Exhibit 10.1

 

FORM OF SECURED CONVERTIBLE NOTE

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE,
INCLUDING SECTIONS 3(c)(ii) AND 17(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)(ii) OF THIS NOTE.

 

Applied DNA Sciences, Inc.

 

Secured Convertible Note

 

Issuance Date: November 29, 2018 Original Principal Amount: U.S. $___________  
Interest Rate per Annum: 6.00%

 

FOR VALUE RECEIVED, Applied DNA Sciences, Inc., a Delaware corporation (the
“Company”), hereby promises to pay to [___________________] or registered
assigns (“Holder”) the amount set out above as the Original Principal Amount (as
reduced pursuant to the terms hereof pursuant to redemption, conversion or
otherwise, the “Principal”) when due, whether upon the Maturity Date (as defined
below), acceleration, redemption or otherwise (in each case in accordance with
the terms hereof) and to pay interest (“Interest”) on any outstanding Principal
at the applicable Interest Rate from the date set out above as the Issuance Date
(the “Issuance Date”) until the same becomes due and payable, whether upon an
Interest Date (as defined below), the Maturity Date, acceleration, redemption,
conversion or otherwise (in each case in accordance with the terms hereof). This
Secured Convertible Note (including all Secured Convertible Notes issued in
exchange, transfer or replacement hereof, this “Note”) is one of an issue of
Secured Convertible Notes issued pursuant to the Securities Purchase Agreement
on multiple Closing Dates (collectively, the “Notes” and such other Secured
Convertible Notes, the “Other Notes”). Certain capitalized terms used herein are
defined in Section 26.

 

1.            PAYMENTS OF PRINCIPAL. Subject to the conversion of the Principal
and accrued and unpaid Interest (as defined below) into Conversion Shares
pursuant to Section 8 hereof, on the Maturity Date, the Company shall pay to the
Holder an amount in cash representing all outstanding Principal, accrued and
unpaid Interest. The “Maturity Date” shall be November 28, 2021. At any time the
Company may prepay any portion or all of the outstanding Principal amount of
this Note and any accrued and unpaid Interest.

 

2.            INTEREST; INTEREST RATE.

 

(a)          Interest on this Note shall commence accruing on the Issuance Date
and shall be computed on the basis of a 360-day year comprised of twelve thirty
day months and shall be payable in arrears semi-annually on May 29th and
November 29th during the period beginning on the Issuance Date and ending on,
and including, the Maturity Date or the Conversion Date, as the case may be (the
“Interest Date”). Subject to the conversion of the accrued and unpaid Interest
into Conversion Shares pursuant to Section 8 hereof, Interest shall be payable
on the Interest Date to the record holder of this Note on the Interest Date, in
cash.

 

(b)          From and after the occurrence and during the continuance of an
Event of Default, the Interest Rate shall be increased to 10% per annum, or the
maximum rate permissible by law, whichever is less. In the event that such Event
of Default is subsequently cured, the adjustment referred to in the preceding
sentence shall cease to be effective as of the date of such cure; provided that
the Interest as calculated and unpaid at such increased rate during the
continuance of such Event of Default shall continue to apply to the extent
relating to the days after the occurrence of such Event of Default through and
including the date of cure of such Event of Default.

 

(c)          Notwithstanding any provision in this Note to the contrary, through
the Maturity Date, at the option of the Company in lieu of paying in cash the
interest accrued to any Interest Date, any accrued but unpaid interest shall be
capitalized and added as of such Interest Date to the principal amount of this
Note (the “PIK Amount”). Such PIK Amount shall bear interest from the applicable
Interest Date at the same rate per annum and be payable in the same manner as in
the case of the original principal amount of this Note and shall otherwise be
treated as principal of this Note for all purposes. From and after each Interest
Date, the principal amount of this Note shall, including with respect to
Conversion Amount, without further action on the part of the Company or the
Holder, be deemed to be increased by the PIK Amount so capitalized and added to
principal in accordance with the provisions hereof.

