Exhibit 10.2

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE 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 HOLDER TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED
BY SUCH SECURITIES. THIS NOTE WAS ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER SECTION 3(A)(9) OF THE SECURITIES ACT AND AS SUCH, THE ISSUE
DATE OF THIS NOTE TACKS BACK TO THE DATE OF A CERTAIN DEBT SETTLEMENT AGREEMENT,
DATED OCTOBER 31, 2017.

 

Principal Amount: $[____]

 

Date of Issue: September___, 2018

 

PRECIPIO, INC.

 

CONVERTIBLE PROMISSORY NOTE

DUE JANUARY 1, 2021

 

  The undersigned, PRECIPO, INC., a Delaware corporation (the “Company”), having
its principal place of business at 4 Science Park, New Haven, CT 06511, hereby
unconditionally promises to pay to the order of [_________] or its registered
assigns, (the “Holder”), the amount of $[____] in accordance with Section 2
hereof; provided, however, that upon conversion of any amount due under this
Convertible Promissory Note (this “Note”) into Conversion Shares pursuant to and
subject to the terms hereof, such conversion will constitute the discharge of
such principal so converted under this Note to the extent herein provided.

 

Section 1. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Note, (a) capitalized terms used and not defined
herein shall have the meanings ascribed to them in the Exchange Agreement, of
even date herewith, pursuant to which this Note is issued, and (b) the following
terms shall have the following meanings:

 

“Alternate Consideration” shall have the meaning set forth in Section 5(d).

 

“Authorized Failure Shares” shall have the meaning set forth in Section
4(3)(vii).

 

 1 

 

 

“Authorized Share Failure” shall have the meaning set forth in Section
4(3)(vii).

 

“Bankruptcy Event” means any of the following events: (a) the Company or any
subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof
commences a case or other proceeding under any bankruptcy, reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction relating to the Company or any
subsidiary thereof, (b) there is commenced against the Company or any subsidiary
thereof any such case or proceeding that is not dismissed within 60 days after
commencement, (c) the Company or any subsidiary thereof is adjudicated insolvent
or bankrupt or any order of relief or other order approving any such case or
proceeding is entered, (d) the Company or any subsidiary thereof suffers any
appointment of any custodian or the like for it or any substantial part of its
property that is not discharged or stayed within 60 calendar days after such
appointment, (e) the Company or any subsidiary thereof makes a general
assignment for the benefit of creditors, (f) the Company or any subsidiary
thereof calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts or (g) the Company or any subsidiary
thereof, by any act or failure to act, expressly indicates its consent to,
approval of or acquiescence in any of the foregoing or takes any corporate or
other action for the purpose of effecting any of the foregoing.

 

“Beneficial Ownership Limitation” shall have the meaning set forth in Section
5(d).

 

“Business Day” means any day except any Saturday, any Sunday, any day which is 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.

 

“Buy-In” shall have the meaning set forth in Section 4(3)(v).

 

“Change of Control Transaction” means the occurrence after the date hereof of
any of (a) an acquisition after the date hereof by an individual or legal entity
or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 50% of the
voting securities of the Company (other than by means of conversion or exercise
of the Notes and the Common Stock issued together with the Notes), (b) the
Company merges into or consolidates with any other Person, or any Person merges
into or consolidates with the Company and, after giving effect to such
transaction, the stockholders of the Company immediately prior to such
transaction own less than 50% of the aggregate voting power of the Company or
the successor entity of such transaction, (c) the Company sells or transfers all
or substantially all of its assets to another Person and the stockholders of the
Company immediately prior to such transaction own less than 50% of the aggregate
voting power of the acquiring entity immediately after the transaction, (d) a
replacement at one time or within a one year period of more than one-half of the
members of the Board of Directors which is not approved by a majority of those
individuals who are members of the Board of Directors on the date hereof (or by
those individuals who are serving as members of the Board of Directors on any
date whose nomination to the Board of Directors was approved by a majority of
the members of the Board of Directors who are members on the date hereof), or
(e) the execution by the Company of an agreement to which the Company is a party
or by which it is bound, providing for any of the events set forth in clauses
(a) through (d) above.

 

“Common Stock” means the common shares of the Company, par value $0.01 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed.

 

 2 

 

 

“Conversion” shall have the meaning ascribed to such term in Section 4.

 

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

 

“Conversion Price” shall have the meaning set forth in Section 4.2.

 

“Conversion Shares” means, collectively, the shares of Common Stock issuable
upon conversion of any amounts due under this Note in accordance with the terms
hereof.

