately
upon effective notice from the SEC) the Company shall immediately issue to the Buyer shares of
its Common Stock representing 9.99% of its outstanding shares of Common Stock post issuance.
Should �the �Buyer �own �any �shares �of �the �Company's �Common �Stock �at �the �time �of �issuance, �the
shares �already owned �by �the �Buyer �together �with �the �shares �to �be �issued �pursuant �to �this �Section
2.3(b) �shall �represent ��9.99% �of �the ��Company's ��outstanding �shares �of ��Common �Stock �post
issuance. �The �Buyer �shall �be �entitled �to �have �the �Company, �at �Buyer's �sole �discretion, �delay �the
issuance of Common Stock pursuant to this Section 2.3(b) for a period not to exceed 90 days.
(c) �Should �by �the �time �the �Registration �Statement �to �be �filed �with �the �SEC
pursuant �to �this �Agreement �becomes �effective, �a �market �cap �of �$2,000,000 �or �more �is �reached
then �the �Company �shall �immediately �upon �effective �notice �from �the �SEC �issue �shares �of �its
Common �Stock �to �the �Buyer �in �accordance �with �Section �2.3(b) �above. �The �Company shall �issue
additional �shares �of �Common �Stock �representing �$80,000 �based �on �the �Formula �Price �as �soon �as
the �Buyer �shall �notify �the �Company �that �such �issuance �shall �not �result �in �its �ownership �of �more
than �9.99% �of �the �Company's �outstanding �shares �of �Common �Stock. �The �Buyer �shall �be �entitled
7
to �have �the �Company, �at �Buyer's �sole �discretion, �delay �the �issuance �of �Common �Stock �pursuant
to this Section 2.3(c) for a period not to exceed 90 days.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1
Representations �and �Warranties �of �the �Company. ��Except �as �set �forth �under �the
corresponding section �of �the �Disclosure Schedules, �which �Disclosure Schedules �shall �be deemed
a part hereof and to qualify any representation or warranty otherwise made herein to the extent of
such disclosure, the Company hereby makes the representations and warranties set forth below to
the Buyer:
(a)
Subsidiaries. ��All �of �the �direct �and �indirect �subsidiaries �of �the �Company
are �set �forth �on �Schedule �3.1(a). ��The �Company �owns, �directly �or �indirectly, �all �of �the
capital �stock �or �other �equity interests �of �each �Subsidiary �free �and �clear �of �any �Liens, �and
all the issued and outstanding shares of capital stock of each Subsidiary are validly issued
and �are �fully �paid, �non-assessable �and �free �of �preemptive �and �similar �rights �to �subscribe
for �or �purchase �securities. ��If �the �Company �has �no �subsidiaries, �then �all �other �references
in the Transaction Documents to the Subsidiaries or any of them will be disregarded.
(b)
Organization ���and ���Qualification.
The ��Company ��and ���each ���of ���the
Subsidiaries �is �an �entity duly incorporated �or �otherwise �organized, �validly existing and �in
good �standing �under �the �laws �of �the �jurisdiction �of �its �incorporation �or �organization �(as
applicable), �with �the �requisite �power �and �authority �to �own �and �use �its �properties �and
assets �and �to �carry on �its �business �as �currently conducted. ��Neither �the �Company nor �any
Subsidiary is in violation or default of any of the �provisions of its respective certificate or
articles �of �incorporation, �bylaws �or �other �organizational �or �charter �documents. ��Each �of
the �Company �and �the �Subsidiaries �is �duly �qualified �to �conduct �business �and �is �in �good
standing �as �a �foreign �corporation �or �other �entity �in �each �jurisdiction �in �which �the �nature
of �the �business �conducted �or �property �owned �by �it �makes �such �qualification �necessary,
except �where �the �failure �to �be �so �qualified �or �in �good �standing, �as �the �case �may be, �could
not �have �or �reasonably �be �expected �to �result �in �(i) �a �material �adverse �effect �on �the
legality, �validity �or �enforceability �of �any �Transaction �Document, �(ii) �a �material �adverse
effect �on �the �results �of �operations, �assets, �business, �prospects �or �condition �(financial �or
otherwise) �of �the �Company �and �the �Subsidiaries, �taken �as �a �whole, �or �(iii) �a �material
adverse �effect �on �the �Companys �ability �to �perform �in �any �material �respect �on �a �timely
basis �its �obligations �under �any �Transaction �Document �(any �of �(i), �(ii) �or �(iii), �a �Material
Adverse Effect) and no �Proceeding has been instituted in any such jurisdiction revoking,
limiting �or �curtailing �or �seeking �to �revoke, �limit �or �curtail �such �power �and �authority �or
qualification.
(c)
Authorization; �Enforcement. ���The �Company �has �the �requisite �corporate
power �and �authority �to �enter �into �and �to �consummate �the �transactions �contemplated �by
each �of �the �Transaction �Documents �and �otherwise �to �carry �out �its �obligations �hereunder
and thereunder. �The execution and delivery of each of the Transaction Documents by the
Company �and �the �consummation �by �it ��of �the �transactions �contemplated �hereby �and
thereby �have �been �duly �authorized �by �all �necessary �action �on �the �part �of �the �Company
8
and ��no ��further ��action ��is ��required ��by ��the ��Company, ��its ��board ��of ��directors ��or ��its
stockholders ��in ��connection ��therewith ��other ��than ��in ��connection ��with ��the ��Required
Approvals. ��Each �Transaction �Document �has �been �(or upon �delivery will �have been) �duly
executed �by �the �Company �and, �when �delivered �in �accordance �with �the �terms �hereof �and
thereof, �will �constitute �the �valid �and �binding �obligation �of �the �Company �enforceable
against �the �Company �in �accordance �with �its �terms �except �(i) �as �limited �by ��general
equitable �principles �and �applicable �bankruptcy, �insolvency, �reorganization, �moratorium
and other laws of �general application affecting enforcement of creditors rights �generally,
(ii) as limited by laws relating to the availability of specific performance, injunctive relief
or ��other ��equitable ��remedies ��and ��(iii) ��insofar ��as ��indemnification ��and ��contribution
provisions may be limited by applicable law.
(d)
No Conflicts. �The execution, delivery and performance of the Transaction
Documents �by �the �Company, �the �issuance �and �sale �of �the �Draw �Down �Shares �and �the
consummation ��by ��the ��Company ��of ��the ��other ��transactions ��contemplated ��hereby ��and
thereby do �not �and will not (i) �conflict with or violate any provision of the �Companys �or
any Subsidiarys �certificate �or �articles �of �incorporation, �bylaws �or �other �organizational �or
charter �documents, �or �(ii) �conflict �with, �or �constitute �a �default �(or �an �event �that �with
notice �or �lapse �of �time �or �both �would �become �a �default) �under, �result �in �the �creation �of
any �Lien �upon �any �of �the �properties �or �assets �of �the �Company �or �any �Subsidiary, �or �give
to �others �any �rights �of �termination, �amendment, �acceleration �or �cancellation �(with �or
without �notice, �lapse �of �time �or �both) �of, �any �agreement, �credit �facility, �debt �or �other
instrument ���(evidencing ���a ���Company ��or ���Subsidiary ��debt ���or ���otherwise) ���or ���other
understanding �to �which �the �Company �or �any �Subsidiary �is �a �party �or �by �which �any
property �or �asset �of �the �Company �or �any �Subsidiary �is �bound �or �affected, �or �(iii) �subject
to ��the ��Required ��Approvals, ��conflict ��with ��or ��result ��in ��a �violation ��of ��any �law, ��rule,
regulation, ��order, ��judgment, ��injunction, ��decree ��or ��other ��restriction ��of ��any ��court ��or
governmental �authority �to �which �the �Company �or �a �Subsidiary �is �subject �(including
federal and state securities laws and regulations), or by which any property or asset of the
Company �or �a �Subsidiary �is �bound �or �affected; �except �in �the �case �of �each �of �clauses �(ii)
and (iii), such as could not have or reasonably be expected to result in a Material Adverse
Effect.
(e)
Filings, �Consents �and �Approvals. ��The �Company �is �not �required �to �obtain
any �consent, �waiver, �authorization �or �order �of, �give �any �notice �to, �or �make �any �filing �or
registration �with, �any �court �or �other �federal, �state, �local �or �other �governmental �authority
or �other �Person �in �connection �with �the �execution, �delivery �and �performance �by �the
Company �of �the �Transaction �Documents, �other �than �(i) �filings �required �pursuant �to
Section �4.4 �of �this �Agreement, �(ii) �the �filing �with �the �Commission �of �the �Registration
Statement ��and ��any ��amendments ��or ��supplements ��thereto, ��(iii) ��application(s) ��to ��each
applicable �Trading �Market �for �the �listing �of �the �Securities �for �trading �thereon �in �the �time
and �manner �required �thereby, �and �(iv) �the �filing �of �Form �D �with �the �Commission �and
such filings as are required to be made under applicable state securities laws (collectively,
the Required Approvals).
(f)
Issuance �of �the �Securities. ��The �Securities �are �duly �authorized �and, �when
issued �and �paid �for �in �accordance �with �the �applicable �Transaction �Documents, �will �be
9
duly and �validly issued, �fully paid �and �nonassessable, �free and �clear �of �all �Liens �imposed
by �the �Company �other �than �restrictions �on �transfer �provided �for �in �the �Transaction
Documents. ����Capitalization. ����The �capitalization ��of ��the ��Company �is ��as ��set ��forth ��on
Schedule �3.1(f). ��The �Company �has �not �issued �any �capital �stock �since �its �most �recently
filed �periodic �report �under �the �Exchange �Act, �other �than �pursuant �to �the �exercise �of
employee �stock �options �under �the �Companys �stock �option �plans, �the �issuance �of �shares
of �Common �Stock �to �employees �pursuant �to �the �Companys �employee �stock �purchase
plan ��and ��pursuant ��to ��the ��conversion ��or ��exercise ��of ��Common ��Stock ��Equivalents
outstanding �as �of �the �date �of �the �most �recently �filed �periodic �report �under �the �Exchange
Act. ��No �Person �has �any �right �of �first �refusal, �preemptive �right, �right �of �participation, �or
any �similar ��right ��to ��participate ��in ��the ��transactions ��contemplated ��by �the �Transaction
Documents. ��Except �as �a �result �of �the �purchase �and �sale �of �the �Securities, �there �are �no
outstanding �options, �warrants, �script �rights �to �subscribe �to, �calls �or �commitments �of �any
character �whatsoever �relating �to, �or �securities, �rights �or �obligations �convertible �into �or
exercisable �or �exchangeable �for, �or �giving �any �Person �any �right �to �subscribe �for �or
acquire, �any �shares �of �Common �Stock, �or �contracts, �commitments, �understandings �or
arrangements �by which �the �Company or �any Subsidiary is �or �may become �bound �to �issue
additional �shares �of �Common �Stock �or �Common �Stock �Equivalents. ��The �issuance �and
sale �of �the �Securities �will �not �obligate �the �Company to �issue �shares �of �Common �Stock �or
other �securities �to �any �Person �(other �than �the �Buyer) �and �will �not �result �in �a �right �of �any
holder �of �Company �securities �to �adjust �the �exercise, �conversion, �exchange �or �reset �price
under ��any �of ��such ��securities. ��All ��of ��the ��outstanding �shares ��of ��capital ��stock ��of ��the
Company ��are ��validly ��issued, ��fully ��paid ��and ��nonassessable, ��have ��been ��issued ��in
compliance with all federal and state securities laws, and none of such outstanding shares
was �issued �in �violation �of �any �preemptive �rights �or �similar �rights �to �subscribe �for �or
purchase �securities. ��No �further �approval �or �authorization �of �any �stockholder, �the �Board
of �Directors �of �the �Company �or �others �is �required �for �the �issuance �and �sale �of �the
Securities. ���There �are �no �stockholders �agreements, �voting �agreements �or �other �similar
agreements �with �respect �to �the �Companys �capital �stock �to �which �the �Company is �a �party
or, ��to ��the ��knowledge ��of ��the ��Company, ��between ��or ��among ��any ��of ��the ��Companys
stockholders.
(g)
SEC �Reports; �Financial �Statements. ��The �Company �has �filed �all �reports,
schedules, �forms, �statements �and �other �documents �required �to �be �filed �by �it �under �the
Securities �Act �and �the �Exchange �Act, �including �pursuant �to �Section �13(a) �or �15(d)
thereof, �for �the �two ��years �preceding �the �date �hereof �(or �such �shorter �period �as �the
Company ��was ��required ��by ��law ��or ��regulation ��to ��file ��such ��material) ��(the ��foregoing
materials, including the exhibits thereto and documents incorporated by reference therein,
being �collectively �referred �to �herein �as �the �SEC �Reports) �on �a �timely �basis �or �has
received a valid extension of such time of filing and has filed any such SEC Reports prior
to �the �expiration �of �any �such �extension. ��As �of �their �respective �dates, �the �SEC �Reports
complied �in �all �material �respects �with �the �requirements �of �the �Securities �Act �and �the
Exchange �Act, �as �applicable, �and �none �of �the �SEC �Reports, �when �filed, �contained �any
untrue statement �of �a �material �fact �or �omitted �to �state �a material �fact �required �to �be stated
therein ��or ��necessary ��in ��order ��to ��make ��the ��statements ��therein, ��in ��the ��light ��of ��the
circumstances �under �which �they were �made, �not �misleading. ��The �financial �statements �of
the Company included in the SEC Reports comply in all material respects with applicable
10
accounting �requirements �and �the �rules �and �regulations �of �the �Commission �with �respect
thereto �as �in �effect �at �the �time �of �filing. ��Such �financial �statements �have �been �prepared �in
accordance �with �United �States �generally �accepted �accounting �principles �applied �on �a
consistent �basis �during �the �periods �involved �(GAAP), �except �as �may �be �otherwise
specified �in �such �financial �statements �or �the �notes �thereto �and �except �that �unaudited
financial �statements �may �not �contain �all �footnotes �required �by �GAAP, �and �fairly �present
in ��all ��material ��respects ��the ��financial ��position ��of ��the ��Company �and ��its ��consolidated
subsidiaries as of and for the dates thereof and the results of operations and cash flows for
the ��periods ��then ��ended, ��subject, ��in ��the ��case ��of ��unaudited ��statements, ��to ��normal,
immaterial, year-end audit adjustments.
(h)
Material ��Changes; ��Undisclosed ��Events, ��Liabilities ��or ��Developments.
Since the �date �of �the �latest �audited �financial �statements �included �within �the �SEC �Reports,
except �as �specifically �disclosed �in �a �subsequent �SEC �Report, �(i) �there �has �been �no �event,
occurrence �or �development �that �has �had �or �that �could �reasonably �be �expected �to �result �in
a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) �other �than �(A) �trade �payables �and �accrued �expenses �incurred �in �the �ordinary
course �of �business �consistent �with �past �practice �and �(B) �liabilities �not �required �to �be
reflected �in �the �Companys �financial �statements �pursuant �to �GAAP �or �disclosed �in �filings
made �with �the �Commission, �(iii) �the �Company �has �not �altered �its �method �of �accounting,
(iv) �the �Company �has �not �declared �or �made �any �dividend �or �distribution �of �cash �or �other
property to �its �stockholders �or �purchased, �redeemed �or �made �any agreements �to �purchase
or �redeem �any �shares �of �its �capital �stock �and �(v) �the �Company �has �not �issued �any �equity
securities �to �any �officer, �director �or �Affiliate, �except �pursuant �to �existing �Company stock
option �plans. ��The �Company �does �not �have �pending �before �the �Commission �any �request
for �confidential �treatment �of �information. ���Except �for �the �issuance �of �the �Securities
contemplated �by �this �Agreement �or �as �set �forth �on �Schedule �3.1(h), �no �event, �liability �or
development �has �occurred �or �exists �with �respect �to �the �Company �or �its �Subsidiaries �or
their �respective �business, �properties, �operations �or �financial �condition, �that �would �be
required �to �be �disclosed �by the �Company under �applicable �securities �laws �at �the �time �this
representation is made that has not been publicly disclosed at least 1 Trading Day prior to
the date that this representation is made.
(i)
Litigation. �There is no action, suit, inquiry, notice of violation, proceeding
or �investigation �pending �or, �to �the �knowledge �of �the �Company, �threatened �against �or
affecting �the �Company, �any �Subsidiary �or �any �of �their �respective �properties �before �or �by
any ��court, ��arbitrator, ��governmental ��or ��administrative ��agency �or ��regulatory ��authority
(federal, �state, �county, �local �or �foreign) �(collectively, �an �Action) �which �(i) �adversely
affects �or �challenges �the �legality, �validity �or �enforceability �of �any �of �the �Transaction
Documents �or �the �Securities �or �(ii) �could, �if �there �were �an �unfavorable �decision, �have �or
reasonably be �expected �to �result �in �a �Material �Adverse �Effect. ��Neither �the �Company nor
any �Subsidiary, �nor �any �director �or �officer �thereof, �is �or �has �been �the �subject �of �any
Action �involving �a �claim �of �violation �of �or �liability �under �federal �or �state �securities �laws
or �a �claim �of �breach �of �fiduciary �duty. ��There �has �not �been, �and �to �the �knowledge �of �the
Company, �there �is �not �pending �or �contemplated, �any �investigation �by �the �Commission
involving the Company or any current or former director or officer of the �Company. ��The
Commission �has �not �issued �any �stop �order �or �other �order �suspending �the �effectiveness �of
11
any �registration �statement �filed �by �the �Company �or �any �Subsidiary �under �the �Exchange
Act or the Securities Act.