 

 -1- 

 

 

3.            CONVERSION OF NOTES. This Note shall be convertible into
Conversion Shares, 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
Conversion Shares in accordance with Section 3(c), at the Conversion Rate (as
defined below). The Company shall not issue any fraction of a Conversion Share
upon any conversion. If the issuance would result in the issuance of a fraction
of a Conversion Share, the Company shall round such fraction of a Conversion
Share up to the nearest whole share. The Company shall pay any and all transfer,
stamp and similar taxes that may be payable with respect to the issuance and
delivery of Conversion Shares upon conversion of any Conversion Amount; provided
that the Company shall not be required to pay any tax that may be payable in
respect of the issuance and delivery of Conversion Shares to any Person other
than the Holder or with respect to any income tax due by the Holder with respect
to such Conversion Shares.

 

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

 

(i)          “Conversion Amount” means the portion of the Principal to be
converted, redeemed or otherwise with respect to which this determination is
being made, plus all accrued and unpaid Interest on any Conversion Amount up to
and including the Conversion Date (as defined below).

 

(ii)         “Conversion Price” means USD $2.50.

 

(c)          Mechanics of Conversion.

 

(i)          Optional Conversion. To convert any Conversion Amount into
Conversion Shares on any date (a “Conversion Date”), the Holder shall (A)
transmit by facsimile or email (by attachment in PDF format) (or otherwise
deliver), for receipt on or prior to 11:59 p.m., New York 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)(ii), surrender this Note to a common carrier for delivery to the Company as
soon as practicable on or following such date (or an indemnification undertaking
with respect to this Note in the case of its loss, theft or destruction). On or
before the first Business Day following the date of receipt of a Conversion
Notice, the Company shall transmit by facsimile or email (by attachment in PDF
format) a confirmation (the “Conversion Confirmation”) of receipt of such
Conversion Notice to the Holder and the Company’s Transfer Agent. Any Conversion
Confirmation delivered by the Company shall confirm the Conversion Amount. On or
before the fifth Business Day following the date of receipt of a Conversion
Notice, the Company shall, provided that the Transfer Agent is participating in
the DTC Fast Automated Securities Transfer Program, credit such aggregate number
of Conversion Shares to which the Holder shall be entitled to the Holder’s or
its designee’s balance account with DTC through its Deposit/Withdrawal as
Custodian system. If the Transfer Agent is not participating in the DTC Fast
Automated Securities Transfer Program or if a Holder otherwise requests, the
Company shall issue and deliver (via reputable overnight courier) 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 Conversion Shares to which the
Holder shall be entitled. If this Note is physically surrendered for conversion
as required by Section 3(c)(ii) 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 five
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 17(d)) representing
the outstanding Principal not converted. The Person or Persons entitled to
receive the Conversion Shares issuable upon a conversion of this Note shall be
treated for all purposes as the record holder or holders of such Conversion
Shares on the Conversion Date.

 

(ii)         Registration; Book-Entry. The Company shall maintain a register
(the “Register”) for the recordation of the names and addresses of the holders
of each Note and the principal amount of the Notes held by such holders (the
“Registered Notes”). The entries in the Register shall be conclusive and binding
for all purposes absent manifest error. The Company and the holders of the Notes
shall treat each Person whose name is recorded in the Register as the owner of a
Note for all purposes, including, without limitation, the right to receive
payments of principal and interest hereunder, notwithstanding notice to the
contrary. A Registered Note may be assigned or sold in whole or in part only by
registration of such assignment or sale on the Register. Upon its receipt of a
request to assign or sell all or part of any Registered Note by a Holder, the
Company shall record the information contained therein in the Register and issue
one or more new Registered Notes in the same aggregate principal amount as the
principal amount of the surrendered Registered Note to the designated assignee
or transferee pursuant to Section 17. 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 Principal 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
reissuance of this Note upon physical surrender of this Note. The Holder and the
Company shall maintain records showing the Principal and Interest 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.

