Document:

gtbp_ex102

 

Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

REGISTRATION RIGHTS AGREEMENT (this
"Agreement"), dated as of
______________, by and among GT Biopharma, Inc., a Delaware corporation, with headquarters
located at 9350 Wilshire Blvd, Suite
203, Beverly Hills, CA 90212 (the "Company"), and the investors listed on
the Schedule of Purchasers attached hereto (each, a "Purchaser" and collectively, the
"Purchasers").

 

WHEREAS:

 

A.           In
connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "Securities Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions of
the Securities Purchase Agreement, to issue and sell to each
Purchaser, a Convertible Note (collectively, the
“Notes”), which
will be convertible into shares of the Company's common stock, par
value $0.001 per share (the "Common
Stock") (the shares of Common Stock issuable upon conversion
of the Notes, collectively, the "Common Shares").

 

B.           In
accordance with the terms of the Securities Purchase Agreement, the
Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable
state securities laws.

 

NOW, THEREFORE, in consideration of the
premises and the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and each of the Purchasers
hereby agree as follows:

 

1.           Definitions.

 

Capitalized terms
used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement.
As used in this Agreement, the following terms shall have the
following meanings:

 

(a)           "Additional
Effective Date" means the date the Additional Registration
Statement is declared effective by the SEC.

 

(b)           "Additional
Effectiveness Deadline" means the date which is the earlier
of (x) (i) in the event that the Additional Registration Statement
is not subject to a full review by the SEC, thirty (30) calendar
days after the earlier of the
Additional Filing Date and the Additional Filing Deadline or
(ii) in the event that the Additional Registration Statement is
subject to a full review by the SEC, fifty (50) calendar days after
the earlier of the Additional Filing
Date and the Additional Filing Deadline and (y) the fifth
(5th)
Business Day after the date the Company is notified (orally or in
writing, whichever is earlier) by the SEC that such Additional
Registration Statement will not be reviewed or will not be subject
to further review; provided, however, that if the Additional
Effectiveness Deadline falls on a Saturday, Sunday or other day
that the SEC is closed for business, the Additional Effectiveness
Deadline shall be extended to the next Business Day on which the
SEC is open for business.

 

(c)           "Additional
Filing Date" means the date on which the Additional
Registration Statement is filed with the SEC.

 

(d)           "Additional
Filing Deadline" means if Cutback Shares are required to be
included in any Additional Registration Statement, thirty (30) days
after the date substantially all of the Registrable Securities
registered under the immediately preceding Registration Statement
are sold.

 

 

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(e)           "Additional
Registrable Securities" means, (i) any Cutback Shares not
previously included on a Registration Statement and (ii) any
capital stock of the Company issued or issuable with respect to the
Common Shares, or the Cutback Shares, as applicable, as a result of
any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise.

 

(f)           "Additional
Registration Statement" means a registration statement or
registration statements of the Company filed under the 1933 Act
covering the resale of any Additional Registrable
Securities.

 

(g)           "Additional
Required Registration Amount" means (I) any Cutback Shares
not previously included on a Registration Statement, all subject to
adjustment as provided in Section 2(f) or (II) such other amount as
may be permitted by the staff of the SEC pursuant to Rule
415.

 

(h)           "Business
Day" means any day other than Saturday, Sunday or any other
day on which commercial banks in the City of New York are
authorized or required by law to remain closed.

 

(i)           "Closing
Date" shall have the meaning set forth in the Securities
Purchase Agreement.

 

(j)           "Cutback
Shares" means any of the Initial Required Registration
Amount or the Additional Required Registration Amount (without
regard to clause (II) in the definition thereof) of Registrable
Securities not included in all Registration Statements previously
declared effective as contemplated hereunder as a result of a
limitation on the maximum number of shares of Common Stock of the
Company permitted to be registered by the staff of the SEC pursuant
to Rule 415. For the purpose of determining the Cutback Shares, in
order to determine any applicable Required Registration Amount,
unless an Investor gives written notice to the Company to the
contrary with respect to the allocation of its Cutback Shares, the
Common Shares shall be excluded on a pro rata basis among the
Investors until all of the Common Shares have been
excluded.