 

“Equity Conditions Failure” means “Equity Conditions Failure” means that any of
the following conditions has not been satisfied during any applicable Equity
Conditions Measuring Period (as defined below): (a) with respect to the
applicable date of determination all of the Conversion Shares would be freely
tradable under Rule 144 or without the need for registration under any
applicable federal or state securities laws (in each case, disregarding any
limitation on conversion of this Note); (b) on each day during the period
beginning one month prior to the applicable date of determination and ending on
and including the applicable date of determination (the “Equity Conditions
Measuring Period”), the Common Stock is listed or designated for quotation (as
applicable) on Trading Market and shall not have been suspended from trading on
any such Trading Market (other than suspensions of not more than two (2) Trading
Days and occurring prior to the applicable date of determination due to business
announcements by Company); (c) on each day during the Equity Conditions
Measuring Period, Company shall have delivered all shares of Common Stock
issuable upon conversion of this Note on a timely basis as set forth herein;
(d)  any shares of Common Stock to be issued in connection with the event
requiring determination may be issued in full without violating the rules or
regulations of the Trading Market on which the Common Stock is then listed or
designated for quotation (as applicable); (e) Company shall have no knowledge of
any fact that would reasonably be expected to cause any of the Conversion Shares
to not be freely tradable without the need for registration under any applicable
state securities laws (in each case, disregarding any limitation on conversion
of this Note); (f) on each day during the Equity Conditions Measuring Period,
there shall not have occurred an Event of Default or an event that with the
passage of time or giving of notice would constitute an Event of Default; and
(g) the Common Stock shall be DWAC eligible as of the Conversion Date.

 

“Event of Default” shall have the meaning set forth in Section 7.1.

 

“Fundamental Transaction” shall have the meaning set forth in Section 5(5).

 

“New York Courts” shall have the meaning set forth in Section 10(e).

 

“Note Register” shall have the meaning set forth in Section 3.

 

“Notice of Conversion” shall have the meaning set forth in Section 4.1.

 

“Purchase Rights” shall have the meaning set forth in Section 5.2.

 

“Put Notice” means an irrevocable written notice from the Company to the Holder
directing the Holder to convert up to twenty (20%) percent of the then
outstanding principal amount of the Note at the Conversion Price.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

 3 

 

 

“Share Delivery Date” shall have the meaning set forth in Section 4.3.

 

“Successor Entity” shall have the meaning set forth in Section 5.4.

 

“Trading Day” means a day on which the principal Trading Market is open for
trading.

 

“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any
successors to any of the foregoing).

 

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market other than the OTC Bulletin Board, the daily volume weighted
average price of the Common Stock for such date (or the nearest preceding date)
on the Trading Market on which the Common Stock is then listed or quoted as
reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City
time) to 4:02 p.m. (New York City time)), (b) if the Common Stock is then quoted
on the OTC Bulletin Board, the volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if
the Common Stock is not then listed or quoted for trading on a Trading Market
and if prices for the Common Stock are then reported in the “Pink Sheets”
published by Pink OTC Markets, 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) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Holders of a majority in interest of the
Notes then outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company. “5 day VWAP” means the VWAP over
five (5) consecutive trading days.

 

Section 2.           Installment Payments. The Company shall pay to the Holder
the aggregate amount of this Note in eighteen (18) equal installments of
$150,062.61 starting on August 1, 2019 and ending on January 1, 2021. To the
extent there are conversions hereunder, the conversions shall be applied to the
last remaining installment amounts in inverse order from date of issuance.

 

Section 3.           Reliance on Note Register Prior to due presentment for
transfer to the Company of this Note, the Company and any agent of the Company
may treat the Person in whose name this Note is duly registered on the Note
Register as the owner hereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not this Note is overdue, and
neither the Company nor any such agent shall be affected by notice to the
contrary.

 

Section 4.           Conversion.

 

4.1 Voluntary Conversion. At any time, and from time to time, until this Note is
no longer outstanding, this Note shall be convertible, in accordance with this
Section 4, into shares of Common Stock at the option of the Holder, (subject to
the conversion limitations set forth in Section 4(e) hereof) as follows:

 

 4 

 

 

(i) The Holder shall effect conversions by delivering to the Company a Notice of
Conversion, the form of which is attached hereto as Annex A (each, a “Notice of
Conversion”), specifying therein the principal amount and accrued interest (if
any) of this Note to be converted and the date on which such conversion shall be
effected (such date, the “Conversion Date”). If no Conversion Date is specified
in a Notice of Conversion, the Conversion Date shall be the date that such
Notice of Conversion is deemed delivered hereunder. To effect conversions
hereunder, the Holder shall not be required to physically surrender this Note to
the Company unless the entire principal amount of this Note has been so
converted. Conversions hereunder shall have the effect of lowering the
outstanding principal amount of this Note in an amount equal to the applicable
conversion. The Holder and the Company shall maintain records showing the
principal amount(s) converted and the date of such conversion(s).

 

(ii) The Holder shall have the right, but not the obligation, to convert, at the
Conversion Price, any amount up to $300,000 on any given Trading Day, with a
maximum conversion amount up to $500,000 during a period of five (5) Trading
Days. Requests by the Holder to convert amounts exceeding $500,000 shall be
subject to the prior written approval of the Company. Notwithstanding the
aforementioned, provided that the daily share trading volume of the Company’s
Common Stock exceeds $2,500,000 on a Trading Day, the limitations aforementioned
shall not apply on that Trading Day.

 

(iii) At any time at which there is no Equity Conditions Failure, the Company
shall have the right. but not the obligation, to direct the Holder, by its
delivery to the Holder of a Put Notice of up to 20% of the then outstanding
principal amount of the Note provided that (x) the Common Stock is traded at a
$1.25 or higher and (y) that the daily share trading volume of the Company’s
Common Stock exceeds 500,000 per day over a five (5) Trading Day period prior to
the date of the Put Notice. The Company shall have the right to provide such Put
Notice once every ten (10) Trading Days.

 

4.2 The conversion price (the “Conversion Price”) in effect on any Conversion
Date shall be the lesser of (i) the average VWAP for the five trading days prior
to the date of conversion multiplied by 1.65  and (ii) $1.00.

 

4.3 Mechanics of Conversion:

 

(i) Conversion Shares Issuable. The number of Conversion Shares issuable upon a
conversion hereunder shall be determined by the quotient obtained by dividing
(x) the outstanding principal amount of this Note, plus accrued interest (if
any) by (y) the Conversion Price.

 

(ii) Delivery of Certificate Upon Conversion. Not later than two (2) Trading
Days after each Conversion Date (the “Share Delivery Date”), the Company shall
deliver, or cause to be delivered, to the Holder an unlegeneded certificate or
certificates representing the number of Conversion Shares being acquired upon
the conversion of this Note. The Company shall use its best efforts to deliver
any certificate or certificates required to be delivered by the Company under
this Section 4.3(ii) electronically through DWAC.

 

(iii) Failure to Deliver Certificates. If, in the case of any Notice of
Conversion, such certificate or certificates are not delivered to or as directed
by the applicable Holder by the Share Delivery Date, the Holder shall be
entitled to elect by written notice to the Company at any time on or before its
receipt of such certificate or certificates, to rescind such Conversion, in
which event the Company shall promptly return to the Holder any original Note
delivered to the Company and the Holder shall promptly return to the Company the
Common Stock certificates issued to such Holder pursuant to the rescinded Notice
of Conversion.

 

 5 

 

 

 

(iv) Obligation Absolute; Partial Liquidated Damages. The Company’s obligations
to issue and deliver the Conversion Shares upon conversion of this Note in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of such Conversion Shares;
provided, however, that such delivery shall not operate as a waiver by the
Company of any such action the Company may have against the Holder. In the event
the Holder of this Note shall elect to convert any or all of the outstanding
principal amount hereof, the Company may not refuse conversion based on any
claim that the Holder or anyone associated or affiliated with the Holder has
been engaged in any violation of law, agreement or for any other reason, unless
an injunction from a court, on notice to Holder, restraining and or enjoining
conversion of all or part of this Note shall have been sought and obtained, and
the Company posts a surety bond for the benefit of the Holder in the amount of
100% of the outstanding principal amount of this Note, which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds of which shall
be payable to the Holder to the extent it obtains judgment. In the absence of
such injunction, the Company shall issue Conversion Shares or, if applicable,
cash, upon a properly noticed conversion. If the Company fails for any reason to
deliver to the Holder such certificate or certificates pursuant to Section
4(3)(ii) by the Share Delivery Date, the Company shall pay to the Holder, in
cash, as liquidated damages and not as a penalty, for each $1,000 of principal
amount being converted, $10 per Trading Day (increasing to $20 per Trading Day
on the fifth (5th) Trading Day after such liquidated damages begin to accrue)
for each Trading Day after such Share Delivery Date until such certificates are
delivered or Holder rescinds such conversion. Nothing herein shall limit a
Holder’s right to pursue actual damages or declare an Event of Default hereunder
for the Company’s failure to deliver Conversion Shares within the period
specified herein and the Holder shall have the right to pursue all remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief. The exercise of any
such rights shall not prohibit the Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable law.

