Exhibit 10.2

THIS DEBENTURE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS DEBENTURE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. THIS DEBENTURE AND THE COMMON STOCK ISSUABLE UPON
CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENTOR AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO AMPIO PHARMACEUTICALS, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.

SENIOR UNSECURED MANDATORILY CONVERTIBLE DEBENTURE

FOR VALUE RECEIVED, AMPIO PHARMACEUTICALS, INC., a Delaware corporation (the
“Borrower” or “Ampio”), promises to pay to                      (the “Holder”)
or his registered assigns or successors in interest, the sum of
                     Thousand Dollars ($            ,000.00)(the “Principal
Amount”), together with any accrued and unpaid interest hereon, on March 31,
2011.

The following terms shall apply to this Senior Unsecured Mandatorily Convertible
Debenture (the “Debenture”):

ARTICLE I

INTEREST, MATURITY AND STATUS

1.1. Interest and Warrant. This Debenture shall accrue interest at the rate of
8% per annum, with interest payable quarterly commencing with the quarter ending
December 31, 2010. At Ampio’s discretion, interest may be paid in cash or by
payment-in-kind (“PIK”) through the issuance of additional Debentures (the “PIK
Debentures”) in the form of this Debenture, in an aggregate principal amount
equal to the interest then payable to the Holder. In addition, on receipt of the
Principal Amount, Ampio shall issue to the Holder warrants (the “Warrants”) that
will entitle the Holder to acquire on exercise of the Warrants an aggregate
number of Ampio shares of common stock (the “Warrant Shares”) equal to 20% of
the Conversion Shares (defined below) issuable on conversion of this Debenture.
The Warrant exercise price will be equal to the Conversion Price (defined
below), and the Warrants will be exercisable for a period of three years from
the date of the Offering (defined below).

1.2. Maturity. The aggregate principal amount outstanding under this Debenture
(the “Principal Amount”) and any PIK Debentures, together with any accrued and
unpaid interest on this Debenture and any PIK Debentures, shall automatically be
paid through conversion into Ampio common stock at the earlier of (i) closing of
a public or private equity financing (the “Offering”) in an amount exceeding $10
million, or (ii) March 31, 2011 (hereinafter, the “Conversion Maturity Date”).

1.3. Status. The Debentures are unsecured.

ARTICLE II

CONVERSION REPAYMENT

2.1. Mandatory Conversion. Subject to the terms of this Article II, on the
Conversion Maturity Date, this Debenture and any PIK Debentures issued in
connection herewith shall automatically convert, without any further action by
the Holder, into Ampio common stock at the Conversion Price. The shares of Ampio
common stock to be issued upon such conversion and on conversion of any PIK
Debentures are herein referred to as the “Conversion Shares.” The “Conversion
Price” shall mean the lower of (i) $1.75 per share, or (ii) the per-share price
at which Ampio’s common stock is sold in the Offering (or in the first tranche
of the Offering if the Offering is split into tranches). The Conversion Price
may be adjusted pursuant to the other terms of this Debenture.

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2.2. Voluntary Conversion. Subject to the terms of this Article II, commencing
30 days from the date of issuance and until the Conversion Maturity Date, the
Holder may voluntarily convert this Debenture and any PIK Debentures issued in
connection herewith into Ampio common stock at the Conversion Price.

2.3. Mechanics of Conversion. Within three business days of the Conversion
Maturity Date, Borrower shall provide irrevocable written instructions to
Ampio’s transfer agent accompanied by an opinion of counsel to Borrower and
shall cause the transfer agent to transmit the certificates representing the
Conversion Shares to the Holder by physical delivery or crediting the account of
the Holder’s designated broker with the Depository Trust Corporation (“DTC”)
through its Deposit Withdrawal Agent Commission (“DWAC”) system. The Holder
shall be treated for all purposes as the record holder of such Common Stock,
unless the Holder provides Borrower written instructions to the contrary.

2.4. Determination and Adjustment of Conversion Shares and Conversion Price.

(a) The number of Conversion Shares to be issued upon each conversion of this
Debenture shall be determined by dividing that portion of the principal to be
converted by the then applicable Conversion Price.

(b) The Conversion Price and number and kind of shares or other securities to be
issued upon conversion shall be subject to adjustment from time to time upon the
happening of certain events while this conversion right remains outstanding, as
follows: If the Borrower at any time on or after the issuance date 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 and the number of Conversion Shares will be
proportionately increased. If the Borrower at any time on or after the issuance
date combines (by combination, reverse stock split or otherwise) 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
and the number of Conversion Shares will be proportionately decreased. Any
adjustment under this Section 2.4(b) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
Notwithstanding the foregoing and any other terms of this Debenture, the
issuance of shares of Ampio common stock (i) in the Offering (ii) in connection
with the acquisition of DMI BioSciences, Inc. (“BioSciences”), and (iii) the
issuance of additional debentures with terms identical or substantially
equivalent to the terms hereof shall not be events which shall require any
adjustment in the Conversion Price or the Conversion Shares.

(c) As described in subparagraph (b) above, the Borrower may issue additional
debentures on terms identical or substantially equivalent to those set forth
herein. If for any reason the Borrower issues additional debentures on terms
that are more favorable to the holder(s) thereof than the terms of this
Debenture are to the Holder, the Borrower agrees that it will ascribe “most
favored nation” status to the Holder and will conform the terms of this
Debenture such that the terms hereof are as favorable to the Holder as any other
debenture issued to any other holder prior to the Public Offering.

2.5 Registration and Release of Prior Issued Shares From Lock-Up. Ampio shall
include on the registration statement to be filed in connection with a public
Offering, or shall file a separate registration statement if the Offering is
undertaken privately (hereinafter, the “Registration Statement”), (i) the
Conversion Shares issuable on conversion of this Debenture and any PIK
Debentures, (ii) the shares of Ampio common stock issuable or issued to the
Holder in connection with the BioSciences acquisition (the “BioSciences
Shares”), if any, and (iii) the Warrant Shares (collectively, the Conversion
Shares, the BioSciences Shares and the Warrant Shares are referred to as the
“Shares”). Such registration shall be without cost to the Holder, except if the
Holder desires to obtain his, her or its own counsel, in which case the fees of
such counsel shall be paid by the Holder. If the Registration Statement is not
declared effective by the Conversion Maturity Date, then Ampio shall obtain the
effectiveness of such Registration Statement within 60 days thereafter. Failure
to obtain the registration of the Shares shall be an Event of Default hereunder.
Ampio shall release the Holder from any lockup applicable to the BioSciences
Shares and shall not require the Holder to execute any lock-up agreement with
respect to the Shares. It is understood by the parties that the release of the
Holder from any lock-up of the BioSciences Shares, if any are held by the
Holder, is specifically premised upon the Holder’s agreement to purchase this
Debenture from Ampio.

 

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2.6. Authorized Shares. The Borrower will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Shares upon the full conversion of this Debenture, any PIK Debentures,
and the exercise of the Warrants, with such reservation remaining in effect at
all time until this Debenture is repaid in full by conversion. The Borrower
represents that upon issuance, such Shares will be duly and validly issued,
fully paid and non-assessable shares of Ampio Common Stock with such rights and
attributes as are pari passu to the rights and attributes of Ampio Common Stock
presently outstanding and to be issued in the Offering. In addition, if the
Borrower shall issue any securities or make any change to its capital structure
which would change the number of Conversion Shares into which this Debenture
shall be convertible at the then current Conversion Price or into which the
Warrants may be exercised, the Borrower shall at the same time make proper
provision so that thereafter there shall be a sufficient number of shares of
Common Stock authorized and reserved for conversion of this Debenture and
exercise of the Warrants. The Borrower (i) acknowledges that it will irrevocably
instruct its transfer agent to issue certificates for the Common Stock issuable
upon conversion of this Debenture and exercise of the Warrants, and (ii) agrees
that its issuance of this Debenture shall constitute full authority to its
officers and agents who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock in accordance with the terms and conditions of this Debenture and,
upon exercise thereof, the Warrants.

2.7 Status of Shares. The Conversion Shares issued on conversion of this
Debenture, the BioSciences Shares and the Warrant Shares shall be restricted
stock until the Registration Statement is declared effective by the SEC.
Accordingly, until such time as the Registration Statement is declared
effective, the Shares shall be salable by the Holder only in accordance with the
provisions of Rule 144 or other available exemption from Section 5 of the
Securities Act of 1933, as amended, in accordance with the terms of such
exemption. In connection with the Offering, Ampio will agree with the
underwriters or placement agent thereof to timely file all required reports
under the Securities Exchange Act of 1934, as amended, in order to ensure that
the current public information requirement of Rule 144 is met by Ampio.

ARTICLE III

EVENTS OF DEFAULT

The occurrence of any of the following events set forth in Sections 3.1 through
3.9, inclusive, shall be an “Event of Default”:

3.1. Breach of Covenant. Borrower breaches any covenant or other term or
condition of this Debenture in any material respect and such breach, if subject
to cure, continues for a period of five (5) days after the occurrence thereof
and notice of breach being furnished to Borrower by Holder.