 

(k)           "Effective
Date" means the Initial Effective Date and the Additional
Effective Date, as applicable.

 

 

(l)           "Effectiveness
Deadline" means the Initial Effectiveness Deadline and the
Additional Effectiveness Deadline, as applicable.

 

(m)           "Eligible
Market" means the Principal Market, The New York Stock
Exchange, Inc., the NYSE American, The Nasdaq Capital Market, The
Nasdaq Global Select Market, The Nasdaq Global Market, the OTC
Bulletin Board, the OTCQB or the OTCQX (or any successor to any of
the foregoing).

 

(n)           "Filing
Deadline" means the Initial Filing Deadline and the
Additional Filing Deadline, as applicable.

 

(o)           "Initial
Effective Date" means the date that the Initial Registration
Statement has been declared effective by the SEC.

 

(p)           "Initial
Effectiveness Deadline" means the date which is the earlier
of (x) (i) in the event that the Initial Registration Statement is
not subject to a full review by the SEC, forty-five (45) calendar
days after the Initial Filing Deadline, or (ii) in the event that
the Initial Registration Statement is subject to a full review by
the SEC, ninety (90) calendar days after the Initial Filing
Deadline, and (y) the fifth (5th) Business Day after
the date the Company is notified (orally or in writing, whichever
is earlier) by the SEC that such Initial Registration Statement
will not be reviewed or will not be subject to further review;
provided, however, that if the Initial Effectiveness Deadline falls
on a Saturday, Sunday or other day that the SEC is closed for
business, the Initial Effectiveness Deadline shall be extended to
the next Business Day on which the SEC is open for
business.

 

 

 

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(q)           "Initial
Filing Date" means the date on which the Initial
Registration Statement is filed with the SEC.

 

(r)           "Initial
Filing Deadline" means thirty (30) days after the Initial
Closing (as defined in the Securities Purchase
Agreement).

 

(s)           "Initial
Registrable Securities" means (i) the Common Shares issued
or issuable upon conversion of the Notes issued pursuant to the
terms of the Securities Purchase Agreement, and (ii) any capital
stock of the Company issued or issuable with respect to the Common
Shares, or the Notes as a result of any stock split, stock
dividend, recapitalization, exchange or similar event or otherwise
without regard to any limitations on conversion of the
Notes.

 

(t)           "Initial
Registration Statement" means a registration statement or
registration statements of the Company filed under the 1933 Act
covering the resale of the Initial Registrable
Securities.

 

(u)           "Initial
Required Registration Amount" means (i) the sum of the number of Common
Shares, or (ii) such other amount as may be permitted by the
staff of the SEC pursuant to Rule 415.

 

(v)           "Investor"
means a Purchaser or any transferee or assignee thereof to whom a
Purchaser assigns its rights under this Agreement and who agrees to
become bound by the provisions of this Agreement in accordance with
Section 9 and any transferee or assignee thereof to whom a
transferee or assignee assigns its rights under this Agreement and
who agrees to become bound by the provisions of this Agreement in
accordance with Section 9.

 

(w)           "Person"
means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency
thereof.

 

(x)           "Principal
Market" means The OTCQB.

 

(y)           "register,"
"registered," and
"registration" refer to a
registration effected by preparing and filing one or more
Registration Statements (as defined below) in compliance with the
1933 Act and pursuant to Rule 415, and the declaration or ordering
of effectiveness of such Registration Statement(s) by the
SEC.

 

(z)           "Registrable
Securities" means the Initial Registrable Securities and the
Additional Registrable Securities.

 

 

(aa)           "Registration
Statement" means the Initial Registration Statement and the
Additional Registration Statement, as applicable.

 

 

(bb)           "Required
Holders" means holders of at least a majority of the
Registrable Securities.

 

 

 

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(cc)           "Required
Registration Amount" means either the Initial Required
Registration Amount or the Additional Required Registration Amount,
as applicable.

