EXHIBIT 10.1

 

US $4,235,000 September 12, 2012   New York, New York

 

SERIES D SENIOR SECURED PROMISSORY NOTE

 

For value received, and on the terms and subject to the conditions set forth
herein, MedPro Safety Products, Inc., a corporation formed and existing under
the laws of the State of Nevada (the “Company”), HEREBY PROMISES TO PAY to
Vision Opportunity Master Fund, Ltd. (the “Noteholder”), on the Maturity Date
(defined below) the principal sum of US $4,235,000 (the “Loan”), plus any unpaid
interest accrued thereon, or such lesser amount as shall be equal to the unpaid
principal amount of the Loan borrowed hereunder plus such interest. The Company
hereby promises to make principal repayments and to pay interest on the dates
and at the rate or rates provided for herein.

 

This Note is one of a series of senior secured promissory notes in the aggregate
principal amount of up to $6,035,000 issued by the Company during the period
commencing on the date hereof and ending not later than October 12, 2012, which
notes, together with any notes from time to time issued in replacement thereof,
whether pursuant to transfer or assignment or otherwise, are hereafter sometimes
collectively referred to as the “Series D Notes”, each of which Series D Notes
is substantially in the form of this Note.

 

In connection with each drawdown of amounts under this Note, the Noteholder will
receive shares of Series D Preferred Stock of the Company, par value $0.01 per
share (the “Series D Shares”) issued hereunder.

 

1.          Certain Terms Defined. The following terms for all purposes of this
Note shall have the respective meanings specified below.

 

“Additional Financing” has the meaning set forth in Section 2(b).

 

“Aggregate Borrowing” means the actual cumulative amount borrowed by the Company
pursuant to this Note as of any applicable date.

 

“Automation Equipment Lease” means the equipment lease or similar financing
which may be obtained by the Company in connection with equipment required to
manufacture the Company’s drug delivery product lines, which are secured solely
by the equipment so leased.

 

“Available Funding” means $4,235,000 less all amounts drawn pursuant to Section
2(a).

 

“Bonus Shares” has the meaning set forth in Section 5(a).

 

“Budget” means the detailed monthly budget approved by the board of directors of
the Company and the Majority Noteholder(s) prior to the date hereof which
provides for a spending plan of the Company of not more than $4.235 million, in
the aggregate, through September 30, 2013, the final version of which Budget has
been presented to Vision Opportunity Master Fund, Ltd. concurrently with the
Closing. If the aggregate principal amount of all Series D Notes exceeds $4.235
million, then the board of directors of the Company will approve a revised
Budget that provides for a spending plan of the Company of not more than such
aggregate principal amount of all Series D Notes.

 

“Business Day” means any day except a Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized by law to close.

 

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“Change of Control” means any transaction or series of related transactions
(including without limitation any reorganization, merger, consolidation, sale of
assets or sale of stock) that will result in (i) the sale of all or
substantially all of the assets of the Company, (ii) a change in ownership of
50% or more of the Company’s then outstanding capital stock, in one or a series
of transactions occurring within a period of six (6) months, or more than 50% of
the existing board of directors of the Company are replaced and the replacement
directors are not reasonably acceptable to Vision Opportunity Master Fund, Ltd.,
or (iii) a consolidation or merger of the Company with or into any other entity
(or other corporate reorganization) immediately after which the shareholders of
the Company hold less than fifty percent (50%) of the voting power of the
surviving entity.

 

“Collateral” has the meaning set forth in Schedule II.

 

“Collateral Agent” means Vision Opportunity Master Fund, Ltd., in its capacity
as the collateral agent.

 

“Commission Documents” has the meaning set forth in Section 9(e).

 

“Commitment” shall equal the principal amount of this Note.

 

“Common Stock” means the common stock of the Company, par value $ 0.001 per
share.

 

“Company” has the meaning set forth in the introductory paragraphs.

 

“Conversion Shares” has the meaning set forth in Section 9(v).

 

“Equity Securities” means (i) any shares of any class of capital stock of the
Company, and (ii) any debt or equity outstanding or similar instrument
convertible into or exercisable or exchangeable for, with or without
consideration, any shares of any class of capital stock of the Company.

 

“Event of Default” has the meaning set forth in Section 8.

 

“Excess Funding Capacity” means, on any given Funding Date, (i) the cumulative
amount of all permitted borrowings pursuant to this Note contemplated by the
Funding Schedule during the period prior to such Funding Date, minus (ii) the
Aggregate Borrowing as of the date that is immediately prior to such Funding
Date.

 

“Exchange Act” has the meaning set forth in Section 9(e).

 

“Form 10-K” has the meaning set forth in Section 9(e).

 

“Form 10-Q” has the meaning set forth in Section 9(e).

 

“Funding Date” has the meaning set forth in Section 2(a).

 

“Funding Schedule” has the meaning set forth in Section 2(a).

 

“GAAP” has the meaning set forth in Section 9(e).

 

“Indebtedness” means (a) any liabilities for borrowed money or other amounts
owed (other than trade accounts payable incurred in the ordinary course of
business) and (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 Company’s balance sheet (or the notes thereto).

 

“Indemnified Party” has the meaning set forth in Section 20.

 

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“Intellectual Property Rights” has the meaning set forth in Section 9(r).

 

“Loan” has the meaning set forth in the introductory paragraphs.

 

“Majority Noteholder(s)” means the holders of at least 51% in principal amount
of the Series D Notes then outstanding.

 

“Material Adverse Effect’ shall mean any fact, circumstance, condition, event,
change, effect or occurrence that, individually or in the aggregate, has had, or
is reasonably likely to have, an adverse effect of at least $250,000 on or with
respect to the financial condition, business, assets, or results of operations
of the Company and its Subsidiaries taken as a whole.

 

“Maturity Date” means December 31, 2013, or such earlier date as may be provided
in Section 7; provided that if any such date is not a Business Day, then such
date shall be the next succeeding Business Day.

 

“Note” shall mean this Senior Secured Promissory Note as amended, from time to
time, in accordance with the terms hereof.

 

“Notice” has the meaning set forth in Section 2(a).

 

“Noteholder” has the meaning set forth in the introductory paragraphs.

 

“Noteholder Group” means the holders of the Series D Notes.

 

“Period” means the period beginning on the date hereof through and including the
Maturity Date.

 

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, or other entity.

 

“Rule 144” means Rule 144 promulgated by the Securities and Exchange 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 Securities and
Exchange Commission having substantially the same effect as such Rule.

 

“Securities Act” has the meaning set forth in Section 9(u).

 

“Senior Notes” means the MedPro Investments Senior Secured 14% Notes due 2016.

 

“Senior Notes Security Agreement” means the Pledge and Security Agreement dated
as of September 1, 2010, by MedPro Safety Products, Inc. to U.S. Bank National
Association, as trustee.

 

“Series D Notes” has the meaning set forth in the introductory paragraphs.

 

“Series D Shares” has the meaning set forth in the introductory paragraphs.

 

“Series D Certificate of Designation” means the Certificate of Designation of
the Series D Preferred Stock of the Company, filed with the Secretary of State
of the State of Nevada on the date hereof, as may be amended from time to time.

 

“Subsidiary” means any corporation or other entity of which at least a majority
of (i) the equity, or (ii) the securities or other ownership interest having
ordinary voting power (absolutely or contingently) for the election of directors
or other persons performing similar functions, are owned directly or indirectly
by the Company and/or any of its other Subsidiaries.

 

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Terms used but not defined herein that are defined in the Uniform Commercial
Code in effect in the State of New York shall have the meanings given to such
terms therein.

