Document:

Unassociated Document

Exhibit 10.1

SECOND AMENDMENT TO TRANSACTION DOCUMENTS

This SECOND AMENDMENT TO TRANSACTION DOCUMENTS (this “Amendment”) is made as of the 13th day of August 2009, by and between URIGEN PHARMACEUTICALS, INC., a Delaware
corporation with its principal place of business at 27 Maiden Lane, Suite 595, San Francisco, California 94108 (the “Borrower”), Urigen N.A., Inc., a Delaware corporation with its principal place of business at 27 Maiden Lane, Suite 595, San Francisco, CA 94108 (the “Guarantor”), and PLATINUM-MONTAUR LIFE SCIENCES, LLC, a Delaware limited liability company (the “Lender”).

WHEREAS, the Lender and the Borrower previously entered into a Note Purchase Agreement, dated as of January 9, 2009 (the “Purchase Agreement”), which provided for the issuance to the Lender of a Senior Secured Convertible
Promissory Note as set forth therein (the “January 2009 Note”), and the parties have executed certain documents and instruments in connection therewith;

WHEREAS, the Lender issued to the Borrower a Senior Secured Convertible Promissory Note on or about April 28, 2009 (the “April 2009 Note” and, together with the January 2009 Note, the “Existing Notes”);

WHEREAS, in connection with the April 2009 Note, the Borrower and the Lender entered into an Amendment to Transaction Documents dated as of April 28, 2009;

WHEREAS, the Guarantor guaranteed the obligations of the Borrower pursuant to the Guaranty, dated as of January 9, 2009, delivered to the Lender (the “Guaranty”);

WHEREAS, the Borrower’s obligations under the Existing Notes, and the Guarantor’s obligations under the Guaranty, are secured pursuant to the Security Agreement (the “Security Agreement”), dated as of January
9, 2009, among the parties hereto, and the Patent, Trademark and Copyright Security Agreement (the “IP Security Agreement”), dated January 9, 2009, among the parties hereto; and

WHEREAS, the Borrower has requested that the Lender extend additional credit in the form of an additional Senior Secured Convertible Promissory Note, in the principal amount of $202,500 (the “New Note”), in substantially the form attached hereto.

 

NOW, THEREFORE, in consideration of the foregoing and for the covenants contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:

 

 

 

 

 

 

 

SECTION ONE

DEFINITIONS; REPRESENTATIONS

 

Section 1.1          Terms Defined.  Unless otherwise defined herein, capitalized terms used herein shall have the meanings given to such terms in the Purchase
Agreement.

 

Section 1.2          Representations and Warranties of Borrower.    The Borrower and the Guarantor  represent and warrant to the Lender as follows:

(a)           Except as otherwise set forth herein or in the Schedules and Exhibits hereto, the representations and warranties of the Borrower and the Guarantor made in the Transaction Documents remain true, complete and accurate in all
material respects, and the covenants of the Borrower and the Guarantor are hereby reaffirmed, as of the date hereof.

(b)           The Borrower and the Guarantor has each performed, in all material respects, all obligations to be performed by it to date under the Transaction Documents and no default or Event of Default exists thereunder or an event
that with the passage of time or giving of notice or both, would constitute a default or an Event of Default.

(c)           Each of the Borrower and the Guarantor is a corporation duly organized, qualified, and existing in good standing under the laws of the State of Delaware and has full power and authority to consummate the transactions contemplated
hereby.  The Borrower and the Guarantor are each duly qualified to do business in all states and other jurisdictions in which the character of the property owned by it or the nature of its activities causes such qualification to be necessary.

(d)           The execution, delivery and performance of this Amendment has been duly authorized by all necessary corporate actions of each of the Borrower and the Guarantor, are within the corporate power of Borrower and the Guarantor
and are not in contravention of law, the Borrower’s or the Guarantor’s Articles of Incorporation, By-laws or the terms of any other documents, agreements or undertakings to which the Borrower or the Guarantor is a party or by which the Borrower or the Guarantor is bound.  No approval of any person, corporation, governmental body or other entity is a prerequisite to the execution, delivery and performance by the Borrower and the Guarantor of this Amendment to ensure the validity or enforceability
hereof.

(e)           This Amendment will constitute the legally binding obligation of Borrower and the Guarantor, enforceable in accordance with its terms, subject to the effect of applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws now existing or hereafter
enacted relating to or affecting the enforcement of creditors’ rights generally, and as enforceability may be subject to limitations based on general principles of equity (regardless of whether such enforceability is considered a proceeding in equity or at law).

SECTION TWO

AMENDMENTS

 

The Lender, the Borrower and the Guarantor have agreed to amend certain provisions of the Purchase Agreement  and the other Transaction Documents as set forth herein.

 

Section 2.1          References in Purchase Agreement.     The parties hereto agree that (i) the term “Notes” in the Purchase Agreement shall
be deemed to include within its meaning the New Note, (ii) the term “Conversion Shares” in the Purchase Agreement shall be deemed to include within its meaning the shares of Common Stock issuable upon conversion of the New Note, and (iii) the term “Transaction Documents” in the Purchase Agreement shall be deemed to include within its meaning the New Note.

Section 2.2          References in the Existing Note.    The parties hereto agree that all references to the “Other Note” in the Existing Notes
shall mean and include the New Note.

Section 2.3          The Guaranty.   The Guarantor hereby acknowledges and agrees that the “Obligations”, as defined in the Guaranty, include all obligations
of the Borrower under the New Note.

Section 2.4          Security Documents.   The Borrower and the Guarantor intend that the obligations under the New Note be secured by the collateral securing
the obligations under the Existing Notes, including pursuant to the Security Agreement and the IP Security Agreement.  In connection therewith, the parties hereto agree that (i) the term “Notes” in the Security Agreement shall be deemed to include within its meaning the New Note, (ii) the term “Obligations” in the Security Agreement shall be deemed to include within its meaning all obligations of the Borrower under the New Note and the Guarantor under the Guaranty (as amended
hereby) and (iii) the term “Obligations” in the IP Security Agreement shall be deemed to include within its meaning all obligations of the Borrower under the New Note and the Guarantor under the Guaranty.

SECTION THREE

CLOSING CONDITIONS

 

Section 3.1          Closing Conditions.    The obligations of the Lender hereunder are subject to fulfillment of the following conditions precedent:

(A)           Amendment Documents.  The Borrower shall execute and deliver to the Lender this Amendment and all other Amendment Documents (as defined below) applicable
to it.

(B)           Corporation Resolutions.  The Lender shall have received a copy, certified by the Secretary of the Borrower and the Guarantor, of a resolution of
the Board of Directors of the Borrower and the Guarantor authorizing the execution, delivery and performance of this Amendment and each of the documents to be executed by the Borrower and the Guarantor in connection with this Amendment (the “Amendment Documents”), including the New Note.

(C)           Instruments.  All instruments and documents whose execution and delivery are required or contemplated by this Amendment and such other and further
instruments and documents as the Lender may reasonably require shall have been duly executed and delivered in form and in substance reasonably satisfactory to the Lender, including the New Note.

(D)           Closing Expenses.  The Borrower shall pay all closing expenses, including reasonable attorneys’ fees, filing fees and recording fees, reasonably
incurred by the Lender in connection with this Amendment and the other Amendment Documents.

Section 3.2          Funding.  Upon satisfaction of the conditions set forth in Section 3.1 above, the Lender shall purchase the New Note for the cash consideration of
$202,500.  The Closing hereunder shall take place at the offices of the Lender at 152 West 57th Street, New York, NY.

 

 

 

SECTION FOUR

MISCELLANEOUS

Section 4.1           Transaction Documents.  The Borrower shall deliver this Amendment, and all other Amendment
Documents to the Lender, and these documents shall be included in the term “Transaction Documents” in the Purchase Agreement.

Section 4.2           Future References.  All references to the Purchase Agreement and the other Transaction Documents shall hereinafter refer to such agreement
as amended hereby.

Section 4.3           Continuing Effect.  The provisions of the Transaction Documents, as modified herein, shall remain in full force and effect in accordance with
their terms and are hereby ratified and confirmed.  The Lender does not in any way waive the Borrower’s or the Guarantor’s obligations to comply with any of the provisions, covenants and terms of the Purchase Agreement and the other Transaction Documents, nor does the Lender waive any other right the Lender may have at law or in equity.

 

Section 4.4           Expenses.  Borrower agrees, regardless of whether or not the transactions contemplated hereby shall be consummated, to pay all reasonable expenses
incurred by the Lender incident to such transactions in the preparation of documentation relating thereto, including all fees and disbursements of the counsel to the Lender, for services to the Lender, which fees may be deducted from the purchase price of the New Note on closing hereunder.

 

Section 4.5            General.   Borrower and the Guarantor shall execute and deliver such additional documents and do such other acts as the Lender may
reasonably require to implement the intent of this Amendment fully.  This Amendment may be executed in several counterparts by the Borrowers and the Lender, each of which shall be deemed an original but all of which together shall constitute one and the same Amendment.  This Amendment shall be governed by the laws of the State of New York, without regards to the conflict of law provisions thereof.

 

 

 

 

 

 

IN WITNESS WHEREOF, the undersigned have caused this Second Amendment to the Transaction Documents to be executed as of the date first above written.

 

	 	
BORROWER:
	 
	 	 	 
	 	URIGEN PHARMACEUTICALS, INC.	 
	 	 	 