 

(v) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to the Holder such certificate or
certificates by the Share Delivery Date pursuant to Section 4(c)(ii), and if
after such Share Delivery Date the Holder is required by its brokerage firm to
purchase (in an open market transaction or otherwise), or the Holder’s brokerage
firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Conversion Shares which the Holder was entitled to
receive upon the conversion relating to such Share Delivery Date (a “Buy-In”),
then the Company shall (A) pay in cash to the Holder (in addition to any other
remedies available to or elected by the Holder) the amount, if any, by which (x)
the Holder’s total purchase price (including any brokerage commissions) for the
Common Stock so purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that the Holder was entitled to receive from the
conversion at issue multiplied by (2) the actual sale price at which the sell
order giving rise to such purchase obligation was executed (including any
brokerage commissions) and (B) at the option of the Holder, either reissue (if
surrendered) this Note in a principal amount equal to the principal amount of
the attempted conversion (in which case such conversion shall be deemed
rescinded) or deliver to the Holder the number of shares of Common Stock that
would have been issued if the Company had timely complied with its delivery
requirements under Section 4(c)(ii). For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of this Note with respect to which the actual sale price
of the Conversion Shares (including any brokerage commissions) giving rise to
such purchase obligation was a total of $10,000 under clause (A) of the
immediately preceding sentence, the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In and, upon request of the
Company, evidence of the amount of such loss. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon conversion of this Note as
required pursuant to the terms hereof.

 

 6 

 

 

 

(vi) Reservation of Shares Issuable Upon Conversion. The Company covenants that
it will at all times reserve and keep available out of its authorized and
unissued shares of Common Stock for the sole purpose of issuance upon conversion
of this Note, each as herein provided, free from preemptive rights or any other
actual contingent purchase rights of Persons other than the Holder (and the
other Holder of the Notes), not less than such aggregate number of shares equal
to two and one half times the number of shares of the Common Stock as shall be
issuable (taking into account the adjustments and restrictions of Section 5)
upon the conversion of the then outstanding principal amount of this Note and
accrued interest hereunder (if any). The Company covenants that all shares of
Common Stock that shall be so issuable shall, upon issue, be duly authorized,
validly issued, fully paid and nonassessable and able to be resold by the Holder
under Rule 144 without restriction.

 

(vii) Insufficient Authorized Shares. If, notwithstanding Section 4.3(v), and
not in limitation thereof, at any time while any of the Notes remain outstanding
the Company does not have a sufficient number of authorized and unreserved
shares of Common Stock to satisfy its obligation to reserve for issuance upon
conversion of the Notes at least a number of shares of Common Stock equal to the
amount specified in Section 4(3)(v) (an “Authorized Share Failure”), then the
Company shall immediately take all action necessary to increase the Company’s
authorized shares of Common Stock to an amount sufficient to allow the Company
to reserve the applicable amount for the Notes then outstanding. Without
limiting the generality of the foregoing sentence, as soon as practicable after
the date of the occurrence of an Authorized Share Failure, but in no event later
than sixty (60) days after the occurrence of such Authorized Share Failure, the
Company shall hold a meeting of its stockholders for the approval of an increase
in the number of authorized shares of Common Stock. In connection with such
meeting, the Company shall provide each stockholder with a proxy statement and
shall use its best efforts to solicit its stockholders’ approval of such
increase in authorized shares of Common Stock and to cause its board of
directors to recommend to the stockholders that they approve such proposal. In
the event that the Company is prohibited from issuing shares of Common Stock
upon any conversion due to the failure by the Company to have sufficient shares
of Common Stock available out of the authorized but unissued shares of Common
Stock (such unavailable number of shares of Common Stock, the “Authorized
Failure Shares”), in lieu of delivering such Authorized Failure Shares to the
Holder, the Company shall pay cash in exchange for the portion of the Note
convertible into such Authorized Failure Shares at a price equal to the sum of
the product of (x) such number of Authorized Failure Shares and (y) the greatest
closing sale price of the Common Stock on any Trading Day during the period
commencing on the date the Authorized Failure Shares should have been issued
pursuant to the terms of this Note and ending on the date of such issuance of
payment under this Section 4(3).

 

(viii) Fractional Shares. No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of this Note. As to any fraction of a
share which the Holder would otherwise be entitled to purchase upon such
conversion, the Company shall at its election, either pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Conversion Price or round up to the next whole share.

 

 7 

 

 

(ix) Transfer Taxes and Expenses. The issuance of certificates for shares of the
Common Stock on conversion of this Note shall be made without charge to the
Holder hereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificates, provided that, the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of this Note so converted and
the Company shall not be required to issue or deliver such certificates unless
or until the Person or Persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The Company shall pay
all Transfer Agent fees required for same-day processing of any Notice of
Conversion.

 