 

2.           Loan Drawdown; Cessation of Drawdowns.

 

(a)          During the Period and subject to Sections 2(b) and 2(c), the
Company may borrow from the Noteholder, and the Noteholder will loan to the
Company, an aggregate amount not to exceed the Commitment, which loans shall be
made at such times (each, a “Funding Date”) and are contemplated to be in such
amounts as are set forth on Schedule I attached hereto (the “Funding Schedule”).
As a condition to the Noteholder making any loan hereunder, the Company shall
provide to the Noteholder, at least three (3) Business Days’ prior to each
Funding Date, written notice (each, a “Notice”) of a drawdown request for an
amount of up to the sum of (i) the amount contemplated in the Funding Schedule
for such Funding Date, and (ii) the amount of Excess Funding Capacity as of such
Funding Date, which Notice shall contain a statement of the Aggregate Borrowing
as of immediately prior to the applicable Funding Date and a certification that,
as of the applicable Funding Date, (i) no Event of Default is or will be in
effect, (ii) the Company has complied and is in compliance as of the applicable
Funding Date with all covenants set forth in Section 10, (iii) the
representations and warranties of the Company set forth in Section 9 are and
will be on the applicable Funding Date true and correct in all material
respects, and (vi) any other documentation reasonably requested by the
Noteholder. The form of the Notice is attached hereto as Schedule IV. Upon the
reasonable satisfaction of the Noteholder that the foregoing conditions
precedent have been satisfied (or waived by the Noteholder), the Noteholder
shall lend, and the Company shall borrow, on the Funding Date such amount as set
forth in such Notice. The Company agrees that, in respect of any amounts
borrowed by the Company under the Series D Notes, the Company will make such
borrowings pro rata from all holders of Series D Notes in accordance with the
relative principal amounts of such Series D Notes.

 

(b)          In the event that during the Period the Company enters into a new
equity financing (an “Additional Financing”) permitted under the terms and
conditions set forth herein (including Section 10(k)), which Additional
Financing is (i) made on terms no less favorable to the Company than those set
forth in this Note, and (ii) in an aggregate amount which equals or exceeds the
sum of (A) the aggregate Available Funding under all Series D Notes at the time
of the closing of such Additional Financing, and (B) $500,000, then the Company
shall have the right, at its sole discretion, to cancel all remaining borrowings
under the Funding Schedule of all (but not less than all) of the Series D Notes,
which cancellation must be made by written notice to the Noteholder not less
than five (5) Business Days prior to the anticipated closing of the Additional
Financing and which notice shall contain all relevant documents and agreements
entered into by the Company in connection with such Additional Financing. Any
election by the Noteholder to participate in such Additional Financing shall be
made at least two (2) Business Days prior to the anticipated closing of the
Additional Financing. In the event that the Company elects to so cancel all
remaining borrowings under the Financing Schedule of all the Series D Notes,
then the Noteholder shall have the right, at its sole discretion, to participate
in such Additional Financing by investing up to an amount equal to the Available
Funding into the Company on the same terms and conditions as the other investors
in such Additional Financing. In the event that such Additional Financing fails
to close, any cancellation by the Company pursuant to this Section 2(b) shall be
rescinded and the Company shall continue to make the remaining borrowings in
accordance with the Funding Schedule. For the avoidance of doubt, in the event
of any cancellation of remaining borrowings pursuant to this Section 2(b), the
Noteholder shall be entitled to keep all Series D Shares that it has received
pursuant to Section 5(a) prior to such cancellation.

 

(c)          In the event that during the Period the Company enters into an
Additional Financing and the proceeds to the Company from such Additional
Financing equals or exceeds the sum of (X) the Available Funding, and (Y) $2.0
million, then, unless the Company has exercised its right to cancel all
remaining borrowings pursuant to Section 2(b), the Noteholder shall have the
right, at its sole discretion, to elect to reduce the Available Funding by 50%
(in which event the amount of each loan contemplated in the Funding Schedule on
each Funding Date shall be reduced by 50% and the amounts of Series D Shares
received by the Noteholder in connection with such loan shall be reduced by
50%), which election must be made by written notice to the Company not more than
five (5) Business Days following the closing of such Additional Financing. The
Company agrees to give the Noteholder written notice not less than five (5)
Business Days prior to the anticipated closing of any Additional Financing,
which notice shall contain all relevant documents and agreements entered into by
the Company in connection with such Additional Financing.

 

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3.           Maturity of the Loan.

 

The Loan shall mature, and the principal amount thereof shall become immediately
due and payable (together with unpaid interest accrued thereon) on the Maturity
Date.

 

4.           Interest Payments.

 

The unpaid principal amount of the Loan outstanding shall bear interest at a
rate equal to 10% per annum. Notwithstanding the foregoing, upon an Event of
Default, all amounts outstanding under this Note shall bear interest on and
after the date of such Event of Default at a rate equal to the lesser of (i) the
maximum interest rate permitted by applicable law and (ii) 15%. All interest
accrued hereon shall be payable on the Maturity Date. Interest shall be computed
on the basis of a year of 365 days and paid for the actual number of days
elapsed.

 

5.           Series D Shares.

 

(a)          Subject to Sections 2(b) and 2(c), on each Funding Date, in
consideration of the loan made on such Funding Date and for no additional
consideration, the Company shall issue a number of Series D Shares to the
Noteholder equal to the product of (i) the aggregate amount borrowed by the
Company from the Noteholder on the applicable Funding Date (including any
amounts of Excess Funding Capacity so borrowed), and (ii) 0.0225. In addition,
unless this Note is canceled in accordance with Section 2(b) prior to the
applicable date (in which event no additional Bonus Shares shall be granted
hereunder following such cancellation), Vision Opportunity Master Fund, Ltd.
shall have the right to receive the following number of Series D Shares on the
following dates without regard as to whether the Vision Opportunity Master Fund,
Ltd. make any loans as of such date: (i) on the date hereof, 7,500 Series D
Shares; (ii) on October 31, 2012, 11,250 Series D Shares; and (iii) on December
31, 2012, 11,250 Series D Shares(collectively, the “Bonus Shares”).

 

For United States federal income tax purposes, the Noteholder and the Company
agree to allocate any amounts advanced under this Note between the Note and the
Series D Shares based upon their respective fair market values at the time of
the advance. The Noteholder and the Company agree to file any United States
federal, state of local income tax returns in a manner consistent with the
previous sentence.

 

(b)          The Series D Shares and/or Conversion Shares may only be
transferred in compliance with state and federal securities laws. In connection
with any transfer of the Series D Shares or Conversion Shares other than
pursuant to an effective registration statement, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor, 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 Series D Shares or Conversion Shares under the
Securities Act.

 

(c)          Certificates evidencing the Series D Shares and the Conversion
Shares will contain the following legend, until such time as they are not
required under Section 5(e):

 

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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 SECURED BY SUCH SECURITIES IN ACCORDANCE WITH
APPLICABLE LAW.

 

(d)          Certificates evidencing Series D Shares or Conversion Shares shall
not contain any legend (including the legend set forth in Section 5(c)): (i)
following a sale or transfer of such Series D Shares or Conversion Shares
pursuant to an effective registration statement, (ii) following a sale or
transfer of such shares pursuant to Rule 144 (assuming the transferee is not an
Affiliate of the Company (as defined in the Securities Act)), or (iii) while
such Series D Shares or Conversion Shares are eligible for sale without volume
limitations pursuant to Rule 144. If the Noteholder shall make a sale or
transfer of Series D Shares or Conversion Shares either (x) pursuant to Rule 144
or (y) pursuant to a registration statement, and in each case shall have
delivered to the Company or the Company’s transfer agent the certificate
representing Series D Shares or Conversion Shares containing a restrictive
legend which are the subject of such sale or transfer and a representation
letter in customary form, then the Company shall take all such actions as are
necessary to cause the removal of such legend and return to the Noteholder (or
its successor or designee) unlegended certificates for such Series D Shares or
Conversion Shares.

 

6.           Prepayments.

 

Subject to the terms and conditions of this Section 6, the Company may prepay
the Loan, upon ten (10) days prior written notice to the Noteholder, in whole or
in part at any time or from time to time without penalty or premium by paying
the principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. Any such prepayments made under this Section 6 shall be in
minimum increments of $100,000. For the avoidance of doubt, any prepayments
under this Section 6 shall not have any effect on the Series D Shares issued by
the Company to the Noteholder hereunder or the Company’s rights to borrow
amounts under this Note in accordance with the Funding Schedule, and no amount
so prepaid shall be deemed or otherwise constitute Excess Funding Capacity or
otherwise be available for borrowing by the Company. The Company agrees that, in
respect of any amounts pre-paid by the Company under the Series D Notes, the
Company will make such prepayments to all holders of Series D Notes pro rata in
accordance with the relative principal amounts of such Series D Notes.