 

 -2- 

 

 

4.            RIGHTS UPON EVENT OF DEFAULT.

 

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

 

(i)          the suspension from trading or failure of the Common Stock to be
listed on an Eligible Market for a period of five consecutive Trading Days or
for more than an aggregate of ten Trading Days in any 365-day period;

 

(ii)         the delisting of the Company’s Common Stock from the Principal
Market;

 

(iii)        the Company’s failure to pay to the Holder any amount of Principal,
Interest, or other amounts when and as due under this Note or any other
Transaction Document (as defined in the Securities Purchase Agreement) or any
other agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated hereby and thereby to which the
Holder is a party, except, in the case of a failure to pay Interest and other
amounts when and as due, in which case only if such failure continues for a
period of at least three Business Days;

 

(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)          any proceeding is instituted against the Company or any of its
Subsidiaries in an involuntary case, or a court of competent jurisdiction enters
an order or decree under any Bankruptcy Law that (A) appoints a Custodian of the
Company or any of its Subsidiaries for all or substantially all of its property
or (B) orders the liquidation of the Company or any of its Subsidiaries and, in
each case, such order or decree is not dismissed or stayed within thirty days of
such entry;

 

(vi)         the Company shall fail to perform or observe any covenant,
agreement or other obligation contained in any Transaction Document on its part
to be performed or observed and such failure shall remain unremedied for a
period of ten Business Days;

 

(vii)        the Security Agreement shall, for any reason, after the perfection
date specified in the Securities Purchase Agreement, cease to create a valid,
enforceable and perfected first priority security interest and Lien in any of
the Collateral (as defined in the Security Agreement) purported to be covered
thereby, or the Company shall so state in writing, or the Company shall in any
way challenge, or shall bring any proceeding which shall in any way challenge,
the prior valid, enforceable or perfected status of such security interest or
Lien or the validity or enforceability thereof;

 

(b)          Remedies. Upon the occurrence of an Event of Default, the Company
shall within five Business Days deliver written notice thereof via facsimile or
email and overnight courier (an “Event of Default Notice”) to the Holder. At any
time after the earlier of the Holder’s receipt of an Event of Default Notice and
the Holder becoming aware of an Event of Default, the Holder may require the
Company to redeem all or any portion of this Note by delivering written notice
thereof (the “Event of Default Redemption Notice”) to the Company, which Event
of Default Redemption Notice shall indicate the portion of this Note the Holder
is electing to redeem and, in the case the Holder has not received an Event of
Default Notice, the Event of Default of which the Holder has become aware. Each
portion of this Note subject to redemption by the Company pursuant to this
Section 4(b) shall be redeemed by the Company at a price equal to the sum of the
Conversion Amount to be redeemed together with accrued and unpaid Interest with
respect to such Conversion Amount (the “Event of Default Redemption Price”).
Redemptions required by this Section 4(b) shall be made in accordance with the
provisions of Section 12. To the extent redemptions required by this Section
4(b) are deemed or determined by a court of competent jurisdiction to be
prepayments of the Note by the Company, such redemptions shall be deemed to be
voluntary prepayments. The parties hereto agree that in the event of the
Company’s redemption of any portion of the Note under this Section 4(b), the
Holder’s damages would be uncertain and difficult to estimate because of the
parties’ inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for the Holder.

 

 -3- 

 

 

5.            RIGHTS UPON FUNDAMENTAL TRANSACTION; CHANGE OF CONTROL.

 

(a)          Assumption. The Company shall not enter into or be party to a
Fundamental Transaction 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 in form and substance reasonably satisfactory to the Required
Holders and approved by the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of Notes in exchange
for such Notes a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to the Notes, including,
without limitation, having a principal amount and interest rate equal to the
principal amounts and the interest rates of the Notes then outstanding held by
such holder, having similar conversion rights and having similar ranking to the
Notes, and satisfactory to the Required Holders. Upon the occurrence of any
Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, 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. Upon consummation of the Fundamental Transaction, the Successor Entity
shall deliver to the Holder confirmation that there shall be issued upon
conversion or redemption of this Note at any time after the consummation of the
Fundamental Transaction, in lieu of the shares of the Company’s Common Stock (or
other securities, cash, assets or other property) issuable upon the conversion
or redemption of the Notes prior to such Fundamental Transaction, such shares of
the publicly traded common stock (or their equivalent) of the Successor Entity
(including its Parent Entity), as adjusted in accordance with the provisions of
this Note. The provisions of this Section 5 shall apply similarly and equally to
successive Fundamental Transactions and shall be applied without regard to any
limitations on the conversion or redemption of this Note.

