Document:

Lexaria Bioscience Corp. - Exhibit 10.1 - Filed by newsfilecorp.com

Exhibit 10.1 

SERVICES AGREEMENT 

THIS AGREEMENT dated for reference the 17th day of
January, 2018. 

BETWEEN: 

  
    
      
        Lexaria Bioscience Corp., a company duly incorporated
          under the laws of the State of Nevada and having its office at 156 Valleyview
          Rd, Kelowna BC Canada V1X 3M4 

        (hereinafter referred to as the “Company”) 

      

    

  

OF THE FIRST PART 

AND 

  
    
      
        JGRNT Capital Corp. of XXXXXX XXXX, Toronto,
          Ontario, . 

        (hereinafter referred to as "JGRNT" or “Consultant”) 

      

    

  

WHEREAS: 

	A. 	
      The Company wishes to engage JGRNT for corporate
      development and to provide services to it on the terms and conditions
      hereinafter set forth.

	 	 
	B. 	
      JGRNT has agreed to provide the services to the Company
      on the terms and conditions set out in this
Agreement.

NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of
the premises and of the covenants and agreements hereinafter contained the
parties hereto have agreed as follows: 

1.    ENGAGEMENT OF SERVICES 

	1.1. 	
      The Company hereby engages JGRNT to provide services as
      an independent contractor to the Company under the direction and approval
      of the Company’s President and Chief Executive Officer; and JGRNT hereby
      agrees to perform the following duties required of him in accordance with
      the terms of this agreement namely:

	 	A. 	
      Introductions, discussions and negotiations with
      individuals and corporations to assist the company’s growth &
      financing – including potential technology partners; licensees; finance
      providers; strategic partners, and more.

	 	 	 
	 	B. 	
      Creating/maintaining investor related material including
      assisting with press release creation, corporate presentations, website
      content, etc. Keeping the message to the financial markets
  aligned.

	 	 	 
	 	C. 	
      Other corporate development activities, which may include
      contract negotiating and revisions.

	 	 	 
	 	D. 	
      Other activities as may be required to help build the
      business, which could also include strategic financing partners, or merger
      and acquisition opportunities.

	 	 	 
	 	E. 	
      New geographical markets for products; and contemplation
      of new products for existing geographical markets.

	 	 	 
	 	F. 	
      General Services. JGRNT shall serve the Company (and/or
      such subsidiary or subsidiaries of the company as the Company may from
      time to time require) in such consulting capacity or capacities as may
      from time to time be determined by resolution of the Board of Directors or
      senior management of the Company and shall perform such duties as an
      independent contractor. JGRNT will work as needed with lawyers, partners,
      and other stakeholders as required by the Company. JGRNT shall fulfill
      all other duties that should be reasonably
expected by and at the pleasure of the Company’s management (together with all
other items within this Section 1.1, the “Services”). 

- 2 - 

2.    TERM 

	2.1. 	
      The initial term of this Agreement shall be for a period
      of one (1) year, commencing as of the 17th day of January 2018
      and continuing month to month thereafter with all terms in effect unless
      and until terminated or upon Agreement expiry as hereinafter
    provided.

3.    SERVICES 

	3.1 	
      JGRNT agrees to perform the Services contracted hereunder
      in the following manner:

	 	(a) 	
      to carry out all functions associated with the Services
      to the best of his skill and ability for the exclusive benefit of the
      Company and to act at all times during the term of this Agreement in the
      best interests of the Company;

	 	 	 
	 	(b) 	
      to carry out the Services in a timely manner;

	 	 	 
	 	(c) 	
      to conduct himself within the expected levels of
      corporate professionalism and decorum always representing the Company to
      the highest corporate standards; and

	 	 	 
	 	(d) 	
      to use his best endeavors to preserve the goodwill and
      reputation of the Company and the relationship between the Company and its
      stakeholders.

4.    REMUNERATION 

	 	4.1. 	
      The Company shall pay to JGRNT for all Services rendered
      hereunder:

	 	 	 
	 	4.2. 	
      the sum of one thousand dollars (CDN$1,000.00) per month,
      plus HST if applicable, payable on the 30th day of each month
      (the “Monthly Fee”);

	 	 	 
	 	4.3. 	
      The Company shall issue 500,000 warrants to JGRNT, each
      to purchase one share of common stock of the Company at a price that is
      US$0.01 higher than the closing price on the OTCQX on the day previous to
      the announcement of this Agreement and that expire two years after
      issuance;

	 	 	 
	 	4.4. 	
      JGRNT’s out of pocket expenses incurred on behalf of the
      Company will be paid as per Section 8.5 of this Agreement.

	 	 	 
	 	4.5. 	
      JGRNT will be entitled to receive a bonus on terms and
      conditions that may be established and approved by not less than two
      persons of the Company’s management, in their sole discretion acting
      reasonably.

	 	 	 
	 	4.6. 	
      For new customers sourced by the Consultant during the
      first six (6) months after signing; for combined Lexaria and ViPova products and including all
      combined sales efforts and/or technology licensing revenues, achieving
      non-refundable revenues of US$200,000 to any single customer in any
      consecutive 60-day period would result in a restricted common share award
      of 100,000 Company shares; and, after the first six (6) months after
      signing and expiring twelve (12) months after signing; for combined
      Lexaria and ViPova products and including all sales efforts, achieving
      non-refundable revenues of US$200,000 to any single customer in any
      consecutive 60-day period would result in a restricted common share award
      of 50,000 Company shares; this clause limited to one payment per customer
      during the 12-month period, but payable on each customer that meets these
  sales/licensing thresholds;

- 3 - 

	 	4.7. 	
      For new customers sourced by the Consultant during the
      first six (6) months after signing; for combined Lexaria and ViPova
      products and including all combined sales efforts and/or technology
      licensing revenues, achieving non-refundable revenues of US$500,000 in any
      fiscal quarter would result in a restricted common share award of 200,000
      Company shares; and, after the first six (6) months after signing and
      expiring twelve (12) months after signing; for combined Lexaria and ViPova
      products and including all sales efforts, achieving non-refundable
      revenues of US$500,000 in any fiscal quarter would result in a restricted
      common share award of 100,000 Company shares; this clause limited to one
      payment per fiscal quarter;

	 	 	 
	 	4.8. 	
      Sections 4.5 and 4.6, above, collectively or
      individually, are defined as “Milestone Payments”.

	 	 	 
	 	4.9. 	
      Sections 4.5 and 4.6, above, are additive to each other.
      For example, if Consultant sources a customer that produces $650,000 in
      revenue in the first six months, then Consultant is eligible to receive
      the Milestone Payment noted in Section 4.5, but NOT eligible to receive
      the Milestone Payment noted in Section 4.6, unless the customer produces
      revenue of $700,000 or more within the first six
months.

If so requested by JGRNT and through calculation with and
JGRNT’s approval at the time of any and each award, all restricted common share
awards mentioned in this Agreement shall be subject to a reduction in the number
of restricted common shares issued to JGRNT per grant to be paid instead as cash
proportional to the tax liability to be incurred by JGRNT at the time of the
award. The Company would withhold from payment to JGRNT that fraction of
restricted common shares in each of the paragraphs in Section 3, above, that
would correspond with the federal and provincial income tax payments otherwise
payable by JGRNT specifically with respect to each award only, and JGRNT agrees
that such a hybrid payment of cash and restricted common shares would fulfill
the obligations of the Company with respect to each affected award. The intent
of this partial cash payment would be to provide cash compensation to JGRNT in
the proportionate amount of each restricted common share award and it is
expressly agreed that it remains the sole responsibility of JGRNT to remit all
amounts due to Provincial and Federal tax authorities. This provision does not
conflict with nor negate the validity of Section 4.6 or 4.7. 

5.    TERMINATION 

	 	5.1. 	
      This Agreement may be terminated by either party at any
      time by one (1) month notice in advance, in writing given by JGRNT to the
      Company, or by the Company to JGRNT.

	 	 	 	 
	 		(a) 	
      The Company may terminate this Agreement at any time,
      without further obligation to JGRNT if JGRNT breaches any of the terms and
      conditions of this Agreement;

- 4 - 

6.   NOTICE 

	6.1. 	
      Any notice to be given under this Agreement shall be in
      writing and shall be deemed to have been given if delivered to, or sent by
      prepaid registered post addressed to, the respective addresses of the
      parties appearing on the first page of this Agreement (or to such other
      address as one party provides to the other in a notice given according to
      this paragraph). Where a notice is given by registered post it shall be
      conclusively deemed to be given and received on the fifth day after its
      deposit in a Canada post office any place in
Canada.

7.   TAXES

	7.1	JGRNT
      shall be responsible for the payment of its income, capital gains and all other
      taxes and other remittances including but not limited to any form of insurance
      as shall be required by any governmental entity (including but not limited to
      health insurance and federal and state or provincial income taxes), with respect
      to compensation paid by the Company to JGRNT, and nothing in this Agreement
      implies or creates a relationship of employment. JGRNT agrees to indemnify the
      Company for any tax, insurance or other remittance JGRNT fails to make and which
    the Company may be obligated to pay.

8.   MISCELLANEOUS 

	8.1 	
      This Agreement may not be assigned by either party
      without the prior written consent of the other.

	 	 
	8.2 	
      The titles of headings to the respective paragraphs of
      this agreement shall be regarded as having been used for reference and
      convenience only.

	 	 
	8.3 	
      This Agreement shall enure to the benefit of and be
      binding upon the parties hereto and their respective heirs, executors,
      administrators, successors and permitted assigns.

	 	 
	8.4 	
      This Agreement shall be governed by and interpreted in
      accordance with the laws of British Columbia, Canada.

	 	 
	8.5 	
      Expenses. JGRNT shall be reimbursed for all
      travelling and other expenses actually and properly incurred by it in
      connection with its duties hereunder, not including commuting to the
      office that is the normal place of business. For all such expenses JGRNT
      shall furnish to the Company statements, receipts and vouchers for such
      out-of-pocket expenses on a monthly basis. JGRNT is pre-authorized
      to incur up to $500 per month, cumulatively, in relevant expenses.
      Amounts over $500 per month, and all air-travel and hotel expenses,
      must be pre-approved by management of the Company or will be
      disallowed. Both parties recognize that as the financial condition of the
      Company improves or deteriorates, this amount may be increased or
      decreased without making changes to this document, provided the Company
      makes JGRNT aware, in writing, of the changed amount.

	 	 
	8.6 	
      JGRNT shall not, either during the continuance of its
      contract hereunder or at any time thereafter, disclose the private affairs
      of the Company and/or its subsidiary or subsidiaries, or any secrets or
      intellectual property of the Company (together or separately and as
      described below, “Proprietary Information”) and/or its subsidiary
      or subsidiaries, to any person other than the Directors of the Company
      and/or its subsidiary or subsidiaries or for the Company's purposes and
      shall not (either during the continuance of its contract hereunder or at
      any time thereafter) use for its own purposes or for any purpose other
      than those of the Company any information it may acquire in relation to
      the business and affairs of the Company and/or
its subsidiary or subsidiaries, unless required by
  law.