 

7.           General Provisions As To Payments.

 

All payments of principal and interest on the Loan by the Company hereunder
shall be made not later than 12:00 Noon (New York City time) on the date when
due either by cashier’s check, certified check or by wire transfer of
immediately available funds to the Noteholder's account at a bank in the United
States specified by the Noteholder in writing to the Company without reduction
by reason of any set-off or counterclaim.

 

8.           Events of Default; Remedies.

 

(a)          Each of the following events shall constitute an “Event of
Default”:

 

(i)          the outstanding principal amount of the Loan and/or any interest
accrued thereon shall not be paid when due;

 

(ii)         subject to Section 8(a)(iii), the Company breaches any of its
covenants, agreements or other obligations hereunder (including, without
limitation, set forth in Section 10) or set forth in or otherwise applicable to
the Series D Certificate of Designation and such breach is not cured within
thirty (30) days after notice from the Noteholder (if capable of being cured);

 

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(iii)        the Company breaches any of its covenants, agreements or other
obligations set forth in Section 11(a) or Section 11(d);

 

(iv)        the occurrence of an event of default under any other Series D Note;

 

(v)         any representation or warranty of the Company made in this Note or
in any Notice shall be false or incorrect when made in any material respect;

 

(vi)        the Company or any Subsidiary shall (A) breach any of their
respective obligations under any material agreement to which the Company or such
Subsidiary, respectively, it is a party, the effect of which breach results in
damages and/or losses to the Company and/or such Subsidiary in excess of
$250,000, or (B) default in the payment when due (subject to any applicable
grace period), whether by acceleration or otherwise, of any Indebtedness of the
Company or any Subsidiary involving the borrowing of money or the extension of
credit in excess of $250,000, or a default shall occur in the performance or
observance of any obligation or condition with respect to such Indebtedness if
the effect of such default is to accelerate the maturity of any such
Indebtedness, or such default shall continue unremedied for any applicable
period of time sufficient to permit the holder or holders of such Indebtedness,
or any trustee or agent for such holders, to cause such Indebtedness to become
due and payable prior to its expressed maturity;

 

(vii)       any judgment or order for the payment of money in excess of $250,000
shall be rendered against the Company or any Subsidiary and shall not be covered
by insurance;

 

(viii)      upon a Change of Control of the Company (other than if such Change
of Control occurs solely by virtue of a sale by the Majority Noteholder(s)
and/or their respective affiliates of its or their equity of the Company (unless
substantially all of the outstanding equity of the Company is sold in such
transaction));

 

(ix)         a court shall enter a decree or order for relief in respect of the
Company or any Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of the Company or any Subsidiary or for any substantial part
of the property of the Company or any Subsidiary or ordering the winding up or
liquidation of the affairs of the Company or any Subsidiary, and such decree or
order shall remain unstayed and in effect for a period of sixty (60) consecutive
days; or

 

(x)          the Company or any Subsidiary shall commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consent to the entry of an order for relief in an involuntary case
under any such law, or consent to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Company or any Subsidiary or for any substantial part of the
property of the Company or any Subsidiary, or the Company or any Subsidiary
shall make any general assignment for the benefit of creditors.

 

(b)          Upon the occurrence and during the continuance of an Event of
Default, the Majority Noteholder(s) may, in their sole discretion, without
notice of its election and without demand, do any one or more of the following,
all of which are authorized by the Company:

 

(i)          declare all obligations of the Company hereunder immediately due
and payable (provided that upon the occurrence of an Event of Default described
in Sections 8(a)(ix) or 8(a)(x), all such obligations shall become immediately
due and payable without any action by the Majority Noteholder(s));

 

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(ii)         cease making any loans, advancing money or extending credit to or
for the benefit of Company under this Note;

 

(iii)        settle or adjust disputes and claims directly with account debtors
for amounts, upon terms and in whatever order that the Majority Noteholder(s)
reasonably considers advisable;

 

(iv)        make such payments and do such acts as the Majority Noteholder(s)
considers necessary or reasonable to protect its security interest in the
Collateral. The Company agrees to assemble the Collateral if the Majority
Noteholder(s) so requires, and to make the Collateral available to the
Collateral Agent (on behalf of the Noteholder Group) as the Majority
Noteholder(s) may designate. The Company authorizes the Collateral Agent (on
behalf of the Noteholder Group) to enter the premises where the Collateral is
located, to take and maintain possession of the Collateral, or any part of it,
and to pay, purchase, contest, or compromise any encumbrance, charge, or lien
which in the Collateral Agent’s determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of the Company’s owned premises, the Company hereby grants
the Collateral Agent (on behalf of the Noteholder Group) a license to enter into
possession of such premises and to occupy the same, without charge, in order to
exercise any of the Collateral Agent’s and/or the Noteholder Group’s rights or
remedies provided herein, at law, in equity, or otherwise;

 

(v)         set off and apply to the obligations of the Company hereunder any
and all (a) balances and deposits of the Company held by the Noteholder, or (b)
indebtedness at any time owing to or for the credit or the account of the
Company held by the Noteholder;

 

(vi)        ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral. The Collateral Agent (on behalf of the Noteholder Group) is hereby
granted a license or other right, solely pursuant to the provisions of this
Section 8(b), to use, without charge, the Company’s labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in completing production of, advertising for sale,
and selling any Collateral and, in connection with the Collateral Agent’s
exercise of its rights under this Section 8(b), the Company’s rights under all
licenses and all franchise agreements shall inure to the Collateral Agent’s
benefit;

 

(vii)       dispose of the Collateral by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
the Company’s premises) as the Majority Noteholder(s) determines is commercially
reasonable, and apply any proceeds to the obligations of the Company hereunder
in whatever manner or order the Majority Noteholder(s) deems appropriate;

 

(viii)      the Collateral Agent (on behalf of the Noteholder Group) may credit
bid and purchase any Collateral at any public sale; and

 

(ix)         any deficiency that exists after disposition of the Collateral as
provided above will be paid immediately by the Company and any surplus will be
paid immediately to the Company.

 

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9.           Representations.

 

The Company hereby represents and warrants to the Noteholder, as of the date
hereof and as of each Funding Date, as follows:

 

(a)          The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Nevada and has the requisite
corporate power to own, lease and operate its properties and assets and to
conduct its business as it is now being conducted. The Company does not have any
Subsidiaries except as set forth on Schedule III hereto. Each Subsidiary is a
limited liability company duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization and has the requisite
corporate power to own, lease and operate its properties and assets and to
conduct its business as it is now being conducted. The Company and each such
Subsidiary is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to so qualify would not be reasonably expected to have a
Material Adverse Effect on the Company or such Subsidiary.

 

(b)          The Company has the requisite legal and corporate power and
authority to enter into, issue and perform this Note and issue the Series D
Shares (and the underlying shares of Common Stock following any conversion of
the Series D Shares) in accordance with the terms hereof and thereof. The
execution, delivery and performance of the Series D Notes by the Company and the
consummation by it of the transactions contemplated hereby or thereby have been
duly and validly authorized by all necessary corporate action, and no further
consent or authorization of the Company, its board of directors or stockholders
is required. When executed and delivered by the Company, the Series D Notes
shall constitute a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.

 

(c)          The execution, delivery and performance of the Series D Notes and
the consummation by the Company of the transactions contemplated hereby or
thereby, including, without limitation, the issuance of the Series D Shares and
the grant of security to the Noteholder Group contemplated in Section 15, do not
and will not (i) violate or conflict with any provision of the Company’s
certificate of incorporation or bylaws, each as amended to date, or any
Subsidiary’s comparable charter documents, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries’ respective properties or assets are bound,
including, without limitation, the Senior Notes and the agreements relating
thereto, or (iii) result in a material violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or any of
its Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries are bound or affected.

 

(d)          Neither the Company nor any of its Subsidiaries is required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency or any regulatory or
self-regulatory agency or any other person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Series D Notes in
accordance with the terms hereof, except where the failure to obtain such
consent, authorization or order or make such filing would not be reasonably
expected to have a Material Adverse Effect on the Company, its Subsidiaries or
the transactions contemplated hereby or thereby. All consents, authorizations,
orders, filings and registrations which each of the Company and any of its
Subsidiaries is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof.

 

9

 

 

(e)          The common stock of the Company is registered pursuant to Section
12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and the Company has timely filed all reports, schedules, forms, statements
and other documents required to be filed by it with the Securities and Exchange
Commission pursuant to the reporting requirements of the Exchange Act (all such
filings, including filings incorporated by reference therein, being referred to
herein as the “Commission Documents”). At the times of their respective filings,
the Company’s Form 10-K for the fiscal year ended December 31, 2011 (the “Form
10-K”), and each subsequently filed Form 10-Q of the Company (collectively, the
“Form 10-Q”) complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder and other federal, state and local laws, rules
and regulations applicable to such documents, and the Form 10-K and each Form
10-Q did 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 therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements of the Company included in
the Commission Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations of the
Securities and Exchange Commission or other applicable rules and regulations
with respect thereto. Such consolidated financial statements have been prepared
in accordance with generally accepted accounting principles (“GAAP”) applied on
a consistent basis during the periods involved (except (i) as may be otherwise
indicated in such consolidated financial statements or the notes thereto or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the consolidated financial position of the Company and its
Subsidiaries as of 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 year-end audit adjustments).

 

(f)          Except as set forth in the Commission Documents, since December 31,
2011, the Company has not experienced or suffered any Material Adverse Effect
and the Company is not aware of any fact or circumstance that is reasonably
likely to have a Material Adverse Effect on the Company.

 

(g)          Except as set forth in the Commission Documents, neither the
Company nor any of its Subsidiaries has incurred any material liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) other than those incurred
in the ordinary course of the Company's or its Subsidiaries’ respective
businesses.

 

(h)          Since December 31, 2011, no event or circumstance has occurred or
exists with respect to the Company or its Subsidiaries or their respective
businesses, properties, prospects, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.

 

(i)          Except as set forth in the Commission Documents, neither the
Company nor any Subsidiary has any outstanding secured or unsecured Indebtedness
in excess of $100,000.

 

(j)          Other than the Senior Notes, there is no Indebtedness of the
Company that is senior to or ranks pari passu with the Series D Notes in right
of payment, whether with respect of payment of redemptions, interest, damages or
upon liquidation or dissolution or otherwise.

 

(k)          Schedule III hereto sets forth each Subsidiary of the Company,
showing the jurisdiction of its incorporation or organization and showing the
percentage of each person’s ownership of the outstanding stock or other
interests of such Subsidiary. All of the outstanding shares of capital stock of
each Subsidiary have been duly authorized and validly issued, and are fully paid
and nonassessable. There are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding upon any
Subsidiary for the purchase or acquisition of any shares of capital stock of any
Subsidiary or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such capital stock. Neither
the Company nor any Subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any Subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence. Except as set forth
in the Commission Documents, neither the Company nor any Subsidiary is party to,
nor has any knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of any Subsidiary.

 

10

 

 

(l)          Except as disclosed in the Commission Documents, the Company and
each of its Subsidiaries has the unrestricted right to vote, and (subject to
limitations imposed by applicable law) to receive dividends and distributions
on, all capital securities of their respective Subsidiaries.

 

(m)          Except as set forth in the Commission Documents, each of the
Company and the Subsidiaries has good and valid title to all of its material
real and personal property, free and clear of any mortgages, pledges, charges,
liens, security interests or other encumbrances. Any material leases of the
Company and each of its Subsidiaries are valid and subsisting and in full force
and effect.

 

(n)          The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged.

 

(o)          There is no action, suit, claim, investigation, arbitration,
alternate dispute resolution proceeding or other proceeding pending or, to the
knowledge of the Company (which knowledge shall include the knowledge of the
responsible officers or employees, after reasonable investigation), threatened
against the Company or any Subsidiary which questions the validity of the Series
D Notes or any of the transactions contemplated hereby or any action taken or to
be taken pursuant hereto. Except as set forth in the Commission Documents, (i)
there is no action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or other proceeding pending or, to the knowledge of the
Company (which knowledge shall include the knowledge of the responsible officers
or employees, after reasonable investigation), threatened against or involving
the Company, any Subsidiary or any of their respective properties or assets and
(ii) there are no outstanding orders, judgments, injunctions, awards or decrees
of any court, arbitrator or governmental or regulatory body against the Company
or any Subsidiary or any officers or directors of the Company or Subsidiary in
their capacities as such.

 

(p)          Except as set forth in the Commission Documents, (i) the business
of the Company and the Subsidiaries has been and is presently being conducted in
compliance with all applicable material federal, state and local governmental
laws, rules, regulations and ordinances and (ii) the Company and each of its
Subsidiaries have all material franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it.

 

(q)          Except as set forth in the Commission Documents, (i) the Company
and each of the Subsidiaries has accurately prepared and filed all federal,
state and other tax returns required by law to be filed by it, has paid or made
provisions for the payment of all taxes shown to be due and all additional
assessments, and adequate provisions have been and are reflected in the
consolidated financial statements of the Company and the Subsidiaries for all
current taxes and other charges to which the Company or any Subsidiary is
subject and which are not currently due and payable. The Company has no
knowledge of any additional assessments, adjustments or contingent tax liability
(whether federal or state) of any nature whatsoever, whether pending or
threatened against the Company or any Subsidiary for any period, nor of any
basis for any such assessment, adjustment or contingency.

 

(r)          The Company and the Subsidiaries own or possess adequate rights or
licenses to use all trademarks, service marks, and all applications and
registrations therefor, trade names, patents, patent rights, copyrights,
original works of authorship, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights
(collectively, “Intellectual Property Rights”) necessary to conduct their
respective businesses as now conducted. Except as disclosed in the Commission
Documents, none of the Company’s Intellectual Property Rights have expired or
terminated, or are expected to expire or terminate, within two years from the
date of this Agreement. The Company does not have any knowledge of any material
infringement by the Company or its Subsidiaries of Intellectual Property Rights
of others or by any other party of any Intellectual Property Rights of the
Company or its Subsidiaries. There is no material claim, action or proceeding
pending, or to the knowledge of the Company, being threatened, against the
Company or its Subsidiaries regarding its Intellectual Property Rights. The
Company is unaware of any facts or circumstances which might give rise to any of
the foregoing infringements or claims, actions or proceedings. The Company and
its Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their material Intellectual Property Rights.

 

11

 

 

(s)          There are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing
transactions between (a) the Company, any Subsidiary or any of their respective
customers or suppliers on the one hand, and (b) on the other hand, any officer,
employee, consultant or director of the Company, or any of its Subsidiaries, or
any person owning at least 5% of the outstanding capital stock of the Company or
any Subsidiary or any member of the immediate family of such officer, employee,
consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder, or a
member of the immediate family of such officer, employee, consultant, director
or stockholder which, in each case, is required to be disclosed in the
Commission Documents or in the Company’s most recently filed definitive proxy
statement on Schedule 14A, that is not so disclosed in the Commission Documents
or in such proxy statement.

 

(t)          The records and documents of the Company and its Subsidiaries
accurately reflect in all material respects the information relating to the
business of the Company and the Subsidiaries, the location and collection of
their assets, and the nature of all transactions giving rise to the obligations
or accounts receivable of the Company or any Subsidiary. Except as set forth in
the Commission Documents, the Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment of the
Company's management, 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 actions are taken with respect to any
differences.

 

(u)          The Series D Shares when issued and delivered will be duly and
validly issued and will be free of all liens and restrictions on transfer other
than any restrictions on transfer under the Securities Act of 1933, as amended
(the “Securities Act”). The Commission Documents accurately set forth the fully
diluted equity capitalization of the Company as of the date hereof, prior to the
issuance of Series D Shares as contemplated by this Note, except for employee
option exercises, employee option grants, and warrant exercises after July 18,
2012, the net effect of which would represent a change of less than 1% of the
fully diluted shares of Common Stock shown in the Commission Documents.