 

(b)          Redemption Right. No sooner than fifteen days nor later than ten
days prior to the consummation of a Change of Control, but not prior to the
public announcement of such Change of Control, the Company shall deliver written
notice thereof via facsimile or email and overnight courier to the Holder (a
“Change of Control Notice”). At any time during the period beginning after the
Holder’s receipt of a Change of Control Notice and ending twenty Trading Days
after the date of the consummation of such Change of Control, the Holder may
require the Company to redeem all or any portion of this Note by delivering
written notice thereof (“Change of Control Redemption Notice”) to the Company,
which Change of Control Redemption Notice shall indicate the Conversion Amount
the Holder is electing to redeem. The portion of this Note subject to redemption
pursuant to this Section 5 shall be redeemed by the Company in cash at a price
equal to the Conversion Amount being redeemed plus any accrued and unpaid
interest on the Conversion Amount being redeemed (the “Change of Control
Redemption Price”). Redemptions required by this Section 5(b) shall be made in
accordance with the provisions of Section 12. To the extent redemptions required
by this Section 5(b) are deemed or determined by a court of competent
jurisdiction to be prepayments of the Note by the Company, such redemptions
shall be deemed to be voluntary prepayments. The parties hereto agree that in
the event of the Company’s redemption of any portion of the Note under this
Section 5(b), the Holder’s damages would be uncertain and difficult to estimate
because of the parties’ inability to predict future interest rates and the
uncertainty of the availability of a suitable substitute investment opportunity
for the Holder.

 

6.            RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE
EVENTS.

 

(a)          Purchase Rights. If at any time the Company grants, issues or sells
any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the “Purchase Rights”), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete conversion of this
Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.

 

(b)          Other Corporate Events. In addition to and not in substitution for
any other rights hereunder, prior to the consummation of any Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to
receive securities or other assets with respect to or in exchange for shares of
Common Stock (a “Corporate Event”), the Company shall make appropriate provision
to insure that the Holder will thereafter have the right to receive upon a
conversion of this Note, at the Holder’s option, (i) in addition to the
Conversion Shares receivable upon such conversion, such securities or other
assets to which the Holder would have been entitled with respect to such
Conversion Shares had such Conversion Shares been held by the Holder upon the
consummation of such Corporate Event (without taking into account any
limitations or restrictions on the convertibility of this Note) or (ii) in lieu
of the Conversion Shares otherwise receivable upon such conversion, such
securities or other assets received by the holders of shares of Common Stock in
connection with the consummation of such Corporate Event in such amounts as the
Holder would have been entitled to receive had this Note initially been issued
with conversion rights for the form of such consideration (as opposed to shares
of Common Stock) at a conversion rate for such consideration commensurate with
the Conversion Rate. Provision made pursuant to the preceding sentence shall be
in a form and substance satisfactory to the Required Holders. The provisions of
this Section 6 shall apply similarly and equally to successive Corporate Events
and shall be applied without regard to any limitations on the conversion or
redemption of this Note.

 

 -4- 

 

 

7.            RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

 

(a)          Stock Dividends and Stock Splits. If the Company, at any time while
this Note is outstanding (A) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company pursuant to this Note), or (B) 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 while this Note is outstanding: combines (by
combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock as the case may be, into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
will be proportionately modified.

 

(b)          Other Events. If any event occurs of the type contemplated by the
provisions of this Section 7 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 will make an appropriate 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 7.

 

8.            COMPANY’S RIGHT OF MANDATORY CONVERSION.

 

(a)          Mandatory Conversion. If the price of the Company’s Common Stock
shall remain at a closing price of $3.50 or more for a period of twenty
consecutive Trading Days, the Company shall have the right to require the Holder
to convert all, or any part, of the Conversion Amount of this Note into fully
paid, validly issued and nonassessable shares of Common Stock in accordance with
Section 3(c) hereof at the Conversion Rate with respect to the Conversion Amount
(the “Mandatory Conversion”). The mechanics of conversion set forth in Section
3(c) shall apply to any Mandatory Conversion as if the Company and the Transfer
Agent had received from the Holder on the Mandatory Conversion Date a Conversion
Notice with respect to the Conversion Amount being converted pursuant to the
Mandatory Conversion.