- 5 - 

	8.7 	
      Proprietary Information as that term is used
      herein shall consist of the following:

	 	a) 	
      all knowledge, data and information which JGRNT may
      acquire from the documents and information disclosed to it by the Company,
      its employees, attorneys, consultants, independent contractors, clients or
      representatives whether orally, in written or electronic form or on
      electronic media including, by way of example and not by limitation, any
      products, customer lists, supplier lists, marketing techniques, technical
      processes, formulae, inventions or discoveries (whether patentable or
      not), innovations, suggestions, ideas, reports, data, patents, trade
      secrets and copyrights, made or developed by the Company and related data
      and information related to the conduct of the business of the
    Company.

	 	 	 
	 	b) 	
      Proprietary Information shall also include discussions
      with officers, directors, employees, independent contractors, attorneys,
      consultants, clients, finance sources, customers or representatives and
      the fact that such discussions are taking place.

	 	 	 
	 	c) 	
      Proprietary Information shall not be directly or
      indirectly disclosed to any other person without the prior written
      approval of the Company.

	 	 	 
	 	d) 	
      Proprietary Information may not be used during the period
      of this contract nor thereafter, for the betterment of any other
      commercial enterprise, company, project or person without the prior
      written approval of the Company.

	 	 	 
	 	e) 	
      Proprietary Information shall not include matters of
      general public knowledge, information legally received or obtained by
      JGRNT from a third party or parties without a duty of confidentiality, and
      information independently known or developed by JGRNT without the
      assistance of the Company.

	8.8 	
      JGRNT shall well and faithfully serve the Company or any
      subsidiary as aforesaid during the continuance of its contract hereunder
      and use its best efforts to promote the interests of the Company. At all
      times JGRNT will maintain a high degree of professionalism and integrity
      as would be expected in keeping with his role. JGRNT reserves the right to
      refuse any request from the Company which may, in his reasonable opinion,
      violate either Federal or State Laws in either the United States or
      Canada.

	 	 
	8.9 	
      This Agreement may be terminated forthwith by the Company
      or JGRNT without notice if either party breaches the Agreement. A breach
      may include, but is not limited to, the
following:

	 	a) 	
      The Company or JGRNT shall commit any material breach of
      any of the provisions herein contained; or

	 	 	 
	 	b) 	
      The Company or JGRNT shall be guilty of any misconduct or
      neglect in the discharge of its duties hereunder; or

	 	 	 
	 	c) 	
      The Company or JGRNT shall become bankrupt or make any
      arrangements or composition with its creditors; or

	 	 	 
	 	d) 	
      JGRNT shall become of unsound mind or be declared
      incompetent to handle his own personal affairs; or

	 	 	 
	 		
      (e) The Company or JGRNT shall be convicted of any
      criminal offence other than an offence which, in the reasonable opinion of
      the Board of Directors of the Company, does not affect his/their position
      as a consultant or a director of the Company.

This Agreement may also be terminated by either party upon
thirty (30) days written notice to the other. Should the Company terminate this
agreement for a reason not enumerated in items 8.9(a), 8.9(b), 8.9(c), 8.9(d),
or 8.9(e), JGRNT will be entitled to all Milestone Payments, as they relate to
transactions which were in process but had not yet closed at the date of his
termination, to which he would have otherwise been entitled for a period of 60 days after the date of his notice of termination. 

- 6 - 

8.10      In the event this Agreement
is terminated by reason of default on the part of JGRNT or the written notice of
the Company, then the provisions of Sections on Proprietary Information and on
Confidentiality shall survive the termination or expiration of this Agreement. 

8.11      Upon Termination or
expiration of this Agreement, for any reason, JGRNT shall do the following:
JGRNT must return to Lexaria immediately, all correspondence, information,
reports, emails, phone recordings or transcripts, notes, JGRNT contact
information and all other materials related to the work performed for Lexaria
including all Proprietary Information during the contract period.

	 	a) 	
      All such materials and information as referred to in
      Section 8.11 are the exclusive property of the Company. After returning,
      transmitting or otherwise sending such information to Lexaria, JGRNT must
      destroy any and all remaining copy (ies) or records of same.

	 	 	 
	 	b) 	
      All such materials and information as referred to in
      Section 8.11 were obtained during the time of the paid contract with
      Lexaria, and may not be shown, lent, given, discussed or in any way
      disclosed with or to any other party as per the terms of the contract. The
      Proprietary Information JGRNT gains or has access to during the period of
      the contract is the exclusive property of Lexaria Corp, and the provisions
      governing such proprietary information survives the termination of this
      Consulting Agreement.

8.12 The Company is aware that JGRNT is independent and may
have and may continue to have financial, management or business interests in
other companies. The Company agrees that JGRNT may continue to devote time to
such outside interests, provided that such interests do not conflict with or
hinder JGRNT’s ability to perform his duties under this Agreement. 

8.13 The services to be performed by JGRNT pursuant hereto are
personal in character, to be performed by Mr. Jamieson Bondarenko, and neither
this Agreement nor any rights or benefits arising thereunder are assignable by
JGRNT without the previous written consent of the Company. 

8.14 With the exception of any previously granted options or
restricted stock, any and all previous agreements, written or oral, between the
parties hereto or on their behalf relating to the agreement between JGRNT and
the Company are hereby terminated and cancelled and each of the parties hereto
hereby releases and forever discharges the other party hereto of and from all
manner of actions, causes of action, claims and demands whatsoever under or in
respect of any such previous agreements. 

8.15 Any notice in writing or permitted to be given to JGRNT
hereunder shall be sufficiently given if delivered to JGRNT personally or mailed
by registered mail, postage prepaid, addressed to JGRNT at the address on the
front of this Agreement. Provided any such notice is mailed via guaranteed
overnight delivery, as aforesaid shall be deemed to have been received by JGRNT
on the first business day following the date of mailing. Any notice in writing
required or permitted to be given to the Company hereunder shall be given by
registered mail, postage prepaid, addressed to the Company at the address shown
on page 1 hereof. Any such notice mailed as aforesaid shall be deemed to have
been received by the Company on the first business day following the date of
mailing provided such mailing is sent via guaranteed overnight delivery. Any
such address for the giving of notices hereunder may be changed by notice in
writing given hereunder. 

8.16 The provisions of this Agreement shall inure to the
benefit of and be binding upon JGRNT and the successors and assigns of the
Company. For this purpose, the terms "successors" and "assigns" shall include
any person, firm or corporation or other entity which at any time, whether by
merger, purchase or otherwise, shall acquire all or substantially all of the
assets or business of the Company. 

8.17 Every provision of this Agreement is intended to be
severable. If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity of the
remainder of the provisions of this Agreement. 

- 7 - 

8.18 This Agreement is being delivered and is intended to be
managed from the Province of British Columbia and shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of such Province. Similarly no provision within this contract is deemed
valid should it conflict with the current or future laws of the United States of
America or current or future regulations set forth by the United States
Securities and Exchange Commission, the British Columbia Securities Commission,
or the Ontario Securities Commission. This Agreement may not be changed orally,
but only by an instrument in writing signed by the party against whom or which
enforcement of any waiver, change, modification or discharge is sought. 

8.19 This Agreement and the obligations of the Company herein
are subject to all applicable laws and regulations in force at the local, State,
Province, and Federal levels in both Canada and the United States. In the event
that there is an employment dispute between the Company and JGRNT, JGRNT agrees
to allow it to be settled according to applicable Canadian law in an applicable
British Columbia jurisdiction. 

8.20 The securities referred to herein will not be or have not
been registered under the United States Securities Act of 1933, as amended, and
may not be offered or sold in the United States absent registration or an
applicable exemption from registration requirements. Any and all potential or
actual common share award or stock option awards will be in compliance with all
applicable regulations in the USA and Canada. The securities issued will be
subject to a hold period in Canada of not less than four months and one day, or
for any resales possible into the USA under Rule 144, not less than six months
and one day. Hold periods may be longer if regulations so stipulate. 

8.21 This contract will expire on January 17, 2019 unless
renewed or extended by mutual written consent of both parties prior to that date
and can further serve as a month-to-month agreement after that date if both
parties so agree in writing at that time.

8.22 Any common shares that may be issued under this Agreement
will be subject to applicable hold periods and will include restricted legends
as per regulations that exist at the time of issuance. These legends will
substantially resemble the following: 

  
    
      
        "THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
          AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE AND HAVE BEEN
          ISSUED IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
          OF 1933, AS AMENDED (THE "1933 ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
          SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT
          OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
          THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN ACCORDANCE WITH APPLICABLE
          STATE SECURITIES LAWS." UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE
          HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE XXXXX.

      

    

  

	8.23 	
      JGRNT understands and agrees that his name and likeness
      could be announced and circulated with regards to his role with the
      Company. His name could be disseminated through such avenues as press
      releases, websites, or other media; and in personal meetings and
      appearances and public events. JGRNT understands that as a publicly traded
      entity, the Company has certain transparency obligations to its
      shareholders, stock exchanges, and other regulatory bodies, and has legal
      obligations to disclose JGRNT’s initial and ongoing relationship with the
      Company during the normal course of business.

	 	 
	8.24 	
      Company agrees to indemnify JGRNT and hold JGRNT harmless
      from and against any and all liabilities, losses and expenses arising from
      (i) any breach of JGRNT’s representations and warranties set forth herein;
      (ii) any liability to third parties as a result of JGRNT’s
      communication and/or sale of End Products, and (iii) any claims of
      infringement raised by third parties as to the Technology or Licensed
      Patents.

- 8 - 

	8.25 	
      JGRNT agrees to indemnify Company and hold Company
      harmless from and against any and all liabilities, losses and expenses
      arising from (i) any breach of Company’s representations and warranties
      set forth herein; (ii) any liability to third parties as a result of
      Company’s communication and/or sale of End Products; and (iii) any claims
      of infringement raised by third parties as to the Technology or Licensed
      Patents.

IN WITNESS WHEREOF the parties have executed this
Agreement the day and year first above written. 

	Lexaria Bioscience Corp: 	 
	  	 
	/s/ Chris Bunka
	 
	Authorized Signatory 	 
	  	 
	  	 
	  	 
	/s/ Jamieson
      Bondarenko 	 
	JRGNT Capital Corp. 	 
	Jamieson Bondarenkoifon-ex41_6.htm

 

Exhibit 4.1

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO BORROWER. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

Original Issue Date: January 19, 2018

Principal Amount: $[              ]

 

INSOFONICS CORPORATION

 

0% SENIOR CONVERTIBLE NOTE

DUE JANUARY 19, 2021

 

THIS SENIOR CONVERTIBLE NOTE is one of a series of duly authorized and validly issued Notes of InfoSonics Corporation, a Maryland corporation, (the “Borrower”), having its principal place of business at 4435 Eastgate Mall, Suite 320, San Diego, CA 92121, due January 19, 2021 (this note, the “Note” and, collectively with the other notes of such series, the “Notes”).

 

FOR VALUE RECEIVED, Borrower promises to pay to [                   ] maintaining an address at [                  ], or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of [              ] Dollars ($[                   ]) on January 19, 2021 (the “Maturity Date”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest, if any, to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof.

 

This Note is subject to the following additional provisions:

 

Section 1.          Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:

 

“Alternate Consideration” shall have the meaning set forth in Section 5(e).

 

“Bankruptcy Event” means any of the following events: (a) Borrower or any Subsidiary thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to Borrower or any Subsidiary thereof, (b) there is 

 

 

 

 

commenced against Borrower or any Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) Borrower or any Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) Borrower or any Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) Borrower or any Subsidiary thereof makes a general assignment for the benefit of creditors, (f) Borrower or any Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) Borrower or any Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

 

“Beneficial Ownership Limitation” shall have the meaning set forth in Section 4(e).

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

“Buy-In” shall have the meaning set forth in Section 4(d)(v).