3.2. Breach of Representations and Warranties. Borrower shall have breached in
any material respect any representation or warranty of Borrower made herein,
including failure to obtain the effectiveness of the Registration Statement by
the Conversion Maturity Date or the extension period thereof, and such breach
continues for a period of five (5) days after the occurrence thereof and notice
of breach being furnished to Borrow by Holder.

3.3. Stop Trade. An SEC stop trade order or Principal Market trading suspension
of the Common Stock shall be in effect for five (5) consecutive days or five
(5) days during a period of 10 consecutive days, excluding in all cases a
suspension of all trading on a Principal Market, provided that Borrower shall
not have been able to cure such trading suspension within 30 days of the notice
thereof. For purposes hereof, the “Principal Market” for the Common Stock is the
OTC Bulletin Board.

3.4. Receiver or Trustee. The Borrower or any of its Subsidiaries shall make an
assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business, or such a receiver or trustee shall otherwise be
appointed.

 

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3.5. Judgments. Any money judgment, writ or similar final process shall be
entered or filed against the Borrower or any of its Subsidiaries or any of their
respective property or other assets for more than $500,000 in the aggregate,
which shall remain unvacated, unbonded or unstayed for a period of thirty
(30) days.

3.6. Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower or any
of its Subsidiaries, which proceedings are not dismissed within thirty (30) days
of filing.

3.7. Default Under Other Material Agreements. The occurrence of an Event of
Default under any other material agreement to which the Borrower is party that
evidences indebtedness of at least $500,000.

3.8. Failure to Deliver Conversion Shares or Replacement Debenture. Borrower’s
failure to timely deliver Conversion Shares to the Holder pursuant to and in the
form required by this Debenture, if such failure to timely deliver Conversion
Shares shall not be cured within five (5) business days or, if Borrower is
required to issue a replacement Debenture to Holder, Borrower shall fail to
deliver such replacement Debenture within seven (7) business days.

ARTICLE IV

DEFAULT PROVISIONS

4.1. Default Interest Rate. Following the occurrence and during the continuance
of an Event of Default, interest on this Debenture shall automatically be
instated at a rate of 18% per annum, retroactive (and to be effective) as of the
date of issuance of this Debenture, which interest shall be payable in cash or
Conversion Shares, at the option of the Borrower.

4.2. Conversion Privileges During Default. The conversion privileges set forth
in Article II shall remain in full force and effect from the date hereof and
until this Debenture is paid in full, including in the occurrence of an Event of
Default.

4.3. Cumulative Remedies. The remedies under this Debenture shall be cumulative.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE BORROWER

The Borrower represents and warrants to the Holder as of the date hereof as
follows:

5.1 Organization. Ampio is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own its properties and carry on its business as
now being conducted.

5.2 Authority; Enforceability. Ampio has the requisite corporate power and
authority to execute and deliver this Agreement and to carry out its obligations
hereunder. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Ampio and no other corporate
proceedings on the part of Ampio are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly
executed and delivered by Ampio and constitutes a valid and binding obligation
of Ampio, enforceable against Ampio in accordance with its terms, except as
(a) enforceability may be limited by applicable bankruptcy,

 

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insolvency, fraudulent transfer, moratorium or similar laws from time to time in
effect affecting creditors’ rights generally, and (b) the availability of
equitable remedies may be limited by equitable principles of general
applicability.

5.3 Third Party Consents. No consent, authorization, order or approval of, or
filing or registration with, any governmental authority or other person is
required for the execution and delivery of this Debenture or the consummation by
Ampio of any of the transactions contemplated hereby, except the effectiveness
of the Registration Statement as described herein.

5.4 Disclosure. Ampio has filed with the Securities and Exchange Commission all
of its required filings under the Securities Exchange Act of 1934 since the date
of its merger with Chay Enterprises, Inc. in March 2010.

5.5 No Other Representations or Warranties. Except as set forth above in this
Articles I and V hereof, no other representations or warranties, express or
implied, are made by Ampio.

ARTICLE VI

MISCELLANEOUS

6.1 Accredited Investor Status. The Holder will deliver to Ampio on execution
hereof a subscription agreement which shall evidence that the Holder is an
accredited investor, as that term is defined by the federal securities laws. In
addition, such accredited investor status excludes the value of the Holder’s
principal residence, as required by the Dodd-Frank Wall Street Reform and
Consumer Protection Act.