(j)
Labor �Relations. ��No �material �labor �dispute �exists �or, �to �the �knowledge �of
the �Company, �is �imminent �with �respect �to �any �of �the �employees �of �the �Company �which
could �reasonably �be �expected �to �result �in �a �Material �Adverse �Effect. ����None �of �the
Companys �or �its �Subsidiaries �employees �is �a �member �of �a �union �that �relates �to �such
employees �relationship �with �the �Company, �and �neither �the �Company �or �any �of �its
Subsidiaries �is �a �party �to �a �collective �bargaining �agreement, �and �the �Company �and �its
Subsidiaries �believe �that �their �relationships �with �their �employees �are �good. ��No �executive
officer, �to �the �knowledge �of �the �Company, �is, �or �is �now �expected �to �be, �in �violation �of
any �material �term �of �any �employment �contract, �confidentiality, �disclosure �or �proprietary
information agreement or non-competition agreement, or any other contract or agreement
or any restrictive �covenant, and the continued �employment of �each such �executive officer
does �not �subject �the �Company �or �any �of �its �Subsidiaries �to �any �liability �with �respect �to
any �of �the �foregoing �matters. ��The �Company �and �its �Subsidiaries �are �in �compliance �with
all �U.S. �federal, �state, �local �and �foreign �laws �and �regulations �relating �to �employment �and
employment �practices, �terms �and �conditions �of �employment �and �wages �and �hours, �except
where ��the ��failure ��to ��be ��in ��compliance ��could ��not, ��individually �or ��in ��the ��aggregate,
reasonably be expected to have a Material Adverse Effect.
(k)
Compliance. ���Neither �the �Company �nor �any �Subsidiary �(i) �is �in �default
under �or �in �violation �of �(and �no �event �has �occurred �that �has �not �been �waived �that, �with
notice �or �lapse �of �time �or �both, �would �result �in �a �default �by �the �Company �or �any
Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that
it is in default under or that it is in violation of, any indenture, loan or credit agreement or
any �other �agreement �or �instrument �to �which �it �is �a �party �or �by �which �it �or �any �of �its
properties �is �bound �(whether �or �not �such �default �or �violation �has �been �waived), �(ii) �is �in
violation of any order of any court, arbitrator or governmental body, or (iii) is or has been
in �violation �of �any �statute, �rule �or �regulation �of �any �governmental �authority, �including
without �limitation �all �foreign, �federal, �state �and �local �laws �applicable �to �its �business �and
all �such �laws �that �affect �the �environment, �except �in �each �case �as �could �not �have �or
reasonably be expected to result in a Material Adverse Effect.
(l)
Regulatory ��Permits. ����The ��Company ��and ��the ��Subsidiaries ��possess ��all
certificates, �authorizations �and �permits �issued �by �the �appropriate �federal, �state, �local �or
foreign ��regulatory ��authorities ��necessary ��to ��conduct ��their ��respective ��businesses ��as
described �in �the �SEC �Reports, �except �where �the �failure to �possess �such �permits �could �not
have ��or ��reasonably ��be ��expected ��to ��result ��in ��a ��Material ��Adverse ��Effect ��(Material
Permits), �and �neither �the �Company �nor �any �Subsidiary �has �received �any �notice �of
proceedings relating to the revocation or modification of any Material Permit.
(m)
Title ��to ��Assets. ����The ��Company ��and ��the ��Subsidiaries ��have ��good ��and
marketable �title �in �fee �simple �to �all �real �property �owned �by �them �that �is �material �to �the
business �of �the �Company �and �the �Subsidiaries �and �good �and �marketable �title �in �all
personal property owned �by them that is material �to the business of the �Company and �the
Subsidiaries, in each case free and clear of all Liens, except for Liens as do not materially
12
affect �the �value �of �such �property �and �do �not �materially �interfere �with �the �use �made �and
proposed to be made of such property by the Company and the Subsidiaries and Liens for
the �payment �of �federal, �state �or �other �taxes, �the �payment �of �which �is �neither �delinquent
nor ��subject ��to ��penalties. ����Any �real ��property ��and ��facilities ��held ��under ��lease ��by �the
Company �and �the �Subsidiaries �are �held �by �them �under �valid, �subsisting �and �enforceable
leases with which the Company and the Subsidiaries are in compliance.
(n)
Patents and Trademarks. �The Company and the Subsidiaries have, or have
rights �to �use, �all �patents, �patent �applications, �trademarks, �trademark �applications, �service
marks, �trade �names, �trade �secrets, �inventions, �copyrights, �licenses �and �other �intellectual
property �rights �and �similar �rights �necessary �or �material �for �use �in �connection �with �their
respective �businesses �as �described �in �the �SEC �Reports �and �which �the �failure �to �so �have
could �have �a �Material �Adverse �Effect �(collectively, �the �Intellectual �Property �Rights).
Neither the Company nor any Subsidiary has received a �notice (written or �otherwise) that
the �Intellectual �Property �Rights �used �by �the �Company �or �any �Subsidiary �violates �or
infringes �upon �the �rights �of �any �Person. ���To �the �knowledge �of �the �Company, �all �such
Intellectual �Property �Rights �are �enforceable �and �there �is �no �existing �infringement �by
another ��Person ��of ��any ��of ��the ��Intellectual ��Property ��Rights. ����The ��Company ��and ��its
Subsidiaries ���have ���taken ���reasonable ���security ���measures ���to ���protect ���the ���secrecy,
confidentiality �and �value �of �all �of �their �intellectual �properties, �except �where �failure �to �do
so �could �not, �individually �or �in �the �aggregate, �reasonably �be �expected �to �have �a �Material
Adverse Effect.
(o)
Insurance. ��The �Company �and �the �Subsidiaries �are �insured �by �insurers �of
recognized �financial �responsibility �against �such �losses �and �risks �and �in �such �amounts �as
are �prudent �and �customary �in �the �businesses �in �which �the �Company �and �the �Subsidiaries
are �engaged, �including, �but �not �limited �to, �directors �and �officers �insurance �coverage �at
least �equal �to �$5,000,000. ��Neither �the �Company �nor �any �Subsidiary �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 without a significant increase in cost.
(p)
Transactions �With �Affiliates �and �Employees. ���Except �as �set �forth �in �the
SEC �Reports, �none �of �the �officers �or �directors �of �the �Company �and, �to �the �knowledge �of
the ��Company, ��none ��of ��the ��employees ��of ��the ��Company �is ��presently �a �party �to ��any
transaction �with �the �Company �or �any �Subsidiary �(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 entity in which any officer, director,
or �any �such �employee �has �a �substantial �interest �or �is �an �officer, �director, �trustee �or
partner, �in �each �case �in �excess �of �$60,000 �other �than �(i) �for �payment �of �salary �or
consulting �fees �for �services �rendered, �(ii) �reimbursement �for �expenses �incurred �on �behalf
of �the �Company �and �(iii) �for �other �employee �benefits, �including �stock �option �agreements
under any stock option plan of the Company.
13
(q)
Sarbanes-Oxley; ��Internal ��Accounting ��Controls. ����The ��Company ��is ��in
material �compliance �with �all �provisions �of �the �Sarbanes-Oxley �Act �of �2002 �which �are
applicable �to �it �as �of �the �Closing �Date. ��The �Company �and �the �Subsidiaries �maintain �a
system �of �internal �accounting �controls �sufficient �to �provide �reasonable �assurance �that �(i)
transactions ��are ��executed ��in ��accordance ��with ��managements ��general ��or ��specific
authorizations, ��(ii) ��transactions ��are ��recorded ��as ��necessary ��to ��permit ��preparation ��of
financial �statements �in �conformity �with �GAAP �and �to �maintain �asset �accountability, �(iii)
access �to �assets �is �permitted �only �in �accordance �with �managements �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 has �established �disclosure controls �and �procedures �(as �defined
in �Exchange �Act �Rules �13a-15(e) �and �15d-15(e)) �for �the �Company �and �designed �such
disclosure �controls �and �procedures �to �ensure �that �information �required �to �be �disclosed �by
the �Company �in �the �reports �it �files �or �submits �under �the �Exchange �Act �is �recorded,
processed, ���summarized ���and ���reported, ���within ���the ���time ���periods ���specified ���in ���the
Commissions �rules �and �forms. ��The �Companys �certifying �officers �have �evaluated �the
effectiveness �of �the �Companys �disclosure �controls �and �procedures �as �of �the �end �of �the
period �covered �by the �Companys �most �recently filed �periodic �report �under �the �Exchange
Act (such date, the Evaluation Date). �The Company presented in its most recently filed
periodic �report �under �the �Exchange �Act �the �conclusions �of �the �certifying �officers �about
the �effectiveness �of �the �disclosure �controls �and �procedures �based �on �their �evaluations �as
of �the �Evaluation �Date. ��Since �the �Evaluation �Date, �there �have �been �no �changes �in �the
Companys �internal �control �over �financial �reporting �(as �such �term �is �defined �in �the
Exchange �Act) �that �has �materially �affected, �or �is �reasonably �likely �to �materially �affect,
the Companys internal control over financial reporting.
(r)
Certain �Fees. �Any �brokerage �or �finders �fees �or �commissions �that �are, �or
will �be, �payable �by �the �Company �to �any �broker, �financial �advisor �or �consultant, �finder,
placement agent, investment banker, bank or other Person �with respect to the transactions
contemplated �by the �Transaction �Documents �shall �be borne solely by the �Company. ��The
Buyer �shall �have �no �obligation �with �respect �to �any �fees �or �with �respect �to �any �claims
made by or on �behalf of �other Persons for fees of �a �type contemplated in this Section that
may ��be ��due ��in ��connection ��with ��the ��transactions ��contemplated ��by ��the ��Transaction
Documents.
(s)
Private �Placement. �Assuming �the �accuracy �of �the �Buyer �representations
and warranties set forth in Section 3.2, no registration under the Securities Act is required
for �the �offer �and �sale �of �the �Securities �by �the �Company �to �the �Buyer �as �contemplated
hereby. �The �issuance �and �sale �of �the �Securities �hereunder �does �not �contravene �the �rules
and regulations of the Trading Market.
(t)
Investment �Company. �The �Company is �not, �and �is �not �an �Affiliate �of, �and
immediately �after �receipt �of �payment �for �the �Securities, �will �not �be �or �be �an �Affiliate �of,
an �investment �company �within �the �meaning �of �the �Investment �Company �Act �of �1940,
as �amended. ���The �Company �shall �conduct �its �business �in �a �manner �so �that �it �will �not
become subject to the Investment Company Act.
14
(u)
Registration �Rights. ���Other �than �the �Buyer, �no �Person �has �any �right �to
cause �the �Company to �effect �the �registration �under �the �Securities �Act �of �any �securities �of
the Company.
(v)
Listing �and �Maintenance �Requirements. ��The �Companys �Common �Stock
is �registered �pursuant �to �Section �12(b) �or �12(g) �of �the �Exchange �Act, �and �the �Company
has �taken �no �action �designed �to, �or �which �to �its �knowledge �is �likely to �have �the �effect �of,
terminating �the �registration �of �the �Common �Stock �under �the �Exchange �Act �nor �has �the
Company �received �any �notification �that �the �Commission �is �contemplating �terminating
such �registration. ���The �Company �has �not, �in �the �12 �months �preceding �the �date �hereof,
received �notice �from �any �Trading �Market �on �which �the �Common �Stock �is �or �has �been
listed �or �quoted �to �the �effect �that �the �Company �is �not �in �compliance �with �the �listing �or
maintenance �requirements �of �such �Trading �Market. �The �Company �is, �and �has �no �reason
to �believe �that �it �will �not �in �the �foreseeable �future �continue �to �be, �in �compliance �with �all
such listing and maintenance requirements.
(w)
Application �of �Takeover �Protections. ���The �Company �and �its �Board �of
Directors �have �taken �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 �Companys
Certificate �of �Incorporation �(or �similar �charter �documents) �or �the �laws �of �its �state �of
incorporation that is or could become applicable to the �Buyer as �a result of the �Buyer and
the �Company �fulfilling �their �obligations �or �exercising �their �rights �under �the �Transaction
Documents, �including �without �limitation �as �a �result �of �the �Companys �issuance �of �the
Securities and the Buyers ownership of the Securities.
(x)
Disclosure. ��Except �with �respect �to �the �material �terms �and �conditions �of
the �transactions �contemplated �by �the �Transaction �Documents, �the �Company �confirms
that, �neither �it �nor �any other Person �acting on �its �behalf �has �provided �any of �the �Buyer �or
their ��agents ��or ��counsel ��with ��any ��information ��that ��it ��believes ��constitutes ��or ��might
constitute �material, �non-public �information. ����The �Company �understands �and �confirms
that �the �Buyer �will �rely �on �the �foregoing �representation �in �effecting �transactions �in
securities �of �the �Company. ��All �disclosure �furnished �by �or �on �behalf �of �the �Company �to
the Buyer �regarding the �Company, its business �and the transactions contemplated hereby,
including the �Disclosure �Schedules �to �this �Agreement, �with �respect �to �the �representations
and �warranties �made �herein �are �true �and �correct �with �respect �to �such �representations �and
warranties �and �do �not �contain �any untrue �statement �of �a �material �fact �or �omit �to �state �any
material �fact �necessary �in �order �to �make �the �statements �made �therein, �in �light �of �the
circumstances ��under ��which ��they ��were ��made, ��not ��misleading. ��The ��press ��releases
disseminated �by �the �Company �during �the �twelve �months �preceding �the �date �of �this
Agreement �taken �as �a �whole �do �not �contain �any �untrue �statement �of �a �material �fact �or
omit to state a material fact required to be stated therein or necessary in order to make the
statements, �in �light �of �the �circumstances �under �which �they �were �made �and �when �made,
not �misleading. ��The �Company �acknowledges �and �agrees �that �the �Buyer �neither �makes
nor ��has ��made ��any ��representations ��or ��warranties ��with ��respect ��to ��the ��transactions
contemplated hereby other than those specifically set forth in Section 3.2 hereof.
15
(y)
No ���Integrated ���Offering. ���Assuming ���the ���accuracy ���of ���the ���Buyers
representations �and �warranties �set �forth �in �Section �3.2, �neither �the �Company, �nor �any �of
its �affiliates, �nor �any �Person �acting �on �its �or �their �behalf �has, �directly �or �indirectly, �made
any �offers �or �sales �of �any �security �or �solicited �any �offers �to �buy �any �security, �under
circumstances �that �would �cause �this �offering �of �the �Securities �to �be �integrated �with �prior
offerings ��by ��the ��Company ��for ��purposes ��of ��the ��Securities ��Act ��or ��any ��applicable
shareholder �approval �provisions �of �any �Trading �Market �on �which �any of �the �securities �of
the Company are listed or designated.
(z)
Solvency. ���Based �on �the �financial �condition �of �the �Company �as �of �the
Closing �Date �after �giving �effect �to �the �receipt �by �the �Company �of �the �proceeds �from �the
sale �of �the �Securities �hereunder, �(i) �the �fair �saleable �value �of �the �Companys �assets
exceeds �the �amount �that �will �be �required �to �be �paid �on �or �in �respect �of �the �Companys
existing debts and other liabilities (including known contingent liabilities) as they mature;
(ii) �the �Companys �assets �do �not �constitute �unreasonably �small �capital �to �carry �on �its
business �as �now �conducted �and �as �proposed �to �be �conducted �including �its �capital �needs
taking �into �account �the �particular �capital �requirements �of �the �business �conducted �by �the
Company, and projected capital requirements and capital availability thereof; and (iii) the
current �cash �flow �of �the �Company, �together �with �the �proceeds �the �Company �would
receive, �were �it �to �liquidate �all �of �its �assets, �after �taking �into �account �all �anticipated �uses
of �the �cash, �would �be �sufficient �to �pay �all �amounts �on �or �in �respect �of �its �liabilities �when
such �amounts �are �required �to �be �paid. ���The �Company �does �not �intend �to �incur �debts
beyond �its �ability �to �pay �such �debts �as �they �mature �(taking �into �account �the �timing �and
amounts �of �cash �to �be �payable �on �or �in �respect �of �its �debt). ���The �Company �has �no
knowledge �of �any �facts �or �circumstances �which �lead �it �to �believe �that �it �will �file �for
reorganization ��or ��liquidation ��under ��the ��bankruptcy ��or ��reorganization ��laws ��of ��any
jurisdiction �within �one �year �from �the �Closing �Date. ��The �SEC �Reports �set �forth �as �of �the
dates �thereof �all �outstanding �secured �and �unsecured �Indebtedness �of �the �Company or �any
Subsidiary, �or �for �which �the �Company �or �any �Subsidiary �has �commitments. ���For �the
purposes �of �this �Agreement, �Indebtedness �shall �mean �(a) �any �liabilities �for �borrowed
money �or �amounts �owed �in �excess �of ��$150,000 �(other �than �trade �accounts �payable
incurred �in �the �ordinary �course �of �business), �(b) �all �guaranties, �endorsements �and �other
contingent �obligations �in �respect �of �Indebtedness �of �others, �whether �or �not �the �same �are
or �should �be �reflected �in �the �Companys �balance �sheet �(or �the �notes �thereto), �except
guaranties �by �endorsement �of �negotiable �instruments �for �deposit �or �collection �or �similar
transactions �in �the �ordinary �course �of �business; �and �(c) �the �present �value �of �any �lease
payments in excess of $150,000 due under leases required to be capitalized in accordance
with �GAAP. ��Neither �the �Company �nor �any �Subsidiary �is �in �default �with �respect �to �any
Indebtedness.