 

 

(dd)           "Rule
415" means Rule 415 promulgated under the 1933 Act or any
successor rule providing for offering securities on a continuous or
delayed basis.

 

(ee)           "SEC"
means the United States Securities and Exchange
Commission.

 

(ff)           "Trading
Day" means any
day on which the Common Stock is traded on the Principal Market,
or, if the Principal Market is not the principal trading market for
the Common Stock, then on the principal securities exchange or
securities market on which the Common Stock is then traded;
provided that "Trading Day" shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for 3
or more hours or any day that the Common Stock is suspended from
trading during the final hour of trading on such exchange or market (or if
such exchange or market does not designate in advance the closing
time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York time).

 

2.           Registration.

 

(a)           Initial
Mandatory Registration. Promptly following the Closing Date,
the Company shall prepare, and, as soon as practicable but in no
event later than the Initial Filing Deadline, file with the SEC the
Initial Registration Statement on Form S-1 covering the resale of
all of the Initial Registrable Securities. In the event that Form
S-3 is unavailable for such a registration, the Company shall use
Form S-1 or such other form as is available for such a registration
on another appropriate form reasonably acceptable to the Required
Holders, subject to the provisions of Section 2(e). The Initial
Registration Statement prepared pursuant hereto shall register for
resale at least the number of shares of Common Stock equal to the
Initial Required Registration Amount determined as of the date the
Initial Registration Statement is initially filed with the SEC,
subject to adjustment as provided in Section 2(f). The Initial
Registration Statement shall contain (except if otherwise directed
by the Required Holders) the "Plan of Distribution" and
"Selling
Shareholders" sections in substantially the form attached
hereto as Exhibit
B, with such modifications as may be required by law. The
Company shall use its commercially reasonable efforts to have the
Initial Registration Statement declared effective by the SEC as
soon as practicable, but in no event later than the Initial
Effectiveness Deadline. By 9:30 a.m. New York time on the second
(2nd)
Business Day following the Initial Effective Date, the Company
shall file with the SEC in accordance with Rule 424 under the 1933
Act the final prospectus to be used in connection with sales
pursuant to such Initial Registration Statement. The Company
represents and warrants that it is the Company’s
understanding that the SEC will not cause there to be Cutback
Shares with respect to up to one-third of the Company’s
public float, calculated under SEC rules.

 

(b)           Additional
Mandatory Registrations. The Company shall prepare, and, as
soon as practicable but in no event later than the Additional
Filing Deadline, file with the SEC an Additional Registration
Statement on Form S-1 covering the resale of all of the Additional
Registrable Securities not previously registered on an Additional
Registration Statement hereunder. To the extent the staff of the
SEC does not permit the Additional Required Registration Amount to
be registered on an Additional Registration Statement, the Company
shall file Additional Registration Statements successively trying
to register on each such Additional Registration Statement the
maximum number of remaining Additional Registrable Securities until
the Additional Required Registration Amount has been registered
with the SEC; provided that after two rejections by the SEC of
Additional Registration Statements, the Company shall not be
required to file Additional Registration Statements more frequently
than once per sixty day period commencing subsequent to the second
rejection. In the event that Form S-3 is unavailable for such a
registration, the Company shall use Form S-1 or such other form as
is available for such a registration on another appropriate form
reasonably acceptable to the Required Holders, subject to the
provisions of Section 2(e). Each Additional Registration Statement
prepared pursuant hereto shall register for resale at least that
number of shares of Common Stock equal to the Additional Required
Registration Amount determined as of the date such Additional
Registration Statement is initially filed with the SEC, subject to
adjustment as provided in Section 2(f). Each Additional
Registration Statement shall contain (except if otherwise directed
by the Required Holders) the "Plan of Distribution" and
"Selling
Shareholders" sections in substantially the form attached
hereto as Exhibit
B, with such modifications as may be required by law. The
Company shall use its commercially reasonable efforts to have each
Additional Registration Statement declared effective by the SEC as
soon as practicable, but in no event later than the Additional
Effectiveness Deadline. By 9:30 a.m. New York time on the second
(2nd)
Business Day following the Additional Effective Date, the Company
shall file with the SEC in accordance with Rule 424 under the 1933
Act the final prospectus to be used in connection with sales
pursuant to such Additional Registration Statement.

