Careview Communications, Inc. 8-K [crvw-8k_022318.htm]

Exhibit 10.34

 

Execution Version 

 

Eighth AMENDMENT TO
NOTE AND WARRANT PURCHASE AGREEMENT

 

This EIGHTH AMENDMENT TO NOTE AND WARRANT PURCHASE AGREEMENT, dated as of
February 23, 2018 (this “Amendment”), is made by and among CAREVIEW
COMMUNICATIONS, INC., a Nevada corporation (the “Company”), the HealthCor
Parties (as defined below), as holders of a majority of the shares of Common
Stock issued or issuable (on an as converted basis) upon conversion of the Notes
and Warrants (the “Majority Investors”), and the investors identified on Annex I
attached hereto (together with their respective successors and permitted
assigns, the “Investors”).

 

WITNESSETH:

 

WHEREAS, the Company, HealthCor Partners Fund, L.P. (“HealthCor Partners”),
HealthCor Hybrid Offshore Master Fund, L.P. (“HealthCor Hybrid” and, together
with HealthCor Partners, the “HealthCor Parties”) and certain additional
investors that purchased additional Notes and additional Warrants on February
17, 2015 (the “2015 Investors” and, together with the HealthCor Parties, the
“Existing Investors”) are parties to that certain Note and Warrant Purchase
Agreement, dated as of April 21, 2011 (as amended from time to time, including
without limitation pursuant to that certain Note and Warrant Amendment Agreement
dated December 30, 2011, that certain Second Amendment to Note and Warrant
Purchase Agreement dated January 31, 2012, that certain Third Amendment to Note
and Warrant Purchase Agreement dated August 20, 2013, that certain Fourth
Amendment to Note and Warrant Purchase Agreement dated January 16, 2014, that
certain Fifth Amendment to Note and Warrant Purchase Agreement dated December
15, 2014, that certain Sixth Amendment to Note and Warrant Purchase Agreement
dated March 31, 2015 and that certain Seventh Amendment to Note and Warrant
Purchase Agreement dated June 26, 2015, the “Purchase Agreement”);

 

WHEREAS, the Company issued and sold (a) $5,000,000 initial principal amount of
additional Notes (as contemplated by the Purchase Agreement) to the HealthCor
Parties on January 31, 2012, (b) $5,000,000 initial principal amount of
additional Notes and additional Warrants to purchase 4,000,000 shares of Common
Stock to the HealthCor Parties on January 16, 2014 and (c) $6,000,000 initial
principal amount of additional Notes and additional Warrants to purchase
3,692,308 shares of Common Stock to the HealthCor Parties and the 2015 Investors
on February 17, 2015;

 

WHEREAS, pursuant to Section 7.9 of the Purchase Agreement and subject to the
terms and conditions contained herein, the parties hereto desire to amend the
Purchase Agreement as set forth herein for the purposes of, among other things,
providing for an additional investment in the Company by the Investors;

 

WHEREAS, the Investors wish to purchase from the Company, and the Company wishes
to sell and issue to the Investors, upon the terms and conditions stated herein
and in the Purchase Agreement, (i) additional Notes in the initial aggregate
principal amount of $2,050,000, with a conversion price per share equal to $0.05
(subject to adjustment as described therein) (the “Eighth Amendment Supplemental
Closing Notes”), and (ii) additional Warrants to purchase an aggregate of up to
512,500 shares of the Company’s Common Stock, at an exercise price per share
equal to $0.05 (subject to adjustment as described therein) (the “Eighth
Amendment Supplemental Warrants”), in each case on February 23, 2018 (the
“Eighth Amendment Supplemental Closing Date”); and 

 

1

 

WHEREAS, the Company and the Investors are executing and delivering this
Amendment in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D, as promulgated by the Commission under the
Act.

 

NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties and covenants contained herein and in the Purchase Agreement, which
represent integral components of the transactions contemplated hereby and
thereby and shall be fully enforceable by the parties hereto, and for other good
and valuable consideration, the receipt and sufficiency of which hereby
acknowledged, the Company, the Majority Investors and the Investors mutually
agree as follows:

 

1. Definitions. Capitalized terms used in this Amendment but not defined in this
Amendment shall have the meanings ascribed to them in the Purchase Agreement.

 

2. Amendment to Purchase Agreement. Section 1.3 of the Purchase Agreement is
hereby amended and restated in its entirety to read as follows:

 

“Sale of Additional Securities. After the Closing, the Company may sell to the
Investors, on the same terms and conditions as those contained in this Agreement
(as amended from time to time), up to $18,050,000 in additional Notes and
Warrants to purchase an additional 8,204,808 shares of Common Stock, and (a) any
such additional Notes shall be included within the definition of “Notes” under
this Agreement; (b) any such additional Warrants shall be included within the
definition of “Warrants” under this Agreement; (c) any such additional Notes and
additional Warrants shall be included within the definition of “Closing
Securities” under this Agreement; (d) any shares of Common Stock issuable upon
conversion of any such additional Notes shall be included within the definition
of “Note Shares” under this Agreement; (e) any shares of Common Stock issuable
upon the exercise of any such additional Warrants shall be included within the
definition of “Warrant Shares” under this Agreement; and (f) any amendment or
joinder to this Agreement, the Notes, the Warrants, the Security Agreement, the
IP Security Agreement, the Registration Rights Agreement, the PDL Subordination
Agreement, the PDL Credit Agreement or any other documents contemplated or
necessitated hereby in order to further consummate the sale of any such
additional Notes and/or additional Warrants shall be included within the
definition of “Transaction Documents” under this Agreement. Any such additional
Notes shall be substantially in the form of the senior secured convertible note
attached hereto as Exhibit A, with such updates to the “Issuance Date”,
“Maturity Date”, “First Five Year Note Period”, “Conversion Price” and other
terms as shall be mutually acceptable to the Company and the Investors. Any such
additional Warrants shall be substantially in the form of common stock warrant
attached hereto attached hereto as Exhibit B, with such updates to the
“Expiration Date”, “Warrant Price” and other terms as shall be mutually
acceptable to the Company and the Investors.”

 

2

 

3. Joinder of Additional Investors to Purchase Agreement, Registration Rights
Agreement and Security Agreement. The Investors other than the Existing
Investors (such Investors, the “New Investors”) hereby join in the execution and
agree to be bound by, and are hereby deemed a party to, the Purchase Agreement,
the Registration Rights Agreement and the Security Agreement, as one of the
“Investors” under the Purchase Agreement, one of the “Holders” under the
Registration Rights Agreement and one of the “Secured Parties” under the
Security Agreement, in each case for all purposes thereof. The Company hereby
acknowledges and agrees that the New Investors are hereby joining in the
execution of and agreeing to be bound by and will be deemed a party to, the
Purchase Agreement, the Registration Rights Agreement and the Security
Agreement, as one of the “Investors” under the Purchase Agreement, one of the
“Holders” under the Registration Rights Agreement and one of the “Secured
Parties” under the Security Agreement for all purposes thereof and shall be
entitled to all of the rights, benefits and terms thereof as an Investor, Holder
or Secured Party, as the case may be. By executing this Amendment, each of the
New Investors (severally and not jointly) hereby acknowledges and agrees that it
is bound by all terms and conditions of the Purchase Agreement that apply to an
Investor, all of the terms and conditions of the Registration Rights Agreement
that apply to a Holder and all terms and conditions of the Security Agreement
that apply to a Secured Party, including without limitation the appointment of
HealthCor Partners as the collateral agent, and joins in the representations and
warranties of the several Investors under Article 3 of the Purchase Agreement to
the extent set forth in Section 7 of this Amendment.

 

4. No Further Amendments. Except as amended by this Amendment, the Purchase
Agreement shall remain in full force and effect in accordance with its terms.

 

5. Issuance of Eighth Amendment Supplemental Closing Notes and Eighth Amendment
Supplemental Warrants. Subject to the terms and conditions of this Amendment and
the Purchase Agreement (including without limitation Section 7.6 of the Purchase
Agreement), on the Eighth Amendment Supplemental Closing Date, each of the
Investors listed on Annex I shall severally, and not jointly, purchase from the
Company, and the Company shall sell and issue to each Investor, the Eighth
Amendment Supplemental Closing Notes and the Eighth Amendment Supplemental
Warrants in the respective amounts set forth opposite each such Investor’s name
on Annex I in exchange for a cash payment by each such Investor of the amount
set forth opposite such Investor’s name on Annex I (the “Eighth Amendment
Supplemental Purchase Price”). The Eighth Amendment Supplemental Closing Notes
shall be substantially in the form attached hereto as Exhibit A-1, and the
Eighth Amendment Supplemental Warrants shall be substantially in the form
attached hereto as Exhibit B-1. The closing of the purchase, sale and issuance
of the Eighth Amendment Supplemental Closing Notes and Eighth Amendment
Supplemental Warrants (the “Eighth Amendment Supplemental Closing”) shall take
place on the Eighth Amendment Supplemental Closing Date at the offices of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo PC, One Financial Center, Boston, MA
02111, or at such other location as the Company and the Investors shall mutually
agree. At the Eighth Amendment Supplemental Closing, the Company shall have
satisfied the closing conditions set forth in subsections (c)-(h), (k) and (l)
of Section 4.1 of the Purchase Agreement as of the Eighth Amendment Supplemental
Closing Date (for avoidance of doubt, reading references to the “Closing Date”
in such subsections to refer to the Eighth Amendment Supplemental Closing Date)
and shall deliver to the Investors the Eighth Amendment Supplemental Closing
Notes and the Eighth Amendment Supplemental Warrants, each registered in such
name or names as the Investors may designate. Without limiting the foregoing,
the Company shall deliver to the Investors at such closing a copy of the fully
executed second amendment to the PDL Credit Agreement. On the Eighth Amendment
Supplemental Closing Date, the Investors shall deliver the Eighth Amendment
Supplemental Purchase Price to the Company, payable by wire transfer in same day
funds to an account specified by the Company in writing. At the Eighth Amendment
Supplemental Closing, the New Investors shall deliver to the Company an executed
joinder to the PDL Subordination Agreement. The Eighth Amendment Supplemental
Closing Notes shall be secured as and to the same extent as the other Notes
issued pursuant to the Purchase Agreement, as described in the Transaction
Documents, including, without limitation, the Security Agreement and IP Security
Agreement.

 

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6. Bringdown of Company’s Representations and Warranties. The Company represents
and warrants to the Investors that, except as set forth in a disclosure letter
delivered to the Investors as of the Eighth Amendment Supplemental Closing Date,
the statements contained in Article 2 and the first sentence of Section 5.1(k)
of the Purchase Agreement are true and correct as of the Eighth Amendment
Supplemental Closing Date as though made as of such date, except to the extent
such representations and warranties are specifically made as of a particular
date (in which case such representations and warranties are true and correct as
of such other specified date). For the avoidance of doubt, as a result of the
operation of this Section 6 and for purposes hereof, any representation and
warranty made in the Purchase Agreement “as of the Closing Date” shall be deemed
to be made as of the Eighth Amendment Supplemental Closing Date, any reference
in a representation and warranty to “the date hereof” shall be deemed to refer
to the date of this Amendment, any retroactive time period set forth in a
representation and warranty shall be deemed to be retroactive from the date of
this Amendment for such time period, and any reference to “Closing Securities”
shall be deemed to refer to the Eighth Amendment Supplemental Closing Notes and
the Eighth Amendment Supplemental Warrants.

 

7.   Bringdown of Investors’ Representations and Warranties. Each Investor,
severally and not jointly, represents and warrants to the Company that the
statements contained in Article 3 of the Purchase Agreement are true and correct
as of the Eighth Amendment Supplemental Closing Date as though made as of the
Eighth Amendment Supplemental Closing Date (for this purpose, reading any
reference to “Closing Securities” in such Article 3 to refer only to the Eighth
Amendment Supplemental Closing Notes and the Eighth Amendment Supplemental
Warrants).

 

8.   Form D and Blue Sky. The Company agrees to file a Form D with respect to
the Eighth Amendment Supplemental Closing Notes and the Eighth Amendment
Supplemental Warrants as required under Regulation D and to provide a copy
thereof to the Investors promptly after such filing. The Company shall take such
action as is necessary in order to obtain an exemption for or to qualify the
Eighth Amendment Supplemental Closing Notes and the Eighth Amendment
Supplemental Warrants for sale to the Investors at the Eighth Amendment
Supplemental Closing pursuant to this Amendment under applicable securities or
“Blue Sky” laws of the states of the United States, and shall provide evidence
of any such exemption or qualification so taken to the Investors on or prior to
the Eighth Amendment Supplemental Closing Date promptly upon the request of any
Investor.