 

9.            SECURITY. This Note and the Other Notes are secured to the extent,
within the time and in the manner set forth in the Security Documents (as
defined in the Securities Purchase Agreement).

 

10.          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 reasonable action as may be required to
protect the rights of the Holder of this Note.

 

11.          RESERVATION OF AUTHORIZED SHARES.

 

(a)          Reservation. The Company shall reserve out of its authorized and
unissued stock a number of shares of Common Stock or other securities issuable
upon conversion of the Notes, as the case may be, for each of the Notes equal to
100% of the Conversion Rate with respect to the Conversion Amount of each such
Note as of the Issuance Date (such applicable amount, the “Required Reserve
Amount”). The Company shall increase the Required Reserved Amount in proportion
to any increase in the outstanding principal amount of the Note resulting from a
PIK amount.

 

 -5- 

 

 

(b)          Insufficient Authorized Shares. If at any time while any of the
Notes remain outstanding the Company does not have a sufficient number of
authorized and unreserved shares of Common Stock or other securities issuable
upon conversion of the Notes, as the case may be, to satisfy its obligation to
reserve for issuance upon conversion of the Notes at least a number of shares of
Common Stock or other securities issuable upon conversion of the Notes, as the
case may be, equal to the Required Reserve Amount (an “Authorized Share
Failure”), then the Company shall immediately take all action necessary to
increase the Company’s authorized shares of Common Stock or other securities
issuable upon conversion of the Notes, as the case may be, to an amount
sufficient to allow the Company to reserve the Required Reserve Amount for the
Notes then outstanding. Without limiting the generality of the foregoing
sentence, as soon as reasonably practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than sixty 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 or, if required by applicable law, other securities
issuable upon conversion of the Notes, as the case may be. In connection with
such meeting, the Company shall provide each stockholder with a proxy statement
and shall use its reasonable efforts to solicit its stockholders’ approval of
such increase in authorized shares of Common Stock or, if required by applicable
law, other securities issuable upon conversion of the Note, as the case may be,
and to cause its board of directors of the Company to recommend to the
stockholders that they approve such proposal.

 

12.          HOLDER’S REDEMPTIONS.

 

(a)          Mechanics. The Company shall deliver the applicable Event of
Default Redemption Price or the Change of Control Redemption Price (together,
the “Redemption Price”) to the Holder within five Business Days after the
Company’s receipt of the Holder’s Event of Default Redemption Notice or Change
of Control Redemption Notice (together, the “Redemption Notice”). In the event
of a redemption of less than all of the Conversion Amount of this Note, the
Company shall promptly cause to be issued and delivered to the Holder a new Note
(in accordance with Section 17(d)) representing the outstanding Principal which
has not been redeemed. In the event that the Company does not pay the applicable
Redemption Price to the Holder within the time period required, at any time
thereafter and until the Company pays such unpaid Redemption Price in full, the
Holder shall have the option, in lieu of redemption, to require the Company to
promptly return to the Holder all or any portion of this Note representing the
Conversion Amount that was submitted for redemption and for which the applicable
Redemption Price has not been paid. Upon the Company’s receipt of such notice,
(x) the applicable Redemption Notice shall be null and void with respect to such
Conversion Amount, and (y) the Company shall immediately return this Note, or
issue a new Note (in accordance with Section 17(d)) to the Holder representing
the sum of such Conversion Amount to be redeemed together with accrued and
unpaid Interest with respect to such Conversion Amount.

 

(b)          Redemption by Other Holders. Upon the Company’s receipt of notice
from any of the holders of the Other Notes for redemption or repayment as a
result of an event or occurrence substantially similar to the events or
occurrences described in Section 4(b), the Company shall immediately, but no
later than one Business Day of its receipt thereof, forward to the Holder by
facsimile or email a copy of such notice.

 

13.          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
Delaware General Corporation Law, and as expressly provided in this Note.

 

14.          COVENANTS. So long as this Note is outstanding:

 

(a)          Rank. All payments due under this Note shall rank pari passu with
all Other Notes.

 

(b)          Certificate of Incorporation and Bylaws. Except as set forth in
Section 11(b), the Company shall not amend its Certificate of Incorporation or
Bylaws without the prior written consent of the Required Holders (which consent
shall not be unreasonably withheld).