 

 

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(c)           Allocation
of Registrable Securities. The initial number of Registrable
Securities included in any Registration Statement and any increase
or decrease in the number of Registrable Securities included
therein shall be allocated pro rata among the Investors based on
the number of Registrable Securities held by each Investor at the
time the Registration Statement covering such initial number of
Registrable Securities or increase or decrease thereof is declared
effective by the SEC. In the event that an Investor sells or
otherwise transfers any of such Investor's Registrable Securities,
each transferee shall be allocated a pro rata portion of the then
remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common
Stock included in a Registration Statement and which remain
allocated to any Person which ceases to hold any Registrable
Securities covered by such Registration Statement shall be
allocated to the remaining Investors, pro rata based on the number
of Registrable Securities then held by such Investors which are
covered by such Registration Statement. In no event shall the
Company include any securities other than Registrable Securities on
any Registration Statement without the prior written consent of the
Required Holders.

 

(d)           Legal
Counsel. Subject to Section 5 hereof, the Required Holders
shall have the right to select one legal counsel to review and
oversee any registration pursuant to this Section 2 ("Legal Counsel"), which shall be Gary
Henrie, Esq., or such other counsel as thereafter designated by the
Required Holders. The Company and Legal Counsel shall reasonably
cooperate with each other in performing the Company's obligations
under this Agreement.

 

(e)           Ineligibility
for Form S-3. In the event that Form S-3 is not available
for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the
Registrable Securities on Form S-1 or another appropriate form
reasonably acceptable to the Required Holders and (ii) undertake to
register the Registrable Securities on Form S-3 if such form
becomes available prior to any required post-effective amendment,
provided that the Company shall maintain the effectiveness of the
Registration Statement then in effect until such time as any such
Registration Statement on Form S-3 filed by the Company covering
the Registrable Securities has been declared effective by the
SEC.

 

(f)           Sufficient
Number of Shares Registered. In the event the number of
shares available under a Registration Statement filed pursuant to
Section 2(a) or Section 2(b) is insufficient to cover the Required
Registration Amount of Registrable Securities required to be
covered by such Registration Statement or an Investor's allocated
portion of the Registrable Securities pursuant to Section 2(c), the
Company shall amend the applicable Registration Statement, or file
a new Registration Statement (on the short form available therefor,
if applicable), or both, so as to cover at least the Required
Registration Amount as of the Trading Day immediately preceding the
date of the filing of such amendment or new Registration Statement,
in each case, as soon as practicable, but in any event not later
than fifteen (15) days after the necessity therefor arises. The
Company shall use its commercially reasonable efforts to cause such
amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. For purposes of
the foregoing provision, the number of shares available under a
Registration Statement shall be deemed "insufficient to cover all
of the Registrable Securities" if at any time the number of shares
of Common Stock available for resale under the Registration
Statement is less than the Required Registration
Amount.

 

 

5

 

 

 