 

(v)         The shares of Common Stock (the “Conversion Shares”) issuable upon
conversion of the Series D Shares have been duly reserved for issuance by the
Company in sufficient number to cover the conversion of all of the Series D
Shares. The issuance of the Conversion Shares upon conversion of the Series D
Shares has been duly authorized by the Company and the Conversion Shares when
delivered in accordance with the Series D Certificate of Designation, will be
validly issued, fully paid and non-assessable, and free of all liens and
restrictions on transfer other than any restrictions on transfer under the
Securities Act.

 

(w)          The offer, issuance, sale and delivery of the Series D Shares and
Conversion Shares will not under current laws and regulations require compliance
with the prospectus delivery or registration requirements of the Securities Act.

 

(x)          The Company is the sole owner of, and has good and marketable title
to, all of the Collateral free and clear of any and all liens or encumbrances,
in each case other than as set forth in the Senior Notes Security Agreement. To
the extent that any parts of the Collateral are Intellectual Property Rights, no
such Collateral has been judged invalid or unenforceable, in whole or in part,
and no claim has been made that any part of such Collateral violates the rights
of any third party. Other than as set forth in the Senior Notes Security
Agreement or the Series D Notes, neither the Company nor any Subsidiary is a
party to, or bound by, any agreement that restricts the grant by the Company or
any Subsidiary of a security interest in the Collateral.

 

12

 

 

(y)          The Company is not now and has not been, at any time during the
past three (3) years, a shell company as defined by Rule 405 of the Securities
Act.

 

(z)          No representation or warranty of the Company in the Series D Notes
contains or will contain any untrue statement of a material fact nor shall such
representations and warranties taken as a whole omit any statement necessary in
order to make any material statement contained herein not misleading.         

 

10.         Affirmative Covenants.

 

Unless otherwise consented to by the Majority Noteholder(s), and for so long as
any amounts under the Notes remains unpaid:

 

(a)          the Company shall (and shall cause each Subsidiary to) maintain its
existence and authority to conduct its business as presently contemplated to be
conducted;

 

(b)          the Company shall comply, and cause each Subsidiary to comply, in
each case in all material respects, with all applicable laws, rules, regulations
and orders applicable to the Company and each Subsidiary;

 

(c)          the Company shall keep and cause each Subsidiary to keep adequate
records and books of account, in which complete entries will be made in
accordance with GAAP consistently applied, reflecting all financial transactions
of the Company and its Subsidiaries, and in which, for each fiscal year, all
proper reserves for depreciation, depletion, obsolescence, amortization, taxes,
bad debts and other purposes in connection with its business shall be made;

 

(d)          the Company shall (and shall cause each Subsidiary to) maintain
insurance with responsible companies in such amounts and against such risks as
are customary to businesses similar to the Company’s and its Subsidiaries’;

 

(e)          the Company shall pay all applicable taxes as they come due;

 

(f)          the Company shall operate in accordance with the Budget and the
assumptions set forth in the Budget.

 

(g)          if the Company (a) does not enter into a definitive agreement with
respect to an additional equity funding of at least $10 million prior to
November 30, 2012, and (b) does not receive such funds prior to December 31,
2012, then the Company shall implement a strategic alternative process to be
agreed to by the parties.

 

(h)          the Company shall provide the Noteholder with monthly
reconciliations of its spending as compared to the Budget within five business
days after the end of each calendar month which will provide for an aggregate
adverse variance on the total amount expended of not more than 5% in the
aggregate from September 1, 2012 through each month-end as contemplated in the
Budget (unless otherwise consented to by the Majority Noteholder(s)).

 

(i)          the net proceeds from the Series D Notes shall be used by the
Company in the manner contemplated in the Budget;

 

13

 

 

(j)          the Company shall timely file all reports required to be filed with
the Securities and Exchange Commission pursuant to the Exchange Act, and the
Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination;

 

(k)          at any time that an Event of Default has occurred and is
continuing, the Majority Noteholder(s) shall have a right to audit the Company’s
accounts and appraise Collateral. At any time the Series D Notes are
outstanding, the Company shall, at the request of the Majority Noteholder(s),
indicate on its records concerning the Collateral a notation, in form
satisfactory to the Majority Noteholder(s), of the security interest of the
Noteholder Group hereunder;

 

(l)          the Company, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where the Company’s
business is conducted on the date hereof. The Company shall also maintain
insurance relating to the Company’s business, ownership and use of the
Collateral in amounts and of a type that are customary to businesses similar to
the Company’s. The Company will make all filings that are necessary or
desirable, or otherwise reasonable requested by the Majority Noteholder(s), in
connection with the perfection of the Noteholder Group’s security interest in
the Collateral.

 

11.         Negative Covenants.

 

Except as is otherwise necessary for the Company to comply with the terms
relating to the Senior Notes, as provided in the attached Schedule VI, unless
otherwise consented to by the Majority Noteholder(s), and for so long as any
amounts under the Notes remains unpaid:

 

(a)          the Company shall not (and shall cause each Subsidiary to not) (i)
sell, transfer or otherwise dispose of any of its properties, assets and/or
rights including, without limitation, its intellectual property, to any person,
(ii) grant, create, incur, assume or suffer to exist any lien, encumbrance,
charge or other security interest senior or pari passu to the Series D Notes
upon any of its property, assets or revenues, whether now owned or hereafter
acquired including, without limitation, the Collateral, other than in connection
with Automation Equipment Leases entered into in the ordinary course of the
Company’s business, (iii) take any action which could reasonably be expected to
have a Material Adverse Effect on the value or marketability of the Collateral
or the priority of the Noteholder’s lien on the Collateral; provided, however,
that the Company may grant licenses, exclusivity arrangements, technology access
or sharing rights, and other similar rights to its products and the Intellectual
Property Rights related thereto in connection with bona fide commercial
transactions with customers, suppliers, strategic partners or other similar
counterparties entered into in the ordinary course of the Company’s business;

 

(b)          Except with respect to the transaction with Vision Opportunity
Master Fund, Ltd. contemplated by this Note, the Company shall not (and shall
cause each Subsidiary to not) become a party to any transactions which exceed,
individually or in the aggregate, $50,000 with any person who is an affiliate of
the Company or any Subsidiary, except transactions in the ordinary course of
business that are upon fair and reasonable terms that are fully disclosed to the
Noteholder and are no less favorable to the Company or such Subsidiary than
would be obtained in a comparable arm’s length transaction with a person not an
affiliate of the Company or such Subsidiary;

 

(c)          the Company shall not enter into any agreement in which the terms
of such agreement would restrict or impair the right or ability of the Company
or any Subsidiary to perform its obligations under the Series D Notes;

 

14

 

 

(d)          the Company shall not (and shall cause each Subsidiary to not)
incur any Indebtedness that is senior or pari passu in right of payment to the
Series D Notes, other than in connection with Automation Equipment Leases
entered into in the ordinary course of the Company’s business; and

 

(e)          the Company shall not (and shall cause each Subsidiary to not)
liquidate or dissolve or instruct or grant resolutions to any liquidator of the
Company or any Subsidiary.

 

12.         Transfers.

 

The Company may not transfer or assign this Note nor any right or obligation
hereunder to any person or entity without the prior written consent of the
Majority Noteholder(s). The Noteholder may freely transfer, assign or pledge in
whole or in part this Note without the prior consent of the Company, provided
that any such transfer, assignment or pledge complies with applicable federal
and state securities laws. This Note shall be a registered note and the Company
shall keep, at its principal executive office, books for the registration and
registration of transfer of this Note and the Series D Notes. Prior to
presentation of this Note for registration of transfer, the Company shall treat
the person in whose name this Note is registered as the owner and holder of this
Note for all purposes whatsoever. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Note and (a) in the case of loss, theft or
destruction, of indemnity reasonably satisfactory to it; or (b) in the case of
mutilation, upon surrender thereof, the Company, at its expense, will execute
and deliver in lieu thereof this Note a new Note, in the same principal amount
as the unpaid principal amount of this Note and dated the date to which interest
shall have been paid on this Note or, if no interest shall have yet been so
paid, dated the date of this Note.

 

13.          Registration Rights.

 

The parties agree to amend the Registration Rights Agreement, dated as of
September 5, 2007, between the Company’s predecessor and Vision Opportunity
Master Fund Ltd promptly following the date hereof to provide certain customary
demand and piggyback registration rights with respect to the Conversion Shares.

 

14.         Information Rights.

 

Unless otherwise agreed by the Majority Noteholder(s) (a) as long as the
Noteholder owns this Note or any Series D Shares or Conversion Shares, if the
Company is not required to file reports pursuant to such laws, it will prepare
and furnish to the Noteholder and make publicly available in accordance with
Rule 144(c) such information as is required for the Noteholder to sell all of
the Conversion Shares under Rule 144, and (b) the Company will take such further
action as any holder of this Note or any Series D Shares or Conversion Shares
may reasonably request, all to the extent required from time to time to enable
such person to sell the Conversion Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144. In
addition, the Majority Noteholder(s) shall have the right, at any time upon
reasonable notice, audit the books and records of the Company to ensure
compliance by the Company with the terms and conditions set forth in this Note,
the cost of any such audit would be borne by the Majority Noteholder(s).

 

15.         Collateral.

 

(a)          To secure all obligations of the Company to the Noteholder Group in
connection with the Loan and the Series D Notes, including without limitation
the payment of the principal of and all interest on the loans made pursuant to
the Series D Notes, the Company hereby assigns, pledges and grants a security
interest in and delivers to the Collateral Agent, on behalf of the Noteholder
Group, all of its rights, title and interest in the Collateral. This Note and
the Series D Notes constitutes a security agreement for purposes of the Uniform
Commercial Code in all relevant jurisdictions. Upon an Event of Default, the
Collateral Agent, on behalf of the Noteholder Group, shall have all the rights
and remedies of a secured party provided in the Uniform Commercial Code in force
in the State of New York. The Collateral is granted as security only and shall
not subject the Collateral Agent (or any other member of the Noteholder Group)
to, or in any way affect or modify, any obligation or liability of the Company
with respect to any of the Collateral or any transaction in connection
therewith.

 

15

 

 

(b)          The Company agrees that it will, at the expense of the Noteholder
Group and in such manner and form as the Collateral Agent may reasonably
require, execute, deliver, file and record any financing statement, specific
assignment or other paper and take any other action that may be reasonably
necessary or desirable, or that the Collateral Agent may reasonably request, in
order to create, preserve, perfect or validate any security interest or to
enable the Collateral Agent to exercise and enforce its rights hereunder with
respect to any of the Collateral. To the extent permitted by applicable law, the
Company hereby authorizes the Collateral Agent (on behalf of the Noteholder
Group) to execute and file, in the name of the Company or otherwise, Uniform
Commercial Code financing statements (which may be carbon, photographic,
photostatic or other reproductions of the Series D Notes or of a financing
statement relating to the Series D Notes) and financing statements and other
appropriate filings with the US Patent and Trademark Office, in each case which
the Collateral Agent in its sole discretion may deem necessary or appropriate to
further perfect its security interest in the Collateral.

 

(c)          If an Event of Default shall have occurred and be continuing, the
Collateral Agent (on behalf of the Noteholder Group) shall have the right to the
extent permitted by law, and the Company shall take all such action as may be
necessary or appropriate to give effect to such right, including the right to
use, consume, sell, lease or otherwise dispose of any Collateral, to vote and to
give consents, ratifications and waivers, and take any other action with respect
to any or all of the Collateral with the same force and effect as if the
Collateral Agent were the absolute and sole owner thereof.

 

(d)          The Company hereby irrevocably appoints the Collateral Agent (on
behalf of the Noteholder Group) its true and lawful attorney, with full power of
substitution, in the name of the Company, the Collateral Agent or otherwise, for
the sole use and benefit of the Collateral Agent, but at the expense of the
Noteholder Group, to the extent permitted by law to exercise, at any time and
from time to time while an Event of Default has occurred and is continuing, all
or any of the following powers with respect to all or any of the Collateral:

 

(i)          to demand, sue for, collect, receive and give acquaintance for any
and all monies due to become due upon or by virtue thereof,

 

(ii)         to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto,

 

(iii)        to sell, transfer, assign or otherwise deal in or with the same or
the proceeds or avails thereof, as fully and effectually as if the Collateral
Agent were the absolute owner thereof, and

 

(iv)        to extend the time of payment of any or all thereof and to make any
allowance and other adjustments with reference thereto;

 

(v)         do all acts and things necessary or expedient, in furtherance of any
such purposes;

 

provided that the Collateral Agent shall give the Company not less than ten
days’ prior written notice of the time and place of any sale or other intended
disposition of any of the Collateral. The Collateral Agent and the Company agree
that such notice constitutes “reasonable notification” within the meaning of
Sections 9-611 and 9-612 of the Uniform Commercial Code.

 

16

 

 

(e)           The Company covenants and agrees that in the event that any of the
Collateral shall become subject to any lien or security interest (other than the
lien and security interest in favor of the Noteholder Group created hereunder or
under any other obligation of the Company to the Noteholder Group), or the lien
on and security interest in the Collateral in favor of the Noteholder Group
created hereunder shall cease to be a perfected security interest in and lien on
any of such Collateral except pursuant to a release herein contemplated, the
Company will promptly take whatever action may be necessary to release such
other liens or security interests or to restore the Noteholder Group’s lien on
and security interest in the Collateral as a perfected security interest or
lien, as the case may be. The Company acknowledges that money damages would not
be a sufficient remedy for the breach of the Company’s covenants in this
paragraph and that, in addition to all other remedies that may be available, the
Collateral Agent and the Noteholder Group shall be entitled to specific
performance as a remedy for any such breach.

 

(f)          So long as the Collateral Agent complies with reasonable practices,
the Collateral Agent shall not in any way or manner be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto
occurring or arising in any manner or fashion from any cause; (c) any diminution
in the value thereof; or (d) any act or default of any carrier, warehouseman,
bailee, forwarding agency, or other person whomsoever. All risk of loss, damage
or destruction of the Collateral shall be borne by the Company

 

(g)          The Collateral Agent shall act in good faith in its apportionment
of the Collateral (or proceeds therefrom) amongst the holders of the Series D
Notes following an Event of Default.

 

(h)          The Noteholder hereby agrees to reimburse and pay to the Collateral
Agent such Noteholder’s ratable portion (as determined by the relative principal
amounts of the Series D Notes) of all fees and expenses incurred hereunder by
the Collateral Agent.

 

(i)          The security interest in the Collateral created herein shall
terminate at such time as the Company shall have paid the entire outstanding
principal balance of and all accrued interest on the Notes and the Notes shall
have terminated. The Collateral Agent (on behalf of the Noteholder Group) shall
promptly execute and file, in the name of the Company or otherwise, appropriate
Uniform Commercial Code filings and appropriate filings with the US Patent and
Trademark Office as are necessary or appropriate to document the termination of
its security interest in the Collateral at such time as such security interest
so terminates.

 

16.         Limitation of Obligations of the Collateral Agent and Majority
Noteholder(s); Exculpation and Indemnification of the Collateral Agent.

 

(a)          The Noteholder hereby irrevocably designates and appoints the
Collateral Agent as the agent of the Noteholder, and the Collateral Agent hereby
accepts such appointment, under this Note, and the Noteholder irrevocably
authorizes the Collateral Agent, in such capacity, to take such actions on its
behalf, and to exercise such powers and perform such duties as are expressly
delegated to the Collateral Agent by the terms of this Note, together with such
other powers as are reasonably incidental thereto. Notwithstanding any provision
to the contrary elsewhere in this Note, (i) neither the Collateral Agent nor the
Majority Noteholder(s) shall have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with the Noteholder,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Note or otherwise exist against the
Collateral Agent or the Majority Noteholder(s), regardless of whether an Event
of Default has occurred and is continuing, (ii) neither the Collateral Agent nor
the Majority Noteholder(s) shall have any duty to take any discretionary action
or exercise any discretionary powers, and (iii) neither the Collateral Agent nor
the Majority Noteholder shall have any duty to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to the Collateral Agent or the Majority Noteholder(s), as applicable,
in this Note, it being understood and agreed, that in respect of the Collateral,
rights under this Note or any act, omission or event related thereto, except as
otherwise provided herein, the Collateral Agent or the Majority Noteholder(s),
as applicable, may act in any manner deemed appropriate in its sole discretion.

 

17

 

 

(b)          Neither the Collateral Agent nor any of its affiliates, and their
respective directors, officers, employees, counsel, agents or attorneys-in-fact
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Note (except for its or such
Person’s own gross negligence or willful misconduct, as determined by a final,
non-appealable judgment of a court of competent jurisdiction), or (ii)
responsible in any manner to the Noteholder for the creation, validity,
perfection or priority of the liens on the Collateral or the ownership,
existence, condition or value of any Collateral or whether such Collateral has
been protected or insured or has been encumbered, or whether any particular
reserves are appropriate. The Collateral Agent shall not be under any obligation
to the Noteholder to ascertain or to inquire as to the observance or performance
of any of the agreements contained in, or conditions of, this Note, or to
inspect the properties, books or records of the Company. No provision of this
Note shall require the Collateral Agent to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder or take any action if the Collateral Agent believes in good faith or
has been advised in writing by counsel that compliance with such instructions
would be prohibited by applicable law. The Collateral Agent shall not be liable
to the Noteholder or any third party for special, indirect, incidental, punitive
or consequential damages or lost profits or loss of business of any kind,
whether or not foreseeable, arising in connection with this Note or the
Collateral.

 

(c)          The Noteholder expressly acknowledges that neither the Collateral
Agent nor any of its officers, directors, employees, agents, attorneys in fact
or affiliates has made any representations or warranties to it, including,
without limitation, regarding the Company, its financial condition or its
prospects.

 

(d)          The Noteholder hereby agrees to indemnify the Collateral Agent in
its capacity as such and its affiliates, and their respective directors,
officers, employees, counsel, agents and attorneys-in-fact, pro rata in
accordance with the relative principal amount of the Series D Notes, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time be imposed on, incurred by or asserted against
such Person in any way relating to or arising out of, its performance of its
obligations under this Note or any action taken or omitted by the Collateral
Agent under or in connection with any of the foregoing.

 

(e)          The Collateral Agent is an “agent” of the Noteholder within the
meaning of the term “secured party” as defined in the New York Uniform
Commercial Code. The Noteholder authorizes the Collateral Agent to take all
actions contemplated by this Note, and further agrees that it does not have the
right individually to seek to realize upon the Collateral or take any
enforcement action or exercise any right that it might otherwise have under
applicable law to credit bid at foreclosure sales, UCC sales or other similar
dispositions of Collateral, it being understood and agreed that such rights and
remedies may be exercised solely by the Collateral Agent for the benefit of the
Noteholder upon the terms of this Note. The Collateral Agent is hereby
authorized to execute and deliver on behalf of the Noteholder any documents
necessary or appropriate to grant and perfect a lien on such Collateral in favor
of the Collateral Agent on behalf of the Noteholder. The Noteholder hereby
authorizes the Collateral Agent, at its option and in its discretion, to release
any lien granted to or held by the Collateral Agent. Upon request by the
Collateral Agent at any time, the Noteholder will confirm in writing the
Collateral Agent’s authority to release particular types or items of Collateral
pursuant hereto. Notwithstanding anything to the contrary herein, the Collateral
Agent shall not be required to execute any document on terms which, in the
Collateral Agent’s opinion, would expose the Collateral Agent to liability or
create any obligation or entail any consequence other than the release of such
liens without recourse or warranty.

 

(f)          The agreements of the Noteholder set forth in this Section 16 shall
survive the repayment in full of the Loan and all other amounts payable
hereunder.

 

17.         Powers and Remedies Cumulative; Delay or Omission Not Waiver of
Event of Default.

 

No right or remedy herein conferred upon or reserved to the Noteholder, the
Majority Noteholder(s) and/or the Collateral Agent is intended to be exclusive
of any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy. No delay or omission of the Noteholder, the
Majority Noteholder(s) and/or the Collateral Agent to exercise any right or
power, if any, accruing upon any Event of Default occurring and continuing as
aforesaid shall impair any such right or power or shall be construed to be a
waiver of any Event of Default or an acquiescence therein; and every power and
remedy given by this Note or by law may be exercised from time to time, and as
often as shall be deemed expedient, by the Noteholder, the Majority
Noteholder(s) and/or the Collateral Agent.

 

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18.         Amendments.

 

This Note may be amended only with the written consent of both the Company and
the Majority Noteholder(s).

 

19.         Attorneys Fees/Enforcement Costs.

 

(a)          The Company will reimburse the Vision Opportunity Master Fund, Ltd.
for reasonable legal fees and expenses in connection with the transactions
contemplated hereby, not to exceed $25,000. In the event that this Note is
collected by law or through attorneys at law, or under advice therefrom, the
Company agrees to pay all costs of collection, including reasonable attorneys’
fees, whether or not suit is brought, and whether incurred in connection with
collection, trial, appeal, bankruptcy or other creditors’ proceedings or
otherwise.

 

20.         Survival of Representations and Warranties; Indemnification

 

All representations and warranties made hereunder shall survive the applicable
Funding Date until 60 calendar days after the filing of the Company’s Form 10-K
in respect of FY 2013, or, in the event the Company is no longer required to
file such Form 10-K, June 30, 2014. The Company agrees to indemnify and hold
harmless the Noteholder (and their respective directors, officers, managers,
partners, members, shareholders, affiliates, agents, successors and assigns,
(each, an “Indemnified Party”) from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorneys’ fees, charges and disbursements) incurred by such
Indemnified Party as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein or in any
Notice delivered to the Noteholder pursuant to Section 2.

 

21.         Miscellaneous.

 

(a)          The parties hereto hereby waive presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance and enforcement of or any default under this Note,
except as specifically provided herein.

 

(b)          Any provision of this Note which is illegal, invalid, prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such illegality, invalidity, prohibition or unenforceability
without invalidating or impairing the remaining provisions hereof or affecting
the validity or enforceability of such provision in any other jurisdiction.

 

(c)          This Note shall bind the Company and its successors and permitted
assigns. The rights under and benefits of this Note shall inure to the
Noteholder and its successors and assigns.

 

(d)          The Section headings herein are for convenience only and shall not
affect the construction hereof.

 

(e)          All notices, requests, demands, consents, instructions or other
communications required or permitted hereunder shall in writing and faxed,
mailed or delivered to each party at the respective addresses of the parties, or
at such other address or facsimile number as the Company shall have furnished to
Noteholder in writing. All such notices and communications will be deemed
effectively given the earlier of (i) when received, (ii) when delivered
personally, (iii) one business day after being delivered by facsimile (with
receipt of appropriate confirmation), (iv) one Business Day after being
deposited with an overnight courier service of recognized standing, or (v) on
receipt of confirmation of delivery.

 

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(f)          In the event any interest is paid on this Note, which is deemed to
be in excess of the then legal maximum rate, then that portion of the interest
payment representing an amount in excess of the then legal maximum rate shall be
deemed a payment of principal and applied against the principal of this Note.

THIS NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.

 

THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY
LITIGATION ARISING HEREUNDER. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE
WITHIN OR WITHOUT THE STATE OF NEW YORK. THE COMPANY HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

BY ITS ACCEPTANCE OF THIS NOTE THE NOTEHOLDER AND THE COMPANY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS NOTE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE NOTEHOLDER OR THE
COMPANY. THE COMPANY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE NOTEHOLDER MAKING THE LOAN EVIDENCED HEREBY.

 

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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly
executed on the date indicated above.

 

  MEDPRO SAFETY PRODUCTS, INC.       By: W. Craig Turner   Name: W. Craig Turner
  Title: Chairman and Chief Executive Officer

 

NOTEHOLDER

 

VISION OPPORTUNITY MASTER FUND, LTD.

 

By: /s/ Adam Benowitz   Name: Adam Benowitz   Title: Director  

 

COLLATERAL AGENT

 

VISION OPPORTUNITY MASTER FUND, LTD., as Collateral Agent on behalf of the
Noteholder Group

 

By: /s/ Adam Benowitz   Name: Adam Benowitz   Title: Director        

 

 

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Schedules to the SERIES D SENIOR SECURED PROMISSORY NOTE

 

Schedule   Description       I   Funding Schedule       II   Collateral      
III   Subsidiaries       IV   Notice of Drawdown       V   Notice of Conversion
– Series D Preferred Stock       VI   Excerpts from Agreements Governing 14%
Senior Notes Qualifying Negative Covenants

 

Certain schedules and addenda to schedules have been furnished with this
exhibit. The Company agrees to furnish supplementally a copy of any omitted
schedule or addendum to the Commission upon request.

 

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SCHEDULE I

 

DATE  AMOUNT OF ADVANCE        September 12, 2012  $727,000  September 30, 2012 
$662,000  October 31, 2012  $372,000  November 30, 2012  $309,000  December 31,
2012  $257,000  January 31, 2013  $361,000  February 28, 2013  $190,000  March
31, 2013  $183,000  April 30, 2013  $0  May 31, 2013  $211,000  June 30, 2013 
$238,000  July 31, 2013  $512,000  August 31, 2013  $213,000         TOTAL 
$4,235,000 

 

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SCHEDULE II

 

COLLATERAL

 

“Collateral” means:

 

(a)          all accounts (as defined in the Uniform Commercial Code of the
State of New York, the “UCC”) and payment intangibles, including, without
limitation, all contract rights, and all other forms of monetary obligations
owing to the Company, and all credit insurance, guaranties, or security
therefor, whether or not they have been earned by performance;

 

(b)          all chattel paper (as defined in the UCC), including, without
limitation, electronic chattel paper and tangible chattel paper evidencing both
a monetary obligation and a security interest in or lease of goods, together
with any guarantees, letters of credit, and other security therefor;

 

(c)          all commercial tort claims (as defined in the UCC);

 

(d)          all deposit accounts (as defined in the UCC) held in the name of
the Company, and all of the cash and cash equivalents, deposited therein from
time to time, and all securities, rights, interests, shares of stock,
instruments, interests, or other property contained, deposited, held or
otherwise added to any deposit account from time to time;

 

(e)          all documents (as defined in the UCC), including, without
limitation, any paper that is treated in the regular course of business as
adequate evidence that the person in possession of the paper is entitled to
receive, hold, and dispose of the goods the paper covers, including warehouse
receipts, bills of lading, certificates of title, and applications for
certificates of title;

 

(f)          all equipment (as defined in the UCC), machinery and all fixtures,
and all accessions, additions, attachments, improvements, substitutions and
replacements thereto and thereof and warranties (express and implied) received
from the sellers and manufacturers of the foregoing property, and all related
claims, credits, setoffs, and other rights of recovery;

 

(g)          all general intangibles (as defined in the UCC) of any kind,
including, without limitation, all money, contract rights, corporate or other
business records, all intellectual property rights, inventions, designs,
formulas, patents (including, without limitation, the patents set forth on
Addendum A), patent applications (including, without limitation, the patent
applications set forth on Addendum A), service marks, trademarks, trade names,
trade secrets, engineering drawings, goodwill, rights to prepaid expenses,
registrations, franchises, copyrights, licenses, customer lists, computer
programs and other software (as defined in the UCC), source code, tax refund
claims, royalty, licensing and product rights, all claims under guarantees,
security interests or other security held by or granted to Company, all
indemnification rights, and rights to retrieval from third parties of
electronically processed and recorded data pertaining to any Collateral, things
in action, items, checks, drafts, and all orders in transit to or from Company,
credits or deposits of Company (whether general or special) that are held by the
Noteholder Group or the Collateral Agent;

 

(h)          all goods (as defined in the UCC);

 

(i)          all inventory (as defined in the UCC), whether in the possession of
the Company or of a bailee or other person for sale, storage, transit,
processing, use or otherwise and whether consisting of whole goods, spare parts,
components, supplies, materials, or consigned, returned or repossessed goods,
which are held for sale or lease, which are to be furnished (or have been
furnished) under any contract of service or which are raw materials, work in
process or materials used or consumed in Company’s business, and all warranties
and related claims, credits, setoffs, and other rights of recovery with respect
to any of the foregoing;

 

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(j)          all instruments (as defined in the UCC) including, without
limitation, every promissory note, negotiable instrument, certificated security,
or other writing that evidences a right to payment of money, that is not a lease
or security agreement, and that is transferred in the ordinary course or conduct
of business (including worldwide shipment) by delivery with any necessary
assignment or endorsement;

 

(k)          all investment property (as defined in the UCC) pledged to or
delivered to Lender’s control from time to time, and any and all other property
in which the Company at any time has rights and in which at any time a security
interest has been transferred to the Noteholder Group (and regardless of whether
any such property constitutes a certificated or uncertificated security or is
held directly or through one or more financial intermediaries through book
entries);

 

(l)          all letter of credit rights (as defined in the UCC);

 

(m)          all supporting obligations (as defined in the UCC);

 

(n)          all books, files, records (as defined in the UCC) relating to the
Collateral;

 

(o)          each policy and contract of insurance owned or maintained by the
Company, and all the benefits thereof including, without limitation, all claims
of whatsoever nature, as well as return premiums, and in and to all moneys and
claims for moneys in connection therewith;

 

(p)          all certificates and instruments evidencing any securities or other
Collateral subject to the Series D Notes from time to time and all interest,
dividends, distributions, cash, investment property, securities, shares of
stock, and other amounts and property from time to time received, receivable,
paid or payable or otherwise distributed from time to time in respect of, in
exchange or substitution for, or as an addition to any of the foregoing
Collateral;

 

(q)          all other tangible or intangible personal property of every kind
and nature;

 

(r)          all beneficial interests in any trusts, whether in the form of debt
or equity interests or otherwise;

 

(s)          all equity interests of any subsidiary of the Company; and

 

(t)          all accessions and additions to the foregoing, substitutions
therefor, and replacements, products and proceeds (as defined in the UCC) of any
of the property of the Company described in clauses (a) through (s) above
(including any proceeds of insurance thereon).

 

Notwithstanding anything to the contrary, the Collateral shall not include such
intellectual property and stock of the Company's Subsidiaries which have been
pledged to secure the Company’s obligations under the Senior Notes, including
the Company’s interests in following: (i)          MedPro Investments, LLC (the
“Issuer”), (ii) the Product and the intellectual property rights related to the
Product, (iii) any Royalty Payments and (iv) any other Royalty Rights.

 

“Product” means (i) Vacuette® Premium Safety Needle System, a blood collection
device that is formatted in two separate models: tube-activated and
skin-activated, (ii) Vacuette® Premium Winged Safety Blood Collection Set, a
device used for infusion and blood collection in the healthcare setting, and
(iii) all products substantially similar to, or derived from, any of the
foregoing, regardless of the brands, marks or names under which they are
offered.

 

25

 

 

“Royalty Payments” means all royalty payments and other payments that may be
required by Section 2.2 of the Medical Supply Manufacturing Agreement dated as
of July 14, 2010 (the “Manufacturing Agreement”) between the Company and Greiner
Bio-One GmbH (“Greiner”) and any successor agreement (the “Manufacturing
Agreement”) or other successor agreement or other agreement evidencing any
Royalty Rights, and in each case, after issuance of the Senior Notes.

 

“Royalty Rights” means the assets to be sold, transferred, conveyed, assigned,
contributed and granted by the Company to the Issuer pursuant to the Purchase
and Sale Agreement between the Company and the Issuer dated as of September 1,
2010 (the “Purchase and Sale Agreement”) and the Bill of Sale, consisting of (x)
all of the Company’s right, title and interest in, to and under the
Manufacturing Agreement; including without limitation all of the Company’s
rights (i) to receive the Royalty Payments, (ii) to receive Royalty Statements,
(iii) to make indemnification claims against Greiner pursuant to the
Manufacturing Agreement and (iv) to the proceeds of and the rights to enforce
each of the foregoing and (y) any rights similar to those described in clause
(x) above under any agreement entered into by the Company pursuant to the
Purchase and Sale Agreement or otherwise following the termination of the
Manufacturing Agreement or otherwise.

 

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

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