(aa) �����Tax �Status. ���Except �for �matters �that �would �not, �individually �or �in �the
aggregate, �have �or �reasonably �be �expected �to �result �in �a �Material �Adverse �Effect, �the
Company �and �each �Subsidiary �has �filed �all �necessary �federal, �state �and �foreign �income
and �franchise �tax �returns �and �has �paid �or �accrued �all �taxes �shown �as �due �thereon, �and �the
Company �has �no �knowledge �of �a �tax �deficiency �which �has �been �asserted �or �threatened
against the Company or any Subsidiary.
16
(bb) �����No �General �Solicitation. ��Neither �the �Company �nor �any �person �acting �on
behalf �of �the �Company �has �offered �or �sold �any �of �the �Securities �by �any �form �of �general
solicitation �or �general �advertising. ��The �Company �has �offered �the �Securities �for �sale �only
to the Buyer.
(cc) �����Foreign Corrupt Practices. ��Neither the Company, �nor to the �knowledge of
the Company, any agent �or other person acting on �behalf of the Company, �has (i) directly
or �indirectly, �used �any �funds �for �unlawful �contributions, �gifts, �entertainment �or �other
unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful
payment �to �foreign �or �domestic �government �officials �or �employees �or �to �any �foreign �or
domestic �political �parties �or �campaigns �from �corporate �funds, �(iii) �failed �to �disclose �fully
any �contribution �made �by �the �Company �(or �made �by �any �person �acting �on �its �behalf �of
which �the �Company �is �aware) �which �is ���in �violation �of �law, �or �(iv) �violated �in �any
material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.
(dd) �����Accountants. ����The ��Companys ��accountants ��are ��set ��forth ��on ��Schedule
3.1(dd) ��of ��the ��Disclosure ��Schedule. �����To ��the ��knowledge ��of ��the ��Company, ��such
accountants, �who �the �Company �expects �will �express �their �opinion �with �respect �to �the
financial �statements �to �be �included �in �the �Companys �Annual �Report �on �Form �10-K �for
the �year �ending �December �31, �2014, �are �a �registered �public �accounting �firm �as �required
by the Exchange Act.
(ee) �����Acknowledgment ��Regarding ��Buyers ��Purchase ��of ��Securities.
The
Company �acknowledges �and �agrees �that �the �Buyer �is �acting �solely �in �the �capacity �of �an
arms �length �Buyer �with �respect �to �the �Transaction �Documents �and �the �transactions
contemplated �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 �thereby and �any
advice given by the �Buyer or �any of its respective representatives or agents in connection
with �the �Transaction �Documents �and �the �transactions �contemplated �thereby �is �merely
incidental �to �the �Buyers �purchase �of �the �Securities. ��The �Company �further �represents �to
the �Buyer �that �the �Companys �decision �to �enter �into �this �Agreement ��and �the �other
Transaction �Documents �has �been �based �solely �on �the �independent �evaluation �of �the
transactions contemplated hereby by the Company and its representatives.
(ff)
Manipulation �of �Price. ��The �Company �has �not, �and �to �its �knowledge �no
one �acting �on �its �behalf �has, �(i) �taken, �directly or �indirectly, �any action �designed �to �cause
or �to �result �in �the �stabilization �or �manipulation �of �the �price �of �any �security �of �the
Company �to �facilitate �the �sale �or �resale �of �any �of �the �Securities, �(ii) �sold, �bid �for,
purchased, or, paid any compensation for soliciting purchases of, any of the Securities, or
(iii) �paid �or �agreed �to �pay �to �any �person �any �compensation �for �soliciting �another �to
purchase �any �other �securities �of �the �Company, �other �than, �in �the �case �of �clauses �(ii) �and
(iii), ��compensation ��paid ��to ��the ��Companys ��placement ��agent ��in ��connection ��with ��the
placement of the Securities.
(gg) �����Acknowledgement �Regarding �Buyers �Trading �Activity. ��Anything �in �this
Agreement �or �elsewhere �herein �to �the �contrary �notwithstanding, �it �is �understood �and
17
acknowledged by the Company that Buyer has neither been asked to agree, nor has Buyer
agreed, �to �desist �from �purchasing �or �selling �long �securities �of �the �Company, �including,
without limitation, during the periods that the value of the Draw Down Shares deliverable
in �connection �with �a �Draw �Down �are �being �determined. ��The �Company �acknowledges
that �such �aforementioned �activities �do �not �constitute �a �breach �of �any �of �the �Transaction
Documents.
3.2
Representations ��and ��Warranties ��of ��the ��Buyer. ����Buyer ��hereby �represents ��and
warrants as of the date hereof and as of each Closing Date to the Company as follows:
(a)
Organization; ��Authority. ����Buyer ��is ��an ��entity ��duly ��organized, ��validly
existing �and �in �good �standing �under �the �laws �of �the �jurisdiction �of �its �organization �with
full �right, �corporate �or �partnership �power �and �authority �to �enter �into �and �to �consummate
the �transactions �contemplated �by �the �Transaction �Documents �and �otherwise �to �carry �out
its obligations �hereunder and thereunder. The execution, �delivery and performance by the
Buyer �of �the �transactions �contemplated �by �this �Agreement �have �been �duly �authorized �by
all �necessary �corporate �or �similar �action �on �the �part �of �the �Buyer. ���Each �Transaction
Document to which it is a party has been duly executed by the Buyer, and when delivered
by �the �Buyer �in �accordance �with �the �terms �hereof, �will �constitute �the �valid �and �legally
binding �obligation �of �the �Buyer, �enforceable �against �it �in �accordance �with �its �terms,
except ��(i) ��as ��limited ��by ��general ��equitable ��principles ��and ��applicable ��bankruptcy,
insolvency, �reorganization, �moratorium �and �other �laws �of �general �application �affecting
enforcement ��of ��creditors ��rights ��generally, ��(ii) ��as ��limited ��by ��laws ��relating ��to ��the
availability of �specific �performance, �injunctive �relief or �other equitable �remedies �and �(iii)
insofar as indemnification and contribution provisions may be limited by applicable law.
(b)
Own ��Account. �����Buyer ��understands ��that ��the ��Shares ��are ��restricted
securities �and �have �not �been �registered �under �the �Securities �Act �or �any �applicable �state
securities �law �and �is �acquiring the �Shares ��as �principal �for its �own �account �and �not �with �a
view �to �or �for �distributing �or �reselling �such �Shares �or �any �part �thereof �in �violation �of �the
Securities ��Act ��or ��any ��applicable ��state ��securities ��law, ��has ��no ��present ��intention ��of
distributing �any �of �such �Shares �in �violation �of �the �Securities �Act �or �any �applicable �state
securities �law �and �has �no �direct �or �indirect �arrangement �or �understandings �with �any other
persons �to �distribute �or �regarding �the �distribution �of �such �Shares �in �violation �of �the
Securities �Act �or �any applicable �state �securities �law �(this �representation �and �warranty not
limiting �the �Buyers �right �to �sell �the �Securities �pursuant �to �the �Registration �Statement �or
otherwise �in �compliance �with �applicable �federal �and �state �securities �laws). ���Buyer �is
acquiring the Shares hereunder in the ordinary course of its business.
(c)
Buyer �Status. ��At the time the �Buyer was �offered �the Shares, �it was, �and at
the �date �hereof �it �is, �and �90 �days �following �the �Initial �Closing, �it �will �be �either: �(i) �an
accredited �investor �as �defined �in �Rule �501 �under �the �Securities �Act �or �(ii) �a �qualified
institutional buyer as defined in Rule 144A(a) under the Securities Act
(d)
Experience ���of ���Buyer. ���Buyer, ���either ���alone ���or ���together ���with ���its
representatives, ��has ��such ��knowledge, ��sophistication ��and ��experience ��in ��business ��and
financial �matters �so �as �to �be �capable �of �evaluating �the �merits �and �risks �of �the �prospective
18
investment in the Securities, and has so evaluated the merits and risks of such investment.
Buyer �is �able �to �bear �the �economic �risk �of �an �investment �in �the �Securities �and, �at �the
present time, is able to afford a complete loss of such investment.
(e)
General �Solicitation. ��Buyer �is �not �purchasing �the �Securities �as �a �result �of
any ��advertisement, ��article, ��notice ��or ��other ��communication ��regarding ��the ��Securities
published �in �any �newspaper, �magazine �or �similar �media �or �broadcast �over �television �or
radio ��or ��presented ��at ��any ��seminar ��or ��any ��other ��general ��solicitation ��or ��general
advertisement.
(f)
Short �Sales �and �Confidentiality �Prior �to �the �Date �Hereof. ��Other �than �the
transaction �contemplated �hereunder, �the �Buyer �has �not �directly �or �indirectly, �nor �has �any
Person acting on behalf of or pursuant to any understanding with �the Buyer, executed any
disposition, �including �Short �Sales, in �the �securities �of �the �Company �during �the �period
commencing �from �the �time �that �the �Buyer �first �received �a �term �sheet �(written �or �oral)
from the Company or any other Person setting forth the material terms of the transactions
contemplated �hereunder �until �the �date �hereof �(Discussion �Time). ��Notwithstanding �the
foregoing, if the Buyer is �a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of �the Buyer's �assets and the portfolio managers have
no ��direct ��knowledge ��of ��the ��investment ��decisions ��made ��by ��the ��portfolio ��managers
managing �other �portions �of �the �Buyer's �assets, �the �representation �set �forth �above �shall
only �apply �with �respect �to �the �portion �of �assets �managed �by �the �portfolio �manager �that
made �the �investment �decision �to �purchase �the �Securities �covered �by �this �Agreement.
Other �than �to �other �Persons �party �to �this �Agreement, �the �Buyer �has �maintained �the
confidentiality of �all �disclosures �made �to �it �in �connection �with �this �transaction �(including
the existence and terms of this transaction).
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1
Transfer Restrictions.
(a)
The �Securities �may �only �be �disposed �of �in �compliance �with �state �and
federal �securities �laws. ��In �connection �with �any �transfer �of �Securities �other �than �pursuant
to an effective registration statement or Rule 144, to the Company or to an �affiliate of �the
Buyer �or �in �connection �with �a �pledge �as �contemplated �in �Section �4.1(b), �the �Company
may �require �the �transferor �thereof �to �provide �to �the �Company �an �opinion �of �counsel
selected �by �the �transferor �and �reasonably �acceptable �to �the �Company, �the �form �and
substance �of �which �opinion �shall �be reasonably satisfactory to �the �Company, �to �the �effect
that �such �transfer �does �not �require �registration �of �such �transferred �Securities �under �the
Securities Act. ��As a condition of transfer, any such transferee shall agree in writing to be
bound �by �the �terms �of �this �Agreement �and �shall �have �the �rights �of �the �Buyer �under �this
Agreement and the Registration Rights Agreement, as to issued Securities only.
(b)
The �Buyer �agrees �to �the �imprinting, �so �long �as �is �required �by this �Section
4.1, of a legend on any of the Securities in the following form:
19
THESE ���SECURITIES ���HAVE ���NOT ���BEEN ���REGISTERED ���WITH ���THE
SECURITIES ��AND ��EXCHANGE ��COMMISSION ��OR ��THE ��SECURITIES
COMMISSION �OF �ANY �STATE �IN �RELIANCE �UPON �AN �EXEMPTION
FROM ��REGISTRATION ��UNDER ��THE ��SECURITIES ��ACT ��OF ��1933, ��AS
AMENDED �(THE �SECURITIES �ACT), �AND, �ACCORDINGLY, �MAY �NOT
BE ��OFFERED ���OR ��SOLD ��EXCEPT ��PURSUANT ��TO ��AN ��EFFECTIVE
REGISTRATION ���STATEMENT ���UNDER ���THE ���SECURITIES ���ACT ���OR
PURSUANT ���TO ���AN ���AVAILABLE ���EXEMPTION ���FROM, ���OR ���IN ���A
TRANSACTION
NOT
SUBJECT
TO,
THE
REGISTRATION
REQUIREMENTS ��OF ��THE ��SECURITIES ��ACT ��AND ��IN ��ACCORDANCE
WITH �APPLICABLE �STATE �SECURITIES �LAWS �AS �EVIDENCED �BY �A
LEGAL ��OPINION ��OF ��COUNSEL ��TO ��THE ��TRANSFEROR ��TO ��SUCH
EFFECT, ���THE ���SUBSTANCE ���OF ��WHICH ���SHALL ���BE ���REASONABLY
ACCEPTABLE ��TO ��THE ��COMPANY. �����THESE ��SECURITIES ��MAY ��BE
PLEDGED �IN �CONNECTION �WITH �A �BONA �FIDE �MARGIN �ACCOUNT
WITH ��A ��REGISTERED ��BROKER-DEALER ��OR ��OTHER ��LOAN ��WITH ��A
FINANCIAL �INSTITUTION �THAT �IS �AN �ACCREDITED �INVESTOR �AS
DEFINED ��IN �RULE �501(a) �UNDER �THE �SECURITIES �ACT ��OR �OTHER
LOAN SECURED BY SUCH SECURITIES.
The �Company �acknowledges �and �agrees �that �the �Buyer �may �from �time �to �time
pledge �pursuant �to �a �bona �fide �margin �agreement �with �a �registered �broker-dealer �or �grant
a �security �interest �in �some �or �all �of �the �Securities �to �a �financial �institution �that �is �an
accredited �investor �as �defined �in �Rule �501(a) �under �the �Securities �Act �and �who �agrees
to �be �bound �by �the �provisions �of �this �Agreement �and �the �Registration �Rights �Agreement
and, �if �required �under �the �terms �of �such �arrangement, �the �Buyer �may �transfer �pledged �or
secured Securities to the �pledgees or secured parties. �Such a pledge or transfer would not
be �subject �to �approval �of �the �Company �and �no �legal �opinion �of �legal �counsel �of �the
pledgee, �secured �party �or �pledgor �shall �be �required �in �connection �therewith. ��Further, �no
notice �shall �be �required �of �such �pledge. ���At �the �Buyers �expense, �the �Company �will
execute �and �deliver �such �reasonable �documentation �as �a �pledgee �or �secured �party �of
Securities ��may ��reasonably ��request ��in ��connection ��with ��a ��pledge ��or ��transfer ��of ��the
Securities, ��including, ��if ��the ��Securities ��are ��subject ��to ��registration ��pursuant ��to ��the
Registration �Rights �Agreement, �the �preparation �and �filing �of �any �required �prospectus
supplement �under �Rule �424(b)(3) �under �the �Securities �Act �or �other �applicable �provision
of the Securities Act to appropriately amend the list of Selling Stockholders thereunder.
(c)
Certificates �evidencing �the �Draw �Down �Shares �and �the �Shares �shall �not
contain ��any ��legend ��(including ��the ��legend ��set ��forth ��in ��Section ��4.1(b)), ��(i) ��while ��a
registration �statement �(including �the �Registration �Statement) �covering �the �resale �of �such
security �is �effective �under �the �Securities �Act, �or �(ii) �following �any �sale �of �such �Draw
Down �Shares �or �Shares �pursuant �to �Rule �144, �or �(iii) �if �such �legend �is �not �required �under
applicable ��requirements ��of ��the ��Securities ��Act ��(including ��judicial ��interpretations ��and
pronouncements �issued �by �the �staff �of �the �Commission). ��The �Company �shall �cause �its
counsel �to �issue �a �legal �opinion �to �the �Companys �transfer �agent �promptly �after �the
Effective �Date �if �required �by �the �Companys �transfer �agent �to �effect �the �removal �of �the
legend hereunder. ��The Company agrees that following the Effective Date �or at such time
20
as �such �legend �is �no �longer �required �under �this �Section �4.1(c), �it �will, �no �later �than �3
(three) ��Trading ��Days ��following ��the ��delivery ��by ��the ��Buyer ��to ��the ��Company ��or ��the
Companys �transfer �agent �of �a �certificate �representing �Draw �Down �Shares, �or �Shares, �as
the �case �may �be, �issued �with �a �restrictive �legend �(such �third �Trading �Day, �the �Legend
Removal �Date), �deliver �or �cause �to �be �delivered �to �the �Buyer �a �certificate �representing
such �shares �that �is �free �from �all �restrictive �and �other �legends. �All �Draw �Down �Shares
shall �be �delivered �without �any �restrictive �legends. �The �Company �may �not �make �any
notation �on �its �records �or �give �instructions �to �any �transfer �agent �of �the �Company �that
enlarge �the �restrictions �on �transfer �set �forth �in �this �Section. ���Certificates �for �Securities
subject �to �legend �removal �hereunder �shall �be �transmitted �by �the �transfer �agent �of �the
Company �to �the �Buyer �by �crediting �the �account �of �the �Buyers �broker �(as �indicated �by
Buyer) with the Depository Trust Company system.
(d)
In addition to the Buyers other available remedies, the Company shall pay
to �the �Buyer, �in �cash, �as �partial �liquidated �damages �and �not �as �a �penalty, �for �each �$1,000
of �Draw �Down �Shares, �or �Shares �(based �on �the �Closing �Price �of �the �Common �Stock �on
the �date �such �Securities �are �submitted �to �the �Companys �transfer �agent) �delivered �for
removal �of �the �restrictive �legend �and �subject �to �Section �4.1(c), �$7.50 �per �Trading �Day
(increasing to $15 �per Trading Day 5 (five) Trading Days after such damages have begun
to �accrue) �for �each �Trading �Day �after �2nd �Trading �Day �following �the �Legend �Removal
Date �until �such �certificate �is �delivered �without �a �legend. �Nothing �herein �shall �limit �the
Buyers �right �to �pursue �actual �damages �for �the �Companys �failure �to �deliver �certificates
representing �any �Securities �as �required �by �the �Transaction �Documents, �and �the �Buyer
shall �have �the �right �to �pursue �all �remedies �available �to �it �at �law �or �in �equity �including,
without limitation, a decree of specific performance and/or injunctive relief.
(e)
Buyer �agrees �that �the �removal �of �the �restrictive �legend �from �certificates
representing �Securities �as �set �forth �in �this �Section �4.1 �is �predicated �upon �the �Companys
reliance ��that ��the ��Buyer ��will ��sell ��any ��Securities ��pursuant ��to ��either ��the ��registration
requirements ��of ��the ��Securities ��Act, ��including ��any ��applicable ��prospectus ��delivery
requirements, or an exemption therefrom.
4.2
Furnishing �of �Information. ��As �long �as �Buyer �owns �any �Securities, �the �Company
covenants �to �timely �file �(or �obtain �extensions �in �respect �thereof �and �file �within �the �applicable
grace period) all reports required to be filed by the Company after the date hereof pursuant to the
Exchange �Act. ��As �long �as �the �Buyer �owns �any Securities, �if �the �Company is �not �required �to �file
reports �pursuant �to �the �Exchange �Act, �it �will �prepare and �furnish �to �the �Buyer �and �make publicly
available in accordance with Rule 144(c) such information as is required for the �Buyer to sell the
Securities under Rule 144. The Company further covenants that it will take such further action as
Buyer �may �reasonably �request, �to �the �extent �required �from �time �to �time �to �enable �the �Buyer �to
sell �such �Securities �without �registration �under �the �Securities �Act �within �the �requirements �of �the
exemption provided by Rule 144.
4.3
Integration. ��The �Company �shall �not �sell, �offer �for �sale �or �solicit �offers �to �buy �or
otherwise �negotiate �in �respect �of �any security (as �defined �in �Section �2 �of �the �Securities �Act) �that
would �be �integrated �with �the �offer �or �sale �of �the �Securities �in �a �manner �that �would �require �the
registration �under �the �Securities �Act �of �the �sale �of �the �Securities �to �the �Buyer �or �that �would �be
21
integrated �with �the �offer �or �sale �of �the �Securities �for �purposes �of �the �rules �and �regulations �of �any
Trading Market such that �it would require shareholder approval prior to the �closing of such other
transaction ��unless ��shareholder ��approval ��is ��obtained ��before ��the ��closing ��of ��such ��subsequent
transaction.
4.4
Securities �Laws �Disclosure; �Publicity. ��The �Company �shall, �by �5:30 �p.m. �Eastern
time on the fourth Trading Day immediately following the date hereof, issue a Current Report on
Form 8-K, disclosing the material terms of the transactions contemplated hereby, and shall attach
the �Transaction �Documents �thereto. ��The �Company �and �the �Buyer �shall �consult �with �each �other
in �issuing �any �other �press �releases �with �respect �to �the �transactions �contemplated �hereby, �and
neither �the �Company �nor �the �Buyer �shall �issue �any �such �press �release �or �otherwise �make �any
such �public �statement �without �the �prior �consent �of �the �Company, �with �respect �to �any �press
release �of �the �Buyer, �or �without �the �prior �consent �of �the �Buyer, �with �respect �to �any press �release
of �the �Company, �which �consent �shall �not �unreasonably �be �withheld �or �delayed, �except �if �such
disclosure is required by law, in which �case the disclosing party shall promptly provide �the other
party with prior notice of such public statement or communication.
4.5
Shareholder Rights �Plan. ��No �claim �will �be made or �enforced �by the �Company �or,
with �the �consent �of �the �Company, �any �other �Person, �that �the �Buyer �is �an �Acquiring �Person
under any control share acquisition, business combination, poison pill (including any distribution
under �a �rights �agreement) �or �similar �anti-takeover �plan �or �arrangement �in �effect �or �hereafter
adopted by the Company, or that the Buyer could be deemed to trigger the provisions of any such
plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under
any other agreement between the Company and the Buyer.
4.6
Non-Public Information. ��Except with respect to the material terms and conditions
of �the �transactions �contemplated �by �the �Transaction �Documents, �the �Company �covenants �and
agrees that neither it nor any other Person acting on its behalf will provide the Buyer or its agents
or �counsel �with �any �information �that �the �Company �believes �constitutes �material �non-public
information, unless prior thereto the Buyer shall have executed a written agreement regarding the
confidentiality �and �use �of �such �information. ��The �Company �understands �and �confirms �that �the
Buyer �shall �be �relying �on �the �foregoing �representations �in �effecting �transactions �in �securities �of
the Company.
4.7
Indemnification �of �Buyer. �����Subject �to �the �provisions �of �this �Section �4.7, �the
Company �will �indemnify �and �hold �the �Buyer �and �its �directors, �officers, �shareholders, �members,
partners, �employees �and �agents �(and �any �other �Persons �with �a �functionally �equivalent �role �of �a
Person �holding �such �titles �notwithstanding �a �lack �of �such �title �or �any �other �title), �each �Person
who controls the Buyer (within the meaning of Section 15 of the Securities Act and Section 20 of
the ��Exchange ��Act), ��and ��the ��directors, ��officers, ��shareholders, ��agents, ��members, ��partners ��or
employees �(and �any �other �Persons �with �a �functionally �equivalent �role �of �a �Person �holding �such
titles �notwithstanding �a �lack �of �such �title �or �any �other �title) �of �such �controlling �persons �(each, �a
Buyer �Party) �harmless �from �any �and �all �losses, �liabilities, �obligations, �claims, �contingencies,
damages, �costs �and �expenses, �including �all �judgments, �amounts �paid �in �settlements, �court �costs
and �reasonable �attorneys �fees �and �costs �of �investigation �that �any �the �Buyer �Party �may �suffer �or
incur �as �a �result �of �or �relating �to �(a) �any �breach �of �any �of �the �representations, �warranties,
covenants �or �agreements �made �by �the �Company �in �this �Agreement �or �in �the �other �Transaction
22
Documents �or �(b) �any �action �instituted �against ��the �Buyer, �or �any �of �its �Affiliates, �by �any
stockholder �of �the �Company �who �is �not �an �Affiliate �of �the �Buyer, �with �respect �to �any �of �the
transactions �contemplated �by �the �Transaction �Documents �(unless �such �action �is �based �upon �a
breach �of �the �Buyers �representations, �warranties �or �covenants �under �the �Transaction �Documents
or �any �agreements �or �understandings �the �Buyer �may �have �with �any �such �stockholder �or �any
violations �by �the �Buyer �of �state �or �federal �securities �laws �or �any �conduct �by �the �Buyer �which
constitutes �fraud, �gross �negligence, �willful �misconduct �or �malfeasance). ��If �any �action �shall �be
brought �against �any �Buyer �Party �in �respect �of �which �indemnity �may �be �sought �pursuant �to �this
Agreement, �the �Buyer �Party �shall �promptly �notify �the �Company �in �writing, �and �the �Company
shall �have �the �right �to �assume �the �defense �thereof �with �counsel �of �its �own �choosing �reasonably
acceptable �to �the �Buyer �Party. ��Any �Buyer �Party �shall �have �the �right �to �employ separate �counsel
in �any �such �action �and �participate �in �the �defense �thereof, �but �the �fees �and �expenses �of �such
counsel �shall �be �at �the �expense �of �the �Buyer �Party �except �to �the �extent �that �(i) �the �employment
thereof �has �been �specifically �authorized �by �the �Company �in �writing, �(ii) �the �Company �has �failed
after �a �reasonable �period �of �time �to �assume �such �defense �and �to �employ �counsel �or �(iii) �in �such
action �there �is, �in �the �reasonable �opinion �of �such �separate �counsel, �a �material �conflict �on �any
material issue between the position of the Company and the position of the Buyer Party, in which
case �the �Company shall �be �responsible �for the �reasonable �fees �and �expenses �of �no �more than one
such separate counsel. ��The Company will not be liable to any Buyer Party under this Agreement
(i) �for �any �settlement �by �the �Buyer �Party �effected �without �the �Companys �prior �written �consent,
which �shall �not �be �unreasonably �withheld �or �delayed; �or �(ii) �to �the �extent, �but �only �to �the �extent
that �a �loss, �claim, �damage �or �liability �is �attributable �to �any �Buyer �Partys �breach �of �any �of �the
representations, warranties, covenants or agreements made by the �Buyer Party in this Agreement
or in the other Transaction Documents.
4.8
Reservation �of �Common �Stock. �As �of �the �date �hereof, �the �Company �has �reserved
and �the �Company �shall �continue �to �reserve �and �keep �available �at �all �times, �free �of �preemptive
rights, a sufficient number of �shares of Common �Stock for the purpose of �enabling the Company
to issue Draw Down Shares and Shares pursuant to this Agreement.
4.9
Listing �of �Common �Stock. ���The �Company �hereby �agrees �to �use �best �efforts �to
maintain �the �listing �of �the �Common �Stock �on �a �Trading �Market, �and �as �soon �as �reasonably
practicable �following �the �Initial �Closing �(but �not �later �than �the �Effective �Date) �to �list �all �of �the
Draw �Down �Shares �and �the �Shares �on �such �Trading �Market. �The �Company �further �agrees, �if �the
Company applies to have the Common Stock traded on any other Trading Market, it will include
in �such �application �all �of �the �Draw �Down �Shares �and �the �Shares �and �will �take �such �other �action
as �is �necessary �to �cause �all �of �the �Draw �Down �Shares �and �the �Shares �to �be �listed �on �such �other
Trading Market as promptly as possible. ��The Company will take all action reasonably necessary
to �continue �the �listing and �trading of �its �Common Stock �on �a Trading Market �and �will �comply in
all �respects �with �the �Companys �reporting, �filing �and �other �obligations �under �the �bylaws �or �rules
of the Trading Market.
4.10 ����Short �Sales �and �Confidentiality �After �the �Date �Hereof. ���Buyer �covenants �that
neither �it �nor �any �Affiliate �acting �on �its �behalf �or �pursuant �to �any �understanding �with �it �will,
directly or indirectly, �execute any Net Short Sales (as defined below) from the time starting upon
receipt �of �a �Draw �Down �Notice �and �ending �upon �receipt �of �the �Draw �Down �Shares. ��Buyer
covenants �that �until �such �time �as �the �transactions �contemplated �by �this �Agreement �are �publicly
23
disclosed ��by ��the ��Company ��as ��described ��in ��Section ��4.4, ��the ��Buyer ��will ��maintain ��the
confidentiality �of �all �disclosures �made �to �it �in �connection �with �this �transaction �(including �the
existence and terms of this transaction). ��For purposes of this Section 4.10, a Net Short Sale by
the �Buyer �shall �mean �a �sale �of �Common �Stock �by �such �Buyer �that �is �marked �as �a �short �sale �and
that is made at a time when there is no equivalent offsetting long position in Common Stock held
by such Buyer
4.11 ����Form �D; �Blue �Sky �Filings. ��The �Company �agrees �to �timely �file �a �Form �D �with
respect �to �the �Securities �as �required �under �Regulation �D �and �to �provide �a �copy thereof, �promptly
upon request of the Buyer. The Company shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to
the �Buyer �at �the �Closing �under �applicable �securities �or �Blue �Sky �laws �of �the �states �of �the
United States, and shall provide evidence of such actions promptly upon request of Buyer.
4.12 ����Buyer's ��Ownership ��Limitation. ����Anything ��in ��this ��Agreement ��to ��the ��contrary
notwithstanding, �the �Company �may �not �make �a �Draw �Down �to �the �extent �that �such �Draw �Down
exceeds �4.999% �of �the �then �issued �and �outstanding �shares �of �Common �Stock �as �reported �in �the
Companys most recent periodic report filed with the Commission.
4.13 ����Accuracy of Registration Statement. ��On �each �Settlement �Date, �the �Registration
Statement �and �the �prospectus �therein �(including �any �prospectus �supplement) �shall �not �contain
any �untrue �statement �of �a �material �fact �or �omit �to �state �any �material �fact �required �to �be �stated
therein �or �necessary �in �order �to �make �the �statements �therein �not �misleading �in �light �of �the
circumstances �under �which �they �were �made; �and �on �such �Settlement �Date �the �Registration
Statement �and �the �prospectus �therein �will �not �include �any �untrue �statement �of �a �material �fact �or
omit �to �state �a �material �fact �necessary in �order �to �make �the �statements �therein, �in �the �light �of �the
circumstances �under �which �they �were �made, �not �misleading; �provided, �however, �the �Company
makes �no �representations �or �warranties �as �to �the �information �contained �in �or �omitted �from �the
Registration �Statement �and �the �prospectus �therein �in �reliance �upon �and �in �conformity �with �the
information �furnished �in �writing �to �the �Company �by �the �Buyer �specifically �for �inclusion �in �the
Registration Statement and the prospectus therein.
4.14 ����Notice of Certain Events Affecting Registration; Suspension of Right to Request a
Draw �Down. ��The �Company �will �promptly �notify �the �Buyer �in �writing �upon �the �occurrence �of
any �of �the �events �set �forth �in �Section �3(d) �of �the �Registration �Rights �Agreement. ��The �Company
shall �not �deliver �to �the �Buyer �any �Draw �Down �Notice �during �the �continuation �of �any �of �the
foregoing ��events. ����The ��Company ��shall ��promptly ��make ��available ��to ��the ��Buyer ��any ��such
supplements ��or ��amendments ��to ��the ��related ��prospectus, ��at ��which ��time, ��provided ��that ��the
registration �statement �and �any �supplements �and �amendments �thereto �are �then �effective, �the
Company may recommence the delivery of Draw Down Notices.
4.15 ����Mandatory �Reverse �Stock �Split. ���Should �at �any �time �during �the �Commitment
Period �there �shall �be �no �bid �for the �Company's �Common �Stock �on �the �Trading Market �where the
Company's �shares �of �Common �Stock �are listed �or �traded �for 3 �consecutive �trading days, �then �the
Company �shall �immediately �have �its �Common �Stock �undergo �a �reverse �stock �split �at �a �ratio �of
100-to-1 �(each �100 �shares �of �Common �Stock �shall �be �combined �to �become �1 �share �of �Common
Stock).
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4.16 ����Subsequent Equity Sales.
(a)
From �the �date �hereof �until �the �Effective �Date, �neither �the �Company �nor
any Subsidiary shall issue shares of Common Stock or Common Stock Equivalents.
(b)
Until �the �earlier �of �(i) �the �expiration �of �the �Commitment �Period �and �(ii)
the �date �that �the �Company �has �drawn �down �during �the �term �of �this �Agreement �the �entire
Commitment �Amount �hereunder, �the �Company �shall �be �prohibited �from �effecting �or
entering into �an �agreement �to �effect �any �subsequent �financing involving a �Variable �Rate
Transaction. ��The �term �Variable �Rate �Transaction �shall �mean �a �transaction �in �which
the �Company �issues �or �sells �(i) �any �debt �or �equity �securities �that �are �convertible �into,
exchangeable �or �exercisable �for, �or �include �the �right �to �receive �additional �shares �of
Common Stock either (A) at a conversion, exercise or �exchange rate or �other price that is
based �upon �and/or �varies �with �the �trading �prices �of �or �quotations �for �the �shares �of
Common �Stock �at �any �time �after �the �initial �issuance �of �such �debt �or �equity �securities, �or
(B) �with �a �conversion, �exercise �or �exchange �price �that �is �subject �to �being �reset �at �some
future date after the initial issuance of such debt or equity security or upon the occurrence
of �specified �or �contingent �events �directly �or �indirectly �related �to �the �business �of �the
Company �or ��the ��market ��for ��the ��Common ��Stock ��or ��(ii) ��enters ��into ��any ��agreement,
including, �but �not �limited �to, �an �equity �line �of �credit, �whereby �the �Company �may �sell
securities �at �a �future �determined �price. �The �Buyer �shall �be �entitled �to �obtain �injunctive
relief �against �the �Company �to �preclude �any �such �issuance, �which �remedy �shall �be �in
addition to any right to collect damages.