 

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9.   Acknowledgement and Undertaking by Company. The Company agrees and
acknowledges that the transactions described in this Amendment and the issuance
of the Eighth Amendment Supplemental Closing Notes, the Eighth Amendment
Supplemental Warrants and shares of Common Stock upon exercise or conversion of
the Eighth Amendment Supplemental Closing Notes and Eighth Amendment
Supplemental Warrants are intended to be exempt from Section 16(b) of the
Exchange Act to the maximum extent permitted by law including pursuant to Rule
16b-3 under the Exchange Act and the Commission’s releases and interpretations,
and will, from time to time as and when requested by the Investors, and will
cause its successors and assigns to, execute and deliver or cause to be executed
and delivered, to the extent it may lawfully do so, all such documents and
instruments and take, or cause to be taken, to the extent it may lawfully do so,
all such further actions as the Investors may reasonably deem necessary and
desirable to facilitate and effect any such exemption. 

 

10. Miscellaneous.

 

a. Ratification and Confirmation. The Company acknowledges, agrees and confirms
that: (x) the Purchase Agreement and each of the other Transaction Documents, as
amended and otherwise modified by the amendments and other modifications
specifically provided herein or contemplated hereby, are and shall continue to
be in full force and effect and are hereby in all respects ratified and
confirmed; and (y) without limiting the generality of the foregoing clause (x),
(i) all obligations, liabilities and Indebtedness of the Company under the
Transaction Documents, as amended hereby, constitute “Obligations” (as defined
in the Security Agreement) secured by and entitled to the benefits of the
security set forth in the Security Agreement and the IP Security Agreement, and
the liens and security interests granted in favor of the Investors under the
terms of the Security Agreement and the IP Security Agreement are and remain
perfected, effective, enforceable and valid and such liens and security
interests are, in each case, a first priority lien and security interest (except
to the extent otherwise expressly permitted by the Transaction Documents) and
such liens and security interests are hereby in all respects ratified and
confirmed, and (ii) the shares of Common Stock issuable upon exercise or
conversion of the Eighth Supplemental Closing Notes and the Eighth Supplemental
Warrants shall constitute “Registrable Securities” under the Registration Rights
Agreement. At the Eighth Amendment Supplemental Closing, the Company shall
deliver to the Investors an executed copy of the second amendment to the PDL
Credit Agreement and the New Investors shall deliver to the Company an executed
copy of the joinder to the PDL Subordination Agreement.

 

b. Expenses. The Company will pay and bear full responsibility for the
reasonable legal fees and other out-of-pocket costs and expenses of the
Investors attributable to the negotiation and consummation of the transactions
contemplated hereby.

 

c. Further Assurances. The Company shall duly execute and deliver, or cause to
be duly executed and delivered, at its own cost and expense, such further
instruments and documents and to take all such action, in each case as may be
necessary or proper in the reasonable judgment of the Investors to carry out the
provisions and purposes of this Amendment.

 

5

 

d. Survival. The representations, warranties, covenants and agreements made
herein shall survive any investigation made by any party hereto, the execution
and delivery of this Amendment and the closing of the transactions contemplated
hereby.

 

e. Governing Law. All questions concerning the construction, interpretation and
validity of this Amendment shall be governed by and construed and enforced in
accordance with the domestic laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether in the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware. In furtherance of the
foregoing, the internal law of the State of Delaware will control the
interpretation and construction of this Amendment, even if under such
jurisdiction’s choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily or necessarily apply.

 

f. Construction. The Company and the Investors acknowledge that the Company and
its independent counsel and the Investors and their independent counsel have
jointly reviewed and drafted this document, and agree that any rule of
construction and interpretation to the effect that drafting ambiguities are to
be resolved against the drafting party shall not be employed.

 

g. Counterparts; Facsimile and Electronic Signatures. This Amendment may be
executed in any number of counterparts, and each such counterpart hereof shall
be deemed to be an original instrument, but all such counterparts together shall
constitute but one agreement. Counterpart signatures to this Amendment delivered
by facsimile or other electronic transmission shall be acceptable and binding.

 

h. Headings. The section and paragraph headings contained in this Amendment are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Amendment.

 

[Signature Pages Follow]

 

6

 

IN WITNESS WHEREOF, each of the undersigned has duly executed this Eighth
Amendment to Note and Warrant Purchase Agreement as of the date first written
above.

 

  COMPANY:         CareView Communications, Inc., a Nevada corporation        
By: /s/ Steven G. Johnson     Name: Steven G. Johnson     Title: President

 

  MAJORITY INVESTORS:         HealthCor Partners Fund, L.P.   By: HealthCor
Partners Management L.P., as Manager   By: HealthCor Partners Management, G.P.,
LLC, as General Partner         By: /s/ Jeffrey C. Lightcap   Name: Jeffrey C.
Lightcap   Title: Senior Managing Director

 

  Address: HealthCor Partners     Carnegie Hall Towers     152 West 57th Street
    New York, NY 10019

 

  HealthCor Hybrid Offshore Master Fund, L.P.   By: HealthCor Hybrid Offshore
G.P., LLC, as General Partner         By: /s/ Joseph Healey   Name: Joseph
Healey   Title: Co-CEO

 

  Address: HealthCor Partners     Carnegie Hall Towers     152 West 57th Street
    New York, NY 10019

 

[Signature Page to Eighth Amendment to Note and Warrant Purchase Agreement] 

 

 

  INVESTORS:       /s/ Steven G. Johnson   Steven G. Johnson       /s/ Dr. James
R. Higgins   James R. Higgins       /s/ Allen Wheeler   L. Allen Wheeler      
/s/ Steven B. Epstein   Steven B. Epstein       /s/ Jason T. Thompson   Jason T.
Thompson       /s/ Sandra K. McRee   Sandra K. McRee       /s/ Jeffrey C.
Lightcap   Jeffrey C. Lightcap       Rockwell Holdings I, LLC       /s/ Matthew
Bluhm   By:  Matthew Bluhm   Title:  Managing Member

 

[Signature Page to Eighth Amendment to Note and Warrant Purchase Agreement] 

 

 

ACKNOWLEDGED AND AGREED:

 

CareView Communications, Inc., A Texas corporation         By: /s/ Steven G.
Johnson   Name: Steven G. Johnson   Title: President         CareView
Operations, LLC         By: /s/ Steven G. Johnson   Name: Steven G. Johnson  
Title: President  

 

[Signature Page to Eighth Amendment to Note and Warrant Purchase Agreement] 

 

 

Annex I

 

Investors

 

Investor  Eighth Amendment Supplemental Closing Notes   Eighth Amendment
Supplemental Warrants   Eighth Amendment Supplemental Purchase Price  Rockwell
Holdings I, LLC  $100,000    25,000   $100,000  Steven B. Epstein  $100,000  
 25,000   $100,000  James R. Higgins  $500,000    125,000   $500,000  Steven G.
Johnson  $600,000    150,000   $600,000  Jeffrey C. Lightcap  $250,000  
 62,500   $250,000  Sandra K. McRee  $100,000    25,000   $100,000  Jason T.
Thompson  $100,000    25,000   $100,000  L. Allen Wheeler  $300,000    75,000  
$300,000  TOTAL  $2,050,000    512,500   $2,050,000 

 

 

Exhibit A-1

 

Form of Eighth Amendment Supplemental Closing Notes

 

See attached.

 

 

 

SENIOR SECURED CONVERTIBLE NOTE

 

NEITHER THE ISSUANCE AND SALE OF THIS NOTE NOR ANY SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF THIS NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES
LAWS. THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
NOTE MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THIS NOTE OR THE SHARES
OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE UNDER THE SECURITIES ACT,
AS APPLICABLE, OR (B) AN OPINION OF COUNSEL (SELECTED BY THE HOLDER AND
REASONABLY ACCEPTABLE TO THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE
COMPANY, THAT THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
OF THIS NOTE MAY BE OFFERED FOR SALE, SOLD, ASSIGNED OR TRANSFERRED PURSUANT TO
AN EXEMPTION FROM REGISTRATION; PROVIDED THAT SUCH OPINION OF COUNSEL SHALL NOT
BE REQUIRED IN CONNECTION WITH ANY SUCH SALE, ASSIGNMENT OR TRANSFER TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT IS, PRIOR TO SUCH SALE, ASSIGNMENT OR
TRANSFER, AN AFFILIATE OF THE HOLDER OF THIS NOTE, OR (II) UNLESS THE HOLDER
PROVIDES THE COMPANY WITH ASSURANCE (REASONABLY SATISFACTORY TO THE COMPANY)
THAT SUCH NOTE OR THE SHARES OF COMMON STOCK ISSUABLE UPON THE CONVERSION OF THE
NOTE CAN BE SOLD, ASSIGNED OR TRANSFERRED PURSUANT TO RULE 144.

 

ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE,
INCLUDING, WITHOUT LIMITATION, SECTIONS 3(c)(iii) AND 13(a) HEREOF. THE
PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES
ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE
FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

 

 

 

Notwithstanding anything herein to the contrary, the rights and remedies granted
to the Holder pursuant to this Note, the lien and security interest granted to
the Agent securing this Note and the exercise of any right or remedy by the
Holder or Agent relating to this Note are subject to the provisions of the
Subordination and Intercreditor Agreement dated as of June 26, 2015 (as amended,
amended and restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof, the “Intercreditor Agreement”), among PDL
INVESTMENT HOLDINGS, LLC (as assignee of PDL BioPharma, Inc.) and EACH OF THE
NOTE INVESTORS PARTY TO THAT CERTAIN NOTE AND WARRANT PURCHASE AGREEMENT DATED
AS OF APRIL 21, 2011, AS subsequently amended, and certain other persons party
or that may become party thereto from time to time. In the event of any conflict
between the terms of the Intercreditor Agreement and this Note, the Purchase
Agreement and the other Transaction Documents (as defined in the Purchase
Agreement), the terms of the Intercreditor Agreement shall govern and control.

 

2

 

 

No. E-[__]

 

CAREVIEW COMMUNICATIONS, INC.

 

SENIOR SECURED CONVERTIBLE NOTE

 

Issuance Date:  February 23, 2018 Principal Amount:  U.S. $[__________]  
(subject to Section 3(c)(iii) hereof)

 

FOR VALUE RECEIVED, CareView Communications, Inc., a Nevada corporation (the
“Company”), hereby promises to pay to [______________] or the registered
assign(s) thereof (“Holder”) the principal amount set forth above (as increased
and/or decreased pursuant to the terms hereof by reason of the accrual of
Interest, partial conversion or otherwise, and together with the principal
amount of any additional convertible debt instruments issued by the Company to
the Holder in accordance herewith, the “Principal”) when due, whether upon the
Maturity Date, acceleration or otherwise (in each case in accordance with the
terms hereof), together with accrued interest (“Interest”) on any outstanding
Principal at the First Five Year Interest Rate or the Second Five Year Interest
Rate, as applicable, from the date hereof (the “Issuance Date”) until the same
becomes due and payable, whether upon the Maturity Date, acceleration,
conversion or otherwise (in each case, in accordance with the terms hereof).
This Senior Secured Convertible Note (this “Note”) is being issued pursuant to
that certain Note and Warrant Purchase Agreement, dated as of April 21, 2011, as
amended by a Note and Warrant Amendment Agreement entered into as of December
30, 2011, a Second Amendment to Note and Warrant Purchase Agreement dated as of
January 31, 2012, a Third Amendment to Note and Warrant Purchase Agreement dated
as of August 20, 2013, a Fourth Amendment to Note and Warrant Purchase Agreement
dated as of January 16, 2014, a Fifth Amendment to Note and Warrant Purchase
Agreement dated as December 15, 2014, a Sixth Amendment to Note and Warrant
Purchase Agreement dated as March 31, 2015, a Seventh Amendment to Note and
Warrant Purchase Agreement dated as June 26, 2015 and an Eighth Amendment to
Note and Warrant Purchase Agreement dated as February 23, 2018 by and among the
Company, the Holder and the other Investors named therein (the “Purchase
Agreement”), and is entitled to the benefits of, and evidences obligations
incurred under, the Purchase Agreement and the other Transaction Documents (as
defined in the Purchase Agreement), to which reference is made for a description
of the security for this Note and for a statement of the terms and conditions on
which the Company is permitted and required to make prepayments and repayments
of principal of the obligations evidenced hereby and on which such obligations
may be declared to be immediately due and payable. This Note represents a full
recourse obligation of the Company.