(g)           Effect
of Failure to File and Obtain and Maintain Effectiveness of
Registration Statement. If (i) the Initial Registration
Statement when declared effective fails to register the Initial
Required Registration Amount of Initial Registrable Securities (a
"Registration Failure"), (ii) a Registration Statement covering all
of the Registrable Securities required to be covered thereby and
required to be filed by the Company pursuant to this Agreement is
(A) not filed with the SEC on or before the applicable Filing
Deadline (a "Filing Failure") or (B) not declared effective by the
SEC on or before the applicable Effectiveness Deadline, (an
"Effectiveness Failure") or (iii) on any day after the applicable
Effective Date, sales of all of the Registrable Securities required
to be included on such Registration Statement cannot be made (other
than during an Allowable Grace Period (as defined in Section 3(r)))
pursuant to such Registration Statement or otherwise (including,
without limitation, because of the suspension of trading or any
other limitation imposed by an Eligible Market, a failure to keep
such Registration Statement effective, a failure to disclose such
information as is necessary for sales to be made pursuant to such
Registration Statement, a failure to register a sufficient number
of shares of Common Stock or a failure to maintain the listing of
the Common Stock) (a "Maintenance Failure" and collectively with a
Registration Failure, a Filing Failure, and an Effectiveness
Failure, the “Failures” and each a
“Failure”), then, as partial relief for the damages to
any holder by reason of a Failure (which remedy shall not be
exclusive of any other remedies available at law or in equity,
including, without limitation, specific performance or the
additional obligation of the Company to register any Cutback
Shares), the Company shall pay to each holder of Registrable
Securities relating to such Registration Statement an amount in
cash equal to one percent (1.0%) of the aggregate Subscription
Amount (as defined in the Securities Purchase Agreement) of such
Investor's Registrable Securities whether or not included in such
Registration Statement, on each of the following dates: (i) the day
of a Registration Failure, (ii) the day of a Filing Failure; (iii)
the day of an Effectiveness Failure; (iv) the initial day of a
Maintenance Failure; (v) on the thirtieth day after the date of a
Registration Failure and every thirtieth day thereafter (pro rated
for periods totaling less than thirty days) until such Registration
Failure is cured; (vi) on the thirtieth day after the date of a
Filing Failure and every thirtieth day thereafter (pro rated for
periods totaling less than thirty days) until such Filing Failure
is cured; (vii) on the thirtieth day after the date of an
Effectiveness Failure and every thirtieth day thereafter (pro rated
for periods totaling less than thirty days) until such
Effectiveness Failure is cured; and (viii) on the thirtieth day
after the initial date of a Maintenance Failure and every thirtieth
day thereafter (pro rated for periods totaling less than thirty
days) until such Maintenance Failure is cured; provided however, in
the event that there shall be more than one Failure occurring
simultaneously, the 1.0% shall apply in the aggregate (e.g., during
any single or multiple Failure, 1% shall be due, however 1% shall
not be due “per Failure” if the Failures are
simultaneous and for so long as such Failures are simultaneous).
The payments to which a holder shall be entitled pursuant to this
Section 2(g) are referred to herein as "Registration Delay
Payments." Registration Delay Payments shall be paid on the earlier
of (I) the dates set forth above and (II) the third Business Day
after the event or failure giving rise to the Registration Delay
Payments is cured. In the event the Company fails to make
Registration Delay Payments in a timely manner, such Registration
Delay Payments shall bear interest at the rate of one percent (1%)
per month (prorated for partial months) until paid in full.
Notwithstanding anything to the contrary contained herein,
Registration Delay Payments shall (i) not, in the aggregate, exceed
fifteen percent (15%) of the aggregate Purchase Price, (ii) cease
to accrue when all of the Registrable Securities may be sold by
non-affiliates of the Company pursuant to Rule 144 without any
restrictions or limitations and (iii) cease to accrue upon the
termination of the Registration Period (as defined
below).

 

(h)           Limitation
on Other Registration Statements. The Company shall not file
another registration statement under the 1933 Act prior to the
earlier of (i) date that the Initial Registration Statement is
declared effective by the SEC and (ii) the end of the
Registration Period (as defined in Section 3(a); provided that, this Section
2(h) shall not prevent the Company from filing a registration
statement on Form S-4 or Form S-8 with the SEC at any time
beginning thirty (30) days after the initial filing of the Initial
Registration Statement with the SEC.

 

 

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3.           Related
Obligations.

 

At such
time as the Company is obligated to file a Registration Statement
with the SEC pursuant to Section 2(a), 2(b), 2(e) or 2(f), the
Company will use its commercially reasonable efforts to effect the
registration of the Registrable Securities in accordance with the
intended method of disposition thereof and, pursuant thereto, the
Company shall have the following obligations:

 

(a)           The
Company shall promptly prepare and file with the SEC a Registration
Statement with respect to the Registrable Securities and use its
commercially reasonable efforts to cause such Registration
Statement relating to the Registrable Securities to become
effective as soon as practicable after such filing (but in no event
later than the Effectiveness Deadline). The Company shall keep each
Registration Statement effective pursuant to Rule 415 at all times
until the earlier of (i) the date that is two (2) years and six (6)
months after the Closing Date, (ii) the date on which the Investors
shall have sold all of the Registrable Securities required to be
covered by such Registration Statement or (iii) the date on which
all of the Registrable Securities may be sold by non-affiliates of
the Company pursuant to Rule 144 without any restrictions or
limitations (the "Registration
Period"). The Company shall ensure that each Registration
Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements
therein (in the case of prospectuses, in the light of the
circumstances in which they were made) not misleading. The term
"commercially reasonable efforts" shall mean, among other things,
that the Company shall submit to the SEC, within two (2) Business
Days after the later of the date that (i) the Company learns that
no review of a particular Registration Statement will be made by
the staff of the SEC or that the staff has no further comments on a
particular Registration Statement, as the case may be, and (ii) the
approval of Legal Counsel pursuant to Section 3(c) (which approval
is immediately sought), a request for acceleration of effectiveness
of such Registration Statement to a time and date not later than
two (2) Business Days after the submission of such request. The
Company shall respond in writing to comments made by the SEC in
respect of a Registration Statement as soon as practicable, but in
no event later than fifteen (15) days after the receipt of comments
by or notice from the SEC that an amendment is required in order
for a Registration Statement to be declared effective.

 

(b)           The
Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with
such Registration Statement, which prospectus is to be filed
pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep such Registration Statement effective at all
times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by
such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance
with the intended methods of disposition by the seller or sellers
thereof as set forth in such Registration Statement. In the case of
amendments and supplements to a Registration Statement which are
required to be filed pursuant to this Agreement (including pursuant
to this Section 3(b)) by reason of the Company filing a report on
Form 10-K, Form 10-Q, Form 8-K or any analogous report under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the Company shall have
incorporated such report by reference into such Registration
Statement, if applicable, or shall file such amendments or
supplements with the SEC on the same day on which the 1934 Act
report is filed which created the requirement for the Company to
amend or supplement such Registration Statement.

 

 

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(c)           The
Company shall (A) permit Legal Counsel to review and comment upon
(i) a Registration Statement at least three (3) Business Days prior
to its filing with the SEC and (ii) all amendments and supplements
to all Registration Statements (except for those filed by reason of
the Company filing Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q, Current Reports on Form 8-K, and any similar or
successor reports) within a reasonable number of days prior to
their filing with the SEC, (B) permit each Investor to review and
comment on the “Plan of Distribution” and
“Selling Shareholders” sections of the Registration
Statement and all amendments and supplements to the Registration
Statement to the extent any changes are made to those sections, and
(C) not file any Registration Statement or amendment or supplement
thereto in a form to which Legal Counsel reasonably objects;
provided however, that if the delay in filing the Registration
Statement is due to Legal Counsel’s or an Investor’s
unreasonable objections (and unreasonable refusal to allow the
Company to file the Registration Statement) then in such event, no
Registration Failure (or similar event that triggers a Registration
Delay Payment) shall be deemed to have occurred with such delay
arising from Legal Counsel’s unreasonable objections, or
solely with respect to an Investor, arising from such
Investor’s unreasonable objections. The Company shall not
submit a request for acceleration of the effectiveness of a
Registration Statement or any amendment or supplement thereto
without the prior approval of Legal Counsel, which consent shall
not be unreasonably withheld; provided however, that if the delay
in filing the effectiveness of the Registration Statement is due to
Legal Counsel’s unreasonable objections (and unreasonable
refusal to allow the Registration Statement to become effective)
then in such event, no Effectiveness Failure (or similar event that
triggers a Registration Delay Payment) shall be deemed to have
occurred. The Company shall furnish to Legal Counsel, without
charge, copies of any correspondence from the SEC or the staff of
the SEC to the Company or its representatives relating to any
Registration Statement. The Company shall reasonably cooperate with
Legal Counsel in performing the Company's obligations pursuant to
this Section 3.