 

(c)          Use of Proceeds.  The Company will use the proceeds from the sale
of the Notes for general working capital purposes.

 

15.          VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote
of the Required Holders at a meeting duly called for such purpose or the written
consent without a meeting shall be required for any change or amendment to this
Note or the Other Notes. In no event shall any amendment, modification or waiver
be made to this Note which would adversely effect the Holder without the written
consent of the Holder.

 

16.          TRANSFER. This Note and any Conversion Shares issued upon
conversion of this Note may be offered, sold, assigned or transferred by the
Holder without the consent of the Company, subject only to the provisions of
Section 2(f) of the Securities Purchase Agreement and applicable securities
laws.

 

 -6- 

 

 

17.          REISSUANCE OF THIS NOTE.

 

(a)          Transfer. If this Note is to be transferred, 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 Sections
16 and 17(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 17(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)(ii)
following conversion or redemption 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.

 

(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 17(d)) representing the 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 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 17(a) or Section 17(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 and unpaid
Interest on the Principal and Interest of this Note, from the Issuance Date.

 

18.          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.

 

19.          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, attorneys’ fees and disbursements.

 

20.          CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly
drafted by the Company and all the holders of the Notes 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.

 

21.          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.

 

 -7- 

 

 

22.          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
Section 9(f) of the Securities 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
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Conversion Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least twenty days prior to the date
on which the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Fundamental Transaction, dissolution or liquidation,
provided in each case that such information shall be made known to the public
prior to or in conjunction with such notice being provided to the Holder.

 

(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 holders of the Notes, shall initially be as set forth on the
Schedule of Buyers attached to the Securities 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 and, in the case of any Interest Date which is not the
date on which this Note is paid in full, the extension of the due date thereof
shall not be taken into account for purposes of determining the amount of
Interest due on such date. Any amount of Principal or other amounts due under
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 fifteen percent (15%) per annum,
or the maximum rate permissible by law, which is less, from the date such amount
was due until the same is paid in full (“Late Charge”).

 

23.          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.

 

24.          WAIVER OF NOTICE. To the extent permitted by law, the Company
hereby waives demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note and the Securities Purchase Agreement.

 

25.          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. The Company hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in The City of
New York, Borough of Manhattan, for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. In the event that any provision
of this Note is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of this Note. Nothing contained herein shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Company
in any other jurisdiction to collect on the Company’s obligations to the Holder,
to realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court ruling in favor of the Holder. THE COMPANY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

 -8- 

 

 

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

 

(a)          “Bloomberg” means Bloomberg Financial Markets.

 

(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 any Fundamental Transaction other than (i)
any reorganization, recapitalization or reclassification of the Common Stock in
which holders of the Company’s voting power immediately prior to such
reorganization, recapitalization or reclassification continue after such
reorganization, recapitalization or reclassification to hold publicly traded
securities and, directly or indirectly, the voting power of the surviving entity
or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities, or (ii) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company.

 

(d)         “Closing Bid Price” and “Closing Sale Price” means, for any security
as of any date, the last closing bid price and last closing trade price,
respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, 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 closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the “pink sheets” by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price, as the case may be, of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. All
such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during the
applicable calculation period.

 

(e)         “Closing Date” shall have the meaning set forth in the Securities
Purchase Agreement which corresponds to the date this Note and the Other Notes
were initially issued pursuant to the terms of the Securities Purchase
Agreement.

 

(f)         “Common Stock” means shares of the Company’s common stock, $0.001
par value per share.

 

(g)         “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.

 

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

 

(i)          “Conversion Shares” means, shares of Common Stock issuable upon
conversion of this Note.

 

(j)          “Eligible Market” means the Principal Market, The New York Stock
Exchange, Inc., the NYSE Amex, The Nasdaq Global Select Market, The Nasdaq
Global Market, The Nasdaq Capital Market, or any market that is a successor to
any of the foregoing.