6.2. Failure or Indulgence Not Waiver. No failure or delay on the part of the
Holder hereof 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. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.

6.3. Notices. Any notice herein required or permitted to be given shall be in
writing, addressed to the receiving party at the address noted below, and sent
by U.S. mail or by confirmed facsimile transmission, to:

in the case of the Holder:

 

 

     

 

     

 

     

 

     

Facsimile:

 

 

  

in the case of the Borrower:

Donald B. Wingerter, Jr., Chief Executive Officer

Ampio Pharmaceuticals, Inc.

8400 East Crescent Parkway, Suite 600

Greenwood Village, Colorado 80111

Facsimile: (303) 418-1001

 

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with a copy to:

Robert W. Walter, Esq.

Richardson & Patel, LLP

Colorado location: 9660 East Prentice Circle

Greenwood Village, Colorado 80111

Facsimile: (720) 221-8162

6.4. Amendment Provision. The term “Debenture” and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument as it may be amended or supplemented.

6.5. Assignability. This Debenture shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may not be assigned by the Holder without the prior
written consent of the Borrower, which consent will not be unreasonably withheld
by Borrower.

6.6. Cost of Collection. If default is made in the payment of this Debenture,
Borrower shall pay the Holder hereof reasonable costs of collection, including
reasonable attorneys’, expert witness and arbitration fees. If an Event of
Default occurs, then this Section 6.6 shall prevail over Section 6.7 with
respect to responsibility for all costs and fees in the event the Holder
initiates a collection action.

6.7. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This
Debenture shall be governed by, and construed in accordance with, the internal
laws of the State of Colorado, without regard to principles of conflicts of
law. HOLDER AND BORROWER WAIVE ANY RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF THIS DEBENTURE OR ANY TRANSACTION
CONTEMPLATED HEREIN, INCLUDING CLAIMS BASED ON CONTRACT, TORT, BREACH OF DUTY
AND ALL OTHER COMMON LAW OR STATUTORY BASES. Each party hereby submits to the
exclusive jurisdiction of the state and federal courts located in the County of
Denver, State of Colorado. If the jury waiver set forth in this Section is not
enforceable, then any dispute, controversy or claim arising out of or relating
to this Debenture or any of the transactions contemplated herein will be finally
settled by binding arbitration in Denver, Colorado in accordance with the then
current Commercial Arbitration Rules of the American Arbitration Association by
one arbitrator appointed in accordance with said rules. The arbitrator shall
apply Colorado law to the resolution of any dispute, without reference to rules
of conflicts of law or rules of statutory arbitration. Judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Notwithstanding the foregoing, the parties may apply to any court of
competent jurisdiction for preliminary or interim equitable relief, or to compel
arbitration in accordance with this paragraph. The expenses of the arbitration,
including the arbitrator’s fees and expert witness fees, incurred by the parties
to the arbitration, may be awarded to the prevailing party, in the discretion of
the arbitrator, or may be apportioned between the parties in any manner deemed
appropriate by the arbitrator. Unless and until the arbitrator decides that one
party is to pay for all (or a share) of such expenses, both parties shall share
equally in the payment of the arbitrator’s fees as and when billed by the
arbitrator.

6.8. Maximum Payments. Nothing contained herein shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by Borrower to the Holder and thus refunded to the Borrower.

6.9. Independent Legal Advice. All parties acknowledge and represent
that: (a) they have read this Debenture; (b) they clearly understand this
Debenture and each of its terms; (c) they fully and unconditionally consent to
the terms of this Debenture; (d) all parties have had the benefit and advice of
counsel of their own selection, and the Holder has not relied upon the advice or
counsel of Richardson & Patel, LLP, counsel to the Borrower, with respect to
this Debenture; (e) they have executed this Debenture, freely, with knowledge,
and without influence or duress; (f) they have not relied upon any other
representations, either written or oral, express or implied, made to them by any
person, except as is specifically set forth herein; and (g) the consideration
received by them has been actual, adequate, sufficient, and received.

 

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6.10. Construction. Each party acknowledges that it or its own independent legal
counsel participated in the preparation of this Debenture and, therefore,
stipulates that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be applied in the interpretation of this
Debenture to favor either party against the other.

[Balance of page intentionally left blank; signature page follows.]

 

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IN WITNESS WHEREOF, Borrower has caused this Senior Unsecured Mandatorily
Convertible Debenture to be signed in its name effective as of this      day of
            , 2010.

 

AMPIO PHARMACEUTICALS, INC. By:  

/s/

  Name:   Donald B. Wingerter, Jr.   Title:   Chief Executive Officer

 

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