 

Certain capitalized terms used herein are defined in Section 23.

 

(1)            MATURITY. On the Maturity Date, the Holder shall surrender this
Note to the Company and the Company shall pay to the Holder an amount in cash
representing all outstanding Principal, accrued and unpaid Interest and accrued
and unpaid Late Charges (as defined in Section 19(b)), if any. The “Maturity
Date” shall be February 22, 2028.

 

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(2)            INTEREST; INTEREST RATE.

 

(a)          So long as no Event of Default has occurred and is continuing, the
outstanding Principal balance of this Note shall accrue Interest from the
Issuance Date through February 22, 2023 (the “First Five Year Note Period”), at
the rate of twelve and one-half percent (12.5%) per annum (based on a 360-day
year and the actual number of days elapsed in any partial year) (the “First Five
Year Interest Rate”), compounding quarterly, which accrued Interest shall be
added to the outstanding Principal balance of this Note on the last day of each
calendar quarter and shall thereafter itself, as part of such Principal balance,
accrue Interest at the First Five Year Interest Rate (and, during the Second
Five Year Note Period (as defined below), at the Second Five Year Interest Rate
(as defined below)), compounding quarterly. All such accrued Interest added to
the outstanding Principal balance pursuant to the immediately preceding sentence
shall be payable on the same terms and subject to the same conditions set forth
herein. Upon the occurrence of an Event of Default, Interest shall be calculated
at the Default Rate as set forth in Section 2(c) below.

 

(b)          So long as no Event of Default has occurred and is continuing, the
outstanding Principal balance of this Note shall accrue Interest from and after
the end of the First Five Year Note Period through the Maturity Date (the
“Second Five Year Note Period”), at the rate of ten percent (10%) per annum
(based on a 360-day year and the actual number of days elapsed in any partial
year) (the “Second Five Year Interest Rate”). The Interest accruing during the
Second Five Year Note Period may be paid quarterly in arrears in cash or, at the
Company’s option, such Interest may be added to the outstanding Principal
balance of the Note on the last day of each calendar quarter and shall
thereafter itself, as part of such Principal balance, accrue Interest at the
Second Five Year Interest Rate, compounding quarterly. All such accrued Interest
added to the outstanding Principal balance pursuant to the immediately preceding
sentence shall be payable on the same terms and subject to the same conditions
set forth herein. Upon the occurrence of an Event of Default, Interest shall be
calculated at the Default Rate as set forth in Section 2(c) below.

 

(c)          From and after the date such Event of Default occurred, the First
Five Year Interest Rate or the Second Five Year Interest Rate, whichever is then
applicable, shall be increased by five percent (5%) and otherwise applied
consistently with the provisions of Sections 2(a) and 2(b) (the “Default Rate”).

 

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(d)           

  

(i)          In addition to the foregoing, if any Major Event occurs at any time
during the First Five Year Note Period, then all amounts of Interest that are
then scheduled to be paid or accrued pursuant to Section 2(a) through and
including the last day of the First Five Year Note Period, but that have not yet
been paid pursuant to Section 2(a) (such amount, the “First Five Year Major
Event Interest Amount”), will accelerate and become immediately due and payable
by the Company by the issuance to the Holder of an additional convertible debt
instrument with the same terms as this Note, in a principal amount equal to the
First Five Year Major Event Interest Amount, and, at any time from and after the
occurrence of the Major Event, the Holder may, at its option, elect to (A)
convert this Note and such convertible debt instrument at the then effective
Conversion Rate or (B) redeem all or any portion of the outstanding Principal
balance of this Note and such convertible debt instrument, provided that for so
long as this Note or such convertible debt instrument remain outstanding,
subject to Section 2(d)(ii) below, no additional Interest shall accrue on this
Note or such additional convertible debt instrument until the commencement of
the Second Five Year Note Period. If any Major Event occurs at any time during
the Second Five Year Note Period, then all amounts of Interest that are then
scheduled to be paid or accrued pursuant to Section 2(b) through and including
the last day of the Second Five Year Note Period (assuming for this purpose that
the Company would elect to pay all such Interest in cash), but that have not yet
been paid pursuant to Section 2(b) (such amount, the “Second Five Year Major
Event Interest Amount”), will accelerate and become immediately due and payable
by the Company by the issuance to the Holder of an additional convertible debt
instrument with the same terms as this Note and in a principal amount equal to
the Second Five Year Major Event Interest Amount or, at the Company’s option, by
cash payment in immediately available funds of an amount equal to the Second
Five Year Major Event Interest Amount paid within five (5) Business Days of the
occurrence of the Major Event. At any time following the occurrence of the Major
Event, the Holder may, at its option, elect to (X) convert this Note and such
convertible debt instrument (if any) at the then effective Conversion Rate or
(Y) redeem all or any portion of the outstanding Principal balance of this Note
and such convertible debt instrument (if any), provided that, for so long as
this Note or any such convertible debt instrument remain outstanding, subject to
Section 2(d)(ii) below, no additional Interest shall accrue on this Note or such
additional convertible debt instrument for the duration of the Second Five Year
Note Period. For purposes of this Note, the term “Major Event” shall mean the
occurrence of (i) the signing of a definitive agreement or a series of
agreements for the transfer, sale, lease or license of all or substantially all
of the Company’s assets or capital securities; (ii) the signing of a definitive
agreement to consolidate or merge with or into another Person (whether or not
the Company is the Successor Entity) that results or would result, after giving
effect to the consummation of the transactions contemplated by such agreement,
in such other Person (or the holders of such other Person’s capital stock
immediately prior to the transaction) (other than the Holder or its Affiliates)
being or becoming the beneficial owner (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of thirty-five percent (35%) or more of any
class of the Company’s or the Successor Entity’s outstanding capital securities;
(iii) the signing of a definitive agreement or a series of agreements to
consummate a stock acquisition or sale or other business combination (including,
without limitation, a reorganization, recapitalization, or spin-off), or series
thereof, with any other Person or Persons (other than the Holder or its
Affiliates) that results or would result, after giving effect to the
consummation of the transactions contemplated by such agreement or agreements,
in such other Person or Persons being or becoming the beneficial owner (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty-five
percent (35%) or more of any class of the Company’s outstanding capital
securities; (iv) the commencement or other public announcement by any Person
(other than the Company, the Holder or the Holder’s Affiliates) of a purchase,
tender or exchange offer for 35% or more of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the Person or Persons
making or party to, or associated or affiliated with the Persons making or party
to, such purchase, tender or exchange offer), (v) any “person” or “group” (as
these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange
Act) (other than the Holder or its Affiliates) is or shall become the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of either (x) 35% or more of the aggregate ordinary voting power
represented by issued and outstanding Common Stock or (y) 35% or more of the
aggregate ordinary voting power represented by issued and outstanding Common
Stock not held by such Person or Persons as of the date hereof or (vi) the
public announcement by any Person, Persons or group (other than the Company, the
Holder or the Holder’s Affiliates) of a bona fide intention to enter into any of
the agreements or to engage in or commence any of the actions described in
clauses (i) through (v) above, or otherwise reflecting an intent to acquire the
Company or all or substantially all of its assets or capital securities, or the
public announcement by the Company of its receipt of a communication from such a
Person, Persons or group evidencing the same.

 

5

 

 

(ii)         Notwithstanding the foregoing, in the event that, following a Major
Event, an Event of Default occurs during the First Five Year Note Period while
any portion of this Note and/or any convertible debt instrument issued pursuant
to Section 2(d)(i) remains outstanding (such outstanding portion, the “Post EOD
Principal”), the Company shall issue to the Holder an additional convertible
debt instrument with the same terms as this Note and with a face principal
amount equal to the difference (to the extent such difference is positive)
between (A) the applicable EOD Accelerated Interest (as defined in Section 4(b))
on such Post EOD Principal, and (B) the First Five Year Major Event Interest
Amount attributable to the Post EOD Principal and paid under Section 2(d)(i),
and at any time following the occurrence of the Event of Default, the Holder
may, at its option, elect to convert such additional convertible debt instrument
at the then effective Conversion Rate or redeem all or any portion of the
outstanding Principal balance of such convertible debt instrument. In the event
that, following a Major Event, an Event of Default occurs during the Second Five
Year Note Period while any Post EOD Principal remains outstanding, the Company
shall issue to the Holder an additional convertible debt instrument with the
same terms as this Note and with a face principal amount equal to the difference
(to the extent such difference is positive) between (X) the applicable EOD
Accelerated Interest attributable to such Post EOD Principal and (Y) the Second
Five Year Major Event Interest Amount attributable to the Post EOD Principal and
paid under Section 2(d)(i), and at any time following the occurrence of the
Event of Default, the Holder may, at its option, elect to convert such
additional convertible debt instrument at the then effective Conversion Rate or
redeem all or any portion of the outstanding Principal balance of such
convertible debt instrument, provided, however, that the Company shall also have
the option of paying the foregoing amount in cash upon the occurrence of such
Event of Default during the Second Five Year Note Period.

 

(e)          Notwithstanding any other provision of this Note, the aggregate
annual interest rate payable with respect to this Note (including all charges
and fees deemed to be interest pursuant to applicable law) shall not exceed the
maximum annual rate permitted by applicable law. In the event the aggregate
annual interest rate payable with respect to this Note (including all charges
and fees deemed to be interest under applicable laws) exceeds the maximum legal
rate, the Company shall only pay Interest to the Holder at the maximum permitted
rate and the Company shall continue to make such Interest payments at the
maximum permitted rate until all amounts, fees and obligations required to be
paid hereunder have been paid in full.

 

6

 

 

(f)           This Note is one of a series of notes issued by the Company
pursuant to the Purchase Agreement. Such Notes are referred to herein as the
“Notes,” and the holders thereof (including the Holder) are referred to herein
as the “Investors.” The right of an Investor to receive payments of Principal
and Interest under this Note shall be pari passu with the rights of the
other Investors to receive payments of Principal and Interest under their
respective Notes, and the Company covenants that any payments made by it with
respect to the Notes shall be made pro rata among the Investors determined based
on the ratio of the outstanding balance of Principal and Interest under each
Note divided by the aggregate outstanding balance of Principal and Interest
under all Notes.  By the Holder’s acceptance of this Note, the Holder agrees to
the foregoing sentence.

 

(3)           CONVERSION OF NOTE. This Note shall be convertible into shares of
Common Stock, on the terms and conditions set forth in this Section 3.

 

(a)          Conversion Right. At any time or times on or after the Issuance
Date, the Holder shall be entitled to convert any portion of the outstanding and
unpaid Conversion Amount (as defined below) into fully paid and nonassessable
shares of Common Stock in accordance with Section 3(c), at the Conversion Rate
(as defined below). The Company shall not issue any fraction of a share of
Common Stock upon any conversion. If any conversion 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 to the nearest whole share but shall have no
obligation to pay the Holder for any fraction of a share of Common Stock
forfeited as a result of such rounding. The Company shall pay any and all stock
transfer, stamp, documentary and similar taxes (excluding any taxes on the
income or gain of the Holder) that may be payable with respect to the issuance
and delivery of shares of Common Stock to the Holder upon conversion of any
Conversion Amount. To the extent permitted by law, the Company and
the Holder acknowledge and agree that any conversion of all or any portion of
the Conversion Amount into shares of Common Stock pursuant to the terms of
this Section 3(a) will not be treated as a taxable transaction and the Company
and the Holder agree to report any such conversion in a manner consistent with
the foregoing treatment.

 

(b)          Conversion Rate. The number of shares of Common Stock issuable upon
conversion of any Conversion Amount pursuant to Section 3(a) (the “Conversion
Rate”) shall be determined by dividing (x) such Conversion Amount by (y) the
Conversion Price.

 

(i)          “Conversion Amount” means the sum of (A) the portion of the
Principal to be converted with respect to which this determination is being
made, (B) accrued and unpaid Interest with respect to such Principal and (C)
accrued and unpaid Late Charges with respect to such Principal and Interest.

 

(ii)         “Conversion Price” means $0.05, subject to adjustment as provided
herein (including, without limitation, adjustment pursuant to Section 6).

 

7

 

 

(c)           Mechanics of Conversion.

 

(i)           Optional Conversion. To convert any Conversion Amount into shares
of Common Stock on any date (a “Conversion Date”), the Holder shall (A) transmit
by facsimile (or otherwise deliver), for receipt on or prior to 4:00 p.m.,
Dallas, TX time, on such date, a copy of an executed notice of conversion in the
form attached hereto as Exhibit I (the “Conversion Notice”) to the Company and
(B) if required by Section 3(c)(iii), cause this Note to be delivered to the
Company as soon as practicable on or following such date. On or before 4:00
p.m., Dallas, TX time, on the first (1st) Business Day following the date of
receipt of a Conversion Notice, the Company shall transmit by facsimile a
confirmation of receipt of such Conversion Notice to the Holder (at the
facsimile number provided in the Conversion Notice) and the Company’s transfer
agent, if any (the “Transfer Agent”). On or before 4:00 p.m., Dallas, TX time,
on the third (3rd) Business Day following the date of receipt of a Conversion
Notice (the “Share Delivery Date”), the Company shall (X) provided the Transfer
Agent is participating in the DTC Fast Automated Securities Transfer Program,
cause the Transfer Agent to credit such aggregate number of shares of Common
Stock to which the Holder shall be entitled to the Holder’s or its designee’s
balance account with DTC through its Deposit/Withdrawal At Custodian (“DWAC”)
system, or (Y) if the Transfer Agent is not participating in the DTC Fast
Automated Securities Transfer Program, or if the Holder otherwise requests,
issue and deliver to the address as specified in the Conversion Notice, a
certificate, registered in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder shall be entitled. If this
Note is physically surrendered for conversion as required by Section 3(c)(iii)
and the outstanding Principal of this Note is greater than the Principal portion
of the Conversion Amount being converted, then the Company shall as soon as
practicable and in no event later than three (3) Business Days after receipt of
this Note and at its own expense, issue and deliver to the Holder a new Note (in
accordance with Section 13(d)), representing the outstanding Principal not
converted. The Person or Persons entitled to receive the shares of Common Stock
issuable upon a conversion of this Note shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the Conversion Date.

 

(ii)          Company’s Failure to Timely Convert. If, at any time, the Company
shall fail to credit the Holder’s balance account with DTC or issue a
certificate to the Holder, as the case may be, upon conversion of any Conversion
Amount on or prior to the date which is seven (7) Business Days after the
Conversion Date (a “Conversion Failure”), then (A) the Company shall pay damages
to the Holder for each day of such Conversion Failure in an amount equal to 1.5%
of the product of (I) the sum of the number of shares of Common Stock not issued
to the Holder on or prior to the Share Delivery Date and to which the Holder is
entitled, and (II) the Closing Sale Price of the Common Stock on the Share
Delivery Date and (B) the Holder, upon written notice to the Company, may void
its Conversion Notice with respect to, and retain or have returned, as the case
may be, any portion of this Note that has not been converted pursuant to such
Conversion Notice; provided that the voiding of a Conversion Notice shall not
affect the Company’s obligations to make any payments which have accrued prior
to the date of such notice pursuant to this Section 3(c)(ii) or otherwise.

  

(iii)         Book-Entry. Notwithstanding anything to the contrary set forth
herein, upon conversion of any portion of this Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender this Note to
the Company unless (A) the full Conversion Amount represented by this Note is
being converted or (B) the Holder has provided the Company with prior written
notice (which notice may be included in a Conversion Notice) requesting physical
surrender and reissue of this Note. The Holder and the Company shall maintain
records showing the Principal, Interest and Late Charges 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 conversion.

 

8

 

 

(iv)         Disputes. In the event of a dispute between the Company and the
Holder of this Note as to the number of shares of Common Stock issuable to the
Holder in connection with a conversion of this Note, the Company shall issue to
the Holder the number of shares of Common Stock not in dispute and resolve such
dispute in accordance with Section 18.

 

(4)           RIGHTS UPON EVENT OF DEFAULT.

 

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

 

(i)           the Company’s failure to pay to the Investors any amount of
Principal when and as due under the Notes (including, without limitation, upon a
redemption request pursuant to Section 2(d));

 

(ii)          the Company’s failure to pay to the Investors any amount of
Interest, Late Charges or other amounts (other than the amounts specified in
clause (i)) when and as due under the Notes if such failure continues for a
period of at least three (3) Business Days;

 

(iii)         any acceleration prior to maturity of any Indebtedness referred to
in clause (a) or (b) of the definition thereof of the Company or any of its
Subsidiaries consisting of principal individually or in the aggregate equal to
or greater than $500,000;

 

(iv)         the Company or any of its Subsidiaries, pursuant to or within the
meaning of Title 11, U.S. Code, or any similar Federal, foreign or state law for
the relief of debtors (collectively, “Bankruptcy Law”), (A) commences a
voluntary case, (B) consents to the entry of an order for relief against it in
an involuntary case, (C) consents to the appointment of a receiver, trustee,
assignee, liquidator or similar official (a “Custodian”), (D) makes a general
assignment for the benefit of its creditors or (E) admits in writing that it is
generally unable to pay its debts as they become due;

 

(v)          a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that is not vacated, set aside or reversed within sixty (60)
days that (A) is for relief against the Company or any of its Subsidiaries in an
involuntary case, (B) appoints a Custodian of the Company or any of its
Subsidiaries or (C) orders the liquidation of the Company or any of its
Subsidiaries;

  

(vi)         a final judgment or judgments for the payment of money aggregating
in excess of $2,000,000 are rendered against the Company or any of its
Subsidiaries and which judgments are not, within sixty (60) days after the entry
thereof, bonded, discharged or stayed pending appeal, or are not discharged
within sixty (60) days after the expiration of such stay; provided, however,
that any judgment which is covered by insurance or an indemnity from a credit
worthy party shall not be included in calculating the $2,000,000 amount set
forth above so long as the Company provides the Holder a written statement from
such insurer or indemnity provider (which written statement shall be reasonably
satisfactory to the Holder) to the effect that such judgment is covered by
insurance or an indemnity and the Company will receive the proceeds of such
insurance or indemnity within sixty (60) days of the issuance of such judgment;

 

9

 

 

(vii)        the Company or any Subsidiary breaches any negative covenant in any
Transaction Document;

 

(viii)       the Company breaches any affirmative covenant or agreement or
materially breaches any representation or warranty in any Transaction Document,
and such breach continues for a period of at least thirty (30) days;

 

(ix)          if at any time while any portion of the Notes remain outstanding
(x) the Board of Directors fails to include one (1) Director designated by the
Holder(s) of at least a majority of the Principal amount of the Notes
outstanding, voting as a separate class (the “Noteholder Director”), provided
that the Company shall have thirty (30) Business Days following the resignation,
removal or death or disability of the Noteholder Director to appoint a successor
Noteholder Director designated by the Holder(s) of at least a majority of the
Principal amount of the Notes outstanding, voting as a separate class, unless
such failure is the result of the failure by such Holders to notify the Company
of the name of the replacement Noteholder Director, in which event the thirty
(30) Business Day period shall be extended until a date which is ten (10)
Business Days after notice of the name and background of the replacement
Noteholder Director is given to the Company, or (y) without the consent of the
Noteholder Director (or, in the absence of a Noteholder Director, the Holder(s)
of at least a majority of the Principal amount of the Notes outstanding), the
Board of Directors exceeds seven (7) directors, or the Compensation Committee or
Nominating Committee (or other committees serving similar functions) of the
Board of Directors exceeds three (3) members, or (z) the Noteholder Director is
not afforded the right to serve as a member of each of the Compensation
Committee and Nominating Committee (or committees serving similar functions);

 

(x)           the failure of the Company for a period of ninety (90) days
following the resignation and/or departure of Steven Johnson to engage a
replacement therefor that is reasonably acceptable to Investors holding at least
a majority of the Principal amount of the Notes outstanding (the “Majority
Investors”);

 

(xi)          [Intentionally omitted];

 

(xii)         the Company or any Subsidiary shall fail to make any payment
(whether of principal, interest or otherwise and regardless of amount) in
respect of any Indebtedness in excess of $500,000 (“Material Indebtedness”),
when and as the same shall become due and payable, after giving effect to any
grace period with respect thereto;

 

10

 

 

(xiii)        any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause such Material Indebtedness to become due, or to require
the prepayment, repurchase, redemption or defeasance thereof, prior to its
scheduled maturity;

 

(xiv)        there shall occur any material loss theft, damage or destruction of
any Collateral (as defined in the Security Agreement) not fully covered (subject
to such reasonable deductibles as the Holder shall have approved) by insurance;
or

 

(xv)         either (a) the Company’s Board of Directors, a committee of the
Board of Directors or the officer or officers of the Company authorized to take
such action if board action is not required, concludes that any previously
issued financial statements, including interim periods, should no longer be
relied upon because of an error in such financial statements as addressed in
FASB Accounting Standards Codification Topic 250, as may be modified,
supplemented or succeeded, or (b) the Company is advised by, or receives notice
from, its independent accountant that disclosure should be made or action should
be taken to prevent future reliance on a previously issued audit report or
completed interim review related to previously issued financial statements, and
in either case the amended financial statements required in order to permit
reliance on such financial statements for the affected periods have not been
filed with the SEC within ninety (90) days of the earliest such event; provided,
however that if the facts and/or circumstances underlying the Event of Default
described in this Section 4(a)(xv) would also create or constitute a separate
Event of Default under this Note, the cure period set forth in this Section
4(a)(xv) shall not supersede or prevent the application of any shorter cure
period associated with such other applicable Event of Default, which may be
enforced separately and independently.

 

(b)           Rights Upon Event of Default. Promptly after the occurrence of an
Event of Default, the Company shall deliver written notice thereof (an “Event of
Default Notice”) to the Holder, and the Majority Investors may, at their option,
by notice to the Company (an “Event of Default Acceleration Notice”), declare
the Default Amount to be due and payable upon demand (an “Acceleration”),
provided that upon the occurrence of an Event of Default described in Sections
4(a)(iv) and 4(a)(v) above, such Acceleration shall occur automatically without
requiring the delivery of an Event of Default Acceleration Notice, such that the
Default Amount shall automatically become immediately due and payable without
any further notice, demand or other action. For purposes hereof, the “Default
Amount” shall equal the entire unpaid Principal balance under this Note, plus
all previously accrued and unpaid Interest and Late Charges, together with all
future Interest (calculated at the Default Rate pursuant to Section 2(c))
scheduled to accrue during the First Five Year Note Period (if such Acceleration
occurred during the First Five Year Note Period) or the Second Five Year Note
Period (if such Acceleration occurred during the Second Five Year Note Period)
(such future Interest amount the “EOD Accelerated Interest”), in each case
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Company. Following an Acceleration (other than an
Acceleration based on an Event of Default described in Sections 4(a)(iv) and
4(a)(v) above), the Holder shall have the right, but not the obligation, to
demand payment in full of the Default Amount at any time prior to the original
Maturity Date of this Note upon written notice to the Company (a “Demand
Notice”). In the event a Demand Notice is not immediately given upon the
occurrence of an Event of Default, or the Company otherwise does not immediately
pay the Default Amount when due, interest shall continue to accrue on the Note
as provided herein, provided that (i) upon an Acceleration that occurs during
the First Five Year Note Period, such Default Amount shall not accrue additional
Interest until the commencement of the Second Five Year Note Period, and (ii)
upon an Acceleration that occurs during the Second Five Year Note Period, such
Default Amount shall not accrue any additional Interest for the duration of the
Second Five Year Note Period. The Company shall deliver the applicable Default
Amount to the Holder (x) in the case of an Event of Default under Section
4(a)(iv) or 4(a)(v), immediately, and (y) in the case of any other Event of
Default, within five (5) Business Days after the Company’s receipt of the Demand
Notice. In the event the Company fails to deliver the Default Amount as
described above, the Holder shall be permitted to exercise such rights as a
secured party or otherwise hereunder or under the other Transaction Documents to
the extent permitted by applicable law.

 

11

 

 

(5)           RIGHTS UPON A CHANGE OF CONTROL.