	 	 	 	 
	
 
	
By: 
	/s/  Martin E. Shmagin	 
	 	 	Name: Martin E. Shmagin	 
	 	 	Title: Chief Financial Closing	 
	 	 	 	 

 

 

                             

                                                            

                                                                                 

GUARANTOR:

URIGEN N.A., INC.

By:           /s/ William J. Garner, M.D.                                                            Name:
William J. Garner, M.D.

                                                                      Title:
Chief Executive Officer

LENDER:

	
  
	
PLATINUM-MONTAUR LIFE SCIENCES, LLC

By:           /s/                                                      

      Name:

      Title:

  

  

  

EXHIBITS/ATTACHMENTSUnassociated Document

Exhibit 10.2

 

THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER
OF AN OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF MAY BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.

URIGEN PHARMACEUTICALS, INC.

Senior Secured Convertible Promissory Note

due October 9, 2009

 

	 No. 3	 	 	 $202,500

 

Dated:  August 13, 2009

For value received, Urigen Pharmaceuticals, Inc., a Delaware corporation (the “Maker”), hereby promises to pay to the order of Platinum-Montaur Life Sciences, LLC (together with its successors, representatives, and permitted assigns, the “Holder”),
in accordance with the terms hereinafter provided, the principal amount of Two Hundred Two Thousand Five Hundred Dollars ($202,500), together with interest thereon.  Prior to the issuance of this Note, the Maker has issued senior secured convertible promissory notes (referred to herein collectively as the “Other Note”) to the Holder pursuant to the Purchase Agreement (as defined in Section 1.1 hereof).

 

All payments under or pursuant to this Note shall be made in United States Dollars in immediately available funds to the Holder at the address of the Holder first set forth above or at such other place as the Holder may designate from time to time in writing to the Maker or by wire transfer of funds to the Holder’s account, instructions
for which are attached hereto as Exhibit A. The outstanding principal balance of this Note shall be due and payable on October 9, 2009 (the “Maturity Date”) or at such earlier time as provided herein.

 

 

ARTICLE I

 

Section 1.1 Purchase Agreement.  This Note has been executed and delivered pursuant to the Note Purchase Agreement, dated as of January 9, 2009 (the “Purchase
Agreement”), by and among the Maker and the purchasers listed therein and the Second Amendment to Transaction Documents, dated August 13, 2009 (the “Amendment”).  Capitalized terms used and not otherwise defined herein shall have the meanings set forth for such terms in the Purchase Agreement.

 

 

 

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Section 1.2 ­Interest.  Beginning on the issuance date of this Note (the “Issuance Date”), the outstanding principal balance of this Note shall
bear interest, in arrears, at a rate per annum equal to ten percent (10%), payable quarterly on October 1, January 1, April 1 and July 1 of each year (each, an “Interest Payment Date”), commencing October 1, 2009, and on the Maturity Date. Interest shall be payable at the option of the Maker in (A) cash or (B) in registered shares of the Maker’s common stock, par value $0.001 per share (the “Common Stock”);  provided, however, (i) payment of interest in shares of Common
Stock may only occur if during the 20 Trading Days immediately prior to the applicable Interest Payment Date and through and including the date such shares of Common Stock are issued to the Holder all of the Equity Conditions, unless waived by the Holder in writing, have been met and the Maker shall have given the Holder notice in accordance with the notice requirements set forth below, and (ii) as to such Interest Payment Date, on or prior to such Interest Payment Date, the Maker shall have delivered to the
Holder’s account with The Depository Trust Company a number of shares of Common Stock to be applied against such interest payment equal to the quotient of (x) the applicable interest payment divided by (y) 90% of the average VWAP for the five (5) Trading Days immediately preceding the Interest Payment Date.  Interest shall be computed on the basis of a 360-day year of twelve (12) 30-day months, shall compound monthly and shall accrue commencing on the Issuance Date.  Furthermore, upon
the occurrence of an Event of Default (as defined in Section 2.1 hereof), the Maker will pay interest to the Holder, payable on demand, on the outstanding principal balance of and unpaid interest on the Note from the date of the Event of Default until such Event of Default is cured at the rate of the lesser of eighteen percent (18%) and the maximum applicable legal rate per annum.   Notwithstanding the above, the Maker may not issue a number of shares of Common Stock in excess of the Maximum Monthly
Interest Share Amount toward the payment of Interest, as to all outstanding Series A Notes and Series B Notes, in the aggregate, during any rolling twenty (20) Trading Day period. For purposes hereof, “Maximum Monthly Interest Share Amount” means 20% of the aggregate dollar trading volume (as reported on Bloomberg) of the Common Stock on the principal Trading Market over the twenty (20) consecutive Trading Day period immediately prior to the applicable Interest Payment Date.

 

Section 1.3 Payment of Principal; Prepayment.   The Principal Amount hereof shall be paid in full on the Maturity Date or, if earlier, upon acceleration of
this Note in accordance with the terms hereof. Any amount of principal repaid hereunder may not be reborrowed.  The Maker may prepay any portion of the principal amount of this Note without the prior written consent of the Holder by delivering Holder notice thereof at least 10 days prior to the date of prepayment; provided, that, the Maker shall be obligated to honor all conversion requests delivered by the Holder during such 10 day period.

 

Section 1.4 Security Agreement.  The obligations of the Maker hereunder are secured by a continuing security interest in certain assets of the Maker and its subsidiaries
(the “Guarantors”) pursuant to the terms of a Security Agreement dated as of January 9, 2009 by and among the Maker and the Maker’s subsidiaries, on the one hand, and the Holder, on the other hand.  Reference is made to the Purchase Agreement and the Amendment for further provisions relating to the collateral pledged to secure this Note.

 

Section 1.5 Payment on Non-Business Days.  Whenever any payment to be made shall be due on a Saturday, Sunday or a public holiday under the laws of the State of
New York, such payment may be due on the next succeeding business day and such next succeeding day shall be included in the calculation of the amount of accrued interest payable on such date.

 

 

 

 

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Section 1.6 Transfer.  This Note may be transferred or sold, subject to the provisions of Section 5.8 of this Note, or pledged, hypothecated or otherwise granted
as security by the Holder.

 

Section 1.7 Replacement.  Upon receipt of a duly executed, notarized and unsecured written statement from the Holder with respect to the loss, theft or destruction
of this Note (or any replacement hereof) and a standard indemnity, or, in the case of a mutilation of this Note, upon surrender and cancellation of such Note, the Maker shall issue a new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated Note.

 

Section 1.8 Use of Proceeds.  The proceeds from the issuance of the Note shall be used by the Maker to pay premiums for directors and officers liability insurance
and for general working capital.

 

 

ARTICLE II

 

 

EVENTS OF DEFAULT;  REMEDIES

 

Section 2.1 ­Events of Default.  The occurrence of any of the following events shall be an “Event
of Default” under this Note:

 

(a) any default in the payment of (1) the principal amount hereunder when due, or (2) interest on, or liquidated damages in respect of, this Note, as and when the same shall become due and payable (whether on the Maturity Date or by acceleration
or otherwise); or

 

(b) the Maker shall fail to observe or perform any other covenant or agreement contained in this Note or the Other Note which failure is not cured, if possible to cure, within 3 business days after the occurrence thereof; or

 

(c) the suspension from listing, without subsequent listing on any one of, or the failure of the Common Stock to be listed on at least one of the OTC Bulletin Board, the American Stock Exchange, the Nasdaq Capital Markets, the Nasdaq
Global Market, the Nasdaq Global Select Market or The New York Stock Exchange, Inc. for a period of five (5) consecutive Trading Days; or

 

(d) the Maker’s notice to the Holder, including by way of public announcement, at any time, of its inability to comply (including for any of the reasons described in Section 3.7(a) hereof) or its intention not to comply with proper
requests for conversion of this Note into shares of Common Stock; or

 

(e) the Maker shall fail to (i) timely deliver the shares of Common Stock upon conversion of the Note or any interest accrued and unpaid, or (ii) make the payment of any fees and/or liquidated damages under this Note, the Purchase Agreement
or the other Transaction Documents, which failure is not remedied within three (3) business days after the occurrence thereof; or

 

(f) [reserved]; or

 

(g) default shall be made in the performance or observance of (i) any covenant, condition or agreement contained in this Note and such default is not fully cured within three (3) business days after the occurrence thereof or (ii) any
material covenant, condition or agreement contained in the Purchase Agreement, the Other Note or any other Transaction Document (including, without limitation, any use of the proceeds of this Note and the Other Note other than as permitted in the Purchase Agreement) that is not covered by any other provisions of this Section 2.1 and such default is not fully cured within three (3) business days after the Maker receives notice from the Holder of the occurrence thereof;  or

 

(h) any material representation or warranty made by the Maker or Guarantor herein or in the Purchase Agreement, the Other Note or any other Transaction Document shall prove to have been false or incorrect or breached in a material respect
on the date as of which made; or

 

(i) the Maker or any Guarantor shall (A) default in any payment of any amount or amounts of principal of or interest on any Indebtedness (other than the Indebtedness hereunder) the aggregate principal amount of which Indebtedness is in
excess of $25,000 or (B) default in the observance or performance of any other agreement or condition relating to any Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders or beneficiary or beneficiaries of such Indebtedness to cause with the giving of
notice if required, such Indebtedness to become due prior to its stated maturity; or

 

(j) the Maker or any Guarantor shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or assets, (ii)
make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors’ rights generally, (v) acquiesce in writing to any petition filed against it in an involuntary case under United
States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic), (vi) issue a notice of bankruptcy or winding down of its operations or issue a press release regarding same, or (vii) take any action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing; or

 

 

 

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(k) a proceeding or case shall be commenced in respect of the Maker or any Guarantor, without its application or consent, in any court of competent jurisdiction, seeking (i) the liquidation, reorganization, moratorium, dissolution, winding
up, or composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any substantial part of its assets in connection with the liquidation or dissolution of the Maker or any Guarantor or (iii) similar relief in respect of it under any law providing for the relief of debtors, and such proceeding or case described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period of thirty (30) days or any
order for relief shall be entered in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic) against the Maker or any Guarantor or action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing shall be taken with respect to the Maker or any Guarantor and shall continue undismissed, or unstayed and in effect for a period of sixty (60) days; or

 

(l) the failure of the Maker to instruct its transfer agent to remove any legends from shares of Common Stock eligible to be sold under Rule 144 of the Securities Act and issue such unlegended certificates to the Holder within three (3)
business days of the Holder’s request so long as the Holder has provided reasonable assurances to the Maker that such shares of Common Stock can be sold pursuant to Rule 144; or

 

(m) the occurrence of any Event of Default under the Other Note.

 

Section 2.2 ­Remedies Upon An Event of Default.  If an Event of Default shall have occurred and shall be continuing, the Holder of this Note may at any time
at its option declare the entire unpaid principal balance of this Note, together with all interest accrued hereon, due and payable, and thereupon, the same shall be accelerated and so due and payable, without presentment, demand, protest, or notice, all of which are hereby expressly unconditionally and irrevocably waived by the Maker; provided, however, that upon the occurrence of
an Event of Default described (i) in Sections 2.1(j) or (k) above, the outstanding principal balance shall become immediately due and payable and (ii) in Sections 2.1(b)-(i) and (l) –(m) above, the Holder, in its sole and absolute discretion, may (a) demand the prepayment of this Note pursuant to Section 3.6(a) hereof (to the extent permitted by Section 3.6(a) hereof), (b) demand that the principal amount of this Note then outstanding and all accrued and unpaid interest thereon shall be converted into shares
of Common Stock at the Conversion Price per share on the Trading Day immediately preceding the date the Holder demands conversion pursuant to this clause, or (c) exercise or otherwise enforce any one or more of the Holder’s rights, powers, privileges, remedies and interests under this Note, the Purchase Agreement or applicable law.  No course of delay on the part of the Holder shall operate as a waiver thereof or otherwise prejudice the right of the Holder.  No remedy conferred hereby
shall be exclusive of any other remedy referred to herein or now or hereafter available at law, in equity, by statute or otherwise.

 

 

ARTICLE III

­CONVERSION; ANTIDILUTION; PREPAYMENT

 

Section 3.1 ­Conversion Option.  At any time and from time to time on or after the Issuance Date, this Note shall be convertible (in whole or in part), at
the option of the Holder (the “Conversion Option”), into such number of fully paid and non-assessable shares of Common Stock (the “Conversion Rate”) as is determined by dividing (x) that portion of the outstanding principal balance plus any accrued but unpaid interest under this Note as of such date that the Holder elects to convert by (y) the Conversion Price (as defined in Section 3.2 hereof) then in effect on the date on which the Holder faxes a notice of conversion (the “Conversion
Notice”), duly executed, to the Maker (facsimile number: 866-816-1107, Attn.: Martin E. Shmagin) (the “Voluntary Conversion Date” or “Conversion Date”), provided, however, that the Conversion Price shall be subject to adjustment as described in Section 3.5 below.  The Holder shall deliver this Note to the Maker at the address designated in the Purchase Agreement at such time that this Note is fully converted.  With respect to partial conversions of this Note,
the Maker shall keep written records of the amount of this Note converted as of each Conversion Date.

 

Section 3.2 Conversion Price.  The term “Conversion Price” shall mean $0.10, subject to adjustment under Section 3.5 hereof.

 

 

 

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Section 3.3  
	
Mechanics of Conversion.

 

(a) Not later than three (3) Trading Days after any Conversion Date, the Maker or its designated transfer agent, as applicable, shall issue and deliver to the Depository Trust Company (“DTC”)
account on the Holder’s behalf via the Deposit Withdrawal Agent Commission System (“DWAC”) as specified in the Conversion Notice, 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.  In the alternative, not later than three (3) Trading Days after any Conversion Date, the Maker shall deliver to the applicable Holder by express courier a certificate
or certificates which shall be free of restrictive legends and trading restrictions (other than those required by Section 5.1 of the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of this Note (the “Delivery Date”).  Notwithstanding the foregoing to the contrary, the Maker or its transfer agent shall only be obligated to issue and deliver the shares to the DTC on the
Holder’s behalf via DWAC (or certificates free of restrictive legends) if such conversion is in connection with a sale and the Holder has complied with the applicable prospectus delivery requirements (as evidenced by documentation furnished to and reasonably satisfactory to the Maker) or such shares may be sold pursuant to Rule 144 (without restriction as to volume).  If in the case of any Conversion Notice such certificate or certificates are not delivered to or as directed by the applicable
Holder by the Delivery Date, the Holder shall be entitled by written notice to the Maker at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Maker shall immediately return this Note tendered for conversion, whereupon the Maker and the Holder shall each be restored to their respective positions immediately prior to the delivery of such notice of revocation, except that any amounts described in Sections 3.3(b) and (c) shall be payable
through the date notice of rescission is given to the Maker.

 

(b) The Maker understands that a delay in the delivery of the shares of Common Stock upon conversion of this Note beyond the Delivery Date could result in economic loss to the Holder.  If the Maker fails to deliver to the Holder
such shares via DWAC (or, if applicable, certificates) by the Delivery Date, the Maker shall pay to such Holder, in cash, an amount per Trading Day for each Trading Day until such shares are delivered via DWAC or certificates are delivered (if applicable), together with interest on such amount at a rate of 10% per annum, accruing until such amount and any accrued interest thereon is paid in full, equal to the greater of (A) (i) 1% of the aggregate principal amount of the Notes requested to be converted for the
first five (5) Trading Days after the Delivery Date and (ii) 2% of the aggregate principal amount of the Notes requested to be converted for each Trading Day thereafter and (B) $2,000 per day (which amount shall be paid as liquidated damages and not as a penalty).  Nothing herein shall limit a Holder’s right to pursue actual damages for the Maker’s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall
have the right to pursue all remedies available to it at law or in equity (including, without limitation, a decree of specific performance and/or injunctive relief).  Notwithstanding anything to the contrary contained herein, the Holder shall be entitled to withdraw a Conversion Notice, and upon such withdrawal the Maker shall only be obligated to pay the liquidated damages accrued in accordance with this Section 3.3(b) through the date the Conversion Notice is withdrawn.

 

 

 

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(c) In addition to any other rights available to the Holder, if the Maker fails to cause its transfer agent to transmit via DWAC or transmit to the Holder a certificate or certificates representing the shares of Common Stock issuable
upon conversion of this Note on or before the Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the shares of Common Stock issuable upon conversion of this Note which the Holder anticipated receiving upon such conversion (a “Buy-In”), then the Maker shall (1) pay in cash to the
Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of shares of Common Stock issuable upon conversion of this Note that the Maker was required to deliver to the Holder in connection with the conversion at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder,
either reinstate the portion of the Note and equivalent number of shares of Common Stock for which such conversion was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Maker timely complied with its conversion and delivery obligations hereunder.  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Common Stock with an aggregate sale
price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Maker shall be required to pay the Holder $1,000. The Holder shall provide the Maker written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Maker.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Maker’s failure to timely deliver certificates representing shares of Common Stock upon conversion of this Note as required pursuant to the terms hereof.

 

	
Section 3.4  
	
Ownership Cap and Certain Conversion Restrictions.

 

(a) Notwithstanding anything to the contrary set forth in this Note, at no time may all or a portion of this Note be converted if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated
with all other shares of Common Stock owned by the Holder at such time, the number of shares of Common Stock which would result in the Holder beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules thereunder) more than 4.99% of all of the Common Stock outstanding at such time; provided, however, that upon the Holder providing the Maker
with sixty-one (61) days notice (pursuant to Section 4.1 hereof) (the “Waiver Notice”) that the Holder would like to waive this Section 3.4(a) with regard to any or all shares of Common Stock issuable upon conversion of this Note, this Section 3.4(a) will be of no force or effect with regard to all or a portion of the Note referenced in the Waiver Notice.

 

(b) Notwithstanding anything to the contrary set forth in this Note, at no time may all or a portion of this Note be converted if the number of shares of Common Stock to be issued pursuant to such conversion, when aggregated with all
other shares of Common Stock owned by the Holder at such time, would result in the Holder beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules thereunder) in excess of 9.99% of the then issued and outstanding shares of Common Stock outstanding at such time.  The provisions of this Section 3.4(b) may not be amended or waived by the Holder or the Maker.

 

Section 3.5 Adjustment of Conversion Price.

 

(a) Until the Note has been paid in full or converted in full, the Conversion Price shall be subject to adjustment from time to time as follows (but shall not be increased, other than pursuant to Section 3.5(a)(i) hereof):

 

(i) Adjustments for Stock Splits and Combinations.  If the Maker shall at any time or from time to time after the Issuance Date, effect a stock split of the outstanding
Common Stock, the applicable Conversion Price in effect immediately prior to the stock split shall be proportionately decreased.  If the Maker shall at any time or from time to time after the Issuance Date, combine the outstanding shares of Common Stock, the applicable Conversion Price in effect immediately prior to the combination shall be proportionately increased.  Any adjustments under this Section 3.5(a)(i) shall be effective at the close of business on the date the stock split or combination
occurs.

 

(ii)           Adjustments for Certain Dividends and Distributions.  If the Maker shall at any time or from time to time after the Issuance Date, make or issue or set a record date for the determination of
holders of Common Stock entitled to receive a dividend or other distribution payable in shares of Common Stock, then, and in each event, the applicable Conversion Price in effect immediately prior to such event shall be decreased as of the time of such issuance or, in the event such record date shall have been fixed, as of the close of business on such record date, by multiplying, the applicable Conversion Price then in effect by a fraction:

 

(1)           the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date; and

 

(2)           the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend
or distribution.

 

 

 

6

 

 

 

(iii)           Adjustment for Other Dividends and Distributions.  If the Maker shall at any time or from time to time after the Issuance Date, make or issue or set a record date for the determination of holders
of Common Stock entitled to receive a dividend or other distribution payable in other than shares of Common Stock, then, and in each event, an appropriate revision to the applicable Conversion Price shall be made and provision shall be made (by adjustments of the Conversion Price or otherwise) so that the holders of this Note shall receive upon conversions thereof, in addition to the number of shares of Common Stock receivable thereon, the number of securities of the Maker or other issuer (as applicable) which
they would have received had this Note been converted into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including the Conversion Date, retained such securities (together with any distributions payable thereon during such period), giving application to all adjustments called for during such period under this Section 3.5(a)(iii) with respect to the rights of the holders of this Note and the Other Note; provided, however,
that if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions.

 

(iv)           Adjustments for Reclassification, Exchange or Substitution.  If the Common Stock issuable upon conversion of this Note at any time or from time to time after the Issuance Date shall be changed
to the same or different number of shares of any class or classes of stock, whether by reclassification, exchange, substitution or otherwise (other than by way of a stock split or combination of shares or stock dividends provided for in Sections 3.5(a)(i), (ii) and (iii), or a reorganization, merger, consolidation, or sale of assets provided for in Section 3.5(a)(v)), then, and in each event, an appropriate revision to the Conversion Price shall be made and provisions shall be made (by adjustments of the Conversion
Price or otherwise) so that the Holder shall have the right thereafter to convert this Note into the kind and amount of shares of stock and other securities receivable upon reclassification, exchange, substitution or other change, by holders of the number of shares of Common Stock into which such Note might have been converted immediately prior to such reclassification, exchange, substitution or other change, all subject to further adjustment as provided herein.

 

(v)           Adjustments for Reorganization, Merger, Consolidation or Sales of Assets.  If at any time or from time to time after the Issuance
Date there shall be a capital reorganization of the Maker (other than by way of a stock split or combination of shares or stock dividends or distributions provided for in Section 3.5(a)(i), (ii) and (iii), or a reclassification, exchange or substitution of shares provided for in Section 3.5(a)(iv)), or a merger or consolidation of the Maker with or into another Person where the holders of outstanding voting securities prior to such merger or consolidation do not own over fifty percent (50%) of the outstanding
voting securities of the merged or consolidated entity, immediately after such merger or consolidation, or the sale of all or substantially all of the Maker’s properties or assets to any other Person (an “Organic Change”), then as a part of such Organic Change, (A) if the surviving entity in any such Organic Change is a public company that is registered pursuant to the Securities Exchange Act of 1934, as amended, and its common
stock is listed or quoted on a national exchange or the OTC Bulletin Board, an appropriate revision to the Conversion Price shall be made and provision shall be made (by adjustments of the Conversion Price or otherwise) so that the Holder shall have the right thereafter to convert such Note into the kind and amount of shares of stock and other securities or property of the Maker or any successor corporation resulting from Organic Change, and (B) if the surviving entity in any such Organic Change is not a public
company that is registered pursuant to the Securities Exchange Act of 1934, as amended, or its common stock is not listed or quoted on a national exchange or the OTC Bulletin Board, the Holder shall have the right to demand prepayment pursuant to Section 3.6(b) hereof.  In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 3.5(a)(v) with respect to the rights of the Holder after the Organic Change to the end that the provisions of this Section 3.5(a)(v)
(including any adjustment in the applicable Conversion Price then in effect and the number of shares of stock or other securities deliverable upon conversion of this Note and the Other Note) shall be applied after that event in as nearly an equivalent manner as may be practicable.

 

(vi)           Adjustments for Issuance of Additional Shares of Common Stock. In the event the Maker, shall, at any time, from time to time, issue or sell any additional shares of common stock (otherwise than as provided  in
the foregoing subsections (i) through (v) of this Section 3.5(a) or pursuant to Common Stock Equivalents (hereafter defined) granted or issued prior to the Issuance Date) (“Additional Shares of Common Stock”), at a price per share less than the Conversion Price then in effect or without consideration, then the Conversion Price upon each such issuance shall be reduced to a price equal to the consideration per share paid for such Additional
Shares of Common Stock.

 

 

 

7

 

 

 

(vii)           Issuance of Common Stock Equivalents.  The provisions of this Section 3.5(a)(vii) shall apply if (a) the Maker, at any time after the Issuance Date, shall issue any securities convertible into
or exchangeable for, directly or indirectly, Common Stock (“Convertible Securities”), other than the Notes, or (b) any rights or warrants or options to purchase any such Common Stock or Convertible Securities (collectively, the “Common Stock Equivalents”) shall be issued or sold.  If the price per share for which Additional Shares of Common Stock may
be issuable pursuant to any such Common Stock Equivalent shall be less than the applicable Conversion Price then in effect, or if, after any such issuance of Common Stock Equivalents, the price per share for which Additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended shall be less than the applicable Conversion Price in effect at the time of such amendment or adjustment, then the applicable Conversion Price upon each such issuance or amendment shall
be adjusted as provided in the first sentence of subsection (vi) of this Section 3.5(a).

 

(viii)           Consideration for Stock.  In case any shares of Common Stock or any Common Stock Equivalents shall be issued or sold:

 

(1)           in connection with any merger or consolidation in which the Maker is the surviving corporation (other than any consolidation or merger in which the previously outstanding shares of Common Stock of the Maker shall be changed to or exchanged for the stock or other securities
of another corporation), the amount of consideration therefor shall be, deemed to be the fair value, as determined reasonably and in good faith by the Board of Directors of the Maker, of such portion of the assets and business of the nonsurviving corporation as such Board may determine to be attributable to such shares of Common Stock, Convertible Securities, rights or warrants or options, as the case may be; or

 

(2)           in the event of any consolidation or merger of the Maker in which the Maker is not the surviving corporation or in which the previously outstanding shares of Common Stock of the Maker shall be changed into or exchanged for the stock or other securities of another corporation,
or in the event of any sale of all or substantially all of the assets of the Maker for stock or other securities of any corporation, the Maker shall be deemed to have issued a number of shares of its Common Stock for stock or securities or other property of the other corporation computed on the basis of the actual exchange ratio on which the transaction was predicated, and for a consideration equal to the fair market value on the date of such transaction of all such stock or securities or other property of the
other corporation.  If any such calculation results in adjustment of the applicable Conversion Price, or the number of shares of Common Stock issuable upon conversion of the Notes, the determination of the applicable Conversion Price or the number of shares of Common Stock issuable upon conversion of the Notes immediately prior to such merger, consolidation or sale, shall be made after giving effect to such adjustment of the number of shares of Common Stock issuable upon conversion of the Notes.  In
the event Common Stock is issued with other shares or securities or other assets of the Maker for consideration which covers both, the consideration computed as provided in this Section 3.5(a)(viii) shall be allocated among such securities and assets as determined in good faith by the Board of Directors of the Maker; or

 

(3)           for services, other than as permitted pursuant to Section 3.5(c) hereof, the amount of consideration therefor shall be deemed to be the par value of the Common Stock.

(b) Record Date.  In case the Maker shall take record of the holders of its Common Stock for the purpose of entitling them to subscribe for
or purchase Common Stock or Convertible Securities, then the date of the issue or sale of the shares of Common Stock shall be deemed to be such record date.

 

 

 

8

 

 

 

(c) Certain Issues Excepted.  Anything herein to the contrary notwithstanding, the Maker shall not be required to make any adjustment to the Conversion Price in
connection with the following: (a) issuances of shares of Common Stock or options to employees, officers or directors of the Maker pursuant to any stock or option plan existing on the date hereof (and not amended to increase the shares available for grant or issuance thereunder) if such grants were duly approved by a majority of the non-employee members of the Board of Directors of the Maker or a majority of the members of a committee of non-employee directors established for such purpose and, in the case of
any options, the exercise price of such options are in excess of the closing price of the Common Stock on the date of grant; (b) issuances of securities upon the exercise or exchange of or conversion of any securities issued hereunder and/or securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the Issuance Date, provided that such securities have not been amended since the Issuance Date to increase the number of such securities or to decrease the exercise,
exchange or conversion price of any such securities, and (c) securities issued pursuant to acquisitions or strategic transactions, provided any such issuance shall only be to a person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Maker and in which the Maker receives benefits in addition to the investment of funds, but shall not include a transaction in which the Maker is issuing securities primarily for the purpose of raising capital or
to an entity whose primary business is investing in securities.

(d)           No Impairment.  The Maker shall not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation,
merger, 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 to be observed or performed hereunder by the Maker, but will at all times in good faith, assist in the carrying out of all the provisions of this Section 3.5 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the Holder against impairment.  In the event a Holder shall elect to convert
any Notes as provided herein, the Maker cannot refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged in any violation of law, violation of an agreement to which such Holder is a party or for any reason whatsoever, unless, an injunction from a court, or notice, restraining and or adjoining conversion of all or of said Notes shall have issued and the Maker posts a surety bond for the benefit of such Holder in an amount equal to one hundred thirty
percent (130%) of the amount of the Notes the Holder has elected to convert, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Holder (as liquidated damages) in the event it obtains judgment.

(e)           Certificates as to Adjustments.  Upon occurrence of each adjustment or readjustment of the Conversion Price or number of shares of Common Stock issuable upon conversion of this Note pursuant to
this Section 3.5, the Maker at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to the Holder a certificate setting forth such adjustment and readjustment, showing in detail the facts upon which such adjustment or readjustment is based.  The Maker shall, upon written request of the Holder, at any time, furnish or cause to be furnished to the Holder a like certificate setting forth such adjustments and readjustments, the applicable Conversion
Price in effect at the time, and the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon the conversion of this Note.  Notwithstanding the foregoing, the Maker shall not be obligated to deliver a certificate unless such certificate would reflect an increase or decrease of at least one percent (1%) of such adjusted amount.

 

(f)           Issue Taxes.  The Maker shall pay any and all issue and other taxes, excluding federal, state or local income taxes, that may be payable in respect of any issue or delivery of shares of Common
Stock on conversion of this Note pursuant thereto; provided, however, that the Maker shall not be obligated to pay any transfer taxes resulting from any transfer requested by the Holder in connection with any such conversion.

 

(g)           Fractional Shares.  No fractional shares of Common Stock shall be issued upon conversion of this Note.  In lieu of any fractional shares to which the Holder would otherwise be entitled,
the Maker shall pay cash equal to the product of such fraction multiplied by the average of the Closing Bid Prices of the Common Stock for the five (5) consecutive Trading Days immediately preceding the Conversion Date.

 

(h)           Reservation of Common Stock.  The Maker shall at all times when this Note shall be outstanding, reserve and keep available out of its authorized but unissued Common Stock, such number of shares
of Common Stock as shall from time to time be sufficient to effect the conversion of this Note and all interest accrued thereon; provided that the number of shares of Common Stock so reserved shall at no time be less than one hundred twenty percent (120%) of the number of shares of Common Stock for which this Note and all interest accrued thereon are at any time convertible.  The Maker shall, from time to time in accordance with Delaware
law, increase the authorized number of shares of Common Stock if at any time the unissued number of authorized shares shall not be sufficient to satisfy the Maker’s obligations under this Section 3.5(h).

 

(i)           ­Regulatory Compliance.  If any shares of Common Stock to be reserved for the purpose of conversion of this Note or any interest accrued thereon require registration or listing with or approval
of any governmental authority, stock exchange or other regulatory body under any federal or state law or regulation or otherwise before such shares may be validly issued or delivered upon conversion, the Maker shall, at its sole cost and expense, in good faith and as expeditiously as possible, endeavor to secure such registration, listing or approval, as the case may be.

 

 

 

 

9

 

 

Section 3.6 Prepayment.

 

(a)           Prepayment Upon an Event of Default.  Notwithstanding anything to the contrary contained herein, upon the occurrence of an Event of Default described in Sections 2.1(b)-(i) or (l)-(m) hereof, the
Holder shall have the right, at such Holder’s option, to require the Maker to prepay in cash all or a portion of this Note at a price equal to one hundred and ten percent (110%) of the aggregate principal amount of this Note plus all accrued and unpaid interest applicable at the time of such request.  Nothing in this Section 3.6(a) shall limit the Holder’s rights under Section 2.2 hereof.

 

(b)           Prepayment Option Upon Major Transaction.  In addition to all other rights of the Holder contained herein, simultaneous with the occurrence of a Major Transaction (as defined below), the Holder
shall have the right, at the Holder’s option, to require the Maker to prepay all or a portion of the Holder’s Notes in cash at a price equal to the sum of (i) the greater of (A) one hundred and ten percent (110%) of the aggregate principal amount of this Note plus all accrued and unpaid interest and (B) in the event at such time the Holder is unable to obtain the benefit of its conversion rights through the conversion of this Note and resale of the shares of Common Stock issuable upon conversion hereof
in accordance with the terms of this Note and the other Transaction Documents or the Equity Conditions are not satisfied with respect to all such shares of Common Stock, the aggregate principal amount of this Note plus all accrued but unpaid interest hereon, divided by the Conversion Price on (x) the date the Prepayment Price (as defined below) is demanded or otherwise due or (y) the date the Major Transaction Prepayment Price is paid in full, whichever is less, multiplied by the VWAP on (x) the date the Major
Transaction Prepayment Price is demanded or otherwise due, and (y) the date the Major Transaction Prepayment Price is paid in full, whichever is greater, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of this Note and the other Transaction Documents (the “Major Transaction Prepayment Price”).

 

(c)           Prepayment Option Upon Triggering Event.  In addition to all other rights of the Holder contained herein, after a Triggering Event (as defined below), the Holder shall have the right, at the Holder’s
option, to require the Maker to prepay all or a portion of this Note in cash at a price equal to the sum of (i) the greater of (A) one hundred and ten percent (110%) of the aggregate principal amount of this Note plus all accrued and unpaid interest and (B) the aggregate principal amount of this Note plus all accrued but unpaid interest hereon, divided by the Conversion Price on (x) the date the Prepayment Price (as defined below) is demanded or otherwise due or (y) the date the Prepayment Price is paid in full,
whichever is less, multiplied by the VWAP on (x) the date the Prepayment Price is demanded or otherwise due, and (y) the date the Prepayment Price is paid in full, whichever is greater, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of this Note and the other Transaction Documents (the “Triggering Event Prepayment Price,” and, collectively with the Major Transaction Prepayment Price, the “Prepayment
Price”).

 

(d)           “Major Transaction.”  A “Major Transaction” shall be deemed to have occurred at such time as any of the
following events:

 

(i)           the consolidation, merger or other business combination of the Maker with or into another Person (other than (A) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Maker or (B) a consolidation, merger or
other business combination in which the Maker is the surviving entity and the holders of the Maker’s voting power immediately prior to the transaction continue after the transaction to hold, 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).

 

(ii)           the sale or transfer of more than fifty percent (50%) of the Maker’s assets (based on the fair market value as determined in good faith by the Maker’s Board of Directors) other than inventory in the ordinary course of business in one or a related series
of transactions; or

 

(iii)           closing of a purchase, tender or exchange offer made to the holders of more than fifty percent (50%) of the outstanding shares of Common Stock in which more than fifty percent (50%) of the outstanding shares of Common Stock were tendered and accepted.

 

	
(e)  
	
[Reserved]

(f) “Triggering Event.” A “Triggering Event” shall be deemed to have occurred at such time as any of the following events:

 

(i) the suspension from listing, without subsequent listing on any one of, or the failure of the Common Stock to be listed on at least one of the OTC Bulletin Board, the American Stock Exchange, the Nasdaq Capital Markets, the Nasdaq
Global Market, the Nasdaq Global Select Market or The New York Stock Exchange, Inc. for a period of five (5) consecutive Trading Days;

 

(ii) the Maker’s notice to any holder of the Notes, including by way of public announcement, at any time, of its inability to comply (including for any of the reasons described in Section 3.7) or its intention not to comply with
proper requests for conversion of any Notes into shares of Common Stock; or

 

(iii) the Maker’s failure to comply with a Conversion Notice tendered in accordance with the provisions of this Note within ten (10) business days after the receipt by the Maker of the Conversion Notice; or

 

 

 

 

10

 

 

(iv) the Maker deregisters its shares of Common Stock and as a result such shares of Common Stock are no longer publicly traded; or

 

(v) the Maker consummates a “going private” transaction and as a result the Common Stock is no longer registered under Sections 12(b) or 12(g) of the Exchange Act; or

 

(vi) the Maker defaults in the payment of (1) the principal amount hereunder when due, or (2) interest on, or liquidated damages in respect of, this Note, as and when the same shall become due and payable (whether on the Maturity Date
or by acceleration or otherwise); or

 

(vii) the Maker shall fail to comply with Section 5.12(c) of this Note.

 

(g)           [Reserved]

(h)           Mechanics of Prepayment at Option of Holder Upon Major Transaction.  No sooner than fifteen (15) days nor later than ten (10) days prior to the consummation of a Major Transaction, but not prior
to the public announcement of such Major Transaction, the Maker shall deliver written notice thereof via facsimile and overnight courier (“Notice of Major Transaction”) to the Holder of this Note.  At any time after receipt of a Notice of Major Transaction (or, in the event a Notice of Major Transaction is not delivered at least ten (10) days prior to a Major Transaction, at any time within ten (10) days prior to a Major Transaction),
any holder of the Notes then outstanding may require the Maker to prepay, effective immediately prior to the consummation of such Major Transaction, all of the holder’s Notes then outstanding by delivering written notice thereof via facsimile and overnight courier (“Notice of Prepayment at Option of Holder Upon Major Transaction”) to the Maker, which Notice of Prepayment at Option of Holder Upon Major Transaction shall indicate
(i) the principal amount of the Notes that such holder is electing to have prepaid and (ii) the applicable Major Transaction Prepayment Price, as calculated pursuant to Section 3.6(b) above.

 

(i)           Mechanics of Prepayment at Option of Holder Upon Triggering Event.  Within one (1) business day after the occurrence of a Triggering Event, the Maker shall deliver written notice thereof via facsimile
and overnight courier (“Notice of Triggering Event”) to each holder of the Notes.  At any time after the earlier of a holder’s receipt of a Notice of Triggering Event and such holder becoming aware of a Triggering Event, any holder of this Note and the Other Note then outstanding may require the Maker to prepay all of the Notes on a pro rata basis by delivering written notice thereof via facsimile and overnight courier
(“Notice of Prepayment at Option of Holder Upon Triggering Event”) to the Maker, which Notice of Prepayment at Option of Holder Upon Triggering Event shall indicate (i) the amount of the Note that such holder is electing to have prepaid and (ii) the applicable Triggering Event Prepayment Price, as calculated pursuant to Section 3.6(c) above.  A holder shall only be permitted to require the Maker to prepay the Note pursuant
to Section 3.6 hereof for the greater of a period of ten (10) days after receipt by such holder of a Notice of Triggering Event or for so long as such Triggering Event is continuing.

 

(j)           Payment of Prepayment Price.  Upon the Maker’s receipt of a Notice(s) of Prepayment at Option of Holder Upon Triggering Event or a Notice(s) of Prepayment at Option of Holder Upon Major Transaction
from any holder of the Notes, the Maker shall immediately notify each holder of the Notes by facsimile of the Maker’s receipt of such Notice(s) of Prepayment at Option of Holder Upon Triggering Event or Notice(s) of Prepayment at Option of Holder Upon Major Transaction and each holder which has sent such a notice shall promptly submit to the Maker such holder’s certificates representing the Notes which such holder has elected to have prepaid.  The Maker shall deliver the applicable Triggering
Event Prepayment Price, in the case of a prepayment pursuant to Section 3.6(i), to such holder within five (5) business days after the Maker’s receipt of a Notice of Prepayment at Option of Holder Upon Triggering Event and, in the case of a prepayment pursuant to Section 3.6(h), the Maker shall deliver the applicable Major Transaction Prepayment Price immediately prior to the consummation of the Major Transaction; provided that a holder’s original Note shall have been so delivered to the Maker; provided
further that if the Maker is unable to prepay all of the Notes to be prepaid, the Maker shall prepay an amount from each holder of the Notes being prepaid equal to such holder’s pro-rata amount (based on the number of Notes and the Other Note held by such holder relative to the number of Notes and the Other Note outstanding) of all Notes being prepaid.  If the Maker shall fail to prepay all of the Notes submitted for prepayment (other than pursuant to a dispute as to the arithmetic calculation
of the Prepayment Price), in addition to any remedy such holder of the Notes may have under this Note and the Purchase Agreement, the applicable Prepayment Price payable in respect of such Notes not prepaid shall bear interest at the rate of two percent (2%) per month (prorated for partial months) until paid in full.  Until the Maker pays such unpaid applicable Prepayment Price in full to a holder of the Notes submitted for prepayment, such holder shall have the option (the “Void
Optional Prepayment Option”) to, in lieu of prepayment, require the Maker to promptly return to such holder(s) all of the Notes that were submitted for prepayment by such holder(s) under this Section 3.6 and for which the applicable Prepayment Price has not been paid, by sending written notice thereof to the Maker via facsimile (the “Void Optional Prepayment Notice”).  Upon the Maker’s receipt of such Void
Optional Prepayment Notice(s) and prior to payment of the full applicable Prepayment Price to such holder, (i) the Notice(s) of Prepayment at Option of Holder Upon Triggering Event or the Notice(s) of Prepayment at Option of Holder Upon Major Transaction, as the case may be, shall be null and void with respect to those Notes submitted for prepayment and for which the applicable Prepayment Price has not been paid, (ii) the Maker shall immediately return any Notes submitted to the Maker by each holder for prepayment
under this Section 3.6(j) and for which the applicable Prepayment Price has not been paid and (iii) the Conversion Price of such returned Notes shall be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the Void Optional Prepayment Notice(s) is delivered to the Maker and (B) the lowest Closing Bid Price during the period beginning on the date on which the Notice(s) of Prepayment of Option of Holder Upon Major Transaction or the Notice(s) of Prepayment at Option of Holder Upon
Triggering Event, as the case may be, is delivered to the Maker and ending on the date on which the Void Optional Prepayment Notice(s) is delivered to the Maker; provided that no adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect.  A holder’s delivery of a Void Optional Prepayment Notice and exercise of its rights following such notice shall not effect the Maker’s obligations to make any payments which have accrued prior to the
date of such notice.  Payments provided for in this Section 3.6 shall have priority to payments to other stockholders in connection with a Major Transaction.

 

 

 

11

 

 

 

Section 3.7 Inability to Fully Convert.

 

(a)           Holder’s Option if Maker Cannot Fully Convert.  If, upon the Maker’s receipt of a Conversion Notice, the Maker cannot issue shares of Common Stock for any reason, including, without
limitation, because the Maker (x) does not have a sufficient number of shares of Common Stock authorized and available, or (y) is otherwise prohibited by applicable law or by the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Maker or any of its securities from issuing all of the Common Stock which is to be issued to the Holder pursuant to a Conversion Notice, then the Maker shall issue as many shares of Common Stock as
it is able to issue in accordance with the Holder’s Conversion Notice and, with respect to the unconverted portion of this Note, the Holder, solely at Holder’s option, can elect to:

 

(i) If the Maker’s inability to honor any conversion fully is pursuant to Section 3.7(a)(x) above, require the Maker to prepay that portion of this Note for which the Maker is unable to issue Common Stock in accordance with the
Holder’s Conversion Notice (the “Mandatory Prepayment”) at a price per share equal to the Triggering Event Prepayment Price as of such Conversion Date (the “Mandatory Prepayment Price”);

 

(ii) if the Maker’s inability to fully convert is pursuant to Section 3.7(a)(y) above, require the Maker to issue restricted shares of Common Stock in accordance with such holder’s Conversion Notice;

 

(iii) void its Conversion Notice and retain or have returned, as the case may be, this Note that was to be converted pursuant to the Conversion Notice (provided that the Holder’s voiding its Conversion Notice shall not effect the
Maker’s obligations to make any payments which have accrued prior to the date of such notice);

 

(iv) exercise its Buy-In rights pursuant to and in accordance with the terms and provisions of Section 3.3(c) of this Note.

 

In the event a Holder shall elect to convert any portion of its Notes as provided herein, the Maker cannot refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged in any violation of law, violation of an agreement to which such Holder is a party or for any reason whatsoever,
unless, an injunction from a court, on notice, restraining and or adjoining conversion of all or of said Notes shall have been issued and the Maker posts a surety bond for the benefit of such Holder in an amount equal to 130% of the principal amount of the Notes the Holder has elected to convert, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Holder in the event it obtains judgment.

(b)           Mechanics of Fulfilling Holder’s Election.  The Maker shall immediately send via facsimile to the Holder, upon receipt of a facsimile copy of a Conversion Notice from the Holder which cannot
be fully satisfied as described in Section 3.7(a) above, a notice of the Maker’s inability to fully satisfy the Conversion Notice (the “Inability to Fully Convert Notice”).  Such Inability to Fully Convert Notice shall indicate (i) the reason why the Maker is unable to fully satisfy such holder’s Conversion Notice, (ii) the amount of this Note which cannot be converted and (iii) the applicable Mandatory Prepayment
Price.  The Holder shall notify the Maker of its election pursuant to Section 3.7(a) above by delivering written notice via facsimile to the Maker (“Notice in Response to Inability to Convert”).

 

(c)           Payment of Prepayment Price.  If the Holder shall elect to have its Notes prepaid pursuant to Section 3.7(a)(i) above, the Maker shall pay the Mandatory Prepayment Price to the Holder within thirty
(30) days of the Maker’s receipt of the Holder’s Notice in Response to Inability to Convert, provided that prior to the Maker’s receipt of the Holder’s Notice in Response to Inability to Convert the Maker has not delivered a notice to the Holder stating, to the satisfaction of the Holder, that the event or condition resulting in the Mandatory Prepayment has been cured and all Conversion Shares issuable to the Holder can and
will be delivered to the Holder in accordance with the terms of this Note.  If the Maker shall fail to pay the applicable Mandatory Prepayment Price to the Holder on the date that is one (1) business day following the Maker’s receipt of the Holder’s Notice in Response to Inability to Convert (other than pursuant to a dispute as to the determination of the arithmetic calculation of the Prepayment Price), in addition to any remedy the Holder may have under this Note and the Purchase Agreement,
such unpaid amount shall bear interest at the rate of two percent (2%) per month (prorated for partial months) until paid in full.  Until the full Mandatory Prepayment Price is paid in full to the Holder, the Holder may (i) void the Mandatory Prepayment with respect to that portion of the Note for which the full Mandatory Prepayment Price has not been paid, (ii) receive back such Note, and (iii) require that the Conversion Price of such returned Note be adjusted to the lesser of (A) the Conversion Price
as in effect on the date on which the Holder voided the Mandatory Prepayment and (B) the lowest Closing Bid Price during the period beginning on the Conversion Date and ending on the date the Holder voided the Mandatory Prepayment.

 

 

 

12

 

 

 

 

(d)           Pro-rata Conversion and Prepayment.  In the event the Maker receives a Conversion Notice from more than one holder of the Notes on the same day and the Maker can convert and prepay some, but not
all, of the Notes pursuant to this Section 3.7, the Maker shall convert and prepay from each holder of the Notes electing to have its Notes converted and prepaid at such time an amount equal to such holder’s pro-rata amount (based on the principal amount of the Notes held by such holder relative to the principal amount of the Notes and the Other Note outstanding) of all the Notes being converted and prepaid at such time.

 

Section 3.8 No Rights as Shareholder.  Nothing contained in this Note shall be construed as conferring upon the Holder, prior to the conversion of this Note, the
right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Maker or of any other matter, or any other rights as a shareholder of the Maker.

 

 

ARTICLE IV

 

COVENANTS

For so long as this Note is outstanding, without the prior written consent of the holders of at least a majority of the aggregate principal amount of the Notes and the Other Note (together, as one class):

Section 4.1 No Liens.  Other than Permitted Liens, the Maker shall not, and shall not permit the Guarantors to, enter into, create, incur, assume or suffer to
exist any liens, security interests, charges, claims or other encumbrances of any kind (collectively, “Liens”) on or with respect to any of its assets now owned or hereafter acquired or any interest therein or any income or profits therefrom.

 

Section 4.2 No Indebtedness.  Other than Indebtedness existing on the date hereof and disclosed in the Commission Documents and Permitted Subordinated Indebtedness,
the Maker shall not, and shall not permit any Guarantor to, enter into, create, incur, assume or suffer to exist any Indebtedness.

 

Section 4.3 Compliance with Transaction Documents.  The Maker shall, and shall cause the Guarantors to, comply with its obligations under this Note and the other
Transaction Documents.

 

Section 4.4 Compliance with Law.  The Maker shall, and shall cause each of the Guarantors to, comply with law and duly observe and conform in all material respects
to all valid requirements of governmental authorities relating to the conduct of its business or to its properties or assets.

 

Section 4.5 Transactions with Affiliates.  The Maker shall not, and shall not permit the Guarantors to, engage in any transactions with any officer, director,
employee or any Affiliate of the Maker, including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Maker, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $50,000, other than (i)
for payment of reasonable salary for services actually rendered, as approved by the Board of Directors of the Maker as fair in all respects to the Maker, and (ii) reimbursement for expenses incurred on behalf of the Maker.

 

Section 4.6 No Dividends.  the Maker shall not, and shall not permit any Guarantor to, (i) declare or pay any dividends or make any distributions to any holder(s)
of Common Stock or other equity security of the Maker or such Guarantors (other than dividend and distributions from a Guarantor to the Maker which are applied immediately to the repayment of this Note), (ii) purchase or otherwise acquire for value, directly or indirectly, any shares or other equity security of the Maker or any Guarantor, (iii) form, create or permit to exist any subsidiary (other than the Guarantors existing on the date hereof) or become a partner in any partnership or joint venture, or make
any acquisition of any interest in any Person or acquire substantially all of the assets of any Person, or (iv) transfer, assign, pledge, issue or otherwise permit any equity or other ownership interests in the Guarantors to be beneficially owned or held by any person other than the Maker.

 

Section 4.7 No Merger or Sale of Assets.  The Maker shall not, and shall not permit any Guarantor to, (i) merge or consolidate or sell or dispose of all its assets
or any substantial portion thereof or (ii) in any way or manner alter its organizational structure or effect a change of entity;

 

Section 4.8 Payment of Taxes, Etc.  The Maker shall, and shall cause each of the Guarantors to, promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or business of the Maker and the Guarantors, except for such failures to pay that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect; provided, however, that any such tax, assessment, charge or levy need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if
the Maker or such Guarantors shall have set aside on its books adequate reserves with respect thereto, and provided, further, that the Maker and such Guarantors will pay all such taxes, assessments, charges or levies forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefor.

 

 

 

13

 

 

 

Section 4.9 Corporate Existence.  The Maker shall, and shall cause each of the Guarantors to, maintain in full force and effect its corporate existence, rights
and franchises and all licenses and other rights to use property owned or possessed by it and reasonably deemed to be necessary to the conduct of its business.

 

Section 4.10 Investment Company Act.  The Maker shall conduct its businesses in a manner so that it will not become subject to the Investment Company Act of 1940,
as amended.

 

Section 4.11  Maintenance of Assets.  The Maker shall, and shall cause the Guarantors to, keep its properties in good repair, working order and condition,
reasonable wear and tear excepted, and from time to time make all necessary and proper repairs, renewals, replacements, additions and improvements thereto.

 

Section 4.12 Indebtedness to Affiliates.   The Maker shall not, and shall not permit any Guarantor to, make any payment on any indebtedness owed to officers,
directors or Affiliates, or any indebtedness described on Schedule 2.1(k) of the Purchase Agreement.

 

Section 4.13 Restriction on Dividends.  The Maker shall not, and shall not permit any Guarantor to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any encumbrance or restriction on the ability of any Guarantor to pay dividends or distributions to the Maker, pay any indebtedness owed to the Maker or transfer any properties or assets to the Maker.

 

Section 4.14 No Investments.  The Maker shall not, and shall not permit any Guarantor to, make or suffer to exist any Investments or commitments therefor, other
than Investments made in the ordinary course of business.

 

Section 4.15 No Lien on IP.  The Maker shall not, and the Maker shall not permit any Guarantor to, directly or indirectly, to encumber or allow any Liens on, any
of its copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, and the goodwill of the business
of the Maker and its Subsidiaries connected with and symbolized thereby, know-how, operating manuals, trade secret rights, rights to unpatented inventions, and any claims for damage by way of any past, present, or future infringement of any of the foregoing, other than Permitted Liens.

 

 

14

 

 

ARTICLE V

­MISCELLANEOUS

 

Section 5.1 ­Notices.  Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall
be effective (a) upon hand delivery, telecopy or facsimile at the address or number designated in the Purchase Agreement (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or
upon actual receipt of such mailing, whichever shall first occur.  The Maker will give written notice to the Holder at least ten (10) days prior to the date on which the Maker takes a record (x) with respect to any dividend or distribution upon the Common Stock, (y) with respect to any pro rata subscription offer to holders of Common Stock or (z) for determining rights to vote with respect to any Organic Change, dissolution, liquidation or winding-up and in no event shall such notice be provided to
such holder prior to such information being made known to the public.  The Maker will also give written notice to the Holder at least ten (10) days prior to the date on which any Organic Change, dissolution, liquidation or winding-up will take place and in no event shall such notice be provided to the Holder prior to such information being made known to the public. The Maker shall promptly notify the Holder of this Note of any notices sent or received, or any actions taken with respect to the Other
Note.

 

Section 5.2 Governing Law.  This Note shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to
any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction.  This Note shall not be interpreted or construed with any presumption against the party causing this Note to be drafted.  All payment obligations arising under this Note are subject to the express condition that at no time shall the Borrower be obligated or required to pay interest at a rate which could subject the Holder to either civil or criminal liability as a result
of being in excess of the maximum rate which the Borrower is permitted by law to contract or agree to pay. If by the terms of this Note, the Borrower is at any time required or obligated to pay interest at a rate in excess of such maximum rate, the applicable rate of interest shall be deemed to be immediately reduced to such maximum rate, and interest thus payable shall be computed at such maximum rate, and the portion of all prior interest payments in excess of such maximum rate shall be applied and shall be
deemed to have been payments in reduction of principal.

 

Section 5.3 ­Headings.  Article and section headings in this Note are included herein for purposes of convenience of reference only and shall not constitute
a part of this Note for any other purpose.

 

Section 5.4 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, at law or in equity (including, without limitation, a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit a holder’s right to pursue actual damages for any failure by the Maker 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 thereof and shall not, except as expressly provided herein, be subject to any other obligation of the Maker (or the performance thereof).  The Maker acknowledges that a breach by it of its obligations hereunder will cause irreparable and material harm to the Holder and that the remedy at law for any such breach may be inadequate. Therefore the Maker agrees that, in the event of any such breach or threatened
breach, the Holder shall be entitled, in addition to all other available rights and remedies, at law or in equity, to seek and obtain such equitable relief, including but not limited to an injunction restraining any such breach or threatened breach, without the necessity of showing economic loss and without any bond or other security being required.

 

 

 

15

 

 

 

Section 5.5 Enforcement Expenses.  The Maker agrees to pay all costs and expenses of enforcement of this Note, including, without limitation, reasonable attorneys’
fees and expenses.

 

Section 5.6 Binding Effect.   The obligations of the Maker and the Holder set forth herein shall be binding upon the successors and assigns of each such party,
whether or not such successors or assigns are permitted by the terms hereof.

 

Section 5.7 Amendments.  This Note may not be modified or amended in any manner except in writing executed by the Maker and the Holder.

 

Section 5.8 Compliance with Securities Laws.  The Holder of this Note acknowledges that this Note is being acquired solely for the Holder’s own account and
not as a nominee for any other party, and for investment, and that the Holder shall not offer, sell or otherwise dispose of this Note except in compliance with applicable securities laws.  This Note and any Note issued in substitution or replacement therefor shall be stamped or imprinted with a legend in substantially the following form:

 

“THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT
BY THE MAKER OF AN OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE MAY BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.”

Section 5.9 ­Consent to Jurisdiction.  Each of the Maker and the Holder (i) hereby irrevocably submits to the exclusive jurisdiction of the United States District
Court sitting in the Southern District of New York and the courts of the State of New York located in New York county for the purposes of any suit, action or proceeding arising out of or relating to this Note and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.  Each
of the Maker and the Holder consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under the Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing in this Section 5.9 shall affect or limit any right to serve process in any other manner permitted by law.  Each of the Maker and the Holder hereby agree that the prevailing
party in any suit, action or proceeding arising out of or relating to this Note shall be entitled to reimbursement for reasonable legal fees from the non-prevailing party.

 

Section 5.10 ­Parties in Interest.  This Note shall be binding upon, inure to the benefit of and be enforceable by the Maker, the Holder and their respective
successors and permitted assigns.

 

Section 5.11 ­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.

 

Section 5.12 ­Maker Waivers; Dispute Resolution.  Except as otherwise specifically provided herein, the Maker and all others that may become liable for all
or any part of the obligations evidenced by this Note, hereby waive presentment, demand, notice of nonpayment, protest and all other demands’ and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and do hereby consent to any number of renewals of extensions of the time or payment hereof and agree that any such renewals or extensions may be made without notice to any such persons and without affecting their liability herein and do further consent to the release
of any person liable hereon, all without affecting the liability of the other persons, firms or Maker liable for the payment of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.

 

(a) No delay or omission on the part of the Holder in exercising its rights under this Note, or course of conduct relating hereto, shall operate as a waiver of such rights or any other right of the Holder, nor shall any waiver by the
Holder of any such right or rights on any one occasion be deemed a waiver of the same right or rights on any future occasion.

 

 

16

 

 

 

(b) THE MAKER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY
WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.

 

(c) In the case of a dispute as to the determination of the Closing Bid Price or the VWAP or the arithmetic calculation of the Conversion Price, any adjustment to the Conversion Price, liquidated damages amount, interest or dividend calculation,
or any redemption price, redemption amount, adjusted Conversion Price, or similar calculation, or as to whether a subsequent issuance of securities is prohibited hereunder or would lead to an adjustment to the Conversion Price, the Maker shall submit the disputed determinations or arithmetic calculations via facsimile within two (2) Business Days of receipt, or deemed receipt, of the Conversion Notice, any redemption notice, default notice or other event giving rise to such dispute, as the case may be, to the
Holder. If the Holder and the Maker are unable to agree upon such determination or calculation within two (2) Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Maker shall, within two (2) Business Days submit via facsimile (a) the disputed determination of the Closing Price or the VWAP to an independent, reputable investment bank selected by the Maker and approved by the Holder, which approval shall not be unreasonably withheld, (b) the disputed arithmetic
calculation of the Conversion Price, adjusted Conversion Price or any redemption price, redemption amount or default amount to the Maker’s independent, outside accountant or (c) the disputed facts regarding whether a subsequent issuance of securities is prohibited hereunder or would lead to an adjustment to the Conversion Price (or any of the other above described facts not expressly designated to the investment bank or accountant), to an expert attorney from a nationally recognized outside law firm (having
at least 100 attorneys and having with no prior relationship with the Maker) selected by the Maker and approved by the Lead Purchaser as defined in the Purchase Agreement).  The Maker, at the Maker’s expense, shall cause the investment bank, the accountant, the law firm, or other expert, as the case may be, to perform the determinations or calculations and notify the Maker and the Holder of the results no later than five (5) Business Days from the time it receives the disputed determinations or
calculations. Such investment bank’s, accountant’s or attorney’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

 

Section 5.13 Definitions.  Terms used herein and not defined shall have the meanings set forth in the Purchase Agreement.  For the purposes hereof, the
following terms shall have the following meanings:

 

“Closing Bid Price” shall mean, on any particular date (i) the last trading price per share of the Common Stock on such date on the OTC Bulletin Board or another registered national stock exchange on which the Common Stock is then listed, or if there is no such
price on such date, then the last trading price on such exchange or quotation system on the date nearest preceding such date, or (ii) if the Common Stock is not then listed or traded on a registered national securities exchange or quoted on the OTC Bulletin Board, then the average of the “Pink Sheet” quotes for the relevant conversion period, as determined in good faith by the Holder, or (iii) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined
by the Holder and reasonably acceptable to the Maker.

“Equity Conditions” shall mean, during the period in question, (i) the Maker shall have duly honored all conversions and redemptions scheduled to occur or occurring by virtue of one or more Conversion Notices of the Holder, if any, (ii) all liquidated damages
and other amounts owing to the Holder in respect of this Note shall have been paid; (iii) (A) there is an effective registration statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares issuable pursuant to this Note as a payment of interest or principal, or (B) such shares may be sold by the Holder pursuant to Rule 144 under the Securities Act without regards to volume limitations and the Maker and its counsel shall have delivered all legal opinions
and other documents necessary to effect such sale, (iv) the Common Stock is trading on the Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed for trading on a Trading Market (and the Maker believes, in good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for the foreseeable future), (v) there is a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares
issuable pursuant to the Transaction Documents, (vi) there is then existing no Event of Default or event which, with the passage of time or the giving of notice, would constitute an Event of Default, (vii) the issuance of the shares in question to the Holder would not violate the limitations set forth in Section 3.4(a) or 3.4(b) hereof, (viii) no public announcement of a pending or proposed Major Transaction or Triggering Event has occurred and (ix) the average daily trading dollar volume of the Common Stock
for each three consecutive Trading Days throughout such period exceeds $100,000.

“Indebtedness” means (a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters
of credit, bankers acceptances, current swap agreements, interest rate hedging agreements, interest rate swaps, or other financial products, (c) all capital lease obligations that exceed $10,000 in the aggregate in any fiscal year, (d) all obligations or liabilities secured by a lien or encumbrance on any asset of the Maker, irrespective of whether such obligation or liability is assumed, (e) all obligations for the deferred purchase price of assets, together with trade debt and other accounts payable that exceed
$10,000 in the aggregate in any fiscal year, (f) all synthetic leases, and (g) any obligation guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse) any of the foregoing obligations of any other person; provided, however, Indebtedness shall not include (a) usual and customary trade debt incurred in the ordinary course of business and (b) endorsements for collection or deposit in the ordinary course of business.

 

 

 

 

17

 

 

“Investment” means, with respect to any Person, all investments in any other Person, whether by way of extension of credit, loan, advance, purchase of stock or other ownership interest (other than ownership interests in such Person), bonds, notes, debentures or
other securities, or otherwise, and whether existing on the date of this Agreement or thereafter made, but such term shall not include the cash surrender value of life insurance policies on the lives of officers or employees, excluding amounts due from customers for services or products delivered or sold in the ordinary course of business.

“Permitted Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good
faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Maker) have been established in accordance with GAAP; (b) Liens imposed by law which were incurred in the ordinary course of the Maker’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Maker’s business, and which (x) do not individually or in the aggregate
materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Maker and its consolidated subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien; and (c) Liens securing the Permitted Subordinated Indebtedness to the extent such Liens are expressly subordinate to the Liens
securing this Note.

“Permitted Subordinated Indebtedness” means Indebtedness incurred after the date hereof in an aggregate amount not in excess of $257,000 that (i) shall be expressly subordinate in right of payment to this Note in form and substance satisfactory to the Holder in
its reasonable discretion, (ii) shall not be secured by any asset, agreement, guarantee or other collateral, other than Liens expressly subordinate to the liens securing this Note, and (iii) in the event of any bankruptcy, liquidation or other similar proceeding, shall provide for the payment in full of this Note prior to the payment of any amounts in respect thereof.

“Person” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

 

“Trading Day” means (a) a day on which the Common Stock is traded on the OTC Bulletin Board or a registered national securities exchange, or (b) if the Common Stock is not traded on the OTC Bulletin Board or a registered national securities exchange, a day on
which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Common Stock is not listed or quoted as set forth in (a) or (b) hereof, then Trading Day shall mean any day except Saturday, Sunday
and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close.

“Trading Market” means the Over the Counter Bulletin Board, the New York Stock Exchange, the Nasdaq Capital Markets, the Nasdaq Global Markets, the Nasdaq Global Select Market or the American Stock Exchange.

“VWAP” means, for any date, (i) the daily volume weighted average price of the Common Stock for such date on the OTC Bulletin Board as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (ii) if
the Common Stock is not then listed or quoted on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by the Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (iii) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and
reasonably acceptable to the Maker.

  

18

  

IN WITNESS WHEREOF, the Maker has caused this Note to be duly executed by its duly authorized officer as of the date first above indicated.

	 	URIGEN PHARMACEUTICALS, INC.	 
	 	 	 	 
	
 
	
By: 
	/s/  Martin E. Shmagin	 
	 	 	Name: Martin E. Shmagin	 
	 	 	Title: Chief Financial Officer	 
	 	 	 	 

 

19

 

EXHIBIT A

WIRE INSTRUCTIONS

 

 

Commerce Bank

 

ABA 026013673

 

Account Name: Platinum Montaur Life Sciences, LLC

 

Account Number: 7926319497

 

 

 

 

  

20

  

FORM OF

 

NOTICE OF CONVERSION

 

(To be Executed by the Registered Holder in order to Convert the Note)

 

The undersigned hereby irrevocably elects to convert $ ________________ of the principal amount [and accrued interest thereon] of the above Note No. ___ into shares of Common Stock of Urigen Pharmaceuticals, Inc. (the “Maker”) according to the conditions hereof, as of the date written below.

 

Date of Conversion ________________________________________________________

 

Applicable Conversion Price _________________________________________________

 

Number of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder on the Date of Conversion: _________________________

 

Signature________________________________________________________________

 

[Name]

 

Address:________________________________________________________________

 

________________________________________________________________

 

 

21

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