 

“Change of Control Transaction” means, other than by means of conversion or exercise of the Notes and the Securities issued together with the Notes, the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of Borrower, by contract or otherwise) of in excess of 50% of the voting securities of Borrower, (b) Borrower merges into or consolidates with any other Person, or any Person merges into or consolidates with Borrower and, after giving effect to such transaction, the stockholders of Borrower immediately prior to such transaction own less than 50% of the aggregate voting power of Borrower or the successor entity of such transaction, (c) Borrower sells or transfers all or substantially all of its assets to another Person and the stockholders of Borrower immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a one year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by Borrower of an agreement to which Borrower is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.

 

“Closing Price” means on any particular date (a) the last reported closing bid price per share of Common Stock on such date on the Trading Market (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (b) if there is no such price on such date, then the closing bid price on the Trading Market on the date nearest preceding such date (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (c)  if the Common Stock is not then listed or quoted on a Trading Market and if prices for the Common Stock are then reported in the “pink sheets” published by OTC Markets Group, Inc. (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 (d) if the shares of Common Stock are not then publicly traded 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 Borrower, the fees and expenses of which shall be paid by Borrower.

 

“Conversion Date” shall have the meaning set forth in Section 4(a).

 

“Conversion Price” shall have the meaning set forth in Section 4(c).

 

“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Note in accordance with the terms hereof.

 

“Event of Default” shall have the meaning set forth in Section 8(a).

 

“Fundamental Transaction” shall have the meaning set forth in Section 5(e).

 

“GAAP” shall mean United States generally accepted accounting principles.

 

“Issuable Maximum” shall have the meaning set forth in Section 4(g).

 

“Mandatory Default Amount” means the sum of (a) the outstanding principal amount of this Note divided by the Conversion Price on the date the Mandatory Default Amount is either demanded (if demand or notice is required to create an Event of Default) or otherwise due and (b) all other amounts, costs, expenses and liquidated damages due in respect of this Note.

 

“Note Register” shall mean the books and records of the Company.

 

“Notice of Conversion” shall have the meaning set forth in Section 4(a).

 

“Original Issue Date” means the date of the first issuance of the Notes, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence such Notes.

 

“Other Holders” means holders of Other Notes.

 

“Other Notes” means Notes nearly identical to this Note issued to other Holders pursuant to the Purchase Agreement.

 

“Permitted Liens” means liens on the fixed assets of the Borrower with a purchase price below $50,000.

 

“Purchase Agreement” means the Securities Purchase Agreement, dated as of January 19, 2018 among Borrower and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Share Delivery Date” shall have the meaning set forth in Section 4(d)(ii).

 

“Successor Entity” shall have the meaning set forth in Section 5(e).

 

“Trading Day” means a day on which the principal Trading Market is open for trading.

 

 

 

 

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTCQB, or the OTCQX (or any successors to any of the foregoing).

 

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported on the OTCQX, OTCQB or OTC Pink Marketplace maintained by the OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the volume weighted average price of the Common Stock on the first such facility (or a similar organization or agency succeeding to its functions of reporting prices), or (d) 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 Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to Borrower, the fees and expenses of which shall be paid by Borrower.

 

Section 2.         Interest.

 

a)Interest. This Note shall not bear interest.  

 

b)Payment Grace Period.  The Borrower shall not have any grace period to pay any monetary amounts due under this Note except as specifically set forth herein.

 

c)Conversion Privileges.  The Conversion Rights set forth in Section 4 shall remain in full force and effect immediately from the date hereof and until the Note is paid in full regardless of the occurrence of an Event of Default, subject to the limitations set forth in Section 4(e) and 4(f).  This Note shall be payable in full on the Maturity Date, unless previously converted into Common Stock in accordance with Section 4 hereof.

 

d)Application of Payments.  Payments made in connection with this Note shall be applied first to amounts due hereunder other than principal, thereafter to any fees, interest or penalties accrued pursuant to the terms herein.

 

e)Pari Passu.  Except as otherwise set forth herein, all payments made on this Note and the Other Notes and all actions taken by the Borrower with respect to this Note and the Other Notes, shall be made and taken pari passu with respect to this Note and the Other Notes.  

 

f)Manner and Place of Payment.  Principal on this Note and other payments in connection with this Note shall be payable at the Holder’s offices as designated above in lawful money of the United States of America in immediately available funds without set-off, deduction or counterclaim.  Upon assignment of the interest of Holder in this Note, Borrower shall instead make its payment pursuant to the assignee’s instructions upon receipt of written notice thereof.  Except as set forth herein, this Note may not be prepaid or mandatorily converted without the consent of the Holder.

 

 

 

 

 

Section 3.           Registration of Transfers and Exchanges.

 

a)          Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.

 

b)          Investment Representations. This Note has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.

 

c)          Reliance on Note Register. Prior to due presentment for transfer to Borrower of this Note, Borrower and any agent of Borrower may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither Borrower nor any such agent shall be affected by notice to the contrary.

 

Section 4.          Conversion.

 

a)          Voluntary Conversion.  At any time after the Original Issuance Date (subject to the restrictions set forth in Sections 4(e) and 4(f) below) (the “Initial Conversion Date”), until this Note is no longer outstanding, this Note shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Sections 4(e) and 4(f) hereof). The Holder shall effect conversions by delivering to Borrower a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal amount of this Note to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to Borrower unless the entire principal amount of this Note has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion. The Holder and Borrower shall maintain records showing the principal amount(s) converted and the date of such conversion(s). Borrower may deliver an objection to any Notice of Conversion within one (1) Business Day of receipt of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Borrower shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.

 

b)          Intentionally omitted.  

 

c)          Conversion Price.  The conversion price for the principal in connection with voluntary conversions by the Holder shall be equal to $1.75 per share (the “Conversion Price”).  

 

d)          Mechanics of Conversion.

 

 

 

 

 

i.          Conversion Shares Issuable Upon Conversion of Principal Amount. The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing the outstanding principal amount of this Note to be converted by (y) the Conversion Price.

 

ii.         Delivery of Certificate Upon Conversion. Not later than two (2) Trading Days after each Conversion Date (the “Share Delivery Date”), and provided there is a sale of such Conversion Shares either pursuant to Rule 144 or an effective Registration Statement, as the case may be, Borrower shall deliver, or cause to be delivered, to the Holder a certificate or certificates representing the Conversion Shares which, on or after the six month anniversary of the Original Issue Date, shall be free of restrictive legends and trading restrictions unless the Holder is an Affiliate of the Borrower (and other than those which may then be required by the Purchase Agreement) representing the number of Conversion Shares being acquired upon the conversion of this Note. On or after the six month anniversary of the Original Issue Date, provided there is a sale of such Conversion Shares either pursuant to Rule 144 or an effective Registration Statement, as the case may be, Borrower shall use its commercially reasonable efforts to deliver any certificate or certificates required to be delivered by Borrower under this Section 4(d) electronically through the Depository Trust Company or another established clearing corporation performing similar functions.

 

iii.         Failure to Deliver Certificates. If, in the case of any Notice of Conversion, such certificate or certificates are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to Borrower at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event Borrower shall promptly return to the Holder any original Note delivered to Borrower and the Holder shall promptly return to Borrower the Common Stock certificates issued to such Holder pursuant to the rescinded Conversion Notice.

 

iv.         Obligation Absolute; Partial Liquidated Damages. Borrower’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to Borrower or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of Borrower to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by Borrower of any such action Borrower may have against the Holder. In the event the Holder of this Note shall elect to convert any or all of the outstanding principal amount hereof, Borrower may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Note shall have been sought and obtained, and Borrower posts a surety bond for the benefit of the Holder in the amount of 150% of the outstanding principal amount of this Note, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to the Holder to the extent it obtains 

 

 

 

 

judgment. In the absence of such injunction, Borrower shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If Borrower fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(d)(ii) by the Share Delivery Date, Borrower shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal amount being converted, $10 per Trading Day (increasing to $20 per Trading Day on the fifth (5th) Trading Day after such liquidated damages being to accrue) for each Trading Day after such Share Delivery Date until such certificates are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 8 hereof for Borrower’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

v.           Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder, if Borrower fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant to Section 4(d)(ii) and the Purchase Agreement, and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder or Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then Borrower shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Note in a principal amount equal to the principal amount of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued if Borrower had timely complied with its delivery requirements under Section 4(d)(ii). 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 this Note with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, Borrower shall be required to pay the Holder $1,000. The Holder shall provide Borrower written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of Borrower, evidence of the amount of such loss. 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 Borrower’s failure to timely deliver certificates representing shares of Common Stock upon conversion of this Note as required pursuant to the terms hereof. 

 

vi.         Reservation of Shares Issuable Upon Conversion. Borrower covenants that it will at all times reserve and keep available out of its authorized and unissued 

 

 

 

 

shares of Common Stock for the sole purpose of issuance upon conversion of this Note as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Notes), not less than one hundred (100%) percent of the aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the then outstanding principal amount of this Note at the Conversion Price (as adjusted from time to time), assuming such principal amount was not converted through the Maturity Date.  Borrower covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

 

vii.         Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, Borrower shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.

 

viii.         Transfer Taxes and Expenses. The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that, Borrower shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note so converted and Borrower shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to Borrower the amount of such tax or shall have established to the satisfaction of Borrower that such tax has been paid. Borrower shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion.

 

e)           Holder’s Conversion Limitations.  Borrower shall not effect any conversion of this Note, and a Holder shall not have the right to convert any portion of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of Borrower subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Notes or the Warrants) beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 4(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4(e) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a 

 

 

 

 

Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to Borrower each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and Borrower shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 4(e), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (A) Borrower’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by Borrower, or (C) a more recent written notice by Borrower or Borrower’s transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, Borrower shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of Borrower, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder. The Holder may decrease the Beneficial Ownership Limitation at any time and the Holder, upon not less than 61 days’ prior notice to Borrower, may increase the Beneficial Ownership Limitation provisions of this Section 4(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4(e) shall continue to apply. Any such increase will not be effective until the 61st day after such notice is delivered to Borrower. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.

 

(f)Issuance Restrictions.  If the Company has not obtained Shareholder Approval (as defined in the Purchase Agreement) or NASDAQ Listing Rule 5635 shall have been otherwise satisfied, then the Company may not issue upon conversion of the Notes a number of shares of Common Stock, which, when aggregated with any other shares of Common Stock underlying the Notes and the August 2016 Securities (as defined in the Purchase Agreement), would exceed 19.99% of the shares of Common Stock issued and outstanding as of the Closing Date (or such other appropriate date for such calculation in accordance with NASDAQ Listing Rules), subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date hereof (such number of shares, the “Issuable Maximum”).  The holders of the Notes shall be entitled to a portion of the Issuable Maximum equal to the quotient obtained by dividing (x) the amount of the Holder’s Notes by (y) the aggregate of all Notes issued to all holders pursuant to this Agreement.  In addition, the Holder may allocate its pro-rata portion of the Issuable Maximum among the August 2016 Securities held by it in its sole discretion.  Such portion shall be adjusted upward 

 

 

 

 

ratably in the event a holder no longer holds any Notes and the amount of shares issued to such holder pursuant to its Notes was less than such holder’s pro-rata share of the Issuable Maximum.

 

Section 5.           Certain Adjustments.

 

a)          Stock Dividends and Stock Splits. If Borrower, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by Borrower upon conversion of the Notes), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of Borrower, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of Borrower) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b)          Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 5(a) above, if at any time Borrower grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

d)Pro Rata Distributions. During such time as this Note is outstanding, if Borrower shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Note, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Note (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined 

 

 

 

 

for the participation in such Distribution (provided, however, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

e)          Fundamental Transaction. If, at any time while this Note is outstanding, (i) Borrower, directly or indirectly, in one or more related transactions effects any merger or consolidation of Borrower with or into another Person, (ii) Borrower, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by Borrower or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) Borrower, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) Borrower, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 4(e) and Section 4(f) on the conversion of this Note), the number of shares of Common Stock of the successor or acquiring corporation or of Borrower, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Note is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(e) and Section 4(f) on the conversion of this Note). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and Borrower shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction. Borrower shall cause any successor entity in a Fundamental Transaction in which Borrower is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of Borrower under this Note and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of this Section 5(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Note, deliver to the Holder in exchange for this Note a security of the Successor Entity 

 

 

 

 

evidenced by a written instrument substantially similar in form and substance to this Note which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Note immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of Borrower and shall assume all of the obligations of Borrower under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as Borrower herein.

 

f)         Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of Borrower) issued and outstanding.

 

g)          Notice to the Holder.

 

i.            Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, Borrower shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

ii.          Notice to Allow Conversion by Holder. If (A) Borrower shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) Borrower shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) Borrower shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of Borrower shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which Borrower is a party, any sale or transfer of all or substantially all of the assets of Borrower, or any compulsory share exchange whereby the Common Stock is converted into other securities, or (E) Borrower shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of Borrower, then, in each case, to the extent that such information constitutes material non-public information (as determined in good faith by the Company), Borrower shall cause to be delivered to the Holder at its last facsimile number or email address as it shall appear upon the Note Register, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share 

 

 

 

 

exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding Borrower or any of the Subsidiaries, Borrower shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert this Note during the twenty (20) day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

Section 6.Prepayment.

 

a)          General.  Except as otherwise provided herein, the Borrower may not prepay or redeem this Note in whole or in part without the prior written consent of the Holder, and to the extent the Borrower agrees with Other Holders to prepay or redeem Other Notes in whole or in part, the Borrower shall offer such prepayment or redemption of this Note on a pro rata basis on the same terms and conditions as agreed upon by the Holder and all Other Holders for such Other Notes.

 

        Section 7.          Negative Covenants.  For so long as any Notes remain outstanding, unless the holders of at least 67% in principal amount of the then outstanding Notes shall have otherwise given prior written consent, Borrower shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:

 

a)          other than as set forth in Section 4.15 of the Purchase Agreement, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind, including, but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; 

 

b)           enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom, other than Permitted Liens;

 

c)          amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder;

 

d)           enter into any agreement with respect to any of the foregoing; or

 

e)declare or pay any dividend.

 

Section 8.             Events of Default.

 

a)           “Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

 

 

 

 

i.           any default in the payment of (A) the principal amount of any Note or (B) liquidated damages and other amounts owing to a Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of a default under clause (B) above, is not cured within 3 Trading Days after Borrower has become or should have become aware of such default;

 

ii.         Borrower shall fail to observe or perform any other covenant or agreement contained in the Purchase Agreement or Notes (other than a breach by Borrower of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (vii) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) 5 Trading Days after notice of such failure sent by the Holder or by any Other Holder to Borrower and (B) 10 Trading Days after Borrower has become or should have become aware of such failure;

 

iii.         a default or event of default that constitutes a Material Adverse Effect (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur under (A) any of the Transaction Documents, including but not limited to failure to strictly comply with the provisions of the Warrants, or (B) any other agreement, lease, document or instrument to which Borrower or any Subsidiary is obligated (and not covered by clause (vi) below);

 

iv.Borrower or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or facility (other than a facility or agreement with any vendor or supplier of Borrower) or indenture agreement, under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing arrangement that (a) involves an obligation greater than $500,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable 

 

v. Borrower or any Subsidiary shall be subject to a Bankruptcy Event;

 

vi.         Borrower or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than $250,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

   

vi.         Borrower does not meet the current public information requirements under Rule 144 within two (2) years of the issuance of the Notes;

 

vii.          Borrower shall fail for any reason to deliver certificates to a Holder prior to the second Trading Day after a Conversion Date pursuant to Section 4(d) or Borrower shall provide at any time notice to the Holder, including by way of public announcement, of Borrower’s intention to not honor requests for conversions of any Notes in accordance with the terms hereof;

 

 

 

 

 

viii.        Any monetary judgment, writ or similar final process shall be entered or filed against Borrower, any subsidiary or any of their respective property or other assets for more than $150,000, and such judgment, writ or similar final process shall (A) remain unvacated, unbonded or unstayed for a period of 90 calendar days and (B) result in a Material Adverse Effect;

 

	
 
	

	
ix.any dissolution, liquidation or winding up by Borrower or a material Subsidiary of a substantial portion of their business;

 

	
 
	

	
x.cessation of operations by Borrower or a material Subsidiary;

 

	
 
	

	
xi.The failure by Borrower or any material Subsidiary to maintain any material intellectual property rights, personal, real property, equipment, leases or other assets which are necessary to conduct its business (whether now or in the future) which would have a Material Adverse Effect and such breach is not cured with twenty (20) days after written notice to the Borrower from the Holder (notwithstanding the foregoing, Borrower may elect in its reasonable business judgment to abandon any intellectual property rights);

 

	
 
	

	
xii.An event resulting in the Common Stock no longer being listed or quoted on a Trading Market, or notification from a Trading Market that the Borrower is not in compliance with the conditions for such continued quotation and such non-compliance continues for twenty (20) days following such notification;

 

	
 
	

	
xiii.a Commission or judicial stop trade order or suspension from its principal Trading Market;

 

	
 
	

	
xiv.the restatement after the date hereof of any financial statements filed by the Borrower with the Commission for any date or period prior to the date hereof and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statements, have constituted a Material Adverse Effect.  For the avoidance of doubt, any restatement related to new accounting pronouncements or pending SEC Comment letters shall not constitute a default under this Section;

 

	
 
	

	
xv.a default by the Borrower of a term, covenant, warranty or undertaking of any other agreement to which the Borrower and Holder are parties and which results in a Material Adverse Effect, or the occurrence of an event of default under any such other agreement to which Borrower and Holder are parties which is not cured after any required notice and/or cure period and which results in a Material Adverse Effect;

 

	
 
	

	
xvi.the occurrence of an Event of Default under any Other Note; or

 

	
 
	

	
xvii.any provision of any Transaction Document shall at any time for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or enforceable against the parties thereto due solely to the willful actions of Borrower, or the validity or enforceability thereof shall be contested by Borrower, or a proceeding shall be commenced by Borrower or any Subsidiary seeking to establish the invalidity or unenforceability thereof, or Borrower or any Subsidiary shall deny in writing that it has any liability or obligation purported to be created under any Transaction Document.

 

 

 

 

 

b)          Remedies Upon Event of Default, Fundamental Transaction and Change of Control Transaction.  If any Event of Default or a Fundamental Transaction the outstanding principal amount of this Note, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. Commencing on the Maturity Date and also five (5) days after the occurrence of any Event of Default interest on this Note shall accrue at an interest rate equal to the lesser of 8% per annum or the maximum rate permitted under applicable law.  Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Note to or as directed by Borrower. In connection with such acceleration described herein, the Holder need not provide, and Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 8(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

Section 9.           Miscellaneous.

 

a)          Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, facsimile or email, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery, (b) the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, or the first Business Day following such delivery if delivered after such time or (c) 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 addresses for such communications shall be: (i) if to Borrower, to: InfoSonics Corporation, 4435 Eastgate Mall, Suite 320, San Diego, CA 92121, Attn: Chief Financial Officer, with a copy by fax only to (which shall not constitute notice): Perkins Coie LLP, 1888 Century Park East, Suite 1700, Los Angeles, CA 90069, Attn: David J. Katz, Esq., facsimile: (310) 843-3268, and (ii) if to the Holder, to: the address and fax number indicated on the front page of this Note.

 

b)          Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of Borrower, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of Borrower. This Note ranks pari passu with all Other Notes now or hereafter issued under the terms set forth herein.         

 

c)          Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, Borrower shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of 

 

 

 

 

evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to Borrower.

 

d)          Governing Law. Except as otherwise set forth herein, all questions concerning governing law, jurisdiction, venue and the construction, validity, enforcement and interpretation of this Note shall be determined in accordance with the provisions of the Purchase Agreement.  This Note shall be deemed an unconditional obligation of Borrower for the payment of money and, without limitation to any other remedies of Holder, may be enforced against Borrower by summary proceeding pursuant to New York Civil Procedure Law and Rules Section 3213 or any similar rule or statute in the jurisdiction where enforcement is sought.  For purposes of such rule or statute, any other document or agreement to which Holder and Borrower are parties or which Borrower delivered to Holder, which may be convenient or necessary to determine Holder’s rights hereunder or Borrower’s obligations to Holder are deemed a part of this Note, whether or not such other document or agreement was delivered together herewith or was executed apart from this Note.

 

e)          Waiver. Any waiver by Borrower or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of Borrower or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion. Any waiver by Borrower or the Holder must be in writing.

 

f)         Severability. Wherever possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Note.

 

g)        Usury. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. Borrower covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive Borrower from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and Borrower (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

 

h)        Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

i)         Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.

 

 

 

 

 

j)         Amendment. Unless otherwise provided for hereunder, this Note may not be modified or amended or the provisions hereof waived without the written consent of Borrower and the Holder.

 

k)        Facsimile Signature.  In the event that the Borrower’s signature is delivered by facsimile transmission, PDF, electronic signature or other similar electronic means, such signature shall create a valid and binding obligation of the Borrower with the same force and effect as if such signature page were an original thereof.

 

 

*********************

 

(Signature Pages Follow)

 

 

 

 

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by an authorized officer as of the _____ day of ________ 2018.

 

INFOSONICS CORPORATION

 

 

By: ___________________________________

     Name: Vernon A. LoForti

Title: Vice President, Chief Financial Officer and   

 Corporate Secretary

 

 

 

 

ANNEX A

 

NOTICE OF CONVERSION

 

The undersigned hereby elects to convert principal under the Senior Convertible Note due January 19, 2021 of InfoSonics Corporation., a Maryland corporation (the “Borrower”), into shares of common stock (the “Common Stock”), of Borrower according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by Borrower in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

 

By the delivery of this Notice of Conversion the undersigned represents and warrants to Borrower that its ownership of the Common Stock does not exceed the amounts specified under Section 4 of this Note, as determined in accordance with Section 13(d) of the Exchange Act.

 

The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

 

Conversion calculations:

	
 
	
Date to Effect Conversion: ____________________________

	
 
	
 

	
 
	
Principal Amount of Note to be Converted: $__________________

	
 
	
 

	
 
	
Number of shares of Common Stock to be issued: ______________

	
 
	
 

	
 
	
Signature: _________________________________________

	
 
	
 

	
 
	
Name: ____________________________________________

	
 
	
 

	
 
	
Address for Delivery of Common Stock Certificates: __________

	
 
	
_____________________________________________________ 

	
 
	
_____________________________________________________

	
 
	
 

	
 
	
Or

	
 
	
 

	
 
	
DWAC Instructions: _________________________________

	
 
	
 

	
 
	
Broker No:_____________

	
 
	
Account No: _______________

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