 

(a)          Assumption. The Company shall not enter into or be party to a
transaction resulting in a Change of Control unless the Successor Entity assumes
in writing all of the obligations of the Company under this Note and the other
Transaction Documents in accordance with the provisions of this Section 5(a)
pursuant to written agreements on or prior to the consummation of such Change of
Control, including the agreement to deliver to the Holder of this Note in
exchange for this Note a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to this Note, including,
without limitation, having a principal amount and interest rate equal to the
principal amounts and the interest rates of this Note (the “Successor Note”).
Upon the occurrence of any Change of Control, the Successor Entity shall succeed
to, and be substituted for (so that from and after the date of such Change of
Control, the provisions of this Note referring to the “Company” shall refer
instead to the Successor Entity), and may exercise every right and power of the
Company and shall assume all of the obligations of the Company under this Note
with the same effect as if such Successor Entity had been named as the Company
herein, until such time as the Successor Note is delivered. Upon consummation of
a Reclassification or Change of Control as a result of which holders of Common
Stock shall be entitled to receive stock, securities, cash, assets or any other
property with respect to or in exchange for such Common Stock, the Company or
Successor Entity, as the case may be, shall deliver to the Holder confirmation
that there shall be issued upon conversion of this Note at any time after the
consummation of such Reclassification or Change of Control, in lieu of the
shares of Common Stock (or other securities, cash, assets or other property)
issuable upon the conversion of this Note prior to such Reclassification or
Change of Control, such shares of stock, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Reclassification or Change of Control had this Note been converted
immediately prior to such Reclassification or Change of Control, as adjusted in
accordance with the provisions of this Note. The provisions of this Section 5(a)
shall apply similarly and equally to successive Change of Control transactions
and shall be applied without regard to any limitations on the conversion of this
Note.

 

12

 

 

(6)           RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

 

(a)          Record Date. If the Company takes a record of the holders of Common
Stock for the purpose of entitling them to receive a dividend or other
distribution payable in Common Stock, Options or in Convertible Securities, then
such record date will be deemed to be the date of the issue or sale of the
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution, as the case may be.

 

(b)          Adjustment of Conversion Rate upon Subdivision or Combination of
Common Stock; Stock Dividends. If the Company at any time, or from time to time,
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at any time, or from
time to time, combines (by combination, reverse stock split or otherwise) one or
more classes of its outstanding shares of Common Stock into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased. Any adjustment under this Section 6(b) shall
become effective at the close of business on the date the subdivision or
combination becomes effective or, in the case of a stock dividend, the date of
such event.

 

(c)          (i)            Adjustment of Conversion Rate upon Cash Dividends
and Distributions. If the Company at any time, or from time to time, pays a
dividend or makes a distribution in cash to the record holders of any class of
Common Stock, then immediately after the close of business on the day that the
Common Stock trades ex-distribution, the Conversion Price then in effect shall
be reduced to an amount equal to the product of (i) the Conversion Price in
effect immediately prior to such dividend or distribution and (ii) the quotient
determined by dividing (A) the Closing Sale Price of the Common Stock on the day
that the Common Stock trades ex-distribution by (B) the sum of (1) the Closing
Sale Price of the Common Stock on the day that the Common Stock trades
ex-distribution plus (2) the amount per share of such dividend or distribution.
The Company shall not be required to give effect to any adjustment in the
Conversion Price pursuant to this Section 6(c) unless and until the net effect
of one or more adjustments (each of which shall be carried forward until counted
toward an adjustment), determined in accordance with this Section 6(c), shall
have resulted in a change of the Conversion Price by at least 1%, and when the
cumulative net effect of more than one adjustment so determined shall be to
change the Conversion Price by at least 1%, such change in the Conversion Price
shall then be given effect.

 

(ii)          Adjustment of Conversion Rate upon Distributions of Capital Stock,
Indebtedness or Other Non-Cash Assets. If the Company at any time, or from time
to time, distributes any shares of capital stock of the Company (other than
Common Stock), evidences of indebtedness or other non-cash assets (including
securities of any person other than the Company but excluding (1) dividends or
distributions paid exclusively in cash or (2) dividends or distributions
referred to in Section 6(b)) to the record holders of any class of Common Stock,
then the Conversion Price then in effect shall be reduced to an amount equal to
the product of (A) the Conversion Price then in effect and (B) a fraction of
which the numerator shall be the Closing Sale Price per share of the Common
Stock on the record date fixed for determination of stockholders entitled to
receive such distribution less the fair market value on such record date (as
determined by the Board of Directors) of the portion of the capital stock,
evidences of indebtedness or other non-cash assets so distributed applicable to
one share of Common Stock (determined on the basis of the number of shares of
Common Stock outstanding on the record date) and of which the denominator shall
be the Closing Sale Price per share of the Common Stock on such record date.

 

13

 

 

(d)         [Intentionally omitted.]

 

(e)          Other Events; Other Dividends and Distributions. If any event
occurs of the type contemplated by the provisions of this Section 6 but not
expressly provided for by such provisions (including, without limitation, the
granting of stock appreciation rights, phantom stock rights or other rights with
equity features), then the Company’s Board of Directors shall, in good faith,
make an adjustment in the Conversion Price so as to protect the rights of the
Holder under this Note; provided that no such adjustment will increase the
Conversion Price as otherwise determined pursuant to this Section 6.

 

(f)           Notice of Adjustment. Whenever the Conversion Price is adjusted
pursuant to this Section 6, the Company shall promptly mail notice of such
adjustment to the Holder, which notice shall set forth the Conversion Price
after adjustment, the date on which such adjustment became effective and a brief
statement of the facts resulting in such adjustment.

 

(7)           NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Certificate of Incorporation, Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Note, and will at all times in good faith carry out all of the
provisions of this Note and take all action as may be required to protect the
rights of the Holder of this Note.

 

(8)           RESERVATION OF AUTHORIZED SHARES.

 

(a)          Reservation. The Company shall at all times reserve out of its
authorized and unissued shares of Common Stock a number of shares of Common
Stock equal to 120% of the Conversion Rate with respect to the full Conversion
Amount of this Note, solely for the purpose of effecting the conversion of this
Note (the “Required Reserve Amount”).

 

(b)          Insufficient Authorized Shares. If at any time while this Note
remains outstanding the Company does not have a sufficient number of authorized
and unreserved shares of Common Stock to satisfy its obligation to reserve the
Required Reserve Amount (an “Authorized Share Failure”), then the Company shall
take all action necessary to increase the Company’s authorized shares of Common
Stock to an amount sufficient to allow the Company to reserve the Required
Reserve Amount. Without limiting the generality of the foregoing sentence, as
soon as practicable after the date of the occurrence of an Authorized Share
Failure, but in no event later than seventy-five (75) days after the occurrence
of such Authorized Share Failure, the Company shall hold a meeting of its
stockholders for the approval of an increase in the number of authorized shares
of Common Stock. In connection with such meeting, the Company shall provide each
stockholder with a proxy statement and shall use its commercially reasonable
efforts to solicit its stockholders’ approval of such increase in authorized
shares of Common Stock and to cause its board of directors to recommend to the
stockholders that they approve such proposal.

 

14

 

 

(9)           VOTING RIGHTS. The Holder shall have no voting rights as the
Holder of this Note, except as required by law, including, but not limited to,
the General Corporation Law of the State of Nevada, and as expressly provided in
this Note, the Company’s Charter or any of the other Transaction Documents.

 

(10)         OTHER COVENANTS.

 

(a)          Listing. The Company shall promptly secure the listing of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any,
upon which the Common Stock is then listed (subject to official notice of
issuance) and shall maintain such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction Documents. The Company
shall maintain the Common Stock’s authorization for quotation on the principal
exchange or market in which it is listed. Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock on the principal market in
which it is listed, other than in connection with a transfer of listing to an
Eligible Market. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 10(a).

 

(b)          Quarterly Report of Outstanding Principal and Interest. The Company
covenants to deliver to the Holder, within 30 days following the end of each
calendar quarter while any portion of this Note remains outstanding, a written
statement signed by an authorized officer of the Company certifying (i) the
amount of the outstanding Principal balance of this Note, including any Interest
added to Principal pursuant to Section 2(a) and 2(b) above, and (ii) all accrued
but unpaid Interest on such outstanding Principal balance, and (iii) all
remaining scheduled payments of Interest through the Maturity Date, in each case
as of the end of such calendar quarter. The parties agree that the scheduled
Interest payments through the Maturity Date will be calculated in the same
manner as in the Notes issued prior to the date hereof.

 

(c)          Waiver of Usury Defense. The Company covenants (to the extent that
it may lawfully do so) that it shall not assert, plead (as a defense or
otherwise) or in any manner whatsoever claim (and shall actively resist any
attempt to compel it to assert, plead or claim) in any action, suit or
proceeding that the interest rate on this Note violates present or future usury
or other laws relating to the interest payable on any Indebtedness and shall not
otherwise avail itself (and shall actively resist any attempt to compel it to
avail itself) of the benefits or advantages of any such laws.

 

15

 

 

(d)             Registration Rights. The Company agrees that the Holder, as a
holder of Registrable Securities (as defined in the Registration Rights
Agreement, dated as of April 21, 2011, by and among the Company and the
Investors identified therein, as may be amended and/or restated from time to
time (the “Registration Rights Agreement”)), is entitled to the benefits of the
Registration Rights Agreement. Further, if (i) the Registration Statement (as
defined in Registration Rights Agreement) required by Section 2(a) of the
Registration Rights Agreement, covering the Registrable Securities required to
be covered thereby is (A) not filed with the SEC on or before thirty (30)
calendar days after the applicable Registration Request (as defined in
Registration Rights Agreement) (a “Filing Failure”) or (B) not declared
effective by the SEC on or before the date that is one hundred and eighty (180)
calendar days after the applicable Registration Request, in each case to the
extent required under the Registration Rights Agreement (an “Effectiveness
Failure”) or (ii) after the effective date of any Registration Statement, after
the second (2nd) consecutive Business Day (other than during an allowable
blackout period pursuant to Section 3(g) of the Registration Rights Agreement
(“Blackout Period”)) on which sales of all of the Registrable Securities
required to be included on such Registration Statement cannot be made pursuant
to such Registration Statement (including, without limitation, because of a
failure to keep such Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to such Registration
Statement, or to maintain a listing of the Common Stock required for sales to be
made under the Registration Statement) (a “Maintenance Failure”), then, as
relief for the damages to the Holder by reason of any such delay in or reduction
of its ability to sell the Registrable Securities, the Company shall pay to the
Holder an amount in cash equal to (A) one percent (1%) of the outstanding
Principal balance of this Note on each of the following dates: (i) the day of a
Filing Failure; (ii) the day of an Effectiveness Failure; and (iii) the initial
day of a Maintenance Failure, and (B) one percent (1%) of the outstanding
Principal balance of this Note on each of the following dates: (i) on every
thirtieth (30th) day after the initial day of a Filing Failure (prorated for
periods totaling less than thirty (30) days) until such Filing Failure is cured;
(ii) on every thirtieth (30th) day after the initial day of an Effectiveness
Failure (prorated for periods totaling less than thirty (30) days) until such
Effectiveness Failure is cured; (iii) on every thirtieth (30th) day after the
initial day of a Maintenance Failure (prorated for periods totaling less than
thirty (30) days) until such Maintenance Failure is cured. The payments to which
the Holder shall be entitled pursuant to this Section 10(d) are referred to
herein as “Registration Default Payments.” Registration Default Payments shall
be paid on the earlier of (I) the last day of the calendar month during which
such Registration Default Payments are incurred and (II) the third (3rd)
Business Day after the event or failure giving rise to the Registration Default
Payments is cured. In the event the Company fails to make Registration Default
Payments in a timely manner, such Registration Default Payments shall bear
interest at the rate of one and one-half percent (1.5%) per month (prorated for
partial months) until paid in full. If the Company has declared a Blackout
Period, a Maintenance Failure shall be deemed not to have occurred and be
continuing in relation to the Registration Statement during the period specified
in Section 3(g) of the Registration Rights Agreement. Registration Default
Payments shall be payable from the first day any Blackout Period exceeds the
period specified in Section 3(g) of the Registration Rights Agreement.
Registration Default Payments shall cease to accrue at the end of the
Effectiveness Period (as defined in Registration Rights Agreement); provided
that the foregoing shall not affect the Company’s obligation to make
Registration Default Payments for any period prior to such time. Whenever in
this Note there is mentioned, in any context, the payment of interest on, or in
respect of, this Note, such mention shall be deemed to include mention of the
payment of liquidated damages on this Note to the extent that, in such context,
such liquidated damages are, were or would be payable in respect thereof
pursuant to this Section 10(d). For the avoidance of doubt, the Registrable
Securities required to be included in any Registration Statement referred to in
this Section 10(d) shall be determined according to the provisions of the
Registration Rights Agreement, including all references to exceptions therein in
such provisions related to the “Rule 415 Amount,” as applicable.

 

16 

 

 

 

(11)        VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTE. Any provision of this
Note may be amended, waived or modified only upon the written consent of both
the Company and the Majority Investors; provided, that no amendment or waiver
may (a) extend the Maturity Date of this Note, (b) decrease the Conversion Price
or Conversion Rate of this Note, (c) reduce the rate or extend the time for
payment of any Interest on this Note, or (d) reduce the percentage of Notes
required for consent to any modifications of the Notes, without the consent of
the Holder of this Note.

 

(12)       TRANSFER. This Note and the shares of Common Stock issuable upon
conversion of this Note may not be offered for sale, sold, transferred or
assigned (i) in the absence of (a) an effective registration statement for this
Note or the shares of Common Stock issuable upon conversion of this Note, as
applicable, or (b) an opinion of counsel (selected by the Holder and reasonably
acceptable to the Company), in a form reasonable acceptable to the Company, that
this Note and the shares of Common Stock issuable upon conversion of this Note
may be offered for sale, sold, assigned or transferred pursuant to an exemption
from registration; provided that such opinion of counsel shall not be required
in connection with any such sale, assignment or transfer to an institutional
accredited investor that is, prior to such sale, assignment or transfer, an
affiliate of the Holder, or (ii) unless the Holder provides the Company with
assurance (reasonably satisfactory to the Company) that such Note or the shares
of Common Stock issuable upon the conversion of this Note can be sold, assigned
or transferred pursuant to Rule 144.

 

(13)        REISSUANCE OF THIS NOTE.

 

(a)              Transfer. This Note is issued in registered form pursuant to
Treasury Regulations section 1.871-14(c)(1). The Company (or its agent) will
maintain a record of the Holder of this Note, and of Principal and Interest
hereon as required by that regulation. This Note may be transferred or otherwise
assigned only by surrender of this Note and issuance of a new Note in accordance
with this Section 13, and neither this Note nor any interest herein may be sold,
transferred or assigned to any Person except upon satisfaction of the conditions
specified in this Section 13. If this Note is to be transferred or assigned, the
Holder shall surrender this Note to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Note (in
accordance with Section 13(d)), registered as the Holder may request,
representing the outstanding Principal being transferred by the Holder and, if
less than the entire outstanding Principal is being transferred, a new Note (in
accordance with Section 13(d)) to the Holder representing the outstanding
Principal not being transferred. The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of Section
3(c)(iii) following conversion of any portion of this Note, the outstanding
Principal represented by this Note may be less than the Principal stated on the
face of this Note.

 

17 

 

 

(b)              Lost, Stolen or Mutilated Note. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Note, and, in the case of loss, theft or destruction, of
any indemnification undertaking by the Holder to the Company in customary form
and, in the case of mutilation, upon surrender and cancellation of this Note,
the Company shall execute and deliver to the Holder a new Note (in accordance
with Section 13(d)) representing the then outstanding Principal.

 

(c)              Note Exchangeable for Different Denominations. This Note is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Note or Notes (in accordance with Section 13(d) and in
Principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.

 

(d)              Issuance of New Notes. Whenever the Company is required to
issue a new Note pursuant to the terms of this Note, such new Note (i) shall be
of like tenor with this Note, (ii) shall represent, as indicated on the face of
such new Note, the Principal remaining outstanding (or in the case of a new Note
being issued pursuant to Section 13(a) or Section 13(c), the Principal
designated by the Holder which, when added to the principal represented by the
other new Notes issued in connection with such issuance, does not exceed the
Principal remaining outstanding under this Note immediately prior to such
issuance of new Notes), (iii) shall have an issuance date, as indicated on the
face of such new Note, which is the same as the Issuance Date of this Note, (iv)
shall have the same rights and conditions as this Note, and (v) shall represent
accrued Interest and Late Charges on the Principal and Interest of this Note,
from the Issuance Date.

 

(14)       REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note and any of the other
Transaction Documents at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein shall limit the
Holder’s right to pursue actual and consequential damages for any failure by the
Company to comply with the terms of this Note. Amounts set forth or provided for
herein with respect to payments, conversion and the like (and the computation
thereof) shall be the amounts to be received by the Holder and shall not, except
as expressly provided herein, be subject to any other obligation of the Company
(or the performance thereof). The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

 

18 

 

 

(15)        PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note
is placed in the hands of an attorney for collection or enforcement or is
collected or enforced through any legal proceeding or the Holder otherwise takes
action to collect amounts due under this Note or to enforce the provisions of
this Note or (b) there occurs any bankruptcy, reorganization, receivership of
the Company or other proceedings affecting Company creditors’ rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including,
but not limited to, reasonable attorneys’ fees and disbursements.

 

(16)        CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly
drafted by the Company and the Holder of this Note and shall not be construed
against any person as the drafter hereof. The headings of this Note are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Note.

 

(17)        FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.

 

(18)        DISPUTE RESOLUTION. In the case of a dispute as to the arithmetic
calculation of the Conversion Rate, the Company shall submit the disputed
arithmetic calculations via facsimile within three (3) Business Days of receipt,
or deemed receipt, of the Conversion Notice, as the case may be, to the Holder.
If the Holder and the Company are unable to agree upon such calculation within
five (5) Business Days of such disputed arithmetic calculation being submitted
to the Holder, then the Company shall, within one Business Day submit via
facsimile the disputed arithmetic calculation of the Conversion Rate to the
Company’s independent, outside accountant. The Company, at the Company’s
expense, shall cause the accountant, as the case may be, to perform the
calculations and notify the Company and the Holder of the results no later than
ten (10) Business Days from the time it receives the disputed calculations. Such
accountant’s calculation, as the case may be, shall be binding upon all parties
absent demonstrable error.

 

19 

 

 

(19)        NOTICES; PAYMENTS.

 

(a)              Notices. Whenever notice is required to be given under this
Note, unless otherwise provided herein, such notice shall be given in accordance
with the Purchase Agreement. The Company shall provide the Holder with prompt
written notice of all actions taken pursuant to this Note, including in
reasonable detail a description of such action and the reason therefor. Without
limiting the generality of the foregoing, the Company will give written notice
to the Holder of any adjustment of the Conversion Price, setting forth in
reasonable detail, and certifying, the calculation of such adjustment.

 

(b)             Payments. Whenever any payment of cash is to be made by the
Company to any Person pursuant to this Note, such payment shall be made in
lawful money of the United States of America by a check drawn on the account of
the Company and sent via overnight courier service to such Person at such
address as previously provided to the Company in writing (which address, in the
case of each of the initial Holder of this Note, shall initially be as set forth
on the signature page to the Purchase Agreement); provided that the Holder may
elect to receive a payment of cash via wire transfer of immediately available
funds by providing the Company with prior written notice setting out such
request and the Holder’s wire transfer instructions. Whenever any amount
expressed to be due by the terms of this Note is due on any day which is not a
Business Day, the same shall instead be due on the next succeeding day which is
a Business Day. Any amount of Principal or other amounts due under the this Note
or the Transaction Documents, other than Interest, which is not paid when due
shall result in a late charge being incurred and payable by the Company in an
amount equal to interest on such amount at the rate of five percent (5%) per
annum from the date such amount was due until the same is paid in full (“Late
Charge”).

 

(20)       CANCELLATION. After all Principal, accrued Interest and other amounts
at any time owed on this Note have been paid in full, this Note shall
automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.

 

(21)       WAIVER OF NOTICE. To the extent permitted by law, the Company hereby
waives demand, notice, presentment, protest and all other demands and notices
(other than the notices expressly provided for in this Note) in connection with
the delivery, acceptance, default or enforcement of this Note and the Purchase
Agreement.

 

20 

 

 

(22)       GOVERNING LAW. This Note shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal
laws of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of New York.

 

(23)       CERTAIN DEFINITIONS. For purposes of this Note, the following terms
shall have the following meanings:

 

(a)              [Intentionally omitted.]

 

(b)             “Business Day” means any day other than Saturday, Sunday or
other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.

 

(c)              “Change of Control” means the consummation of any transaction
described in clauses (i) through (v) of the definition of “Major Event” in
Section 2(d)(i).

 

(d)             “Closing Sale Price” means, as of any date, the last closing
trade price for the Common Stock on the Eligible Market representing the
principal securities exchange or trading market for the Common Stock, as
reported by Bloomberg, or, if such Eligible Market begins to operate on an
extended hours basis and does not designate the closing trade price, then the
last trade price of such security prior to 4:00:00 p.m., New York time, as
reported by Bloomberg, or, if no Eligible Market is the principal securities
exchange or trading market for the Common Stock, the last closing trade price of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last trade price of such security in the over-the-counter market
on the electronic bulletin board for such security as reported by Bloomberg, or,
if no last trade price is reported for such security by Bloomberg, the average
of the ask prices of any market makers for such security as reported in the
“pink sheets” by OTC Markets Group, Inc. or any successor thereto. If the
Closing Sale Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Closing Sale Price of such security on such date
shall be the fair market value as mutually determined by the Company and the
Holder.

 

(e)              “Common Stock” means the shares of the Company’s common stock,
par value $0.001 per share, and any other securities of the Company which may be
issued or issuable with respect to, in exchange for, or in substitution of, such
shares of common stock (including without limitation, by way of
recapitalization, reclassification, reorganization, merger or otherwise).

 

21 

 

 

(f)              “Contingent Obligation” means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.

 

(g)             “Convertible Securities” means any stock or securities (other
than Options) directly or indirectly convertible into or exercisable or
exchangeable for Common Stock.

 

(h)             “Eligible Market” means The New York Stock Exchange (NYSE), the
NYSE American, or The Nasdaq Stock Market, or their successors.

 

(i)               “Exchange Act” means the United States Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder.

 

(j)               “GAAP” means United States generally accepted accounting
principles, consistently applied, or successor conventions.

 

(k)             “Indebtedness” of any Person means, without duplication (a) all
indebtedness for borrowed money, (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services including,
without limitation, “capital leases” in accordance with GAAP (other than trade
payables entered into in the ordinary course of business), (c) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (d) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (e) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (f) all
monetary obligations under any leasing or similar arrangement which, in
connection with GAAP, consistently applied for the periods covered thereby, is
classified as a capital lease, (g) any amount raised by acceptance under any
acceptance credit facility, (h) receivables sold or discounted (other than
within the framework of factoring, securitization or similar transaction where
recourse is only to such receivables or proceeds), (i) any derivative
transaction, (j) any counter-indemnity obligation in respect of a guarantee,
indemnity, bond, standby or documentary letter of credit or any other instrument
issued by a bank or financial institution (excluding commercial letters of
credit issued in the ordinary course of business), (k) all indebtedness referred
to in clauses (a) through (j) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any mortgage, lien, pledge, charge, security interest or other encumbrance upon
or in any property or assets (including accounts and contract rights) owned by
any Person, even though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (l) all
Contingent Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (a) through (k) above.

 

22 

 

 

(l)              “Options” means any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Securities.

 

(m)           “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.

 

(n)             “Reclassification” means any reclassification or change of
shares of Common Stock issuable upon conversion of this Note (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination).

 

(o)             “Rule 144” means Rule 144 promulgated under the Securities Act
and any successor provision thereto.

 

(p)             “SEC” means the United States Securities and Exchange
Commission.

 

(q)             “Securities Act” means the Securities Act of 1933, as amended.

 

(r)               “Subsidiary” means with respect to any Person, any
corporation, association or other business entity of which 50% or more of the
total voting power of equity entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees or other
governing body thereof is at the time owned or controlled by such Person
(regardless of whether such equity is owned directly or through one or more
other Subsidiaries of such Person or a combination thereof).

 

(s)              “Successor Entity” means the Person, which may be the Company,
formed by, resulting from or surviving any Change of Control or the person with
which such Change of Control transaction shall have been made. In the event that
the Person resulting from or surviving any Change of Control is a Subsidiary,
Successor Entity shall be the parent of such Subsidiary.

 

(t)              “Transaction Documents” has the meaning given to such term in
the Purchase Agreement.

 

[Signature page follows]

 

23 

 

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of
the Issuance Date set out above.

 

  CareView Communications, Inc.         By:     Name: Steven G. Johnson    
Title: President

 

[signature page to note]

 

 

 

 

EXHIBIT I

CAREVIEW COMMUNICATIONS, INC.
CONVERSION NOTICE

 

Reference is made to the Convertible Note (the “Note”) issued to the undersigned
by CareView Communications, Inc. (the “Company”). In accordance with and
pursuant to the Note, the undersigned hereby elects to convert the Conversion
Amount (as defined in the Note) of the Note indicated below into shares of
Common Stock par value $0.001 per share (the “Common Stock”) of the Company, as
of the date specified below.

 

Date of Conversion:       Aggregate Conversion Amount to be converted:      
Please confirm the following information:   Conversion Price:       Number of
shares of Common Stock to be issued:       Please issue the Common Stock into
which the Note is being converted in the following name and to the following
address:   Issue to:               Facsimile Number:       Authorization:      
By:       Title:       Dated:       Account Number:     (if electronic book
entry transfer)       Transaction Code Number:     (if electronic book entry
transfer)                          

 

 

 

 

 

Exhibit B-1

 

Form of Eighth Amendment Supplemental Warrants

 

See attached.

 

 

 

 

THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH
SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933,
AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD WITHOUT RESTRICTION PURSUANT TO
RULE 144, OR (III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE
SECURITIES LAWS.

 

SUBJECT TO THE PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID AFTER
5:00 P.M. EASTERN TIME ON FEBRUARY 23, 2028 (THE “EXPIRATION DATE”).

 

No. E-__

 

CareView Communications, Inc.

 

WARRANT TO PURCHASE [___________] SHARES OF

 

COMMON STOCK, PAR VALUE $0.001 PER SHARE

 

For VALUE RECEIVED, [______________________________] (“Warrantholder”), is
entitled to purchase, subject to the provisions of this Warrant, from CareView
Communications, Inc., a Nevada corporation (“Company”), from and after February
23, 2018 and at any time not later than 5:00 P.M., Eastern time, on the
Expiration Date (as defined above), at an exercise price per share equal to
$0.05 (the exercise price in effect being herein called the “Warrant Price”),
[___________] shares (“Warrant Shares”) of the Company’s Common Stock, par value
$0.001 per share (“Common Stock”). The number of Warrant Shares purchasable upon
exercise of this Warrant and the Warrant Price shall be subject to adjustment
from time to time as described herein. This Warrant is being issued pursuant to
the Note and Warrant Purchase Agreement, dated as of April 21, 2011, as amended
on December 30, 2011, January 31, 2012, August 20, 2013, January 16, 2014,
December 15, 2014, March 31, 2015, June 26, 2015 and February 23, 2018 and as
the same may be amended and/or restated from time to time (the “Purchase
Agreement”), among the Company and the Investors named therein. Capitalized
terms used herein have the respective meanings ascribed thereto in the Note and
Warrant and Purchase Agreement unless otherwise defined herein.

 

Section 1.         Registration. The Company shall maintain books for the
transfer and registration of the Warrant. Upon the initial issuance of this
Warrant, the Company shall issue and register the Warrant in the name of the
Warrantholder.

 

Section 2.         Transfers. As provided herein, this Warrant may be
transferred only pursuant to a registration statement filed under the Securities
Act of 1933, as amended (the “Securities Act”), or an exemption from such
registration. Subject to such restrictions, the Company shall transfer this
Warrant from time to time upon the books to be maintained by the Company for
that purpose, upon surrender hereof for transfer, properly endorsed or
accompanied by appropriate instructions for transfer and such other documents as
may be reasonably required by the Company, including, if required by the
Company, an opinion of its counsel to the effect that such transfer is exempt
from the registration requirements of the Securities Act, to establish that such
transfer is being made in accordance with the terms hereof, and a new Warrant
shall be issued to the transferee and the surrendered Warrant shall be canceled
by the Company.

 

 

 

 

Section 3.         Exercise of Warrant. Subject to the provisions hereof, the
Warrantholder may exercise this Warrant, in whole or in part, at any time from
and after February 23, 2018 and prior to its expiration upon surrender of the
Warrant, together with delivery of a duly executed Warrant exercise form, in the
form attached hereto as Appendix A (the “Exercise Agreement”) and payment by
cash, certified check or wire transfer of funds (or, in certain circumstances,
by cashless exercise as provided below) of the aggregate Warrant Price for that
number of Warrant Shares then being purchased, to the Company during normal
business hours on any business day at the Company’s principal executive offices
or such other office or agency of the Company as it may designate by notice to
the Warrantholder (such date, the “Exercise Date”). The Warrant Shares so
purchased shall be deemed to be issued to the Warrantholder or the
Warrantholder’s designee, as the record owner of such shares, as of the close of
business on the date on which this Warrant shall have been surrendered (or the
date evidence of loss, theft or destruction thereof and security or indemnity
satisfactory to the Company has been provided to the Company), the Warrant Price
shall have been paid and the completed Exercise Agreement shall have been
delivered. Execution and delivery of the Exercise Agreement with respect to less
than all of the Warrant Shares shall have the same effect as cancellation of the
original Warrant and issuance of a new Warrant evidencing the right to purchase
the remaining number of Warrant Shares. On or before the first (1st) business
day following the Exercise Date, the Company shall transmit by facsimile an
acknowledgment of confirmation of receipt of the Exercise Agreement (or Net
Issue Election Notice, if applicable, pursuant to Section 18) to the
Warrantholder and the Company’s transfer agent (the “Transfer Agent”).  On or
before the third (3rd) business day following the Exercise Date (the “Share
Delivery Date”), the Company shall (A) provided that the Transfer Agent is
participating in The Depository Trust Company (“DTC”) Fast Automated Securities
Transfer Program, upon the request of the Warrantholder, credit such aggregate
number of Warrant Shares to which the Warrantholder is entitled pursuant to such
exercise to the Warrantholder’s or its designee’s balance account with DTC
through its Deposit Withdrawal At Custodian system, or (B) if the Transfer Agent
is not participating in the DTC Fast Automated Securities Transfer Program,
issue and deliver by overnight courier to the address as specified in the
Exercise Agreement or Net Issue Election Notice, a certificate, registered in
the Company’s share register in the name of the Warrantholder or its designee,
for the number of shares of Common Stock to which the Warrantholder is entitled
pursuant to such exercise. The Company shall be responsible for all fees and
expenses of the Transfer Agent and all fees and expenses with respect to the
issuance of Warrant Shares via DTC, if any.  Any certificates so delivered shall
be in such denominations as may be requested by the Warrantholder and shall be
registered in the name of the Warrantholder or such other name as shall be
designated by the Warrantholder, as specified in the Exercise Agreement or Net
Issue Election Notice, if applicable. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates (or of crediting the
Warrantholder’s balance account with DTC), deliver to the Warrantholder a new
Warrant representing the right to purchase the number of shares with respect to
which this Warrant shall not then have been exercised. As used herein, “business
day” means a day, other than a Saturday or Sunday, on which banks in New York
City are open for the general transaction of business. Each exercise hereof
shall constitute the re-affirmation by the Warrantholder that the
representations and warranties contained in Section 3 of the Purchase Agreement
are true and correct in all material respects with respect to the Warrantholder
as of the time of such exercise.

 

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If (1) the Company shall fail for any reason or no reason to issue to the
Warrantholder within three (3) business days (such third business day, a
“Warrant Share Delivery Date”) of after the Exercise Date, in compliance with
the terms of this Section 3, a certificate for the number of Warrant Shares to
which the Warrantholder is entitled and register such shares on the Company’s
share register or to credit the Warrantholder’s balance account at DTC for such
number of Warrant Shares to which the Warrantholder is entitled upon the
exercise of this Warrant, and (2) on or after the Warrant Share Delivery Date,
the Warrantholder, or any third party on behalf of the Warrantholder or for the
Warrantholder’s account, purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Warrantholder
of shares issuable upon exercise that the Warrantholder anticipated receiving
from the Company (a “Buy-In”), then the Company shall pay in cash to the
Warrantholder (for costs incurred either directly by such Warrantholder or on
behalf of a third party) the amount by which the total purchase price paid for
Common Stock as a result of the Buy-In (including brokerage commissions, if any)
exceeds the proceeds received by such Warrantholder as a result of the sale to
which such Buy-In relates. The Warrantholder shall provide the Company written
notice indicating the amounts payable to the Warrantholder in respect of the
Buy-In.

 

Section 4.         Compliance with the Securities Act. Except as provided in the
Purchase Agreement, the Company may cause the legend set forth on the first page
of this Warrant to be set forth on each Warrant, and a similar legend on any
security issued or issuable upon exercise of this Warrant, unless counsel for
the Company is of the opinion as to any such security that such legend is
unnecessary.

 

Section 5.         Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of this Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for Warrant Shares in a
name other than that of the Warrantholder in respect of which such shares are
issued, and in such case, the Company shall not be required to issue or deliver
any certificate for Warrant Shares or any Warrant until the person requesting
the same has paid to the Company the amount of such tax or has established to
the Company’s reasonable satisfaction that such tax has been paid. The
Warrantholder shall be responsible for income taxes due under federal, state or
other law, if any such tax is due.

 

Section 6.        Mutilated or Missing Warrants. In case this Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon surrender and cancellation of the mutilated Warrant, or
in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and for the purchase of a like number of Warrant Shares,
but only upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond with respect thereto, if
requested by the Company.

 

Section 7.         Reservation of Common Stock. The Company hereby represents
and warrants that there have been reserved, and the Company shall at all
applicable times keep reserved until issued (if necessary) as contemplated by
this Section 7, out of the authorized and unissued shares of Common Stock,
sufficient shares to provide for the exercise of the rights of purchase
represented by this Warrant. The Company agrees that all Warrant Shares issued
upon due exercise of this Warrant shall be, at the time of delivery of the
certificates for such Warrant Shares, duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock of the Company.

 

29 

 

 

Section 8.          Adjustments. Subject and pursuant to the provisions of this
Section 8, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter.

 

(a)       If the Company shall, at any time or from time to time while this
Warrant is outstanding, pay a dividend or make a distribution on its Common
Stock in shares of Common Stock, subdivide its outstanding shares of Common
Stock into a greater number of shares or combine its outstanding shares of
Common Stock into a smaller number of shares or issue by reclassification of its
outstanding shares of Common Stock any shares of its capital stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then (i) the Warrant Price in effect
immediately prior to the date on which such change shall become effective shall
be adjusted by multiplying such Warrant Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such change and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after giving effect to such change and
(ii) the number of Warrant Shares purchasable upon exercise of this Warrant
shall be adjusted by multiplying the number of Warrant Shares purchasable upon
exercise of this Warrant immediately prior to the date on which such change
shall become effective by a fraction, the numerator of which is shall be the
Warrant Price in effect immediately prior to the date on which such change shall
become effective and the denominator of which shall be the Warrant Price in
effect immediately after giving effect to such change, calculated in accordance
with clause (i) above. Such adjustments shall be made successively whenever any
event listed above shall occur.

 

(b)       If any capital reorganization, reclassification of the capital stock
of the Company, consolidation or merger of the Company with another corporation
in which the Company is not the survivor, or sale, transfer or other disposition
of all or substantially all of the Company’s assets to another corporation shall
be effected, then, as a condition of such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition, lawful and adequate
provision shall be made whereby each Warrantholder shall thereafter have the
right to purchase and receive upon the basis and upon the terms and conditions
herein specified and in lieu of the Warrant Shares immediately theretofore
issuable upon exercise of this Warrant, such shares of stock, securities or
assets as would have been issuable or payable with respect to or in exchange for
a number of Warrant Shares equal to the number of Warrant Shares immediately
theretofore issuable upon exercise of this Warrant, had such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition not
taken place, and in any such case appropriate provision shall be made with
respect to the rights and interests of each Warrantholder to the end that the
provisions hereof (including, without limitation, provision for adjustment of
the Warrant Price) shall thereafter be applicable, as nearly equivalent as may
be practicable in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof. The Company shall not effect
any such consolidation, merger, sale, transfer or other disposition unless prior
to or simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or merger, or the
corporation purchasing or otherwise acquiring such assets or other appropriate
corporation or entity shall assume the obligation to deliver to the
Warrantholder, at the last address of the Warrantholder appearing on the books
of the Company, such shares of stock, securities or assets as, in accordance
with the foregoing provisions, the Warrantholder may be entitled to purchase,
and the other obligations under this Warrant. The provisions of this paragraph
(b) shall similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales, transfers or other dispositions.