 

(k)           “Fundamental Transaction” means that the Company shall, directly
or indirectly, in one or more related transactions, (i) consolidate or merge
with or into (whether or not the Company is the surviving corporation) another
Person or Persons, or (ii) sell, assign, transfer, convey or otherwise dispose
of all or substantially all of the properties or assets of the Company to
another Person, or (iii) allow another Person (other than the Holder) to make a
purchase, tender or exchange offer that is accepted by the holders of more than
50% of the outstanding shares of Voting Stock (not including any shares of
Voting 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), or (iv) consummate a stock purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than the 50% of the outstanding shares of Voting Stock (not
including any shares of Voting Stock held by the other Person or other Persons
making or party to, or associated or affiliated with the other Persons making or
party to, such stock purchase agreement or other business combination), or (v)
reorganize, recapitalize or reclassify its Common Stock or (vi) any “person” or
“group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the
Exchange Act) is or shall become the “beneficial owner” (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate
Voting Stock of the Company.

 

 -9- 

 

 

(l)          “GAAP” means United States generally accepted accounting
principles, consistently applied.

 

(m)        “Interest Rate” means, 6.00% per annum, subject to adjustment as set
forth in Section 2(b) hereof.

 

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

 

(o)          “Parent Entity” of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common stock or equivalent
equity security is quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.

 

(p)         “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.

 

(q)         “Principal Market” means the NASDAQ Capital Market.

 

(r)          “Required Holders” means the holders of Notes representing at least
a majority of the aggregate principal amount of the Notes then outstanding.

 

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

 

(t)          “Securities Purchase Agreement” means that certain securities
purchase agreement dated as of the Subscription Date by and among the Company
and the initial holders of the Notes pursuant to which the Company issued the
Notes.

 

(u)          “Subscription Date” means November 29, 2018.

 

(v)          “Successor Entity” means the Person, which may be the Company,
formed by, resulting from or surviving any Fundamental Transaction or the Person
with which such Fundamental Transaction shall have been made, provided that if
such Person is not a publicly traded entity whose common stock or equivalent
equity security is quoted or listed for trading on an Eligible Market, Successor
Entity shall mean such Person’s Parent Entity.

 

(w)         “Trading Day” means any day on which the Common Stock is traded on
the Principal Market, or, if the Principal Market is not the principal trading
market for the Common Stock, then on the principal securities exchange or
securities market on which the Common Stock is then traded; provided that
“Trading Day” shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York Time).

 

(x)          “Voting Stock” of a Person means capital stock of such Person of
the class or classes pursuant to which the holders thereof have the general
voting power to elect, or the general power to appoint, at least a majority of
the board of directors, managers or trustees of such Person (irrespective of
whether or not at the time capital stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).

 

27.          DISCLOSURE. Upon receipt or delivery by the Company of any notice
in accordance with the terms of this Note, unless the Company has in good faith
determined that the matters relating to such notice do not constitute material,
nonpublic information relating to the Company or its Subsidiaries, the Company
shall within four Business Days after any such receipt or delivery publicly
disclose such material, nonpublic information on a Current Report on Form 8-K or
otherwise. In the event that the Company believes that a notice contains
material, nonpublic information relating to the Company or its Subsidiaries, the
Company so shall indicate to such Holder contemporaneously with delivery of such
notice, and in the absence of any such indication, the Holder shall be allowed
to presume that all matters relating to such notice do not constitute material,
nonpublic information relating to the Company or its Subsidiaries.

 

[Signature Page Follows]

 

 -10- 

 

 

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

 

  APPLIED DNA SCIENCES, INC.         By:       Name:     Title:

 

[signature page to Form of Secured Convertible Note]

 

 

 

 

EXHIBIT I

 

APPLIED DNA SCIENCES, INC.
CONVERSION NOTICE

 

Reference is made to the Secured Convertible Note (the “Note”) issued to the
undersigned by Applied DNA Sciences, 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
Conversion Shares (as defined in the Note) 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 Conversion Amount of 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)

 

 

 

 

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Conversion Notice and hereby directs
American Stock Transfer & Trust Company to issue the above indicated number of
shares of Common Stock in accordance with the Transfer Agent Instructions dated
[●], 2018 from the Company and acknowledged and agreed to by American Stock
Transfer & Trust Company.

 

  APPLIED DNA SCIENCES, INC         By:       Name:     Title: