SECURED PROMISSORY NOTE

$500,000.00

Raleigh, North Carolina

 

January 30, 2009

FOR VALUE RECEIVED

, the undersigned, DARA BIOSCIENCES, INC., a corporation organized and existing
under the laws of the State of Delaware (hereinafter referred to as "Maker"),
promises to pay to the order of SURGIVISION, INC., a corporation organized and
existing under the laws of the State of Delaware (hereinafter referred to as
"Lender"), the principal sum of Five Hundred Thousand and 00/100 Dollars
($500,000.00), together with interest from the date hereof until the Maturity
Date (as defined below), upon the unpaid principal balance, at the rate of eight
percent (8%) per annum. This Secured Promissory Note is the "Note" referenced in
the Stock Purchase and Loan Agreement dated as of January 30, 2009, between
Maker and Lender (the "Transaction Agreement") and which is secured pursuant to
the Stock Pledge Agreement dated as of January 30, 2009, between Maker, as
obligor, and Lender, as lender (the "Pledge Agreement.") Capitalized terms used
but not otherwise defined herein shall have the meanings ascribed thereto in the
Transaction Agreement.

Said principal and interest are payable in a single installment on July 30, 2010
(the "Maturity Date"), at which time the entire outstanding principal balance,
together with all accrued but unpaid interest, shall be immediately due and
payable. Any payment shall be applied first to the payment of interest upon the
balance of unpaid principal, and any amount remaining after payment of said
interest shall be applied in reduction of said unpaid principal.

Both principal and interest shall be payable in lawful money of the United
States of America, which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment. Payment shall be made by wire
transfer to the account designated by the holder hereof, or at such other place
as the holder hereof may designate in writing. Maker shall include with any wire
payment a reference line indicating that the payment is from Maker, with a brief
description of the purpose of the funds.

 

To the extent the holder hereof receives payment of any amount under this Note,
whether by way of payment by the Maker, set-off or otherwise, which payment is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, other law or equitable cause, in whole or in part, then, to the
extent of such payment received, this Note or the part hereof intended to be
satisfied thereby shall be revived and continue in full force and effect,
together with all collateral security therefor, as if such payment had not been
received by the holder.

Each of the following shall constitute an event of default under this Note
(each, an "Event of Default"):

(a) The failure by Maker to pay any principal or interest when due hereunder;

(b) The failure by Maker to perform, comply with or observe any agreement,
covenant or obligation under (i) Section 10.1 (insofar as it requires the
preservation of the corporate existence of Maker), Section 10.5, Section 10.6 or
Section 10.8 of the Transaction Agreement, or (ii) subsection (d), (e), (f) or
(g) of Section 5 of the Pledge Agreement;

(c) The failure by Maker to perform, comply with or observe any agreement,
covenant or obligation under any provision of this Note, the Transaction
Agreement or the Pledge Agreement (other than those provisions referred to in
clauses (a) and (b) immediately preceding), and such failure shall not have been
remedied within ten (10) days after an officer of Maker becomes aware of such
failure;

(d) Any representation or warranty or certification made or furnished by the
Maker under this Note, the Transaction Agreement or the Pledge Agreement shall
prove to have been false or incorrect in any material respect when made (or
deemed made);

(e) Any breach or default (or other event or condition) shall occur under any
agreement, indenture or instrument relating to any other indebtedness of Maker
with an aggregate principal amount in excess of $100,000, if the effect of such
breach or default (or such other event or condition) is to cause, or to permit
the holder or holders of the other indebtedness (or a Person on behalf of such
holder or holders) to cause (upon the giving of notice, the lapse of time or
both, or otherwise), such other indebtedness to become or be declared due and
payable, or required to be prepaid, redeemed, purchased or defeased (or an offer
of prepayment, redemption, purchase or defeasance be made), prior to its stated
maturity;

(f) Any of the following events shall occur without the prior written consent of
the holder hereof (which consent may be withheld in the holder's sole and
absolute discretion): (i) the sale, lease, exchange or other transfer of all or
substantially all of the property, assets or business of Maker; (ii) any
liquidation, dissolution or winding up of Maker, whether voluntary or
involuntary; (iii) any merger or consolidation to which Maker is a party or any
sale or other transfer through a single or a series of transactions that results
in the holders of the voting securities of Maker immediately prior thereto
owning less than fifty percent (50%) of the outstanding voting securities of the
surviving entity immediately following such transaction(s); or (iv) any Person
or group (as such term is used in Section 13(d) of the Securities Exchange Act
of 1934) of Persons shall acquire beneficial ownership (as defined in Rule 13d-3
under the Securities Exchange Act of 1934) of securities of Maker representing
fifty percent (50%) or more of the voting securities of Maker then outstanding;

(g) the filing of any petition under any bankruptcy, moratorium, reorganization
or insolvency act, federal or state, by Maker, or the filing by Maker of any
application for the appointment of a receiver for Maker or any substantial part
of Maker's property, or the consent by Maker to the appointment of any such
receiver, or the making of a general assignment for the benefit of creditors by
Maker; or

(h) an involuntary case or other proceeding shall be commenced against Maker
seeking liquidation, reorganization or other relief with respect to Maker or its
debts under any bankruptcy, moratorium, reorganization or insolvency act,
federal or state, or seeking the appointment of a receiver for Maker or any
substantial part of Maker's property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of sixty (60)
consecutive days.

Upon the occurrence of an Event of Default, the entire principal balance
outstanding upon this Note, together with all interest then accrued, shall, at
the option of the holder of this Note, at once become due and payable.

This Note, together with all principal and interest payments due hereunder,
shall bear interest at the lesser of (i) ten percent (10%) per annum or (ii) the
maximum effective contract rate which may lawfully be charged under applicable
statutes and laws from time to time in effect (such lesser rate, the "Default
Rate"), from and after the Maturity Date or the date of an Event of Default
occurring prior to the Maturity Date, until payment in full of all principal and
interest due hereunder is made.

This Note may be prepaid in whole or in part without premium or penalty,
provided that any partial prepayment shall not operate to relieve or diminish
any scheduled payments until all obligations hereunder are paid in full.

If this Note is placed in the hands of an attorney for collection, by suit or
otherwise, or to protect the security for its payment, or to enforce its
collection, or to represent the rights of the holder hereof in connection with
any loan documentation executed in connection herewith, or to defend
successfully against any claim, cause of action or suit brought by Maker against
the holder hereof, Maker shall pay on demand all costs of collection and
litigation (including court costs), together with attorneys' fees.

Maker and any endorsers hereof waive protest, demand, presentment, and notice of
dishonor, and agree that this Note may be extended (at the sole option of the
holder hereof), in whole or in part, without limit as to the number of such
extensions or the period or periods thereof, without notice to them and without
affecting their liability thereon.

 

 

 

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It is the intention of Maker and the holder hereof to comply strictly with
applicable usury laws; and, accordingly, in no event and upon no contingency
shall the holder hereof ever be entitled to receive, collect, or apply as
interest any interest, fees, charges or other payments equivalent to interest,
in excess of the maximum effective contract rate which may lawfully be charged
under applicable statutes and laws from time to time in effect; and in the event
that the holder hereof ever receives, collects, or applies as interest any such
excess, such amount which, but for this provision, would be excessive interest,
shall be applied to the reduction of the principal amount of the indebtedness
hereby evidenced; and if the principal amount of the indebtedness evidenced
hereby, all lawful interest thereon and all lawful fees and charges in
connection therewith, are paid in full, any remaining excess shall forthwith be
paid to Maker or other party lawfully entitled thereto. All interest paid or
agreed to be paid by Maker shall, to the maximum extent permitted under
applicable law, be amortized, prorated, allocated and spread throughout the full
period until payment in full of the principal so that the interest hereon for
such full period shall not exceed the maximum amount permitted by applicable
law. Any provision hereof, or of any other agreement between the holder hereof
and Maker, that operates to bind, obligate, or compel Maker to pay interest in
excess of such maximum effective contract rate shall be construed to require the
payment of the maximum rate only. The provisions of this paragraph shall be
given precedence over any other provision contained herein or in any other
agreement between the holder hereof and Maker that is in conflict with the
provisions of this paragraph.

DARA BIOSCIENCES, INC.

By:

Name:

Title: