Document:

ex10two.htm

 

 

 

 

 

	
$555,555.56
	
September 15, 2009

AMDL, Inc.

 

CONVERTIBLE PROMISSORY NOTE

 

FOR VALUE RECEIVED, AMDL, Inc., a Delaware corporation (the “Company”), promises to pay to St. George Investments, LLC, an Illinois limited liability company (the “Holder,”
and together with the Company, the “Parties”), the principal sum of $555,555.56 together with all accrued and unpaid interest thereon, fees incurred or other amounts owing hereunder, all as set forth below in this Convertible Promissory Note (this “Note”). This Note is issued pursuant to that certain Note and Warrant Purchase Agreement
of even date herewith, entered into by and between the Company and the Holder (the “Purchase Agreement”).

 

1.           Principal and Interest Payments. Interest on the unpaid principal balance of this Note shall accrue at the rate of 12.00% per annum commencing on the date hereof. Beginning on the six (6)-month anniversary of the
date of this Note (the “Initial Payment Date,” and the same day of each month thereafter, a “Payment Date”) and continuing through the one (1)-year anniversary  of the date of this Note (the “Maturity Date”), the Company will make monthly payments
to the Holder equal to the sum of (a) one-twelfth (1/12) of outstanding principal balance of this Note as of the Initial Payment Date, and (b) all accrued interest, and any fees and penalties incurred per the terms of this Note (for the avoidance of doubt, on and after the Initial Payment Date, all interest, fees and penalties are due and payable in full in the month immediately following the month after such amount are accrued or incurred; provided,
however, that all interest, fees and penalties accrued or incurred during the first six months shall be due and payable on the Initial Payment Date). All remaining principal, interest and fees outstanding as of the Maturity Date shall be due and payable on such date in a single balloon payment. Each payment hereunder may be made by the Company, at its option, in the form of either (a) cash, or (b) shares of common stock of the Company, $0.001 par value per share (“Common
Shares”) at the greater of the Floor Price or 80% of the volume-weighted average price (the “VWAP”) for the five (5) business days ending on the business day immediately preceding the applicable payment date as reported by Bloomberg, LP, or if such information is not then being reported by Bloomberg, LP, then as reported by such other data information source as may be selected by the Holder (the “Conversion
Price”). Notwithstanding the foregoing, all payments hereunder shall be made in cash unless all of the following conditions are met: (v) listing approval for the Common Shares issuable under this Note shall have been received from the NYSE Amex; (w) not less than seven (7) calendar days prior to the applicable payment date, the Company shall have notified the Holder that it intends to make such payment in Common Shares; (x) (i) the Common Shares to be issued have been registered under the Securities
Act of 1933, as amended (the “Securities Act”), or (ii) (A) Rule 144 promulgated thereunder (“Rule 144”) is available for their sale, (B) the Company has provided to the Holder (prior to the delivery of the Common Shares on the applicable Payment Date) an attorney’s opinion, in a form acceptable to the Holder, which provides that
Rule 144 is available for the sale of the Common Shares (if the Company fails to provide such an opinion prior to delivery of the Common Shares on the applicable Payment Date the Holder may, at its option, obtain its own opinion, in which case the cost of such opinion will be added to the Outstanding Amount (hereafter defined) of this Note and the Company shall instruct its transfer agent to accept such opinion), (C) the Company is current on all of its SEC reporting obligations, and (D) the Company is not subject
to an extension for reporting its quarterly or annual results; (y) the closing bid price for the Common Shares on the business day on which notice is given is greater than the Floor Price (as defined below) divided by 80%; and (z) the Note shall not be in default. All payments shall be applied first to costs of collection, if any, then to accrued and unpaid interest, and thereafter to principal.

 

 

 

 

 

 

 

 

2.           Conversion.

 

(a)           Optional Conversion. At any time or from time to time prior to payment in full of the entire outstanding principal balance of this Note, plus
accrued interest and fees hereunder (collectively, the “Outstanding Amount”), the Holder shall have the right, subject to the Ownership Limitation (defined below), at the Holder’s option, to convert the Outstanding Amount on this Note, in whole or in part (the “Conversion Amount”), into the number of Common Shares as is determined
by dividing (a) the Outstanding Amount by (b) the greater of (i) the Conversion Price at that time, or (ii) the Floor Price.

 

(b)           Optional Conversion Mechanics. In order to convert this Note into Common Shares the Holder hereof shall give written notice to the Company at its principal corporate office pursuant to the form attached
hereto as Exhibit A (the “Conversion Notice”) of the election to convert the same pursuant to this Section and shall state therein the Conversion Amount, the number of Common Shares to which it is entitled, and the account in which the Common Shares are to be deposited.  The Company shall immediately, but in no event later than five
(5) days after receipt, deliver the number of Common Shares set forth on the Conversion Notice (the “Conversion Shares”) to the account specified by the Holder on the Conversion Notice.  Notwithstanding anything herein to the contrary, all such deliveries of Conversion Shares shall be electronic, via Deposit/Withdrawal at Custodian (DWAC) or Depository Trust Company (DTC).  In the event the Company fails
to deliver the Conversion Shares within three (3) days of receipt of the Conversion Notice, in addition to all other remedies available to the Holder hereunder and at law, a penalty equal to one and one half percent (1.5%) of the Conversion Amount (defined hereafter) shall be added to the balance of this Note per day. The conversion shall be deemed to have been made immediately prior to the close of business on the date of the Conversion Notice, and the person or entity entitled to receive the Common Shares upon
such conversion shall be treated for all purposes as the record holder or holders of such Common Shares as of such date.

 

(c)           Mandatory Conversion. On any date (the “Mandatory Conversion Determination Date”) on which the average closing bid
price for the Common Shares for at least twenty (20) of the immediately preceding thirty (30) trading days equals or exceeds $1.25, then on twenty (20) days’ irrevocable notice (the “Mandatory Conversion Notice”) and subject to the conditions set forth below and the Ownership Limitation, the Company can cause conversion of the Outstanding Amount (the “Mandatory
Conversion”) into Common Shares; provided, however, that no Mandatory Conversion may be made unless all of the following conditions are met: (i) the Company provides the Mandatory Conversion Notice within five (5) business days of the Mandatory Conversion Determination Date; (ii) (a) the Common Shares that are issuable upon the Mandatory Conversion have been registered under the Securities Act, or (b) the Company has provided to the Holder,
prior to delivery of the Common Shares deliverable upon the exercise of this Mandatory Conversion right, an attorney’s opinion, in a form acceptable to the Holder and the transfer agent, which provides that Rule 144 is available for the sale of the Common Shares (if the Company fails to provide such an opinion the Holder may, at its option, obtain its own opinion, in which case the cost of such opinion will be added to the principal balance of this Note and the Company shall instruct its transfer agent
to accept such opinion), (c) the Company is current on all of its SEC reporting obligations, and (d) the Company is not subject to an extension for reporting its quarterly or annual results; (iii) the number of Common Shares being delivered to the Holder, when added to all other shares owned of record or beneficially by the Holder, will not exceed the Ownership Limitation; (iv) the number of Common Shares being delivered to the Holder will not exceed an amount equal to 20% of the product of the average daily
volume of Common Shares traded on the primary exchange for Common Shares during the twenty (20) prior trading days as of the Mandatory Conversion Determination Date multiplied by twenty (20); (v) the Company is not in default of this Note and has timely honored all requests for conversion made by the Holder as of the date of the Mandatory Conversion; (vi) the Company has not violated any covenant, obligation or requirement of the Purchase Agreement and all of the representations and warranties contained therein
remain true as of the Mandatory Conversion Determination Date and the date of the Mandatory Conversion; and (vii) the closing bid price, as reported by Bloomberg, LP (or other means at the discretion of the Holder, if quotations are not available on Bloomberg, LP) for the trading day immediately preceding the date Common Shares are delivered to Holder pursuant to the Mandatory Conversion, is at least the Maximum Conversion Price. Notwithstanding anything herein to the contrary, the provisions of this Section
2(c) shall not apply and the Mandatory Conversion may not occur in whole or in part if the number of Common Shares being delivered to the Holder, when added to all other shares owned of record or beneficially by the Holder, will cause the Holder’s ownership of Common Shares to exceed the Ownership Limitation.

 

 

 

 

 

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(d)           No Fractional Shares. Conversion calculations pursuant to Sections 2(a) and 2(c) shall be rounded up to the nearest whole share, and no fractional shares shall be issuable by the Company upon conversion
of this Note. All shares issuable upon a conversion of this Note (including fractions thereof) shall be aggregated for purposes of determining whether such conversion would result in the issuance of a fractional share.

 

3.           Floor Price. As used herein, the term “Floor Price” means $0.64
per Common Share; provided, that, subject to certain exceptions, if at any time after the date hereof while any portion of the Note is outstanding, the Company sells Common Shares or instruments convertible into or exercisable for Common Shares (including the payment of interest with Common  Shares), or enters into any exchange or settlement agreements to do the same, at a price per Common Share less than $0.64 (the “Lower
Price”), then the Floor Price shall immediately be reduced to equal the Lower Price and shall remain equal to the Lower Price until such time that this Note has been paid off in its entirety or the entire Outstanding Amount has been converted into Common Shares as provided herein. Promptly upon the occurrence of such an event, and in any event not less than 10 business days after such an occurrence, the Company shall notify the Holder in writing of the event, disclose to the Holder the new Floor
Price, and provide to the Holder copies of all relevant documents related to such event, even if the event was or should be disclosed publicly.

 

4.           Maximum Price. The maximum price of Common Shares at which any portion of the Outstanding Amount may be converted into Common Shares (whether at the Holder’s option, as payment of the Outstanding Amount pursuant
to Section 1, or as a Mandatory Conversion) shall be equal to $1.00 per Common Share (the “Maximum Conversion Price”).

 

 

 

 

 

 

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5.           Ownership Limitation. In no event may the Holder own more than 9.99% of the outstanding voting securities of the Company on conversion of this Note or exercise of that certain Warrant (the “Warrant”)
of even date herewith made by the Company in favor of the Holder (the “Ownership Limitation”).

 

6.            Prepayment by the Company. At any time prior to the Maturity Date and upon 30 days’ irrevocable notice, the Company may redeem the then-outstanding principal amount of the Note for cash at a price equal to
125% of the Outstanding Amount; provided, however, that the Holder may elect to convert any amount (up to the Outstanding Amount) as it determines in its sole discretion, pursuant to the terms set forth herein, prior to any such prepayment by giving the Company at least five (5) days’ written notice prior to the date on which the Company intends or intended to make any such prepayment.

 

7.            Adjustment of Number of Shares. The number and character of Common Shares issuable upon conversion of this Note (or any shares of stock or other securities or property at the time receivable or issuable upon conversion
of this Note) are subject to adjustment upon the occurrence of any of the following events:

 

(a)            Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc. In the event that the Company shall fix a record date for the determination of holders of securities affected by any stock split, stock
dividend, reclassification, recapitalization, or other similar event that will, in the future, affect the number of outstanding shares of the Company’s capital stock, then, and in each such case, the Holder, upon conversion of this Note at any time after the Company shall fix the record date for such event, shall receive, in addition to the Common Shares issuable upon conversion of this Note, the right to receive the securities of the Company to which the Holder would have been entitled if the Holder had
converted this Note immediately prior to such record date (all subject to further adjustment as provided in this Note).

 

(b)            Adjustment for Dividends and Distributions. In the event that the Company shall make or issue, or shall fix a record date for the determination
of eligible holders of securities entitled to receive, a dividend or other distribution payable with respect to the Common Shares (or any shares of stock or other securities at the time issuable upon conversion of this Note) that is payable in (a) securities of the Company other than capital stock or (b) any other assets, then, and in each such case, the Holder, upon conversion of this Note at any time after the consummation, effective date or record date of such event, shall receive, in addition to the Common
Shares (or such other stock or securities) issuable upon such conversion prior to such date, the securities or such other assets of the Company to which the Holder would have been entitled upon such date if the Holder had converted this Note immediately prior thereto (all subject to further adjustment as provided in this Note).

 

(c)            Adjustment for Reorganization, Consolidation, Merger. In the event of any reorganization of the Company (or any other corporation the stock or
other securities of which are at the time receivable upon the conversion of this Note) after the date of this Note, or in the event, after such date, the Company (or any such corporation) shall consolidate with or merge into another corporation or convey all or substantially all of its assets to another corporation, then, and in each such case, the Holder, upon the conversion of this Note (as provided in Section 2) at any time after the consummation of such reorganization, consolidation, merger or conveyance,
shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the conversion of this Note prior to such consummation, the stock or other securities or property to which the Holder would have been entitled upon the consummation of such reorganization, consolidation, merger or conveyance if the Holder had converted this Note immediately prior thereto, all subject to further adjustment as provided in this Section 7, and the successor or purchasing corporation in such reorganization,
consolidation, merger or conveyance (if other than the Company) shall duly execute and deliver to the Holder a supplement hereto acknowledging such corporation’s obligations under this Note. In each such case, the terms of this Note shall be applicable to the shares of stock or other securities or property receivable upon the conversion of this Note after the consummation of such reorganization, consolidation, merger or conveyance.

 

 

 

 

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(d)            Conversion of Stock. In the event that all of the authorized Common Shares of the Company is converted, pursuant to the Company’s Articles
of Incorporation, into other capital stock or securities or property, or the Common Shares otherwise cease to exist, then the Holder, upon conversion of this Note at any time after the date on which the Common Shares are so converted or cease to exist (the “Termination Date”), shall receive, in lieu of the number of Common Shares that would have been issuable upon such conversion immediately prior to the Termination Date (the
“Former Number of Common Shares”), the stock and other securities and property to which the Holder would have been entitled to receive upon the Termination Date if the Holder had converted this Note with respect to the Former Number of Common Shares immediately prior to the Termination Date (all subject to further adjustment as provided in this Note).

 

(e)            No Change Necessary. The form of this Note need not be changed because of any adjustment in the number of Common Shares issuable upon its conversion.

 

8.           Trigger Events. Upon the occurrence of any of the following events (each, a “Trigger Event”), (a) the Outstanding Amount shall
immediately increase to 125% of the Outstanding Amount immediately prior to the occurrence of the Trigger Event, (b) such Outstanding Amount, as increased, plus all accrued interest, fees, costs, and penalties, as applicable, shall be due and payable within thirty (30) days thereof, and (c) this Note shall accrue interest at the rate of 18% per annum:

 

(a)           Decline in VWAP.  A decline in the VWAP for the Common Shares for five (5) consecutive trading days to a per Common Share price of less than $0.50, provided that the VWAP of a Common Share remains
less than $0.50 for a period of five (5) consecutive trading days.

 

(b)           Decline in Volume. A decline in the ten (10)-day average daily dollar volume of the Common Shares in their primary market to less than $50,000.00 of volume per day after October 1, 2009.

 

(c)           Judgment. A judgment is entered against the Company in an amount equal to or greater than $100,000.00.

 

 

 

 

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(d)           Failure to File Registration Statement. The Company’s failure to file a registration statement in accordance with the terms of that certain Registration Rights Agreement entered into between the Parties
on even date herewith (the “Registration Rights Agreement”), the failure of the registration statement contemplated thereby to be declared effective according to the terms thereof, or the failure of such registration statement to remain effective at all applicable times thereafter.

 

(e)           Failure to Raise Funds. The Company’s failure to raise at least $2,000,000.00 through the sale of Common Shares by December 1, 2009.

 

(f)           Events of Default. The occurrence of any Event of Default hereunder.

 

(g)           Failure to Maintain S-3 Eligibility. The Company’s failure to maintain eligibility to register Common Shares (or any other securities of the Company) pursuant to Form S-3, in which event the Company
shall provide prompt written notice to the Holder of such failure.

 

(h)           Insufficient Authorized Shares. The Company’s failure to maintain sufficient authorized but unissued Common Shares to honor the conversion of this Note (or the payment of this Note in Common Shares)
or the exercise of the Warrant.

 

9.           Default. If any of the events specified below shall occur (each, an “Event of Default”), the Holder of this Note may, so long
as such condition exists and in addition to the rights set forth in Section 8, declare the entire Outstanding Amount immediately due and payable, by notice in writing to the Company:

 

(a)           Failure to Pay. The Company’s failure to make any payment due and payable under the terms of this Note (whether in cash or Common Shares), including any payment of interest, fees or other amount due
hereunder.

 

(b)           Breaches of Covenants. The Company or its subsidiaries, if any, shall fail to observe or perform any other covenant, obligation, condition or agreement contained in this Note, the Purchase Agreement, the
Warrant, Registration Rights Agreement, or any other agreement between the Parties related hereto or thereto (collectively, the “Transaction Documents”).

 

(c)           Representations and Warranties. Any representation, warranty, certificate, or other statement (financial or otherwise) made or furnished by or on behalf of the Company to the Holder in writing in connection
with the Transaction Documents, or as an inducement to the Holder to enter into the Transaction Documents, shall be false, incorrect, incomplete or misleading in any material respect when made or furnished or becomes untrue thereafter.

 

(d)           Failure to Pay Debts; Voluntary Bankruptcy. If any of the Company’s assets are assigned to its creditors, if the Company fails to pay its debts generally as they become due, or if the Company files
any petition, proceeding, case or action for relief under any bankruptcy, reorganization, insolvency or moratorium law, rule, regulation, statute or ordinance (collectively, “Laws and Rules”), or any other Law and Rule for the relief of, or related to, debtors.

 

 

 

 

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(e)           Involuntary Bankruptcy. If any involuntary petition is filed under any bankruptcy or similar Law or Rule against the Company, or a receiver, trustee, liquidator, assignee, custodian, sequestrator or other
similar official is appointed to take possession of any of the assets or properties of the Company or any guarantor.

 

(f)           Governmental Action. If any governmental or regulatory authority takes or institutes any action that will materially affect the Company’s financial condition, operations or ability to pay or perform
the Company’s obligations under this Note.

 

(g)           Failure to Receive Listing Approval.  If the Company fails to receive listing approval from NYSE Amex for the shares of Common Stock issuable upon conversion of the Note and exercise of the Warrant
by November 15, 2009.

 

10.           No Rights or Liabilities as Shareholder. This Note does not by itself entitle the Holder to any voting rights or other rights as a shareholder of the Company. In the absence of conversion of this Note, no provisions
of this Note, and no enumeration herein of the rights or privileges of the Holder, shall cause the Holder to be a shareholder of the Company for any purpose.

 

11.            Governing Law; Venue. The terms of this Note shall be construed in accordance with the laws of the State of Illinois as applied to contracts entered into by Illinois residents within the State of Illinois which
contracts are to be performed entirely within the State of Illinois. With respect to any disputes arising out of or related to this Note, the parties consent to the exclusive jurisdiction of, and venue in, the state courts in Illinois (or in the event of exclusive federal jurisdiction, the United States District Court Northern District of Illinois).

 

12.            Binding Effect. This Note shall be binding on the Parties and their respective heirs, successors, and assigns; provided, however, that the Company shall not
assign its rights hereunder in whole or in part without the express written consent of the Holder, which consent may be withheld in the sole and absolute discretion of the Holder.

 

13.           Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of the parties to the fullest extent permitted by law and the balance of this
Note shall remain in full force and effect.

 

14.            Attorneys’ Fees. If any action at law or in equity is necessary to enforce this Note or to collect payment under this Note, the Holder shall be entitled to recover reasonable attorneys’ fees directly
related to such enforcement or collection actions.

 

15.            Amendments and Waivers; Remedies. No failure or delay on the part of a party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to a party hereto at law, in equity or otherwise. Any amendment, supplement or modification of or to any provision of this Note, any waiver of any provision of this Note, and any consent to any departure by either Party from the terms of any provision of this Note, shall
be effective (i) only if it is made or given in writing and signed by the Company and the Holder and (ii) only in the specific instance and for the specific purpose for which made or given.

 

 

 

 

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16.           Limitation. Notwithstanding anything to the contrary herein, the Floor Price shall only apply to this Note for so long as the Common Shares are listed on the New York Stock Exchange or the American Stock Exchange.
In the event the Common Shares cease to be listed on any of such exchanges, the Floor Price shall no longer apply with respect to any provision of this Note.

 

17.           Notices. Unless otherwise specifically provided herein, any notice or other communication required or permitted to be given under this Note shall be in writing, shall be delivered by hand or overnight courier service,
by certified mail, postage prepaid, or by facsimile, and will be deemed given upon delivery, if delivered personally, one business day after deposit with a national courier service for overnight delivery, or one business day after transmission by facsimile with confirmation of receipt, and three days after deposit in the mails, if mailed, to the following addresses:

 

 

	 Company: 	 	 AMDL, Inc.	 
	 	 	
 2492 Walnut Ave.

Suite 100

Tustin, California 92780

Attention: Douglas C. MacLellan
	 
	 	 	 	 
	 Holder:	 	
 St. George Investments, LLC

303 East Wacker Drive, Suite 311

Chicago, Illinois 60601

Attention: John Fife

	 
	 	 	 	 
	 With a copy to:	 	
 Jonathan K. Hansen

Bennett Tueller Johnson & Deere, P.C.

3165 East Millrock Drive, Suite 500

Salt Lake City, Utah 84121

	 
	 	 	 	 

18.            Final Note. This Note, together with the Transaction Documents, contains the complete understanding and agreement of the Company and the Holder and supersedes all prior representations, warranties, agreements, arrangements,
understandings, and negotiations.

 

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IN WITNESS WHEREOF, the Company has executed this Note as of the date set forth above.

                                                                                                        
AMDL, INC.

                                                                                                        
By:  ___________________________________                                                                         

                                                                                                                
Douglas C. MacLellan, Chief Executive Officer

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

ST. GEORGE INVESTMENTS, LLC

By:  __________________________

Its:  __________________________

 

[Signature page to Convertible Promissory Note]

  

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EXHIBIT A – CONVERSION NOTICE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

10ex10three.htm

 

 

 

 

THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THIS WARRANT UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO AMDL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

AMDL, INC.

WARRANT TO PURCHASE SHARES OF COMMON STOCK

1.            Issuance. In consideration of good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by AMDL, Inc., a Delaware corporation (the “Company”),
St. George Investments, LLC, an Illinois limited liability company, or registered assigns (the “Holder”), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until the date which is the last calendar day of the month in which the fifth anniversary of the Issue Date occurs (the “Expiration Date”), five hundred thousand (500,000) fully
paid and nonassessable shares of the Company’s Common Stock, $0.001 par value per share (the “Common Stock”), at an initial exercise price of $0.65 per share (the “Exercise Price”), subject to further adjustment as set forth herein. This Warrant is being issued pursuant to the terms of that certain Note and Warrant Purchase Agreement of even date herewith (the “Purchase
Agreement”), to which the Company and the Holder (or the Holder’s predecessor in interest) are parties.

Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement.

This Warrant was originally issued to the Holder or the Holder’s predecessor in interest on September 15, 2009 (the “Issue Date”).

2.           Exercise of Warrants.

2.1           General.

(a) This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date. Such exercise shall be effectuated by submitting to the Company (either by delivery to the Company or by facsimile transmission) a completed and duly executed Notice of Exercise
(substantially in the form attached to this Warrant as EXHIBIT A). The date such Notice of Exercise is either faxed, emailed or delivered to the Company shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding balance of the Warrant, the Holder of this Warrant shall tender this Warrant to the Company within five (5) Trading Days (as defined below) thereafter. The Notice of Exercise shall be
executed by the Holder of this Warrant and shall indicate (i) the number of shares then being purchased pursuant to such exercise and (ii) if applicable (as provided below), whether the exercise is a cashless exercise.

 

 

 

 

 

 

 

For purposes of this Warrant, the term “Trading Day” means any day during which the Principal Market (as defined below) shall be open for business.

(b) Notwithstanding any other provision contained herein to the contrary, if at any time from the period beginning on November 15, 2009 and ending on the Expiration Date, if all of the shares of Common Stock underlying this Warrant are not registered for resale in an effective Registration Statement, the Holder may elect a “cashless”
exercise of this Warrant for any Warrant Shares not registered in an effective Registration Statement. Whereby, the Holder shall be entitled to receive a number of shares of Common Stock equal to (x) the excess of the Current Market Value (as defined below) over the total cash exercise price of the portion of the Warrant then being exercised, divided by (y) the Market Price of the Common Stock.

For the purposes of this Warrant, the following terms shall have the following meanings:

“Current Market Value” shall mean an amount equal to the Market Price of the Common Stock, multiplied by the number of shares of Common Stock specified in the applicable Notice of Exercise.

“Market Price of the Common Stock” shall mean the lower of: (i) the Closing Price (as defined below) of the Company’s common stock on the principal market where Common Stock is traded (the “Principal Market”)
for the prior business day; or (ii) the volume weighted average sales prices of the Common Stock on such market for the prior ten (10) business days, in each case as recorded by Bloomberg, LP (or if that service is not then reporting the relevant information regarding the Common Stock, a comparable reporting service of national reputation selected by the Holder and reasonably acceptable to the Company).

“Closing Price” means the 4:00 P.M. closing bid price of the Common Stock on the Principal Market on the relevant trading day(s), as reported by Bloomberg LP (or if that service is not then reporting the relevant information regarding the Common Stock, a comparable reporting
service of national reputation selected by the Holder and reasonably acceptable to the Company) for the relevant date.

(c) If the Notice of Exercise form elects a “cash” exercise (or if the cashless exercise referred to in the immediately preceding paragraph (b) is not available in accordance with the terms hereof), the Exercise Price per share of Common Stock for the shares then being exercised shall be payable, at the election of the Holder,
in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by the Company at the request of the Holder.

(d) Upon the appropriate payment to the Company, if any, of the Exercise Price for the shares of Common Stock purchased, together with the surrender of this Warrant (if required), the Company shall immediately deliver the shares of Common Stock electronically via Deposit/Withdrawal at Custodian (DWAC) or Depository Trust Company (DTC)
to the account designated by Holder on the Notice of Exercise.  If for any reason the Company is not able to deliver the shares via DWAC or DTC, notwithstanding its best efforts to do so, the Company shall deliver certificates representing the Warrant Shares to the Holder as provided in the Notice of Exercise (the certificates delivered in such manner, the “Warrant Share Certificates”) within three (3) Trading Days (such third Trading
Day, a “Delivery Date”) of (i) with respect to a “cashless exercise,” the Exercise Date as the case may be, or, (ii) with respect to a “cash” exercise, the later of the Exercise Date or the date the payment of the Exercise Price for the relevant Warrant Shares is received by the Company.

 

 

 

 

 

 

 

(e) The Company understands that a delay in the electronic delivery of shares or the delivery of the Warrant Share Certificates, as the case may be, beyond the Delivery Date (assuming electronic delivery is not available) could result in economic loss to the Holder. As compensation to the Holder for such loss, the Company agrees to pay
late payment fees (as liquidated damages and not as a penalty) to the Holder for late delivery of Warrant Share Certificates in the amount of $100 per Trading Day after the Delivery Date for each $10,000 of Exercise Price of the Warrant Shares subject to the delivery default. The Company shall pay any payments incurred under this Section in immediately available funds upon demand. Furthermore, in addition to any other remedies which may be available to the Holder, in the event that the Company fails for any reason
to effect delivery of the Warrant Share Certificates by the Delivery Date, the Holder may revoke all or part of the relevant Warrant exercise by delivery of a notice to such effect to the Company, whereupon the Company and the Holder shall each be restored to their respective positions immediately prior to the exercise of the relevant portion of this Warrant, except that the liquidated damages described above shall be payable through the date notice of revocation or rescission is given to the Company.

(f) The Holder shall be deemed to be the holder of the shares issuable to it in accordance with the provisions of this Section 2.1 on the Exercise Date.

2.2             Ownership Limitation. Notwithstanding the provisions of this Warrant, in no event shall the this Warrant be exercisable to the extent that the issuance of Common Stock upon the exercise thereof,
after taking into account the Common Stock then owned by the Holder and its affiliates, would result in the beneficial ownership by the Holder and its affiliates of more than 9.99% of the outstanding Common Stock (the “Percentage Cap”) of the Company.  For purposes this paragraph, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended.

2.3             Trustee for Warrant Holders. In the event that a qualified bank or trust company shall have been appointed as trustee for the Holder pursuant to Subsection 6.2, such bank or trust company shall
have all the powers and duties of a warrant agent (as hereinafter described) and shall accept, in its own name for the account of the Company or such successor person as may be entitled thereto, all amounts otherwise payable to the Company or such successor, as the case may be, on exercise of this Warrant pursuant to Section 2.1.

3.           Reservation of Shares. The Company hereby agrees that, at all times during the term of this Warrant, there shall be reserved for issuance upon exercise of
this Warrant, one hundred percent (100%) of the number of shares of its Common Stock as shall be required for issuance of the Warrant Shares for the then unexercised portion of this Warrant. For the purposes of such calculations, the Company should assume that the outstanding portion of this Warrant was exercisable in full at any time, without regard to any restrictions which might limit the Holder’s right to exercise all or any portion of this Warrant held by the Holder.

 

 

 

 

 

 

 

 

4.           Mutilation or Loss of Warrant. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant,
and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

5.           Rights of the Holder. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed
in this Warrant and are not enforceable against the Company except to the extent set forth herein.

6.           Protection Against Dilution and Other Adjustments.

6.1           Capital Adjustments.  If the Company shall at any time prior to the expiration of this Warrant subdivide the Common Stock, by split-up or stock split,
or otherwise, or combine its Common Stock, or issue additional shares of its Common Stock as a dividend, the number of Warrant Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision, split or stock dividend, or proportionately decreased in the case of a combination.  Appropriate adjustments shall also be made to the purchase price payable per Warrant Share, but the aggregate purchase price payable for the total number of Warrant Shares
purchasable under this Warrant (as adjusted) shall remain the same.  Any adjustment under this Section 6.1 shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

6.2           Reclassification, Reorganization and Consolidation.  In case of any reclassification, capital reorganization, or change in the capital stock of the
Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 6.1 above), then the Company shall make appropriate provision so that the Holder shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder
of the same number of shares of Common Stock as were purchasable by the Holder immediately prior to such reclassification, reorganization, or change.  In any such case appropriate provisions shall be made with respect to the rights and interest of the Holder so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per Warrant Share
payable hereunder, provided the aggregate purchase price shall remain the same.

6.3           Notice of Adjustment. When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of this Warrant, or in the Exercise
Price, the Company shall promptly notify the Holder of such event and of the number of Shares or other securities or property thereafter purchasable upon exercise of this Warrant.

 

 

 

 

 

 

 

6.4           Issuance of Additional Shares of Common Stock. Commencing on the Issue Date and continuing until this Warrant is either exercised in full or expires, in the
event the Issuer shall issue any additional shares of Common Stock (otherwise than as provided in the foregoing subsections 6.1 through 6.2 of this Section 6 or pursuant to the provisions of the Convertible Promissory Note issued to the initial Holder on the Issue Date) or enter into any exchange or settlement agreements to do the same, at a price per share less than the Exercise Price then in effect or without consideration, then the Exercise Price upon each such issuance shall be adjusted to the price equal
to the consideration per share paid for such additional shares of Common Stock.  Promptly upon the occurrence of such an event, and in any event not less than ten (10) business days after such an occurrence, the Company shall notify the Holder in writing of the event, disclose to the Holder the new Exercise Price, and provide to the Holder copies of all relevant documents related to such event, even if the event was
or should be disclosed publicly.

 

7.         Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock issuable on the exercise of the Warrants, the Company at its expense will promptly cause its Chief Financial
Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of the Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock outstanding
or deemed to be outstanding, and (c) the Exercise Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the Holder of the Warrant and any Warrant Agent of the Company (appointed pursuant to Section 9 hereof).

8.           Transfer to Comply with the Securities Act. This Warrant has not been registered under the 1933 Act and has been issued to the Holder for investment and not with a view to the distribution of either the
Warrant or the Warrant Shares. Neither this Warrant nor any of the Warrant Shares or any other security issued or issuable upon exercise of this Warrant may be sold, transferred, pledged or hypothecated without (i) an effective registration statement under the Act relating to such security or (ii) an opinion of counsel satisfactory to the Company that registration is not required under the Act. Each certificate for the Warrant, the Warrant Shares and any other security issued or issuable upon exercise of this
Warrant shall contain a legend on the face thereof, in form and substance satisfactory to counsel for the Company, setting forth the restrictions on transfer contained in this Section. Any such transfer shall be accompanied by a transferor assignment substantially in the form of EXHIBIT B, executed by the transferor and the transferee and submitted to the Company.

9.           Warrant Agent. The Company may, by written notice to the Holder of the Warrant, appoint an agent (a “Warrant Agent”) for the purpose of
issuing Common Stock on the exercise of this Warrant pursuant hereto, exchanging this Warrant pursuant hereto, and replacing this Warrant pursuant hereto, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such Warrant Agent.

 

 

 

 

 

 

 

10.           Transfer on the Company’s Books. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding
any notice to the contrary.

11.           Notices.  Any notice required or permitted hereunder shall be given in manner provided in the subsection headed “Notices” in the Purchase Agreement, the terms of which are incorporated
herein by reference.

12.          Supplements and Amendments; Whole Agreement.                                                                                       This
Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings other than expressly contained herein and therein.

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

14.           Remedies. The Company stipulates that the remedies at law of the Holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the
terms of this Warrant are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise.

15.           Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.

 

 

 

 

 

 

 

16.           Descriptive Headings.  Descriptive headings of the several Sections of this Warrant are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions
hereof.

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IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed by an officer thereunto duly authorized.

Dated: September 15, 2009

AMDL, INC.

By: _______________________________

___________________________________

(Print Name)

____________________________________

(Title)

 

 

 

 

 

 

 

 

 

 

[Signature page to Warrant]

  

  

  

EXHIBIT A

NOTICE OF EXERCISE OF WARRANT

TO:           AMDL, INC.

VIA FAX TO: (    )______________

The undersigned hereby irrevocably elects to exercise the right, represented by the Common Stock Purchase Warrant dated as of  , 20 , to purchase   shares
of the Common Stock, $0.001 par value (“Common Stock”), of AMDL, INC. and tenders herewith payment in accordance with Section 2 of said Common Stock Purchase Warrant, as follows:

_______                      CASH: $__________________________ = (Exercise Price x Exercise

Shares)

	
_______
	
Payment is being made by:

	
_____
	
enclosed check

	
_____
	
wire transfer

	
_____
	
other

_______                      CASHLESS EXERCISE [if available pursuant to Section 2.1(b)]:

Net number of Warrant Shares to be issued to Holder: ______*

* based on:                      Current Market Value - (Exercise Price x Exercise Shares)

Market Price of Common Stock

Where:

Market Price of Common Stock [“MP”]            =           $____________

Current Market Value [MP x Exercise Shares]  =           $____________

It is the intention of the Holder to comply with the provisions of Section 2.3 of the Warrant regarding certain limits on the Holder’s right to exercise thereunder. The Holder believes this exercise complies with the provisions of said Section 2.3. Nonetheless, to the extent that, pursuant to the exercise effected hereby, the Holder
would have more shares than permitted under said Section, this notice should be amended and revised, ab initio, to refer to the exercise which would result in the issuance of shares consistent with such provision. Any exercise above such amount is hereby deemed void and revoked.

As contemplated by the Warrant, this Notice of Exercise is being sent by facsimile to the fax number and officer indicated above.

If this Notice of Exercise represents the full exercise of the outstanding balance of the Warrant, the Holder either (1) has previously surrendered the Warrant to the Company or (2) will surrender (or cause to be surrendered) the Warrant to the Company at the address indicated above by express courier within five (5) Trading Days after
delivery or facsimile transmission of this Notice of Exercise.

 

 

 

 

 

 

 

The certificates representing the Warrant Shares should be transmitted by the Company to the Holder

_______ via express courier, or

_______ by electronic transfer

after receipt of this Notice of Exercise (by facsimile transmission or otherwise) to:

_____________________________________

_____________________________________

_____________________________________

Dated:           _____________________

___________________________

[Name of Holder]

By:________________________

 

 

 

  

  

  

EXHIBIT B

FORM OF TRANSFEROR ENDORSEMENT

(To be signed only on transfer of Warrant)

For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the percentage and number of shares of Common Stock of AMDL, INC. to which the within Warrant relates specified under the headings “Percentage
Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of AMDL, INC. with full power of substitution in the premises.

Transferees                                           Percentage
Transferred                                            Number Transferred

Dated:___________, ______

______________________________

[Transferor Name must conform to the name of Holder as specified on face of Warrant]

By: ___________________________

Name:_________________________

Signed in the presence of:

_________________________

(Name)

ACCEPTED AND AGREED:

_________________________

[TRANSFEREE]

By:_______________________

Name:_____________________

THE FOREGOING TRANSFER IS CONSENTED TO:

AMDL, INC.

By: _________________________

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