4.4 Holder’s Conversion Limitation. The Company shall not effect any conversion
of this Note, and a Holder shall not have the right to convert any portion of
this Note, to the extent that after giving effect to the conversion set forth on
the applicable Notice of Conversion, the Holder would beneficially own in excess
of the Beneficial Ownership Limitation (as defined below). For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by
the Holder shall include the number of shares of Common Stock issuable upon
conversion of this Note with respect to which such determination is being made,
but shall exclude the number of shares of Common Stock which are issuable upon
(i) conversion of the remaining, unconverted principal amount of this Note
beneficially owned by the Holder or any of its Affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Company subject to a limitation on conversion or exercise analogous to the
limitation contained herein (including, without limitation, any other Notes)
beneficially owned by the Holder or any of its Affiliates. Except as set forth
in the preceding sentence, for purposes of this Section 4.4, beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. To the extent that the
limitation contained in this Section 4.4 applies, the determination of whether
this Note is convertible (in relation to other securities owned by the Holder
together with any Affiliates) and of which principal amount of this Note is
convertible shall be in the sole discretion of the Holder, and the submission of
a Notice of Conversion shall be deemed to be the Holder’s determination of
whether this Note may be converted (in relation to other securities owned by the
Holder together with any Affiliates) and which principal amount of this Note is
convertible, in each case subject to the Beneficial Ownership Limitation. To
ensure compliance with this restriction, the Holder will be deemed to represent
to the Company each time it delivers a Notice of Conversion that such Notice of
Conversion has not violated the restrictions set forth in this paragraph and the
Company shall have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status as
contemplated above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. For purposes
of this Section 4.4, in determining the number of outstanding shares of Common
Stock, the Holder may rely on the number of outstanding shares of Common Stock
as stated in the most recent of the following: (i) the Company’s most recent
periodic or annual report filed with the Commission, as the case may be, (ii) a
more recent public announcement by the Company, or (iii) a more recent written
notice by the Company or the Company’s transfer agent setting forth the number
of shares of Common Stock outstanding. Upon the written or oral request of a
Holder, the Company shall within two Trading Days confirm orally and in writing
to the Holder the number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company,
including this Note, by the Holder or its Affiliates since the date as of which
such number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of this Note held by the Holder. The Holder, upon
not less than 61 days’ prior notice to the Company, may increase or decrease the
Beneficial Ownership Limitation provisions of this Section 4.4, although at no
time may it be increased to more than 9.99%. Any such increase or decrease will
not be effective until the 61st day after such notice is delivered to the
Company. The Beneficial Ownership Limitation provisions of this paragraph shall
be construed and implemented in a manner otherwise than in strict conformity
with the terms of this Section 4.4 to correct this paragraph (or any portion
hereof) which may be defective or inconsistent with the intended Beneficial
Ownership Limitation contained herein or to make changes or supplements
necessary or desirable to properly give effect to such limitation.

 

 8 

 

 

Section 5.           Certain Adjustments.

 

5.1 Stock Dividends and Stock Splits. If the Company, at any time while this
Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution
or distributions payable in shares of Common Stock on shares of Common Stock or
any common stock equivalents, (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, (iii) combines (including by way of a reverse
stock split) outstanding shares of Common Stock into a smaller number of shares
or (iv) issues, in the event of a reclassification of shares of the Common
Stock, any shares of capital stock of the Company, then the Conversion Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding any treasury shares of the Company)
outstanding immediately before such event, and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this Section 5.1 shall become effective
immediately after the record date for the determination of stockholder entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.

 

5.2 Subsequent Rights Offerings. If the Company, at any time while the Note is
outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to the Holder) entitling them to subscribe for or purchase
warrants, securities or other property pro rata to all or substantially all of
the record holders of any class of Common Stock (the “Purchase Rights”), then
the Holder will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock acquirable
upon complete conversion of this Note (without taking into account any
limitations or restrictions on the convertibility of this Note) 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 (provided, however, to the extent that the Holder’s
right to participate in any such Purchase Right would result in the Holder
exceeding the Beneficial Ownership Limitation, then the Holder shall not be
entitled to participate in such Purchase Right to such extent (or beneficial
ownership of such shares of Common Stock as a result of such Purchase Right to
such extent) and such Purchase Right to such extent shall be held in abeyance
for the Holder until such time, if ever, as its right thereto would not result
in the Holder exceeding the Beneficial Ownership Limitation).

 

5.3 Pro Rata Distributions. If the Company, at any time while this Note is
outstanding, shall distribute to all holders of Common Stock (and not to the
Holder) evidences of its indebtedness or assets (including cash and cash
dividends) or rights or warrants to subscribe for or purchase any security other
than the Common Stock then in each such case the Conversion Price shall be
adjusted by multiplying the Conversion Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the VWAP determined
as of the record date mentioned above, and of which the numerator shall be such
VWAP on such record date less the then per share fair market value at such
record date of the portion of such assets or evidence of indebtedness or rights
or warrants so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.