(c)
Notwithstanding the foregoing, this Section 4.16 shall not apply in respect
of �an �Exempt �Issuance, �except �that �no �Variable �Rate �Transaction �shall �be �an �Exempt
Issuance.
ARTICLE V.
CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS
5.1
Conditions �Precedent �to �the �Obligation �of �the �Company �to �Sell �the �Draw �Down
Shares. ��The �obligation �hereunder �of �the �Company �to �proceed �to �close �this �Agreement �and �to
issue �and �sell �the �Draw �Down �Shares �to �the �Buyer �is �subject �to �the �satisfaction �or �waiver, �at �or
before �the �Initial �Closing, �and �as �of �each �Settlement �Date �of �each �of �the �conditions �set �forth
below. �These conditions are for the Company's sole benefit and may be waived by the Company
in writing at any time in its sole discretion.
(a)
Accuracy of Buyers Representations and Warranties. �The representations
and warranties of the �Buyer shall be true and correct in all material respects as of the date
when �made �and �as �of �the �Initial �Closing �and �as �of �each �Settlement �Date �as �though �made
at �that �time �(except �for �representations �and �warranties �that �speak �as �of �a �particular �date,
which shall be true and correct in all material respects as of such dates).
(b)
Performance by the �Buyer. ��The �Buyer shall have performed, satisfied �and
complied �in �all �material �respects �with �all �covenants, �agreements �and �conditions �required
25
by this Agreement to be �performed, �satisfied or complied with by the �Buyer at or prior to
the Initial Closing and as of each Settlement Date.
(c)
No �Injunction. ��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.
(d)
No ��Proceedings ��or ��Litigation. ����No ��material ��Action ��shall ��have ��been
commenced �against �the �Buyer �or �the �Company �or �any �subsidiary, �or �any �of �the �officers,
directors �or �affiliates �of �the �Company �or �any �subsidiary, �seeking �to �restrain, �prevent �or
change ��the ��transactions ��contemplated ��by ��this ��Agreement, ��or ��seeking ��damages ��in
connection with such transactions.
(e)
Initial Closing Deliveries. �The delivery by the Buyer of the items set forth
in Section 2.2(b) of this Agreement.
5.2
Conditions �Precedent �to �the �Obligation �of �the �Buyer �to �Close. ���The �obligation
hereunder �of �the �Buyer �to �perform �its �obligations �under �this �Agreement �and �to �purchase �the
Draw �Down �Shares �is �subject �to �the �satisfaction �or �waiver, �at �or �before �the �Initial �Closing, �of
each of the conditions set forth below. �These conditions are for the Buyers sole benefit and may
be waived by the Buyer in writing at any time in its sole discretion.
(a)
Accuracy �of �the �Company's �Representations �and �Warranties. ��Each �of �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 �Initial �Closing �as �though �made �at �that
time �(except �for �representations �and �warranties �that �speak �as �of �a �particular �date, �which
shall be true and correct in all material respects as of such date).
(b)
Performance �by �the �Company. ����The �Company �shall �have �performed,
satisfied �and �complied �in �all �material �respects �with �all �material �covenants, �agreements
and conditions required by this Agreement to �be performed, satisfied or complied with by
the Company at or prior to the Initial Closing.
(c)
No Injunction. �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.
(d)
No ��Proceedings ��or ��Litigation. ����No ��material ��Action ��shall ��have ��been
commenced, �against �the �Buyer �or �the �Company �or �any �subsidiary, �or �any �of �the �officers,
directors �or �affiliates �of �the �Company �or �any �subsidiary �seeking �to �restrain, �prevent �or
change ��the ��transactions ��contemplated ��by ��this ��Agreement, ��or ��seeking ��damages ��in
connection with such transactions.
(e)
Par �Value. �Par �value �of �Company's �Common �Stock �shall �have �been �set �at
$0.00001.
26
(f)
Initial �Closing �Deliveries. ��The �delivery �by �the �Company �of �the �items �set
forth in Section 2.2(a) of this Agreement.
5.3
Conditions �Precedent �to �the �Obligation �of �the �Buyer �to �Accept �a �Draw �Down �and
Purchase the Draw Down Shares. �The obligation hereunder of the Buyer to accept a Draw Down
request �and �to �acquire �and �pay �for �the �Draw �Down �Shares �is �subject �to �the �satisfaction �at �or
before each Settlement Date, of each of the conditions set forth below.
(a)
Satisfaction �of �Conditions �to �Initial �Closing. ���The �Company �shall �have
satisfied �at �the �Initial �Closing, �or �the �Buyer �shall �have �waived �at �the �Initial �Closing, �the
conditions set forth in Section 5.2.
(b)
Issuance ��of ��Additional ��Shares. ����The ��Company ��shall ��have ��issued ��the
Additional Shares in accordance with Section 2.3.
(c)
No ��Suspension. ����Trading �in ��the �Common ��Stock ��shall ��not ��have ��been
suspended �by �the �Commission �or �the �Trading �Market �(except �for �any �suspension �of
trading ��of ��limited ��duration ��agreed ��to ��by ��the ��Company, ��which ��suspension ��shall ��be
terminated �prior �to �the �delivery �of �each �Draw �Down �Notice), �and, �at �any �time �prior �to
such �Draw �Down �Notice, �trading �in �securities �generally �as �reported �on �the �Trading
Market �shall �not �have �been �suspended �or �limited, �or �minimum �prices �shall �not �have �been
established �on �securities �whose �trades �are �reported �on �the �Trading �Market �unless �the
general �suspension �or �limitation �shall �have �been �terminated �prior �to �the �delivery �of �such
Draw Down Notice.
(d)
Material ���Adverse ���Effect.
No ���Material ���Adverse ���Effect ���and ���no
Consolidation �Event �where �the �successor �entity �has �not �agreed �to �deliver �to �the �Buyer
such �shares �of �stock �and/or �securities �as �the �Buyer �is �entitled �to �receive �pursuant �to �this
Agreement.
(e)
Opinion �of �Counsel. ��The �Buyer �shall �have �received �a �bring-down �letter
from �the �Companys �counsel, �confirming �that �there �is �no �change �from �the �counsels
previously �delivered �opinion, �or �else �specifying �with �particularity �the �reason �for �any
change.
(f)
Minimum Investment Amount. �The Investment Amount for the applicable
Draw �Down �Notice, �as �permitted �pursuant �to �Section �6.1(c), �shall �exceed �$25,000. ��For
purposes �of �clarification, �if �the �maximum �Investment �Amount �as �determined �pursuant �to
Section 6.1(d) is less than $25,000, then the Company shall be precluded from exercising
a Draw Down at such time.
(g)
Equity �Conditions. ���During �the �Draw �Down �Pricing �Period �through �the
Settlement Date, all of the Equity Conditions have been met.
(h)
Prospectus �Supplement. ��On �the �Trading �Day that �the �Company delivers �a
Draw �Down �Notice, �the �Company �shall �have �filed �with �the �Commission �a �prospectus
supplement �pursuant �to �Rule �424 �under �the �Securities �Act �setting �forth �the �terms �of �the
Draw Down.
27
(i)
Involuntary �Suspension �During �Draw �Down �Pricing �Period. ��During �any
Trading �Day during �the �Draw �Down �Pricing �Period �trading �of �the �Common �Stock �on �the
Trading �Market �shall �not �be �suspended �for �more �than �3 �hours, �in �the �aggregate, �or �if �any
Trading �Day �during �the �Draw �Down �Pricing �Period �is �shortened �because �of �a �public
holiday.
(j)
Voluntary �Suspension �During �Draw �Down �Pricing �Period. ���During �any
Trading Day during the �Draw �Down �Pricing Period �sales �of �Draw �Down �Shares �pursuant
to �the �Registration �Statement �shall �not �be �suspended �by �the �Company �for �more �than �3
hours, in the aggregate.
(k)
Directors ��and ��Officers ��Insurance. ����The �Company �shall ��have �obtained
directors ��and ��officers ��insurance ��from ��a ��reputable ��insurance ��provider ��with ��liability
coverage at least equal to the Commitment Amount.
(l)
Par �Value �of �Common �Stock. ��On �the �day �on �which �Draw �Down �Shares
shall �be �issued �pursuant �to �a �Draw �Down �Notice, �the �par �value �of �the �Common �Stock
shall not be higher than the Purchase Price.
(m)
Mandatory �Reverse �Stock �Split. ���The �Company �shall �have �satisfied �the
requirement �set �forth �in �Section �4.15. �For �clarity, �should �the �Company �be �required �to
have �its �Common �Stock �undergo �a �reverse �stock �split �in �accordance �with �Section �4.15,
from �the �moment �that �requirement �becomes �effective �and �until �the �mandatory �reverse
stock split is completed the Company shall be precluded from exercising a Draw Down.
ARTICLE VI.
DRAW DOWN TERMS
6.1
Draw �Down �Terms. ��Subject �to �the �satisfaction �of �the �conditions �set �forth �in �this
Agreement, the parties agree as follows:
(a)
The �Company �may, �in �its �sole �discretion, �issue �and �exercise �draw �downs
against the Commitment Amount (each a �Draw �Down) during the Commitment Period,
which �Draw �Downs �the �Buyer �shall �be �obligated �to �accept, �subject �to �the �terms �and
conditions �under �this �Agreement. �Before �the �Company �shall �exercise �a �Draw �Down, �the
Company �shall �have �caused �a �sufficient �number �of �shares �of �Common �Stock �to �be
registered ��with ��the ��Commission ��to ��cover ��the ��Draw ��Down ��Shares ��to ��be ��issued ��in
connection with such Draw Down (using a good faith estimate based on the recent market
price �of �the �Common �Stock), �and, �on �the �Trading �Day �that �such �request �is �made, �the
Company shall have filed with the Commission a prospectus supplement pursuant to Rule
424 under the Securities Act setting forth the terms of the Draw Down.
(b)
The �Company �may �not �exercise �a �Draw �Down �until �the �applicable �Draw
Down Cushion has elapsed.
(c)
The �Company �must �inform �the �Buyer �by �delivering �a �Draw �Down �notice,
in �the �form �of �Exhibit �C �attached �hereto �(the �Draw �Down �Notice), �via �facsimile
28
transmission, �in �accordance �with �Section �8.3, �as �to �the �dollar �amount �of �the �Draw �Down
(the Investment Amount) the Company wishes to exercise.
(d)
The �maximum �Investment �Amount �as �to �each �Draw �Down �shall �be �equal
to �the �Purchase �Price �multiplied �by �the �lesser �of: �(i) �4.99% �of �the �outstanding �shares �of
Common �Stock �as �of �closing �of �the �Trading �Day �immediately �preceding �the �applicable
Commencement �Date �and �(ii) �the �average �daily trading volume �of �the �Common �Stock �on
the �Trading �Market �during �the �Draw �Down �Pricing �Period �multiplied �by �three �(3). ��The
maximum Investment Amount shall not exceed $500,000.
(e)
The �number �of �Draw �Down �Shares �to �be �issued �on �a �Settlement �Date �(as
defined �in �6.1(f)) �shall �equal �the �Investment �Amount �applicable �to �such �Settlement �Date
divided �by �the �lesser �of �the �Purchase �Price �as �calculated �during �the �applicable �Draw
Down �Pricing �Period �and, �if �the �applicable �Draw �Down �Shares �are �not �delivered �on �or
before ��the ��applicable ��Settlement ��Date, ��the ��Purchase ��Price ��as ��calculated ��during ��the
applicable �Draw �Down �Pricing �Period, �but �assuming �such �Draw �Down �Pricing �Period �is
extended �through �the �Trading �Day �immediately �prior �to �the �date �the �applicable �Draw
Down Shares are actually delivered to the Buyer.
(f)
On the Trading Day immediately following the last day of the �Draw Down
Pricing �Period, �the �Company shall �deliver �to �the �Buyer �and �the �Buyer �shall �acknowledge
to �the �Company �a �settlement �statement �(the �Settlement �Statement) �setting �forth �the
calculation �of �the �Purchase �Price �and �the �Investment �Amount �as �to �the �applicable �Draw
Down �Pricing �Period. ��The �issuance �of �the �Draw �Down �Shares �as �to �a �Draw �Down �and
the �payment �of �the �Investment �Amount �as �to �a �Draw �Down �shall �occur �within �one �(1)
Trading �Day �of �the �end �of �the �applicable �Draw �Down �Pricing �Period �(the �Settlement
Date).
(g)
On �or �before �the �Settlement �Date, �the �applicable �Draw �Down �Shares �shall
be �delivered �to �the �Depository �Trust �Company �(DTC) �account �of �the �Buyer, �or �its
designees, �as �designated �by �the �Buyer �in �the �Settlement �Statement, �via �DTCs �Deposit
Withdrawal �Agent �Commission �system �(DWAC). ��Upon �the �Company �electronically
delivering such Draw Down Shares to the DTC account of the Buyer, or its designees, via
DWAC �by �9:30 �a.m. �ET, �the �Buyer �shall, �on �the �same �day �(or �the �next �Business �Day �if
such ��day ��is ��not ��a ��Business ��Day) ��wire ��transfer ��immediately ��available ��funds ��to ��the
Companys bank account, as designated by the Company in the Settlement Statement, for
the �amount �of �the �Investment �Amount �of �such �Draw �Down �Shares. �Upon �the �Company
electronically delivering �the �applicable �Draw �Down �Shares �to �the �Buyer �or �its �designees
DTC �account �via �DWAC �after �9:30 �a.m. �ET, �the �Buyer �shall �wire �transfer �next �day
available �funds �to �the �Companys �designated �account �on �such �day �(or �the �next �Business
Day if �such day is �not a �Business Day) �for the �amount of the �Investment �Amount of such
Draw Down Shares. ��In case the Company shall not deliver the Draw Down Shares to the
Buyer �through �DWAC, �and �instead �issue �a �new �stock �certificate, �such �certificate �shall �be
shipped �by �over-night �courier �to �an �address �indicated �by �the �Buyer �on �the �Settlement
Statement. ��Upon �receipt �of �the �stock �certificate �evidencing �the �Draw �Down �Shares �by
the �Buyer �or �its �designees �before �9:30 �a.m. �ET, �the �Buyer �shall �wire �transfer �same �day
available �funds �to �the �Companys �designated �account �on �such �day �(or �the �next �Business
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Day if �such day is �not a �Business Day) for the �amount of the �Investment �Amount of such
Draw �Down �Shares. ��Should �receipt �of �the �stock �certificate �evidencing �the �Draw �Down
Shares �occur �after �9:30 �a.m. �ET, �the �Buyer �shall �wire transfer �next �day available �funds �to
the �Companys �designated �account �on �such �day �(or �the �next �Business �Day �if �such �day �is
not �a �Business �Day) �for �the �amount �of �the �Investment �Amount �of �such �Draw �Down
Shares.
(h)
The �Company �understands �that �a �delay �in �the �delivery �of �the �Draw �Down
Shares ��into ��the ��Buyers ��DTC ��account ��beyond ��the ��Settlement ��Date ��could ��result ��in
economic �loss �to �the �Buyer. ���In �addition �to �the �Buyers �other �available �remedies, �the
Company �shall �pay �to �the �Buyer, �in �cash, �as �partial �liquidated �damages �and �not �as �a
penalty, �for �each �$1,000 �of �Draw �Down �Shares �(based �on �the �Closing �Price �of �the
Common �Stock �on �the �applicable �Settlement �Date) �required �to �be �delivered �on �the
Settlement �Date, �$7.50 �per �Trading �Day �(increasing �to �$15 �per �Trading �Day �five �(5)
Trading �Days �after �such �damages �have �begun �to �accrue) �for �each �Trading �Day �after �the
Settlement �Date �until �such �Draw �Down �Shares �are �delivered �pursuant �to �this �Article �VI.
Nothing �herein �shall �limit �the �Buyers �right �to �pursue �actual �damages �for �the �Companys
failure �to �deliver �certificates �representing �any �Securities �as �required �by �the �Transaction
Documents, and the Buyer shall have the right to pursue all remedies available to it at law
or ��in ��equity ��including, ��without ��limitation, ��a ��decree ��of ��specific ��performance ��and/or
injunctive relief.
ARTICLE VII.
TERMINATION
7.1
Term. �The term of this Agreement shall begin on the date hereof and shall end �on
the �earlier �of �(i) �24 �months �from �the �Effective �Date �or �as �otherwise �set �forth �in �Section �7.2 �and
(ii) 30 months from the date hereof.
7.2
Other �Termination. ��This �Agreement �shall �terminate �if �(i) �the �Common �Stock �is
de-listed �from �the �Trading �Market �unless �such �de-listing �is �in �connection �with �a �subsequent
listing �on �another �Trading �Market, �(ii) �there �shall �occur �any �stop �order �or �suspension �of �the
effectiveness of the Registration Statement during the Commitment Period for an aggregate of 30
Trading Days, other than due to the acts of the �Buyer, (iii) the Company files for protection from
creditors �under �any �applicable �law �or �(iv) �the �initial �Registration �Statement �is �not �declared
effective by the Commission on the 12-month anniversary of the date hereof.
ARTICLE VIII.
MISCELLANEOUS
8.1
Fees �and �Expenses. ����Except �as �expressly set �forth �in �the �Transaction �Documents
to �the �contrary, �each �party �shall �pay �the �fees �and �expenses �of �its �advisers, �counsel, �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. ��The �Company
shall pay all transfer agent fees, stamp taxes and �other taxes and duties �levied in connection with
the delivery of any Securities to the Buyer.
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8.2
Entire �Agreement. ���The �Transaction �Documents, �together �with �the �exhibits �and
schedules �thereto, �contain �the �entire �understanding �of �the �parties �with �respect �to �the �subject
matter �hereof �and �supersede �all �prior �agreements �and �understandings, �oral �or �written, �with
respect �to �such �matters, �which �the �parties �acknowledge �have �been �merged �into �such �documents,
exhibits and schedules.
8.3
Notices. ��Any �and �all �notices �or �other �communications �or �deliveries �required �or
permitted �to �be �provided �hereunder �shall �be �in �writing �and �shall �be �deemed �given �and �effective
on �the �earliest �of �(a) �the �date �of �transmission, �if �such �notice �or �communication �is �delivered �via
facsimile �at �the �facsimile �number �set �forth �on �the �signature �pages �attached �hereto �prior �to �5:30
p.m. �(New �York �City �time) �on �a �Trading �Day �evidenced �by �a �transmission �confirmation, �(b) �the
next Trading Day after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached �hereto on a day that is
not �a �Trading �Day �or �later �than �5:30 �p.m. �(New �York �City �time) �on �any �Trading �Day �evidenced
by a �transmission �confirmation, �(c) �the �2nd �Trading �Day �following �the �date �of �mailing, �if �sent �by
U.S. �nationally �recognized �overnight �courier �service, �or �(d) �upon �actual �receipt �by �the �party �to
whom �such �notice �is �required �to �be �given. ��The �address �for �such �notices �and �communications
shall be as set forth on the signature pages attached hereto.
8.4
Amendments; �Waivers. ����No �provision �of �this �Agreement �may �be �waived �or
amended �except �in �a �written �instrument �signed, �in �the �case �of �an �amendment, �by �the �Company
and �the �Buyer �or, �in �the �case �of �a �waiver, �by �the �party �against �whom �enforcement �of �any �such
waived provision is sought. ��No waiver of any default with respect to any provision, condition or
requirement �of �this �Agreement �shall �be �deemed �to �be �a �continuing �waiver �in �the �future �or �a
waiver �of �any �subsequent �default �or �a �waiver �of �any �other �provision, �condition �or �requirement
hereof, �nor �shall �any �delay �or �omission �of �any �party �to �exercise �any �right �hereunder �in �any
manner impair the exercise of any such right.
8.5
Headings. ��The �headings �herein �are �for �convenience �only, �do �not �constitute �a �part
of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
8.6
Successors �and �Assigns. ��This �Agreement �shall �be �binding �upon �and �inure �to �the
benefit of the parties and their successors. �Neither party may assign this Agreement or any rights
or obligations hereunder (other than by merger).
8.7
No �Third-Party �Beneficiaries. ��This �Agreement �is �intended �for �the �benefit �of �the
parties �hereto �and �their �respective �successors �and �permitted �assigns �and �is �not �for �the �benefit �of,
nor �may �any �provision �hereof �be �enforced �by, �any �other �Person, �except �as �otherwise �set �forth �in
Section 4.7.
8.8
Governing �Law. ��All �questions �concerning the �construction, �validity, �enforcement
and ��interpretation ��of ��the ��Transaction ��Documents ��shall ��be ��governed ��by ��and ��construed ��and
enforced �in �accordance �with �the �internal �laws �of �the �State �of �Illinois, �without �regard �to �the
principles of conflicts of law thereof. ��Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by this Agreement and
any �other �Transaction �Documents �(whether �brought �against �a �party �hereto �or �its �respective
affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively
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in �the �state �and �federal �courts �sitting �in �Cook �County, �Illinois. ��Each �party �hereby �irrevocably
submits �to �the �exclusive �jurisdiction �of �the �state �and �federal �courts �sitting �in �Cook �County,
Illinois �for �the �adjudication �of �any �dispute �hereunder �or �in �connection �herewith �or �with �any
transaction �contemplated �hereby �or �discussed �herein �(including �with �respect �to �the �enforcement
of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to �assert in
any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any
such �court, �that �such �suit, �action �or �proceeding �is �improper �or �is �an �inconvenient �venue �for �such
proceeding. ��Each �party �hereby �irrevocably �waives �personal �service �of �process �and �consents �to
process �being �served �in �any �such �suit, �action �or �proceeding �by �mailing �a �copy �thereof �via
registered �or �certified �mail �or �overnight �delivery �(with �evidence �of �delivery) �to �such �party �at �the
address �in �effect �for �notices �to �it �under �this �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. ��The �parties �hereby �waive �all �rights �to �a �trial �by �jury. ��If �either �party �shall �commence �an
action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing
party �in �such �action �or �proceeding �shall �be �reimbursed �by �the �other �party �for �its �reasonable
attorneys �fees �and �other �costs �and �expenses �incurred �with �the �investigation, �preparation �and
prosecution of such action or proceeding.
8.9
Survival. ��The �representations �and �warranties �contained �herein �shall �survive �the
Closing and the delivery of the Draw Down Shares and the Shares.
8.10 ����Execution. ��This �Agreement �may �be �executed �in �two �or �more �counterparts, �all �of
which �when �taken �together �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, �it
being �understood �that �both �parties �need �not �sign �the �same �counterpart. ���In �the �event �that �any
signature is delivered by facsimile transmission �or by e-mail delivery of a .pdf format data file,
such �signature �shall �create �a �valid �and �binding �obligation �of �the �party �executing �(or �on �whose
behalf �such �signature �is �executed) �with �the �same �force �and �effect �as �if �such �facsimile �or �.pdf
signature page were an original thereof.
8.11 ����Severability. ��If �any �term, �provision, �covenant �or �restriction �of �this �Agreement �is
held �by �a �court �of �competent �jurisdiction �to �be �invalid, �illegal, �void �or �unenforceable, �the
remainder of the terms, provisions, covenants and restrictions set forth herein shall �remain in full
force �and �effect �and �shall �in �no �way �be �affected, �impaired �or �invalidated, �and �the �parties �hereto
shall �use �their �commercially �reasonable �efforts �to �find �and �employ �an �alternative �means �to
achieve �the �same �or �substantially �the �same �result �as �that �contemplated �by �such �term, �provision,
covenant �or �restriction. �It �is �hereby �stipulated �and �declared �to �be �the �intention �of �the �parties �that
they �would �have �executed �the �remaining �terms, �provisions, �covenants �and �restrictions �without
including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
8.12 ����Replacement ��of ��Securities. ����If ��any ��certificate ��or ��instrument ��evidencing ��any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in
exchange �and �substitution �for and �upon �cancellation �thereof �(in �the �case �of �mutilation), �or �in lieu
of �and �substitution �therefor, �a �new �certificate �or �instrument, �but �only �upon �receipt �of �evidence
reasonably �satisfactory �to �the �Company �of �such �loss, �theft �or �destruction. ��The �applicant �for �a
new �certificate �or �instrument �under �such �circumstances �shall �also �pay �any �reasonable �third-party
32
costs ��(including ��customary ��indemnity) ��associated ��with ��the ��issuance ��of ��such ��replacement
Securities.
8.13 ����Remedies. ��In �addition �to �being �entitled �to �exercise �all �rights �provided �herein �or
granted �by �law, �including �recovery �of �damages, �each �of �the �Buyer �and �the �Company �will �be
entitled �to �specific �performance �under �the �Transaction �Documents. ����The �parties �agree �that
monetary �damages �may �not �be �adequate �compensation �for �any �loss �incurred �by �reason �of �any
breach �of �obligations �contained �in �the �Transaction �Documents �and �hereby �agrees �to �waive �and
not �to �assert �in �any �action �for �specific �performance �of �any �such �obligation �the �defense �that �a
remedy at law would be adequate.
8.14 ����Liquidated �Damages. ���The �Companys �obligations �to �pay �any �partial �liquidated
damages �or �other �amounts �owing under �the Transaction �Documents �is �a continuing obligation �of
the �Company �and �shall �not �terminate �until �all �unpaid �partial �liquidated �damages �and �other
amounts �have �been �paid �notwithstanding �the �fact �that �the �instrument �or �security �pursuant �to
which �such �partial �liquidated �damages �or �other �amounts �are �due �and �payable �shall �have �been
canceled.
8.15 ����Construction. �The �parties �agree �that �each �of �them �and/or �their �respective �counsel
has �reviewed �and �had �an �opportunity �to �revise �the �Transaction �Documents �and, �therefore, �the
normal �rule �of �construction �to �the �effect �that �any �ambiguities �are �to �be �resolved �against �the
drafting �party �shall �not �be �employed �in �the �interpretation �of �the �Transaction �Documents �or �any
amendments hereto.
(Signature Pages Follow)
33
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement �to �be �duly �executed �by �their �respective �authorized �signatories �as �of �the �date �first
indicated above.
MINERALRITE CORPORATION
Address for Notice:
By:__________________________________________
Fax No.:
E-mail:
Name:
Attn:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR BUYER FOLLOWS]
34
[BUYER SIGNATURE PAGE TO GEIG SECURITIES PURCHASE AGREEMENT]
IN ��WITNESS ��WHEREOF, ��the ��undersigned ��have ��caused ��this ��Securities ��Purchase
Agreement �to �be �duly �executed �by �their �respective �authorized �signatories �as �of �the �date �first
indicated above.
Name of Buyer: River North Equity, Inc.
Signature of Authorized Signatory of Buyer: __________________________________
Name of Authorized Signatory: Edward M. Liceaga
Title of Authorized Signatory: President
Email Address of Buyer: [email protected]
Fax Number of Buyer:
Address for Notice of Buyer:
360 W. Hubbard St.
Unit 2801
Chicago, IL 60654
Address for Delivery of Securities for Buyer (if not same as above):
35
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
This �Registration �Rights �Agreement �(this �Agreement) �is �made �and �entered �into
as �of �January __, �2015, �among MineralRite Corporation, �a Nevada corporation �(the Company)
and River North Equity, Inc. (the Buyer).
This �Agreement �is �made �pursuant �to �the �Securities �Purchase �Agreement, �dated �as
of the date hereof between the Company and the Buyer (the Purchase Agreement).
The Company and Buyer hereby agree as follows:
1.
Definitions. ���Capitalized �terms �used �and �not �otherwise �defined �herein �that �are
defined �in �the �Purchase �Agreement �shall �have �the �meanings �given �such �terms �in �the �Purchase
Agreement. �As used in this Agreement, the following terms shall have the following meanings:
Advice shall have the meaning set forth in Section 6(d).
Effectiveness �Date �means, �with �respect �to �the �initial �Registration �Statement
required to be filed hereunder, the 120th calendar day following the date hereof.
Effectiveness Period shall have the meaning set forth in Section 2(a).
Filing �Date �means, �with �respect �to �the �initial �Registration �Statement �required
hereunder, the 45th calendar day following the date hereof.
Holder or "Holders" means the holder or holders, as the case may be, from time
to time of Registrable Securities. Holder may refer to Holders where appropriate.
Indemnified Party shall have the meaning set forth in Section 5(c).
Indemnifying Party shall have the meaning set forth in Section 5(c).
Losses shall have the meaning set forth in Section 5(a).
Prospectus ��means ��the ��prospectus ��included ��in ��a ��Registration ��Statement
(including, �without �limitation, �a �prospectus �that �includes �any �information �previously
omitted �from �a �prospectus �filed �as �part �of �an �effective �registration �statement �in �reliance
upon �Rule �430A �promulgated �under �the �Securities �Act), �as �amended �or �supplemented �by
any prospectus supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Registration Statement, and all other amendments and
supplements �to �the �Prospectus, �including �post-effective �amendments, �and �all �material
incorporated by reference or deemed to be incorporated by reference in such Prospectus.
Registrable �Securities �means �all �of �(i) �the �Draw �Down �Shares �issuable �as �per
the ��Securities ��Purchase ��Agreement, ��(ii) ��the ��Shares ��as ��per ��the ��Securities ��Purchase
1
Agreement, ���and �(iii) �any �shares �of �Common �Stock �issued �or �issuable �upon �any �stock
split, �dividend �or �other �distribution, �recapitalization �or �similar �event �with �respect �to �the
foregoing.
Registration �Statement �means �the �initial �Registration �Statement �required �to �be
filed �hereunder �and �any �additional �registration �statements �filed �pursuant �to �the �Securities
Purchase ��Agreement, ��including ��(in ��each ��case) ��the ��Prospectus, ��amendments ��and
supplements ��to ��such ��registration ��statement ��or ��Prospectus, ��including ��pre- ��and ��post-
effective �amendments, �all �exhibits �thereto, �and �all �material �incorporated �by �reference �or
deemed to be incorporated by reference in such registration statement.
Rule �415 �means �Rule �415 �promulgated �by �the �Commission �pursuant �to �the
Securities �Act, �as �such �Rule �may �be �amended �from �time �to �time, �or �any �similar �rule �or
regulation �hereafter �adopted �by �the �Commission �having �substantially �the �same �purpose
and effect as such Rule.
Rule �424 �means �Rule �424 �promulgated �by �the �Commission �pursuant �to �the
Securities �Act, �as �such �Rule �may �be �amended �from �time �to �time, �or �any �similar �rule �or
regulation �hereafter �adopted �by �the �Commission �having �substantially �the �same �purpose
and effect as such Rule.
2.
Shelf Registration.
(a)
On or prior to the Filing Date, the Company shall �prepare and file with the
Commission �a �Shelf �Registration �Statement �covering �the �resale �of �the �Registrable
Securities �for �an �offering �to �be �made �by �the �Holder(s) �on �a �continuous �basis �pursuant �to
Rule �415; �provided, �however, �that �if �100% �of �the �Registrable �Securities �hereunder �shall
equal �or �exceed �33% �of �the �issued �and �outstanding �Common �Stock �less �any �such �shares
held �by �Affiliates �of �the �Company �on �the �actual �filing �date �of �the �initial �Registration
Statement �(Registration �Cap), �the �initial �Registration �Statement �shall �register �a �number
of shares of Common Stock which is equal to the Registration Cap; provided, further, that
if �any �Registration �Statement �is �subject �to �a �Registration �Cap, �the �shares �issued �to �the
Buyer �at �the �Initial �Closing �shall �have �priority �in �such �Registration �Statement �over �the
Draw �Down �Shares �if �such �shares �are �not �then �registered �and �that �the �Additional �Shares
to �be �issued �to �the �Buyer �as �per �Section �2.3 �of �the �Purchase �Agreement �shall �be �taken
down �from �an �effective �Registration �Statement. �Subject �to �the �terms �of �this �Agreement,
the �Company �shall �use �its �commercially �reasonable �efforts �to �cause �any �Registration
Statement �to �be �declared �effective �under �the �Securities �Act �as �promptly �as �possible �after
the �filing thereof, �and �with �respect �to �the �initial �Registration �Statement �in �any event �prior
to �the �applicable �Effectiveness �Date, �and �shall �use �its �commercially �reasonable �efforts �to
keep such �Registration Statement continuously effective under the Securities Act until �all
Registrable �Securities �covered �by �such �Registration �Statement �have �been �sold; �provided,
however, �that �Company �shall �not �be �required �to �have �unissued �Draw �Down �Shares
covered by such Registration Statement after the expiration of the Commitment Period as
such ��term ��is ��described ��in ��the ��Securities ��Purchase ��Agreement ����(the ��Effectiveness
Period). �����The ��Company ��shall ��promptly ��notify ��the ��Holders ��via ��facsimile ��of ��the
effectiveness �of �a �Registration �Statement �on �the �same �Trading �Day �that �the �Company
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telephonically �confirms �effectiveness �with �the �Commission. �The �Company �shall �file �a
final Prospectus with the Commission as required by Rule 424.
3.
