EXHIBIT 10.31

 

THIS NOTE AND THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED PURSUANT TO THE
CONVERSION OF THIS NOTE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”).
SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION UNLESS THE TRANSFER IS IN ACCORDANCE WITH RULE 144 OR A SIMILAR
RULE AS THEN IN EFFECT UNDER THE SECURITIES ACT OR UNLESS THE COMPANY RECEIVES
AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING SUCH SALE OR TRANSFER
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT.
THIS NOTE IS ISSUED IN A SERIES OF NOTES UP TO AN AGGREGATE PRINCIPAL AMOUNT OF
$2,500,000.

 

SPOTLIGHT INNOVATION INC.

 

CONVERTIBLE NOTE

 

Issuance Date: _______ [   ], 2016

$______,000.00

 

FOR VALUE RECEIVED, Spotlight Innovation Inc., a Nevada corporation (the
“Company”), hereby promises to pay to the order of __________, (the “Holder”)
the principal sum of ______ (US$_____) in lawful money of the United States of
America, together with interest thereon at the rate of seven and one half
percent (7.5% percent) per annum. Interest will begin to accrue on the Issuance
Date of this Convertible Note (the “Note”). Interest shall be computed on the
basis of a 365-day year for the actual number of days elapsed and shall compound
annually.

 

1. Interest Payments. Interest payments will be made by the Company in shares of
Common Stock of the Company upon conversion of this instrument as set forth in
Section 2 below.

 

2. Conversion. The principal amount and accrued interest of this Note is
convertible into fully paid and nonassessable shares of Common Stock of the
Company as set forth below:

 

(a) Optional Conversion. The Holder shall have the right from time to time, and
at any time during the period beginning on the Issuance Date and ending on the
day immediately prior to the Maturity Date (as defined below) to convert all or
any part of the outstanding and unpaid principal amount and interest of this
Note into fully paid and nonassessable shares of Common Stock at a price per
share equal to Ninety Percent (90%) of the closing bid price of the Common Stock
during the 20 consecutive trading days immediately preceding such conversion. If
the Holder elects such Optional Conversion the Holder shall send the Company the
completed conversion notice annexed hereto. Provided, however, that in no event
shall the 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 the 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 unexercised
or unconverted portion of any other security of the Company 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 the
Holder and its affiliates of more than 4.99% of the outstanding shares of Common
Stock.

 

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(b) Automatic Conversion Upon Maturity Date. In the event this Note remains
outstanding on the Maturity Date, than the outstanding principal amount and
interest due on this Note on the Maturity Date shall automatically convert into
shares of common stock of the Company, without any further action by the Holder
at the Maturity Date (as defined in Section 4 below), at a price per share equal
to Eighty Percent (80%) of the closing bid price of the Common Stock during the
20 consecutive trading days immediately preceding the Maturity Date.

 

(c) Fractional Shares. The Company shall not issue any fraction of a share of
Common Stock upon any conversion. If the issuance would result in the issuance
of a fraction of a share of Common Stock, the Company shall round such fraction
of a share of Common Stock up to the nearest whole share. The Company shall pay
any and all transfer, stamp, and similar taxes that may be due with respect to
the issuance and delivery of Common Stock upon any Conversion.

 

(d) Adjustment of Conversion Price upon Subdivision or Combination of Common
Stock. If the Company, at any time while this Note is outstanding, shall (i) pay
a stock dividend or otherwise make a distribution or distributions on shares of
its Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock, (ii) subdivide outstanding shares of Common Stock into a
larger number of shares, (iii) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (iv)
issue by reclassification of shares of the Common Stock any shares of capital
stock of the Company, then the applicable conversion price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding before such event, and of
which the denominator shall be the number of shares of Common Stock outstanding
after such event. Any adjustment made pursuant to this Section shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution, or shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.

 

(e) Mechanics of Conversion. Subject to Section 2(a) and (b) herein, this Note
may be converted by the Holder in whole or in part at any time from time to time
after the Issuance Date and ending on the day immediately prior to the Maturity
Date (as defined below), in the case of an Optional Conversion pursuant to
Section 2(a) above, by (A) submitting to the Company a Notice of Conversion (by
facsimile, e-mail or other reasonable means of communication dispatched on the
Conversion Date prior to 6:00 p.m., Iowa time), and (B) subject to Section 2(f),
surrendering this Note at the principal office of the Company. On the Maturity
Date, in the event this Note, or any portion thereof, remains outstanding this
Note shall automatically be deemed converted (and cancelled) as set forth in
Section 2(b) above, which the Holder hereby consents. The Holder further agrees
that in the even this Note remains outstanding on the Maturity Date he/she/it
will send the original Note to the Company for cancellation via overnight
courier marked for overnight delivery, within three business days after the
Maturity Date.

 

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(f) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary
set forth herein, upon conversion of this Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender this Note to
the Company unless the entire unpaid principal amount of this Note is so
converted. The Holder and the Company shall maintain records showing the
principal amount so converted and the dates of such conversions or shall use
such other method, reasonably satisfactory to the Holder and the Company, so as
not to require physical surrender of this Note upon each such conversion.

 

(g) Delivery of Common Stock Upon Conversion. Upon receipt by the Company from
the Holder of a facsimile transmission or e-mail (or other reasonable means of
communication) of a Notice of Conversion meeting the requirements for conversion
as provided in this Section, the Company shall issue and deliver or cause to be
issued and delivered to or upon the order of the Holder certificates for the
Common Stock issuable upon such conversion within five (5) business days after
such receipt (and, solely in the case of conversion of the entire unpaid
principal amount hereof, surrender of this Note) in accordance with the terms
hereof.

 

(h) Concerning the Shares. The shares of Common Stock issuable upon conversion
of this Note may not be sold or transferred unless (i) such shares are sold
pursuant to an effective registration statement under the Act, or (ii) the
Company or its transfer agent shall have been furnished with an opinion of
counsel (which opinion shall be the responsibility of the Holder to provide, and
shall be in form, substance and scope customary for opinions of counsel in
comparable transactions) to the effect that the shares to be sold or transferred
may be sold or transferred pursuant to an exemption from such registration or
(iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or
a successor rule) (“Rule 144”) or (iv) such shares are transferred to an
“affiliate” (as defined in Rule 144) of the Company who agrees to sell or
otherwise transfer the shares only in accordance with this Section and who is an
Accredited Investor. Until such time as the shares of Common Stock issuable upon
conversion of this Note have been registered under the Act or otherwise may be
sold pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately sold, each certificate for
shares of Common Stock issuable upon conversion of this Note that has not been
so included in an effective registration statement or that has not been sold
pursuant to an effective registration statement or an exemption that permits
removal of the legend, shall bear a legend substantially in the following form,
as appropriate:

 

“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.”

 

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The legend set forth above shall be removed and the Company shall issue to the
Holder a new certificate therefore free of any transfer legend if (i) the
Company or its transfer agent shall have received an opinion of counsel, in
form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Common Stock
may be made without registration under the Act, which opinion shall be accepted
by the Company so that the sale or transfer is effected or (ii) in the case of
the Common Stock issuable upon conversion of this Note, such security is
registered for sale by the Holder under an effective registration statement
filed under the Act or otherwise may be sold pursuant to Rule 144 without any
restriction as to the number of securities as of a particular date that can then
be immediately sold.

 

3. Events of Default. Each of the following shall constitute an “Event of
Default.”

 

(a) Failure to make any required payment after ten (10) days of receipt of
notice by Holder that such payment was not made; or

 

(b) Upon any Voluntary Bankruptcy or Insolvency Proceedings, which is defined as
any of the following actions by the Company: (i) applying for, or consent to the
appointment of, a receiver, trustee, liquidator or custodian of itself or of all
or a substantial part of its property; (ii) making a general assignment for the
benefit of its creditors; (iii) dissolution or liquidation; (iv) commencing a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or consent to any such relief or
the appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it; or (v) taking any
material action to effect any of the foregoing.

 

(c) upon any Involuntary Bankruptcy or Insolvency Proceedings, which is defined
as proceedings for the appointment of a receiver, trustee, liquidator or
custodian of the Company or of all or a substantial part of the property
thereof, or an involuntary case or other proceedings seeking liquidation,
reorganization or other relief with respect to the Company or the debts thereof
under any bankruptcy, insolvency, or other similar law now or hereafter in
effect shall be commenced and an order for relief entered or such proceeding
shall not be dismissed or discharged within sixty (60) days of commencement.

 

Upon the occurrence of any Event of Default, the Holder may, at its option,
declare in writing to the Company all principal and interest due hereunder to be
due and payable immediately and, upon any such declaration, the same shall
become and be immediately due and payable. Upon the occurrence of any Event of
Default, the Holder may, in addition to declaring all amounts due hereunder to
be immediately due and payable, pursue any available remedy, whether at law or
in equity.

 

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4. Maturity Date. The “Maturity Date” shall be the two-year anniversary of the
Issuance Date.

 

5. Notices.

 

(a) Any notices, consents, waivers or other communications required or permitted
to be given under the terms hereof must be in writing and will be deemed to have
been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
when sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
(1) business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:

 

If to the Company, to:

Spotlight Innovation Inc.

 

6750 Westown Parkway, Suite 200-226

West Des Moines, Iowa 50266

Attention: President

 

Telephone: (515) 274-9087

 

If to the Holder, at such address as set forth on the signature page attached
hereto.

 

6. Choice of law. This Note shall be exclusively governed by and construed in
accordance with the laws of the State of Iowa without regard to the principles
of conflict of laws. The parties further agree that any action between them
shall exclusively be heard in Polk County, Iowa.

 

7. Waiver of Presentment, Demand and Dishonor. No delay on the part of the
Holder in exercising any power or right hereunder shall operate as a waiver of
any such power or right; nor shall any single or partial exercise of any power
or right preclude any other or further exercise of such power or right, or the
exercise of any other power or right, and no waiver whatsoever shall be valid
unless in writing, signed by the Holder, and then only to the extent expressly
set forth herein. No remedy is exclusive of any other remedy and all remedies
shall be cumulative to the maximum extent permitted by applicable law. Except as
otherwise set forth herein, the Company hereby waives presentment, demand for
repayment, diligence, notice of dishonor and all other notices or demands in
connection with the delivery acceptance, performance, default or endorsement of
this Note.

 

8. Severability. If any provision of this Note is determined by any court or
arbitrator of competent jurisdiction to be invalid, illegal or unenforceable, in
any respect under applicable law, such provision will be enforced to the maximum
extent possible given the intent of the parties hereto, and the balance of this
Note shall remain in effect.

 

9. Transaction Costs. Each party shall be responsible for all costs and expenses
it incurs in connection with the preparation of this Note.

 

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

 

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

 

 COMPANY:

SPOTLIGHT INNOVATION INC.

    By:

 

Name:

Cristopher Grunewald   Title: President/CEO  

 

IN WITNESS WHEREOF, the undersigned Holder hereby agrees to the terms set forth
in this Note.

  

By:

 

Name:

 

 

Address

 

 

 

 

 

 

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EXHIBIT I
CONVERSION NOTICE

 

The undersigned hereby irrevocably elects to convert the Note originally dated
________________ into shares of Common Stock of Spotlight Innovation Inc.,
according to the conditions stated therein, as of the Conversion Date written
below as follows:

 

Conversion Date:

 

 

Principal Amount ($)

$_________________

Interest ($)

$_________________

Total Amount converted:

$_________________

 

 

Conversion Price:

$_________________

 

 

Number of shares of Common Stock to be issued:

__________________

 

Please issue the shares of Common Stock in the following name and to the
following address:

 

Name:

Address:

 

 

 

 

 

Authorized Signature:

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

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