 

 9 

 

 

5.4 Fundamental Transaction. If at any time while this Note is outstanding the
Company, directly or indirectly in one or more related transactions effects (i)
any merger or consolidation of the Company with or into another Person and the
Company is not the surviving entity, (ii) any sale, lease, license, assignment,
transfer, conveyance or other disposition of all or substantially all of its
assets in one or a series of related transactions, (iii) any, direct or
indirect, purchase offer, tender offer or exchange offer is completed pursuant
to which Holders of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted by the
Holders of 50% or more of the outstanding Common Stock, (iv) any
reclassification, reorganization or recapitalization of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property, (v)
consummates a stock or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person whereby such other Person acquires
more than 50% of the outstanding shares of Common Stock (not including any
shares of Common Stock held by the other Person or other Persons making or party
to, or associated or affiliated with the other Persons making or party to, such
stock or share purchase agreement or other business combination) (each a
“Fundamental Transaction”), then, upon any subsequent conversion of this Note,
the Holder shall have the right to receive, for each Conversion Share that would
have been issuable upon such conversion immediately prior to the occurrence of
such Fundamental Transaction (without regard to any limitation in Section 4.4 on
the conversion of this Note), the number of shares of Common Stock of the
successor or acquiring corporation or of the Company, if it is the surviving
corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number
of shares of Common Stock for which this Note is convertible immediately prior
to such Fundamental Transaction (without regard to any limitation in Section 4.4
on the conversion of this Note). For purposes of any such conversion, the
determination of the Conversion Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one (1) share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration it receives upon any conversion of this Note
following such Fundamental Transaction. The Company shall cause any successor
entity in a Fundamental Transaction in which the Company is not the survivor
(the “Successor Entity”) to assume in writing all of the obligations of the
Company under this Note in accordance with the provisions of this Section 5.4
and shall, at the option of the holder of this Note, deliver to the Holder in
exchange for this Note a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to this Note which is
convertible for a corresponding number of shares of capital stock of such
Successor Entity (or its parent entity) equivalent to the shares of Common Stock
acquirable and receivable upon conversion of this Note (without regard to any
limitations on the conversion of this Note) at the closing of such Fundamental
Transaction, and with a conversion price which applies the conversion price
hereunder to such shares of capital stock (but taking into account the relative
value of the shares of Common Stock pursuant to such Fundamental Transaction and
the value of such shares of capital stock, such number of shares of capital
stock and such conversion price being for the purpose of protecting the economic
value of this Note immediately prior to the consummation of such Fundamental
Transaction). Upon the occurrence of any such Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of this Note and
the other Transaction Documents referring to the “Company” shall refer instead
to the Successor Entity), and may exercise every right and power of the Company
and shall assume all of the obligations of the Company under this Note and the
other Transaction Documents with the same effect as if such Successor Entity had
been named as the Company herein. Upon the occurrence of a Fundamental
Transaction, all amounts due and owing under this Note shall become immediately
due and payable in full , at the option of the Holder, either by way of
conversion of all outstanding amounts under the Note or payment in full to the
Holder of all amounts due under the Note by the Company.

 

 10 

 

 

 

5.5 Calculations. All calculations under this Section 5.5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 5.5, the number of shares of Common Stock deemed to be issued
and outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding any treasury shares of the Company) issued and
outstanding.

 

5.6 Notice to the Holder.

 

i)       Adjustment to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any provision of this Section 5.6, the Company shall
promptly deliver to each Holder a notice setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.

 

ii)       Notice to Allow Conversion by Holder. If (A) the Company shall declare
a dividend (or any other distribution in whatever form) on the Common Stock, (B)
the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the granting to
all Holder of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the
approval of any stockholder of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company, then, in each case, the Company shall cause to be
filed at each office or agency maintained for the purpose of conversion of this
Note, and shall cause to be delivered to the Holder at its last address as it
shall appear upon the Note Register, at least ten (10) calendar days prior to
the applicable record or effective date hereinafter specified, a notice stating
(a) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the Holder of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (b) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holder of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, provided that the
failure to deliver such notice or any defect therein or in the delivery thereof
shall not affect the validity of the corporate action required to be specified
in such notice. To the extent that any notice provided hereunder constitutes, or
contains, material, non-public information regarding the Company or any of the
Subsidiaries, the Company shall simultaneously file such notice with the
Commission pursuant to a Current Report on Form 8-K. The Holder shall remain
entitled to convert this Note during the 20-day period commencing on the date of
such notice through the effective date of the event triggering such notice
except as may otherwise be expressly set forth herein.

 

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Section 6.            Prepayment of the Note

 

The Company shall have the right to deliver to the Holder, at any time, a notice
in writing of its irrevocable election to repay some or all of the then
outstanding principal amount of this Note for cash on the tenth (10th) Trading
Day following the written notice of prepayment.

 

Section 7.           Negative Covenants

 

As long as any portion of this Note remains outstanding, the Company shall not,
and shall not permit any of the Subsidiaries to, directly or indirectly:

 

(i)amend its charter documents, including, without limitation, its certificate
of incorporation and bylaws, in any manner that materially and adversely affects
any rights of the Holder;

 

(ii)pay cash dividends or distributions on any equity securities of the Company;

 

(iii)enter into any transaction with any Affiliate of the Company which would be
required to be disclosed in any public filing with the Commission, unless such
transaction is expressly approved by a majority of the disinterested directors
of the Company (even if less than a quorum otherwise required for board
approval);

 

(iv)incur, guarantee or assume or suffer to exist any indebtedness, other than
the Indebtedness evidenced by this Note and the other Notes, except for debt
incurred for working capital, which is expressly subordinate in a form
acceptable to the Purchasers to the rights of the Purchasers and for which no
payments may be made at any time when Notes remain outstanding;    

(v)redeem, repurchase or declare or pay any cash dividend or distribution on any
of its capital stock;

 

(vi)sell, lease, license, assign, transfer, spin-off, split-off, close, convey
or otherwise dispose of any assets or rights of the Company or any Subsidiary
owned or hereafter acquired whether in a single transaction or a series of
related transactions, other than (i) sales, leases, licenses, assignments,
transfers, conveyances and other dispositions of such assets or rights by the
Company and its Subsidiaries in the ordinary course of business consistent with
its past practice for fair consideration, (ii) sales of inventory and product in
the ordinary course of business consistent with past practice for fair
consideration, and (iii) a sale or disposition of assets to a third party that
has been approved by the independent members of the Board of Directors; or

 

(vii)enter into any agreement with respect to any of the foregoing.

 

Section 8.            Events of Default.

 

 12 

 

 

(i)“Event of Default” means, wherever used herein, any of the following events
(whatever the reason for such event and whether such event shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):

 

   i.          any default in the payment of (A) the principal amount of the
Note or (B) interest (if any), liquidated damages and other amounts owing to the
Holder on the Note, as and when the same shall become due and payable which
default, solely in the case of an interest payment or other default under clause
(B) above, is not cured within three (3) Trading Days after receipt of written
notice of such default;

 

   ii.          the Company shall fail to observe or perform any other covenant
or agreement contained in the Notes (other than a breach by the Company of its
obligations to deliver shares of Common Stock to the Holder upon conversion,
which breach is addressed in clause (ix) below) which failure is not cured, if
possible to cure, within the earlier to occur of (A) five (5) Trading Days after
notice of such failure sent by the Holder or by any other Holder to the Company
and (B) ten (10) Trading Days after the Company has become aware of such
failure;

 

   iii.          a default or event of default (subject to any grace or cure
period provided in the applicable agreement, document or instrument) shall have
been declared under (A) any of the Transaction Documents or (B) any other
material agreement, lease, document or instrument to which the Company or any
Subsidiary is obligated (and not covered by clause (v) below);

 

   iv.          the Company or any subsidiary (as such term is defined in Rule
1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;

 

   v.           the Company or any Subsidiary shall default on any of its
obligations under any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced, any indebtedness for
borrowed money or money due under any long term leasing or factoring arrangement
that (a) involves an obligation greater than $100,000, whether such indebtedness
now exists or shall hereafter be created, and (b) results in such indebtedness
becoming or being declared due and payable prior to the date on which it would
otherwise become due and payable.

 

   vi.          the Common Stock shall not be eligible for listing or quotation
for trading on a Trading Market and shall not be eligible to resume listing or
quotation for trading thereon within five Trading Days;

 

   vii.          the Company shall be a party to any Change of Control
Transaction or Fundamental Transaction or shall agree to sell or dispose of all
or in excess of 50% of its assets in one transaction or a series of related
transactions (whether or not such sale would constitute a Change of Control
Transaction);

 

 13 

 

  

   viii.          the Company shall fail for any reason to deliver certificates
to a Holder prior to the fifth Trading Day after a Conversion Date pursuant to
Section 4(c) or the Company shall provide at any time notice to the Holder,
including by way of public announcement, of the Company’s intention to not honor
requests for conversions of any Notes in accordance with the terms hereof; or

 

   ix.          any monetary judgment, writ or similar final process shall be
entered or filed against the Company, any subsidiary or any of their respective
property or other assets for more than $100,000, and such judgment, writ or
similar final process shall remain unvacated, unbonded or unstayed for a period
of 45 calendar days.

 

(ii)Remedies Upon Event of Default. If any Event of Default occurs the
outstanding amount under this Note, liquidated damages and other amounts owing
in respect thereof through the date of acceleration, shall become, at the
Holder’s election, immediately due and payable in cash. Commencing five days
after the occurrence of any Event of Default that results in the eventual
acceleration of this Note, the interest rate on this Note shall accrue at an
interest rate equal to the lesser of 18% per annum or the maximum rate permitted
under applicable law. Upon the payment in full of the outstanding amount of this
Note, the Holder shall promptly surrender this Note to or as directed by the
Company. In connection with such acceleration described herein, the Holder need
not provide, and the Company hereby waives, any presentment, demand, protest or
other notice of any kind, and the Holder may immediately and without expiration
of any grace period enforce any and all of its rights and remedies hereunder and
all other remedies available to it under applicable law. Such acceleration may
be rescinded and annulled by Holder at any time prior to payment hereunder and
the Holder shall have all rights as a holder of the Note until such time, if
any, as the Holder receives full payment pursuant to this Section 8(ii). No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.

 

Section 9.           Miscellaneous.

 

(i)Notices. Any and all notices or other communications or deliveries to be
provided by the Holder hereunder, including, without limitation, any Notice of
Conversion, shall be in writing and delivered personally, by facsimile, or sent
by a nationally recognized overnight courier service, addressed to the Company,
at the address set forth above, or such other facsimile number or address as the
Company may specify for such purposes by notice to the Holder delivered in
accordance with this Section 9(i). Any and all notices or other communications
or deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service addressed to the Holder at the facsimile number or address of
the Holder appearing on the books of the Company, or if no such facsimile number
or address appears on the books of the Company, at the principal place of
business of the Holder. Any notice or other communication or deliveries
hereunder 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 any date, (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, (C) the second 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.

 

 14 

 

 

(ii)Absolute Obligation. Except as expressly provided herein, no provision of
this Note shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, liquidated damages and accrued
interest (if any), as applicable, on this Note at the time, place, and rate, and
in the coin or currency, herein prescribed. This Note is a direct debt
obligation of the Company. This Note ranks pari passu with all other Notes now
or hereafter issued under the terms set forth herein.

 

(iii)Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Note, or in lieu of or in substitution
for a lost, stolen or destroyed Note, a new Note for the principal amount of
this Note so mutilated, lost, stolen or destroyed, but only upon receipt of
evidence of such loss, theft or destruction of such Note, and of the ownership
hereof, reasonably satisfactory to the Company.

 

(iv)Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Note shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflict of laws thereof. Each party agrees
that all legal proceedings concerning the interpretation, enforcement and
defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective Affiliates, directors,
officers, shareholder, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the “New
York Courts”). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts 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 such New York Courts, or such New York Courts are
improper or 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 Note 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 applicable law. Each
party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Note or the transactions contemplated hereby.
If any party shall commence an action or proceeding to enforce any provisions of
this Note, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its attorney’s fees and other costs and
expenses incurred in the investigation, preparation and prosecution of such
action or proceeding.

 

 15 

 

 

(v)Amendments. Waiver. No provision of this Note may be waived, modified,
supplemented or amended except in a written instrument signed, in the case of an
amendment, by each of the Company and the Holder or, in the case of a waiver, by
the party against whom enforcement of any such waived provision is sought. Any
waiver by the Company or the Holder of a breach of any provision of this Note
shall not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Note. The failure of
the Company or the Holder to insist upon strict adherence to any term of this
Note on one or more occasions shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term or
any other term of this Note on any other occasion.

 

(vi)Severability. If any provision of this Note is invalid, illegal or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder violates the
applicable law governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum rate of interest permitted
under applicable law. The Company covenants (to the extent that it may lawfully
do so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law or other law which would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on this Note as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Note, and the Company (to the
extent it may lawfully do so) hereby expressly waives all benefits or advantage
of any such law, and covenants that it will not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the Holder,
but will suffer and permit the execution of every such as though no such law has
been enacted.

 

(vii)Successors and Assigns. The terms and conditions of this Note shall inure
to the benefit of and be binding upon the respective successors and assigns of
the parties. The Company may not assign this note or delegate any of its
obligations hereunder without the written consent of the Holder. The Holder may
assign this Note, in whole or in part, and its rights hereunder at any time
without consent of Company.

 

(viii)Next Business Day. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day.

 

(ix)Headings. The headings contained herein are for convenience only, do not
constitute a part of this Note and shall not be deemed to limit or affect any of
the provisions hereof.

 

*********************

 

(Signature Pages Follow)

 

 16 

 

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a
duly authorized officer as of the date first above indicated.

 

  PRECIPIO,  INC.           Name: Ilan Danieli   Title:CEO

 

 17 

 

 

ANNEX A

CONVERSION NOTICE

 

The undersigned hereby elects to convert principal under the sConvertible
Promissory Note due January 1, 2021of Precipio, Inc., a Delaware corporation
(the “Company”), into shares of common stock (the “Common Stock”), of the
Company according to the conditions hereof, as of the date written below. If
shares of Common Stock are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if any.

 

By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that its ownership of the Common Stock does not exceed
the amounts specified under Section 4 of this Note, as determined in accordance
with Section 13(d) of the Exchange Act.

 

The undersigned agrees to comply with the prospectus delivery requirements under
the applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.

 

Conversion calculations:

 

  Date to Effect     Conversion:    

 

  Principal Amount of Note to be Converted:                       Number of
shares of Common Stock to be issued:                    

 

  Signature:    

 

  Name:    

 

  Address for Delivery of Common Stock Certificates: Or  

 

  DWAC Instructions:  

 

  Broker No:    

 

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