Registration Procedures
In ��connection ��with ��the ��Companys ��registration ��obligations ��hereunder, ��the
Company shall:
(a)
Not �less �than �five �Trading �Days �prior �to �the �filing �of ��a �Registration
Statement �and �not �less �than �1 �Trading Day prior �to �the �filing of �any related �Prospectus �or
any ��amendment ��or ��supplement ��thereto ��(including ��any ��document ��that ��would ��be
incorporated �or �deemed �to �be �incorporated �therein �by �reference), �the �Company �shall, �(i)
furnish �to �Holder �copies �of �all �such �documents �proposed �to �be �filed, �which �documents
(other �than �those �incorporated �or �deemed �to �be incorporated �by reference) �will �be subject
to �the �review �of �Holder, �and �(ii) �cause �its �officers �and �directors, �counsel �and �independent
certified �public �accountants �to �respond �to �such �inquiries �as �shall �be �necessary, �in �the
reasonable �opinion �of �respective �counsel �to �Holder �to �conduct �a �reasonable �investigation
within �the �meaning �of �the �Securities �Act. �The �Company �shall �not �file �a �Registration
Statement �or �any �such �Prospectus �or �any �amendments �or �supplements �thereto �to �which
the �Holder �shall �reasonably �object �in �good �faith, �provided �that, �the �Company �is �notified
of �such �objection �in �writing �no �later �than �5 �Trading �Days �after �the �Holder �has �been �so
furnished �copies �of �a �Registration �Statement �or �1 �Trading �Day �after �the �Holder �has �been
so �furnished �copies �of �any �related �Prospectus �or �amendment �or �supplement �thereto �and
provided ��that ��such ��failure ��to ��file ��shall ��not ��constitute ��a ��default ��under ��any ��of ��the
Transaction �Documents �provided �that �the �Company �use �commercially �reasonable �effort
to address such objections promptly.
(b)
(i) �Prepare �and �file �with �the �Commission �such �amendments, �including
post-effective �amendments, �to �the �Registration �Statement �and �the �Prospectus �used �in
connection ��therewith ��as ��may ��be ��necessary ��to ��keep ���the ��Registration ��Statement
continuously �effective �as �to �the �applicable �Registrable �Securities �for �the �Effectiveness
Period and prepare and file with the Commission such additional Registration Statements
in order to register for resale under the Securities Act all of the Registrable Securities; (ii)
cause �the �related �Prospectus �to �be �amended �or �supplemented �by �any �required �Prospectus
supplement (subject to the terms of this Agreement), and as so �supplemented or amended
to �be �filed �pursuant �to �Rule �424; �(iii) �respond �as �promptly �as �reasonably �possible �to �any
comments �received �from �the �Commission �with �respect �to �the �Registration �Statement �or
any �amendment �thereto �and �as �promptly �as �reasonably �possible �provide �the �Holder �true
and �complete �copies �of �all �correspondence �from �and �to �the �Commission �relating �to �the
Registration ��Statement ��(provided ��that ��the ��Company ��may ��excise ��any ��information
contained �therein �which �would �constitute �material �non-public �information �as �to �Holder);
and �(iv) �comply �in �all �material �respects �with �the �provisions �of �the �Securities �Act �and �the
Exchange �Act �with �respect �to �the �disposition �of �all �Registrable �Securities �covered �by �a
Registration Statement during the applicable period in accordance (subject to the terms of
this �Agreement) �with �the �intended �methods �of �disposition �by the �Holder �set �forth �in �such
Registration Statement as so amended or in such Prospectus as so supplemented.
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(c)
If �during �the �Effectiveness �Period, �the �number �of �Registrable �Securities �at
any �time �exceeds �100% �of �the �number �of �shares �of �Common �Stock �then �registered �in �a
Registration �Statement, �then �the �Company �shall �file �as �soon �as �reasonably �practicable �an
additional Registration Statement covering the resale by the Holder of not less than 100%
of the number of such Registrable Securities.
(d)
Notify �the �Holder �of �Registrable �Securities �to �be �sold �(which �notice �shall,
pursuant �to �clauses �(iii) �through �(vi) hereof, �be accompanied �by an �instruction �to �suspend
the �use �of �the �Prospectus �until �the �requisite �changes �have �been �made) �as �promptly �as
reasonably possible (and, in the case of (i)(A) below, not less than 1 Trading Day prior to
such �filing) �and �(if �requested �by any such �Person) �confirm �such �notice in �writing no �later
than �one �Trading �Day �following �the �day �(i)(A) �when �a �Prospectus �or �any �Prospectus
supplement �or �post-effective �amendment �to �a �Registration �Statement �is �proposed �to �be
filed; �(B) �when �the �Commission �notifies �the �Company �whether �there �will �be �a �review
of �such �Registration �Statement �and �whenever �the �Commission �comments �in �writing �on
such �Registration �Statement; �and �(C) �with �respect �to �a �Registration �Statement �or �any
post-effective amendment, when the same has become effective; (ii) of any request by the
Commission �or �any �other �Federal �or �state �governmental �authority �for �amendments �or
supplements �to �a �Registration �Statement �or �Prospectus �or �for �additional �information; �(iii)
of the issuance by the Commission or any other federal or state governmental authority of
any �stop �order �suspending �the �effectiveness �of �a �Registration �Statement �covering �any �or
all �of �the �Registrable �Securities �or �the �initiation �of �any Proceedings �for �that �purpose; �(iv)
of �the �receipt �by �the �Company �of �any �notification �with �respect �to �the �suspension �of �the
qualification �or �exemption �from �qualification �of �any of �the �Registrable Securities �for sale
in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; (v)
of �the �occurrence �of �any �event �or �passage �of �time �that �makes �the �financial �statements
included �in �a �Registration �Statement �ineligible �for �inclusion �therein �or �any �statement
made in �a �Registration �Statement �or �Prospectus �or �any document �incorporated �or �deemed
to �be �incorporated �therein �by reference untrue in �any material respect �or that requires �any
revisions �to �a �Registration �Statement, �Prospectus �or �other �documents �so �that, �in �the �case
of �a �Registration �Statement �or �the �Prospectus, �as �the �case �may be, �it �will �not �contain �any
untrue �statement �of �a �material �fact �or �omit �to �state �any material �fact �required �to �be �stated
therein �or �necessary �to �make �the �statements �therein, �in �light �of �the �circumstances �under
which �they �were �made, �not �misleading; �and �(vi) �the �occurrence �or �existence �of �any
pending �corporate �development �with �respect �to �the �Company �that �the �Company �believes
may �be �material �and �that, �in �the �determination �of �the �Company, �makes �it �not �in �the �best
interest �of �the �Company �to �allow �continued �availability �of �a �Registration �Statement �or
Prospectus; �provided �that �any �and �all �of �such �information �shall �remain �confidential �to
Holder �until �such �information �otherwise �becomes �public, �unless �disclosure �by �Holder �is
required �by �law; �provided, �further, �notwithstanding �Holders �agreement �to �keep �such
information ��confidential, ��the ��Holder ��makes ��no ��acknowledgement ��that ��any ��such
information is material, non-public information.
(e)
Use �its �best �efforts �to �avoid �the �issuance �of, �or, �if �issued, �obtain �the
withdrawal �of �(i) �any �order �suspending �the �effectiveness �of �a �Registration �Statement, �or
(ii) �any �suspension �of �the �qualification �(or �exemption �from �qualification) �of �any �of �the
Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.
4
(f)
Furnish �to �Holder, �without �charge, �at �least �one �conformed �copy �of �each
such �Registration �Statement �and �each �amendment �thereto, �including �financial �statements
and �schedules, �all �documents �incorporated �or �deemed �to �be �incorporated �therein �by
reference �to �the �extent �requested �by �such �Person, �and �all �exhibits �to �the �extent �requested
by �such ��Person ��(including �those ��previously �furnished ��or ��incorporated ��by �reference)
promptly after the filing of such documents with the Commission.
(g)
Subject �to �the �terms �of �this �Agreement, �the �Company �hereby �consents �to
the �use �of �such �Prospectus �and �each �amendment �or �supplement �thereto �by �the �Holder �in
connection �with �the �offering �and �sale �of �the �Registrable �Securities �covered �by �such
Prospectus �and �any �amendment �or �supplement �thereto, �except �after �the �giving �of �any
notice pursuant to Section 3(d).
(h)
Should ��any ��broker-dealer ��be ��required ��to ��make ��a ��filing ��or ��have ��the
Company make a filing with any regulatory authority prior to executing a sale by Holder,
the Company shall (i) make an issuer filing with such authority or authorities, (ii) respond
within five Trading Days to any comments received in connection therewith, and (iii) pay
the filing fees required in connection therewith.
(i)
Prior ���to ���any ��resale ���of ���Registrable ���Securities ���by ��Holder, ���use ���its
commercially �reasonable �efforts �to �register �or �qualify �or �cooperate �with �the �Holder �in
connection �with �the �registration �or �qualification �(or �exemption �from �the �Registration �or
qualification) �of �such ��Registrable �Securities �for �the �resale �by �the �Holder �under �the
securities �or �Blue �Sky �laws �of �such �jurisdictions �within �the �United �States �as �Holder
reasonably �requests �in �writing, �to �keep �each �registration �or �qualification �(or �exemption
therefrom) �effective �during �the �Effectiveness �Period �and �to �do �any �and �all �other �acts �or
things ��reasonably ��necessary ��to ��enable ��the ��disposition ��in ��such ��jurisdictions ��of ��the
Registrable Securities covered by the Registration Statement; provided, that the Company
shall not be required to qualify generally to �do business in any jurisdiction where it is not
then �so �qualified, �subject �the �Company to �any material �tax �in �any such �jurisdiction �where
it �is �not �then �so �subject �or �file �a �general �consent �to �service �of �process �in �any �such
jurisdiction.
(j)
If �requested �by �the �Holder, �cooperate �with �the �Holder �to �facilitate �the
timely �preparation �and �delivery �of �certificates �representing �Registrable �Securities �to �be
delivered �to �a �transferee �pursuant �to �the �Registration �Statement, �which �certificates �shall
be �free, �to �the �extent �permitted �by the �Purchase Agreement, �of �all �restrictive legends, �and
to �enable �such �Registrable �Securities �to �be �in �such �denominations �and �registered �in �such
names as Holder may request.
(k)
Upon �the �occurrence �of �any �event �contemplated �by �this �Section �3, �as
promptly ��as ��reasonably ��possible ��under ��the ��circumstances ��taking ��into ��account ��the
Companys �good �faith �assessment �of �any �adverse �consequences �to �the �Company �and �its
stockholders ��of ��the ��premature ��disclosure ��of ��such ��event, ��prepare ��a ��supplement ��or
amendment, �including �a �post-effective �amendment, �to �the �Registration �Statement �or �a
supplement �to �the �related �Prospectus �or �any �document �incorporated �or �deemed �to �be
incorporated �therein �by �reference, �and �file �any �other �required �document �so �that, �as
5
thereafter �delivered, �neither �the �Registration �Statement �nor �such �Prospectus �will �contain
an �untrue statement �of �a �material �fact �or �omit �to �state a material �fact �required �to �be stated
therein �or �necessary �to �make �the �statements �therein, �in �light �of �the �circumstances �under
which they were made, not misleading. �If the Company notifies the Holder in accordance
with �clauses �(iii) �through �(vi) �of �Section �3(d) �above to �suspend �the �use of �any Prospectus
until �the �requisite �changes �to �such �Prospectus �have �been �made, �then �the �Holder �shall
suspend �use �of �such �Prospectus. ��The �Company will �use �its �best �efforts �to �ensure �that �the
use of the Prospectus may be resumed as promptly as is practicable.
(l)
Comply with all applicable rules and regulations of the Commission.
(m)
The ��Company ��may ��require ��the ��Holder ��to ��furnish ��to ��the ��Company ��a
certified �statement �as �to �the �number �of �shares �of �Common �Stock �beneficially �owned �by
the �Holder �and, �if �required �by �the �Commission, �the �natural �persons �thereof �that �have
voting �and �dispositive �control �over �the �Shares. �The �Holder �acknowledges �that �it �will �be
named �as �an �underwriter �of �the �Registrable �Securities �in �the �Prospectus, �as �required �by
Commission policies.
4.
Registration �Expenses. ��All �fees �and �expenses �incident �to �the �performance �of �or
compliance with this Agreement by the Company shall be borne by the Company whether or not
any �Registrable ��Securities ��are ��sold ��pursuant ��to ��the ��Registration ��Statement. ����The ��fees ��and
expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration
and �filing �fees �(including, �without �limitation, �fees �and �expenses �(A) �with �respect �to �filings
required �to �be �made �with �any �Trading �Market �on �which �the �Common �Stock �is �then �listed �for
trading, �(B) in �compliance with applicable state securities or �Blue Sky laws �reasonably agreed to
by �the �Company �in �writing �(including, �without �limitation, �fees �and �disbursements �of �counsel �for
the �Company �in �connection �with �Blue �Sky �qualifications �or �exemptions �of �the �Registrable
Securities) �and �(C) �if �not �previously �paid �by �the �Company �in �connection �with �an �issuer �filing,
with respect to any filing that may be required to be made by any broker through which a Holder
intends �to �make sales �of Registrable �Securities, �so �long as �the �broker �is �receiving no �more than �a
customary brokerage �commission �in �connection with �such �sale, �(ii) �printing expenses �(including,
without �limitation, �expenses �of �printing �certificates �for �Registrable �Securities, �(iii) �messenger,
telephone �and �delivery �expenses, �(iv) �fees �and �disbursements �of �counsel �for �the �Company, �(v)
Securities �Act �liability �insurance, �if �the �Company �so �desires �such �insurance, �and �(vi) �fees �and
expenses �of �all �other �Persons �retained �by the �Company �in �connection �with �the �consummation �of
the �transactions �contemplated �by this �Agreement. ��In �addition, �the �Company shall �be responsible
for �all �of �its �internal �expenses �incurred �in �connection �with �the �consummation �of �the �transactions
contemplated �by �this �Agreement �(including, �without �limitation, �all �salaries �and �expenses �of �its
officers �and �employees �performing �legal �or �accounting �duties), �the �expense �of �any �annual �audit
and the �fees and �expenses incurred in �connection �with the listing of the �Registrable �Securities on
any securities �exchange �as �required �hereunder. �In �no �event �shall �the �Company be responsible �for
any �broker �or �similar �commissions ��of �Holder �or, �except �to �the �extent �provided �for �in �the
Transaction Documents, any legal fees or other costs of the Holder.
6
5.
Indemnification
(a)
Indemnification �by �the �Company. ���The �Company �shall, �notwithstanding
any �termination �of �this �Agreement, �indemnify �and �hold �harmless �Holder, �the �officers,
directors, ��members, ��partners, ��agents, ��brokers ��(including ��brokers ��who ��offer ��and ��sell
Registrable Securities as principal as a result of a pledge or any failure to perform under a
margin �call �of �Common �Stock), �investment �advisors ��and �employees �(and �any �other
Persons ���with ���a ���functionally ���equivalent ���role ���of ���a ���Person ���holding ���such ���titles,
notwithstanding �a �lack �of �such �title �or �any �other �title) �of �Holder, �each �Person �who
controls �Holder �(within �the �meaning �of �Section �15 �of �the �Securities �Act �or �Section �20 �of
the �Exchange �Act) �and �the �officers, �directors, �members, �shareholders, �partners, �agents
and �employees �(and �any �other �Persons �with �a �functionally �equivalent �role �of �a �Person
holding �such �titles, �notwithstanding �a �lack �of �such �title �or �any �other �title)of �each �such
controlling Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable
attorneys �fees) �and �expenses �(collectively, �Losses), �as �incurred, �arising �out �of �or
relating �to �(1) �any �untrue �or �alleged �untrue �statement �of �a �material �fact �contained �in �a
Registration �Statement, �any �Prospectus �or �any �form �of �prospectus �or �in �any �amendment
or supplement thereto or in any preliminary prospectus, or arising out of or relating to any
omission �or �alleged �omission �of �a �material �fact �required �to �be �stated �therein �or �necessary
to �make �the �statements �therein �(in �the �case �of �any �Prospectus �or �form �of �prospectus �or
supplement �thereto, �in �light �of �the �circumstances �under �which �they �were �made) �not
misleading, �or �(2) �any �violation �or �alleged �violation �by �the �Company �of �the �Securities
Act, �Exchange �Act �or �any �state �securities �law, �or �any �rule �or �regulation �thereunder, �in
connection �with �the �performance �of �its �obligations �under �this �Agreement, �except �to �the
extent, but only to the extent, that (i) such untrue statements or omissions are based solely
upon �information �regarding �Holder �furnished �in �writing �to �the �Company �by �Holder
expressly �for �use �therein, �or �to �the �extent �that �such �information �relates �to �Holder �or
Holders proposed method of distribution of Registrable Securities and was reviewed �and
expressly �approved �in �writing �by �Holder �expressly �for �use �in �a �Registration �Statement,
such �Prospectus �or �such �form �of �Prospectus �or �in �any �amendment �or �supplement �thereto
(it being understood that the Holder has approved Annex �A hereto for this purpose) or (ii)
in �the �case �of �an �occurrence �of �an �event �of �the �type �specified �in �Section �3(d)(iii)-(vi), �the
use �by �Holder �of �an �outdated �or �defective �Prospectus �after �the �Company �has �notified
Holder �in �writing �that �the �Prospectus �is �outdated �or �defective �and �prior �to �the �receipt �by
Holder �of �the �Advice �contemplated �in �Section �6(d). ���The �Company �shall �notify �the
Holder �promptly �of �the �institution, �threat �or �assertion �of �any �Proceeding �arising �from �or
in ��connection ��with ��the ��transactions ��contemplated ��by ��this ��Agreement ��of ��which ��the
Company is aware.
(b)
Indemnification ��by ��Holder. ��Holder ��shall, ��severally ��and ��not ��jointly,
indemnify �and �hold �harmless �the �Company, �its �directors, �officers, �agents �and �employees,
each ��Person ��who ��controls ��the ��Company �(within ��the ��meaning ��of ��Section ��15 ��of ��the
Securities �Act �and �Section �20 �of �the �Exchange �Act), �and �the �directors, �officers, �agents �or
employees �of �such �controlling �Persons, �to �the �fullest �extent �permitted �by �applicable �law,
from and against all �Losses, as incurred, to the �extent arising out of or based solely upon:
(x) Holders failure to comply with the prospectus delivery requirements of the Securities
7
Act �or �(y) �any �untrue �or �alleged �untrue �statement �of �a �material �fact �contained �in �any
Registration �Statement, �any Prospectus, �or �any �form �of �prospectus, �or �in �any �amendment
or supplement thereto or in any preliminary prospectus, or arising out of or relating to any
omission �or �alleged �omission �of �a �material �fact �required �to �be �stated �therein �or �necessary
to make the statements therein not misleading (i) to the extent, but only to the extent, that
such untrue statement or �omission is contained in any information so furnished in writing
by �Holder �to �the �Company �specifically �for �inclusion �in �such �Registration �Statement �or
such �Prospectus �or �(ii) �to �the �extent �that �such �information �relates �to �Holders �proposed
method ��of ��distribution ��of ��Registrable ��Securities ��and ��was ��reviewed ��and ��expressly
approved �in �writing �by �Holder �expressly �for �use �in �a �Registration �Statement �, �such
Prospectus or such form of Prospectus or in any amendment or supplement thereto or (iii)
in �the �case �of �an �occurrence �of �an �event �of �the �type �specified �in �Section �3(d)(iii)-(vi), �the
use �by �Holder �of �an �outdated �or �defective �Prospectus �after �the �Company �has �notified
Holder �in �writing �that �the �Prospectus �is �outdated �or ��defective �and �prior �to �the �receipt �by
Holder �of �the �Advice �contemplated �in �Section �6(d). ���In �no �event �shall �the �liability �of
Holder �hereunder �be �greater �in �amount �than �the �dollar �amount �of �the �net �proceeds
received ��by �Holder ��upon ��the ��sale ��of ��the ��Registrable ��Securities ��giving �rise ��to ��such
indemnification obligation.
(c)
Conduct ��of ��Indemnification ��Proceedings. ��If ��any ��Proceeding ��shall ��be
brought �or �asserted �against �any �Person �entitled �to �indemnity �hereunder �(an �Indemnified
Party), �such �Indemnified �Party �shall �promptly �notify �the �Person �from �whom �indemnity
is �sought �(the �Indemnifying �Party) �in �writing, �and �the �Indemnifying �Party �shall �have
the �right �to �assume �the �defense �thereof, �including �the �employment �of �counsel �reasonably
satisfactory to the �Indemnified Party and the payment of all fees and expenses incurred in
connection �with �defense �thereof; �provided, �that �the �failure �of �any �Indemnified �Party �to
give �such �notice �shall �not �relieve �the �Indemnifying �Party �of �its �obligations �or �liabilities
pursuant �to �this �Agreement, �except �(and �only) �to �the �extent �that �it �shall �be �finally
determined �by �a �court �of �competent �jurisdiction �(which �determination �is �not �subject �to
appeal or further review) that such failure shall have prejudiced the Indemnifying Party.
An �Indemnified �Party shall �have �the �right �to �employ separate �counsel �in �any �such
Proceeding �and �to �participate �in �the �defense �thereof, �but �the �fees �and �expenses �of �such
counsel �shall �be �at �the �expense �of �such �Indemnified �Party �or �Parties �unless: ���(1) �the
Indemnifying ��Party ��has ��agreed ��in ��writing ��to ��pay ��such ��fees ��and ��expenses; ��(2) ��the
Indemnifying �Party �shall �have �failed �promptly �to �assume �the �defense �of �such �Proceeding
and �to �employ �counsel �reasonably �satisfactory �to �such �Indemnified �Party �in �any �such
Proceeding; �or �(3) �the �named �parties �to �any �such �Proceeding �(including �any �impleaded
parties) �include �both �such �Indemnified �Party �and �the �Indemnifying �Party, �and �counsel �to
the �Indemnified �Party shall �reasonably believe �that �a material �conflict �of �interest �is �likely
to ��exist ��if ��the ��same ��counsel ��were ��to ��represent ��such ��Indemnified ��Party ��and ��the
Indemnifying �Party �(in �which �case, �if �such �Indemnified �Party �notifies �the �Indemnifying
Party ��in ��writing ��that ��it ��elects ��to ��employ ��separate ��counsel ��at ��the ��expense ��of ��the
Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense
thereof �and �the �reasonable �fees �and �expenses �of �no �more �than �one �separate �counsel �shall
be �at �the �expense �of �the �Indemnifying Party). ��The �Indemnifying Party shall �not �be �liable
for �any �settlement �of �any �such �Proceeding �effected �without �its �written �consent, �which
8
consent �shall �not �be �unreasonably �withheld �or �delayed. ���No �Indemnifying �Party �shall,
without �the �prior �written �consent �of �the �Indemnified �Party, �effect �any �settlement �of �any
pending �Proceeding �in �respect �of �which �any �Indemnified �Party �is �a �party, �unless �such
settlement �includes �an �unconditional �release �of �such �Indemnified �Party �from �all �liability
on claims that are the subject matter of such Proceeding.
Subject �to �the �terms �of �this �Agreement, �all �reasonable �fees �and �expenses �of �the
Indemnified �Party �(including �reasonable �fees �and �expenses �to �the �extent �incurred �in
connection �with �investigating �or �preparing �to �defend �such �Proceeding �in �a �manner �not
inconsistent �with �this �Section) �shall �be �paid �to �the �Indemnified �Party, �as �incurred, �within
ten �Trading �Days �of �written �notice �thereof �to �the �Indemnifying �Party; �provided, �that �the
Indemnified �Party �shall �promptly �reimburse �the �Indemnifying �Party �for �that �portion �of
such �fees �and �expenses �applicable �to �such �actions �for �which �such �Indemnified �Party �is
judicially determined to be not entitled to indemnification hereunder.
(d)
Contribution. �����If ��the ��indemnification ��under ��Section ��5(a) ��or ��5(b) ��is
unavailable to an �Indemnified Party or insufficient �to hold an �Indemnified �Party harmless
for �any �Losses, �then �each �Indemnifying �Party �shall �contribute �to �the �amount �paid �or
payable �by �such �Indemnified �Party, �in �such �proportion �as �is �appropriate �to �reflect �the
relative �fault �of �the �Indemnifying �Party �and �Indemnified �Party �in �connection �with �the
actions, statements or omissions that resulted in such �Losses as well as any other relevant
equitable �considerations. �The �relative �fault �of �such �Indemnifying �Party �and �Indemnified
Party �shall �be �determined �by �reference �to, �among �other �things, �whether �any �action �in
question, �including �any �untrue �or �alleged �untrue �statement �of �a �material �fact �or �omission
or ��alleged ��omission ��of ��a ��material ��fact, ��has ��been ��taken ��or ��made ��by, ��or ��relates ��to
information �supplied �by, �such �Indemnifying �Party �or �Indemnified �Party, �and �the �parties
relative �intent, �knowledge, �access �to �information �and �opportunity �to �correct �or �prevent
such �action, �statement �or �omission. ��The �amount �paid �or �payable �by a �party �as �a �result �of
any ��Losses ��shall ��be ��deemed ��to ��include, ��subject ��to ��the ��limitations ��set ��forth ��in ��this
Agreement, �any reasonable �attorneys �or �other �fees �or �expenses �incurred �by such �party in
connection with any Proceeding to the extent such party would have been indemnified for
such �fees �or �expenses �if �the �indemnification �provided �for �in �this �Section �was �available �to
such party in accordance with its terms.
The �parties �hereto �agree �that �it �would �not �be �just �and �equitable �if �contribution
pursuant �to �this �Section �5(d) �were �determined �by �pro �rata �allocation �or �by �any �other
method �of �allocation �that �does �not �take �into �account �the �equitable �considerations �referred
to �in �the �immediately �preceding �paragraph. ����Notwithstanding �the �provisions �of ��this
Section �5(d), �Holder �shall �not �be �required �to �contribute, �in �the �aggregate, �any �amount �in
excess of the amount by which the net proceeds actually received by Holder from the sale
of ��the ��Registrable ��Securities ��subject ��to ��the ��Proceeding ��exceeds ��the ��amount ��of ��any
damages �that �Holder �has �otherwise �been �required �to �pay �by �reason �of �such �untrue �or
alleged �untrue �statement �or �omission �or �alleged �omission, �except �in �the �case �of �fraud �by
Holder.
9
The ��indemnity �and ��contribution ��agreements ��contained ��in ��this ��Section ��are ��in
addition �to �any �liability �that �the �Indemnifying �Parties �may �have �to �the �Indemnified
Parties.
6.
Miscellaneous
(a)
Remedies. ��In �the �event �of �a �breach �by �the �Company �or �by �the �Holder, �of
any �of �their �respective �obligations �under �this �Agreement, �Holder �or �the �Company, �as �the
case �may �be, �in �addition �to �being �entitled �to �exercise �all �rights �granted �by �law �and �under
this �Agreement, �including �recovery �of �damages, �will �be �entitled �to �specific �performance
of �its �rights �under �this �Agreement. ���The �Company �and �Holder �agree �that �monetary
damages would not provide adequate compensation for any losses incurred by reason of a
breach �by it �of �any of �the �provisions �of �this �Agreement �and �hereby further �agrees �that, �in
the �event �of �any �action �for �specific �performance �in �respect �of �such �breach, �it �shall �not
assert or shall waive the defense that a remedy at law would be adequate.
(b)
No �Piggyback �on �Registrations. ���Neither �the �Company �nor �any �of �its
security �holders �(other �than �the �Holder �in �such �capacity �pursuant �hereto) �may �include
securities ��of ��the ��Company �in ��the ��Registration ��Statement ��other �than ��the �Registrable
Securities. ��In �addition, �from �the �date �hereof �until �the �end �of �the �Commitment �Period �and
so �long �as �the �Company �shall �have �any �obligation �under �the �Convertible �Note �Purchase
Agreement �and �the �Convertible �Promissory �Note �issued �to �the �Buyer �pursuant �thereto
dated ��January ��__, ��2015, ��other ��than ��Registration ��Statement(s) ��required ��to ��be ��filed
hereunder, ��the ��Company ��shall ��not ��file ��any ��other ��registration ��statements ��with ��the
Commission �seeking �to �register �shares �issuable �pursuant �to �an �equity �line �of �credit �or
similar transaction based on a floating issuance or conversion price.
(c)
Compliance. ���Holder �covenants �and �agrees �that �it �will �comply �with �the
prospectus �delivery �requirements �of �the �Securities �Act �as �applicable �to �it �in �connection
with sales of Registrable Securities pursuant to a Registration Statement.
(d)
Discontinued �Disposition. ��Holder �agrees �by �its �acquisition �of �Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of any event
of �the �kind �described �in �Section �3(d), �Holder �will �forthwith �discontinue �disposition �of
such �Registrable �Securities �under �a �Registration �Statement �until �it �is �advised �in �writing
(the �Advice) �by the �Company that �the �use �of �the �applicable �Prospectus �(as �it �may have
been �supplemented �or �amended) �may be �resumed. ��The �Company will �use its �best �efforts
to ensure that the use of the Prospectus may be resumed as promptly as it practicable.
(e)
Amendments �and �Waivers. �The �provisions �of �this �Agreement, �including
the �provisions �of �this �sentence, �may �not �be �amended, �modified �or �supplemented, �and
waivers or consents to departures from the provisions hereof may not be given, unless the
same �shall �be �in �writing �and �signed �by �the �Company �and �each �Holder �of �the �then
outstanding �Registrable �Securities. ��Notwithstanding �the �foregoing, �a �waiver �or �consent
to depart from the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders �and that does not directly or indirectly affect the �rights of other Holders
may �be �given �by �Holders �of �all �of �the �Registrable �Securities �to �which �such �waiver �or
10
consent �relates; �provided, �however, �that �the �provisions �of �this �sentence �may �not �be
amended, �modified, �or �supplemented �except �in �accordance �with �the �provisions �of �the
immediately preceding sentence.
(f)
Notices. ��Any ��and ��all ��notices ��or ��other ��communications ��or ��deliveries
required �or �permitted �to �be �provided �hereunder �shall �be �delivered �as �set �forth �in �the
Purchase Agreement.
(g)
Successors �and �Assigns. �This �Agreement �shall �be �binding �upon �and �inure
to ��the ��benefit ��of ��the ��parties ��and ��their ��successors. ����Neither ��party ��may ��assign ��this
Agreement or any rights or obligations hereunder (other than by merger).
(h)
Piggy �Back �Registration �Rights. ��If �at �any �time �during �the �Effectiveness
Period �there �is �no �effective �Registration �Statement �covering �all �of �the �Shares �then �issued
and ��outstanding ��and ��the ��Company ��shall ��determine ��to ��prepare ��and ��file ��with ��the
Commission �a �registration �statement �relating �to �an �offering �for �its �own �account �or �the
account �of �others �under �the �Securities �Act �of �any �of �its �equity �securities, �other �than �on
Form �S-4 �or �Form �S-8 �(each �as �promulgated �under �the �Securities �Act) �or �their �then
equivalents ��relating �to ��equity �securities ��to ��be �issued ��solely �in ��connection ��with ��any
acquisition �of �any �entity �or �business �or �equity �securities �issuable �in �connection �with �the
stock �option �or �other �employee �benefit �plans, �then �the �Company �shall �include �in �such
registration �statement �all �of �such �Shares. ��For �clarity, �the �provisions �of �this �Section �6(h)
shall �require �that �the �Company include �the �Shares �and �the �Additional �Shares �to �be �issued
pursuant �to �Section �2.2 �and �2.3, �respectively, �of �the �Securities �Purchase �Agreement �on
the first registration statement it files following the date hereof.
(i)
No ��Inconsistent ��Agreements. ��Neither ��the ��Company ��nor ��any ��of ��its
Subsidiaries �has �entered, �as �of �the �date �hereof, �nor �shall �the �Company �or �any �of �its
Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect
to its securities, that would have the effect of impairing the rights granted to the Holder in
this �Agreement �or �otherwise �conflicts �with �the �provisions �hereof. ��Except �as �set �forth �on
Schedule 6(i), neither the Company nor any of its subsidiaries has previously entered into
any �agreement �granting �any �registration �rights �with �respect �to �any �of �its �securities �to �any
Person that have not been satisfied in full.
(j)
Execution �and �Counterparts. ��This �Agreement �may �be �executed �in �two �or
more counterparts, all of which when taken together 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, �it �being �understood �that �both �parties �need �not �sign �the
same �counterpart. ��In �the �event �that �any �signature �is �delivered �by �facsimile �transmission
or �by �e-mail �delivery �of �a �.pdf �format �data �file, �such �signature �shall �create �a �valid �and
binding obligation �of �the �party executing (or on �whose �behalf �such �signature is �executed)
with �the �same �force �and �effect �as �if �such �facsimile �or �.pdf �signature �page �were �an
original thereof.
11
(k)
Governing ��Law. ����All ��questions ��concerning ��the ��construction, ��validity,
enforcement �and �interpretation �of �this �Agreement �shall �be determined �in �accordance �with
the provisions of the Securities Purchase Agreement.
(l)
Cumulative �Remedies. ��The �remedies �provided �herein �are �cumulative �and
not exclusive of any other remedies provided by law.
(m)
Severability. ��If ��any ��term, ��provision, ��covenant ��or ��restriction ��of ��this
Agreement �is �held �by �a �court �of �competent �jurisdiction �to �be �invalid, �illegal, �void �or
unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth
herein �shall �remain �in �full �force �and �effect �and �shall �in �no �way �be �affected, �impaired �or
invalidated, �and �the �parties �hereto �shall �use �their �commercially �reasonable �efforts �to �find
and �employ �an �alternative �means �to �achieve �the �same �or �substantially �the �same �result �as
that contemplated by such term, provision, covenant or restriction. ��It is hereby stipulated
and ��declared ��to ��be ��the ��intention ��of ��the ��parties ��that ��they �would ��have ��executed ��the
remaining �terms, �provisions, �covenants �and �restrictions �without �including �any �of �such
that may be hereafter declared invalid, illegal, void or unenforceable.
(n)
Headings. ��The �headings �in �this �Agreement �are �for �convenience �only, �do
not �constitute �a �part �of �this �Agreement, �and �shall �not �be �deemed �to �limit �or �affect �any �of
the provisions hereof.
*************************
12
IN �WITNESS �WHEREOF, �the �parties �have �executed �this �Registration �Rights
Agreement as of the date first written above.
MINERALRITE CORPORATION
By: ____________________________
Name: _________________________
Title: ________________________
RIVER NORTH EQUITY, INC.
By: ________________________
Name: Edward M. Liceaga
Title: President
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