 

30 

 

 

(c)       In case the Company shall fix a payment date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in Section 8(a)), or
subscription rights or warrants, the Warrant Price to be in effect after such
payment date shall be determined by multiplying the Warrant Price in effect
immediately prior to such payment date by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding multiplied by
the Market Price (as defined below) per share of Common Stock immediately prior
to such payment date, less the fair market value (as determined by the Company’s
Board of Directors in good faith) of said assets or evidences of indebtedness so
distributed, or of such subscription rights or warrants, and the denominator of
which shall be the total number of shares of Common Stock outstanding multiplied
by such Market Price per share of Common Stock immediately prior to such payment
date. “Market Price” as of a particular date (the “Valuation Date”) shall mean
the following: (a) if the Common Stock is then listed on The NASDAQ Stock Market
or any other national stock exchange, the closing sale price of one share of
Common Stock on such exchange on the last trading day prior to the Valuation
Date; (b) if the Common Stock is then quoted on a tiered marketplace of the OTC
Markets Group Inc. (the “Bulletin Board”) or a similar quotation system or
association, the closing sale price of one share of Common Stock on the Bulletin
Board or such other quotation system or association on the last trading day
prior to the Valuation Date or, if no such closing sale price is available, the
average of the high bid and the low asked price quoted thereon on the last
trading day prior to the Valuation Date; or (c) if the Common Stock is not then
listed on a national stock exchange or quoted on the Bulletin Board or such
other quotation system or association, the fair market value of one share of
Common Stock as of the Valuation Date, as determined in good faith by the Board
of Directors of the Company and the Warrantholder. If the Common Stock is not
then listed on a national securities exchange, the Bulletin Board or such other
quotation system or association, the Board of Directors of the Company shall
respond promptly, in writing, to an inquiry by the Warrantholder prior to the
exercise hereunder as to the fair market value of a share of Common Stock as
determined by the Board of Directors of the Company. In the event that the Board
of Directors of the Company and the Warrantholder are unable to agree upon the
fair market value in respect of subpart (c) of this paragraph, the Company and
the Warrantholder shall jointly select an appraiser, who is experienced in such
matters. The decision of such appraiser shall be final and conclusive, and the
cost of such appraiser shall be borne equally by the Company and the
Warrantholder. Such adjustment shall be made successively whenever such a
payment date is fixed.

 

31 

 

 

(d)       An adjustment to the Warrant Price shall become effective immediately
after the payment date in the case of each dividend or distribution and
immediately after the effective date of each other event which requires an
adjustment.

 

(e)        In the event that, as a result of an adjustment made pursuant to this
Section 8, the Warrantholder shall become entitled to receive any shares of
capital stock of the Company other than shares of Common Stock, the number of
such other shares so receivable upon exercise of this Warrant shall be subject
thereafter to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in this Warrant.

 

(f)        [Intentionally Omitted.]

 

(g)       To the extent permitted by applicable law and the listing requirements
of any stock market or exchange on which the Common Stock is then listed, the
Company from time to time may decrease the Warrant Price by any amount for any
period of time if (i) the period is at least twenty (20) days, (ii) the decrease
is irrevocable during the period, (iii) the decrease is made at the same time to
all Eighth Amendment Supplemental Company Warrants (as defined below) on the
same terms, and (iv) the Board shall have made a determination that such
decrease would be in the best interests of the Company, which determination
shall be conclusive. Whenever the Warrant Price is decreased pursuant to the
preceding sentence, the Company shall provide written notice thereof to the
Warrantholder at least five (5) days prior to the date the decreased Warrant
Price takes effect, and such notice shall state the decreased Warrant Price and
the period during which it will be in effect.

 

Section 9.         Fractional Interest. The Company shall not be required to
issue fractions of Warrant Shares upon the exercise of this Warrant. If any
fractional share of Common Stock would, except for the provisions of the first
sentence of this Section 9, be deliverable upon such exercise, the Company, in
lieu of delivering such fractional share, shall pay to the exercising
Warrantholder an amount in cash equal to the Market Price of such fractional
share of Common Stock on the date of exercise.

 

Section 10.       Extension of Expiration Date. If the Company fails to cause
any Registration Statement covering Registrable Securities (as defined in the
Registration Rights Agreement) to be declared effective prior to the applicable
dates set forth therein, or if any of the events specified in Section 3(b) of
the Registration Rights Agreement occurs, and the Blackout Period (as defined in
the Registration Rights Agreement) (whether alone, or in combination with any
other Blackout Period) continues for more than 60 days in any 12 month period,
or for more than a total of 90 days, then the Expiration Date of this Warrant
shall be extended one day for each day beyond the 60-day or 90-day limits, as
the case may be, that the Blackout Period continues.

 

Section 11.       Benefits. Nothing in this Warrant shall be construed to give
any person, firm or corporation (other than the Company and the Warrantholder)
any legal or equitable right, remedy or claim, it being agreed that this Warrant
shall be for the sole and exclusive benefit of the Company and the
Warrantholder.

 

32 

 

 

Section 12.      Notices to Warrantholder. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall promptly give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. Failure to give such notice to the Warrantholder or any
defect therein shall not affect the legality or validity of the subject
adjustment.

 

Section 13.       Identity of Transfer Agent. The Transfer Agent for the Common
Stock is Holladay Stock Transfer, Inc. Upon the appointment of any subsequent
transfer agent for the Common Stock or other shares of the Company’s capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrant, the Company will mail to the Warrantholder a statement setting forth
the name and address of such transfer agent.

 

Section 14.       Notices. Unless otherwise provided, any notice required or
permitted under this Warrant shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or facsimile, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three days after such notice is deposited in first class mail,
postage prepaid, and (iv) if given by an internationally recognized overnight
air courier, then such notice shall be deemed given one business day after
delivery to such carrier. All notices shall be addressed as follows: if to the
Warrantholder, at its address as set forth in the Company’s books and records
and, if to the Company, at the address as follows, or at such other address as
the Warrantholder or the Company may designate by ten days’ advance written
notice to the other:

 

If to the Company:

 

CareView Communications, Inc.
405 State Highway 121
Suite B-240 

Lewisville, TX 75067
Attention: Chief Executive Officer
Fax: (972) 403-7659

 

With a copy to:

 

Law Offices of Carl A. Generes 

4358 Shady Bend Drive 

Dallas, Texas 75244-7447 

Attn: Carl A. Generes 

Fax: (972) 715-5700

 

Section 15.      Registration Rights. The initial Warrantholder is entitled to
the benefit of certain registration rights with respect to the shares of Common
Stock issuable upon the exercise of this Warrant as provided in the Registration
Rights Agreement, and any subsequent Warrantholder may be entitled to such
rights.

 

33 

 

 

Section 16.       Successors. All the covenants and provisions hereof by or for
the benefit of the Warrantholder shall bind and inure to the benefit of its
respective successors and permitted assigns hereunder.

 

Section 17.       Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.
This Warrant shall be governed by, and construed in accordance with, the
internal laws of the State of Delaware, without reference to the choice of law
provisions thereof. The Company and, by accepting this Warrant, the
Warrantholder, each irrevocably submits to the exclusive jurisdiction of the
courts of the State of Delaware and the United States District Court for the
District of Delaware for the purpose of any suit, action, proceeding or judgment
relating to or arising out of this Warrant and the transactions contemplated
hereby. Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same
methods as are specified for the giving of notices under this Warrant. The
Company and, by accepting this Warrant, the Warrantholder, each irrevocably
consents to the jurisdiction of any such court in any such suit, action or
proceeding and to the laying of venue in such court. The Company and, by
accepting this Warrant, the Warrantholder, each irrevocably waives any objection
to the laying of venue of any such suit, action or proceeding brought in such
courts and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. EACH OF THE
COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE WARRANTHOLDER HEREBY WAIVES ANY RIGHT
TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS WARRANT AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

Section 18.      Cashless Exercise. Notwithstanding any other provision
contained herein to the contrary, the Warrantholder may elect to receive,
without the payment by the Warrantholder of the aggregate Warrant Price in
respect of the shares of Common Stock to be acquired, shares of Common Stock of
equal value to the value of this Warrant, or any specified portion hereof, by
the surrender of this Warrant (or such portion of this Warrant being so
exercised) together with a Net Issue Election Notice, in the form annexed hereto
as Appendix B (the “Net Issue Election Notice”), duly executed, to the Company.
Thereupon, the Company shall issue to the Warrantholder such number of fully
paid, validly issued and nonassessable shares of Common Stock as is computed
using the following formula:

 

X = Y (A - B)

A

 

where

 

X =       the number of shares of Common Stock to which the Warrantholder is
entitled upon such cashless exercise;

 

Y =       the total number of shares of Common Stock covered by this Warrant for
which the Warrantholder has surrendered purchase rights at such time for
cashless exercise (including both shares to be issued to the Warrantholder and
shares as to which the purchase rights are to be canceled as payment therefor);

 

34 

 

 

A =       the “Market Price” of one share of Common Stock as at the date the net
issue election is made; and

 

B =       the Warrant Price in effect under this Warrant at the time the net
issue election is made.

 

Section 19.       [Intentionally Omitted].

 

Section 20.      No Rights as Shareholder. Prior to the exercise of this
Warrant, the Warrantholder shall not have or exercise any rights as a
shareholder of the Company by virtue of its ownership of this Warrant.

 

Section 21.       Amendment; Waiver; Termination. This Warrant is one of a
series of Warrants of like tenor issued on the date hereof by the Company
pursuant to Section 1.3 of the Purchase Agreement and initially covering an
aggregate of up to 512,500 shares of Common Stock (collectively, the “Eighth
Amendment Supplemental Company Warrants”). Any term of this Warrant may be
amended or waived (including the adjustment provisions included in Section 8 of
this Warrant) upon the written consent of the Company and the holders of Eighth
Amendment Supplemental Company Warrants representing at least a majority of the
number of shares of Common Stock then subject to all outstanding Eighth
Amendment Supplemental Company Warrants; provided, that (x) any such amendment
or waiver or termination must apply to all Eighth Amendment Supplemental Company
Warrants; and (y) except as provided in the adjustment provisions of this
Warrant, the number of Warrant Shares subject to this Warrant, the Warrant Price
and the Expiration Date may not be amended, and the right to exercise this
Warrant may not be altered or waived, without the written consent of the
Warrantholder.

 

Section 22.      Section Headings. The section headings in this Warrant are for
the convenience of the Company and the Warrantholder and in no way alter,
modify, amend, limit or restrict the provisions hereof.

 

[Signature Page Follows.]

 

35 

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as
of the 23rd day of February 2018.

 

  CAREVIEW COMMUNICATIONS, INC.       By:     Name: Steven G. Johnson   Title:
President

 

36 

 

APPENDIX A
CAREVIEW COMMUNICATIONS, INC.
WARRANT EXERCISE FORM

 

To CareView Communications, Inc.:

 

The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant (“Warrant”) for, and to purchase thereunder by
the payment of the Warrant Price and surrender of the Warrant, _______________
shares of Common Stock (“Warrant Shares”) provided for therein, and requests
that certificates for the Warrant Shares be issued as follows:

        Name           Address                 Federal Tax ID or Social Security
No.     and delivered by: (  ) certified mail to the above address, or   (  )
electronically (provide DWAC Instructions:_________________), or   (  ) other
(specify): ________________________________________.  

 

and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares purchasable upon exercise of this Warrant be registered in
the name of the undersigned Warrantholder or the undersigned’s Assignee as below
indicated and delivered to the address stated below.

 

Dated: ___________________, ____

          Signature:   Note: The signature must correspond with the name of the
Warrantholder as written on the first page of the Warrant in every particular,
without alteration or enlargement or any change whatever, unless the Warrant has
been assigned.       Name (please print)           Address       Federal
Identification or   Social Security No.       Assignee:          

 

37 

 

 

 APPENDIX B 

CAREVIEW COMMUNICATIONS, INC. 

NET ISSUE ELECTION NOTICE

 

To: CareView Communications, Inc.

 

Date:[_________________________]

 

The undersigned hereby elects under Section 18 of this Warrant to surrender the
right to purchase [____________] shares of Common Stock pursuant to this Warrant
and hereby requests the issuance of [_____________] shares of Common Stock. The
certificate(s) for the shares issuable upon such net issue election shall be
issued in the name of the undersigned or as otherwise indicated below.

    Signature           Name for Registration           Mailing Address