 

(d)           The
Company shall furnish to each Investor whose Registrable Securities
are included in any Registration Statement, without charge, (i)
promptly after the same is prepared and filed with the SEC, at
least one copy of such Registration Statement and any amendment(s)
thereto, including financial statements and schedules, all
documents incorporated therein by reference, if requested by an
Investor, all exhibits and each preliminary prospectus, (ii) upon
the effectiveness of any Registration Statement, ten (10) copies of
the prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of copies
as such Investor may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus,
as such Investor may reasonably request from time to time in order
to facilitate the disposition of the Registrable Securities owned
by such Investor.

 

(e)           The
Company shall use its commercially reasonable efforts to (i)
register and qualify, unless an exemption from registration and
qualification applies, the resale by Investors of the Registrable
Securities covered by a Registration Statement under such other
securities or "blue sky" laws of all applicable jurisdictions in
the United States, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the
Registration Period, (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take
all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided,
however, that the Company shall not be required in connection
therewith or as a condition thereto to (x) qualify to do business
in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(e), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall
promptly notify Legal Counsel of the receipt by the Company of any
notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under
the securities or "blue sky" laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.

 

 

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(f)           The
Company shall notify Legal Counsel in writing of the happening of
any event, as promptly as practicable but not later than the first
Business Day after becoming aware of such event, (i) as a result of
which the prospectus included in a Registration Statement, as then
in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (provided
that in no event shall such notice contain any material, nonpublic
information), or (ii) that results in the lack of effectiveness of
any Registration Statement, and, subject to Section 3(r), promptly
prepare a supplement or amendment to such Registration Statement to
correct such untrue statement or omission, or lack of effectiveness
of any Registration Statement. The Company shall also promptly
notify Legal Counsel in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed,
and when a Registration Statement or any post-effective amendment
has become effective (notification of such effectiveness shall be
delivered to Legal Counsel by facsimile or email on the same day of
such effectiveness and by overnight mail), (ii) of any request by
the SEC for amendments or supplements to a Registration Statement
or related prospectus or related information, and (iii) of the
Company's reasonable determination that a post-effective amendment
to a Registration Statement would be appropriate. By 9:30 a.m. New
York City time on the second (2nd) day following the
date any post-effective amendment has become effective, the Company
shall file with the SEC in accordance with Rule 424 under the 1933
Act the final prospectus to be used in connection with sales
pursuant to such Registration Statement.

 

(g)           The
Company shall use its commercially reasonable efforts to prevent
the issuance of any stop order or other suspension of effectiveness
of a Registration Statement, or the suspension of the qualification
of any of the Registrable Securities for sale in any jurisdiction
and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible
moment and to notify Legal Counsel of the issuance of such order
and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such
purpose.

 

(h)           If
any Investor is required by the SEC to be described in the
Registration Statement as an underwriter or the Company and an
Investor agree that it should be identified as an underwriter of
Registrable Securities in the Registration Statement and the
Registration Statement is so modified, the Company shall furnish to
such Investor, on the date of the effectiveness of the Registration
Statement and thereafter from time to time on such dates as an
Investor may reasonably request (i) a letter, dated such date, from
the Company's independent certified public accountants in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering,
addressed to the Investors, and (ii) an opinion, dated as of such
date, of counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to
the Investors.

 

 

9

 

 

 

 

 

(i)           If
any Investor is required under applicable securities laws to be
described in the Registration Statement as an underwriter or the
Company and an Investor agrees that it could reasonably be deemed
to be an underwriter of Registrable Securities, the Company shall
make available for inspection by (i) such Investor, (ii) Legal
Counsel and (iii) one firm of accountants or other agents retained
by the Investors (collectively, the "Inspectors"), all pertinent financial
and other records, and pertinent corporate documents and properties
of the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers,
directors and employees to supply all information which any
Inspector may reasonably request; provided, however, that each
Inspector shall agree to hold in strict confidence and shall not
make any disclosure (except to an Investor) or use of any Record or
other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final,
non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has
been made generally available to the public other than by
disclosure in violation of this Agreement. Each Investor agrees
that it shall, upon learning that disclosure of such Records is
sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential. Nothing
herein (or in any other confidentiality agreement between the
Company and any Investor) shall be deemed to limit the Investors'
ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and
regulations.

 

(j)           The
Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with
federal or state securities laws, (ii) the disclosure of such
information is necessary to avoid or correct a misstatement or
omission in any Registration Statement, (iii) the release of such
information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of
this Agreement or any other agreement. The Company agrees that it
shall, upon learning that disclosure of such information concerning
an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written
notice to such Investor and allow such Investor a reasonable period
of time, at the Investor's expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, such
information.

 

(k)           The
Company shall use its commercially reasonable efforts either to (i)
cause all of the Registrable Securities covered by a Registration
Statement to be listed on each securities exchange on which
securities of the same class or series issued by the Company are
then listed, if any, if the listing of such Registrable Securities
is then permitted under the rules of such exchange or (ii) secure
the inclusion for quotation of all of the Registrable Securities on
the Principal Market or (iii) if, despite the Company's
commercially reasonable efforts, the Company is unsuccessful in
satisfying the preceding clauses (i) and (ii), to secure the
inclusion for quotation on another Eligible Market for such
Registrable Securities and, without limiting the generality of the
foregoing, to use its commercially reasonable efforts to arrange
for at least two market makers to register with the Financial
Industry Regulatory Authority, Inc. ("FINRA") as such with respect to such
Registrable Securities. The Company shall pay all fees and expenses
in connection with satisfying its obligation under this Section
3(k).

 

(l)           The
Company shall cooperate with the Investors who hold Registrable
Securities being offered and, to the extent applicable, facilitate
the timely preparation and delivery of certificates (not bearing
any restrictive legend) representing the Registrable Securities to
be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case
may be, as the Investors may reasonably request and registered in
such names as the Investors may request.

 

(m)           If
reasonably requested by an Investor, the Company shall as soon as
practicable (i) incorporate in a prospectus supplement or
post-effective amendment such information as an Investor reasonably
requests to be included therein relating to the sale and
distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable
Securities being offered or sold, the purchase price being paid
therefor and any other terms of the offering of the Registrable
Securities to be sold in such offering; (ii) make all required
filings of such prospectus supplement or post-effective amendment
after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii)
supplement or make amendments to any Registration Statement if
reasonably requested by an Investor holding any Registrable
Securities.

 

 

10

 

 

 

 

 

(n)           The
Company shall use its commercially reasonable efforts to cause the
Registrable Securities covered by a Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of
such Registrable Securities.

 

(o)           The
Company shall make generally available to its security holders as
soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form
complying with, and in the manner provided by, the provisions of
Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal
quarter next following the applicable Effective Date of a
Registration Statement.

 

(p)           The
Company shall otherwise use its commercially reasonable efforts to
comply in all material respects with all applicable rules and
regulations of the SEC in connection with any registration
hereunder.

 

(q)           Within
two (2) Business Days after a Registration Statement which covers
Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to
deliver, to the transfer agent for such Registrable Securities
(with copies to the Investors whose Registrable Securities are
included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in
the form attached hereto as Exhibit A.

 

(r)           Notwithstanding
anything to the contrary herein, at any time after the Effective
Date, the Company may delay the disclosure of material, non-public
information concerning the Company the disclosure of which at the
time is not, in the good faith opinion of the Board of Directors of
the Company and its counsel, in the best interest of the Company
and, in the opinion of counsel to the Company, otherwise required
(a "Grace Period");
provided, that the Company shall promptly (i) notify the Investors
in writing of the existence of material, non-public information
giving rise to a Grace Period (provided that in each notice the
Company will not disclose the content of such material, non-public
information to the Investors) and the date on which the Grace
Period will begin, and (ii) notify the Investors in writing of the
date on which the Grace Period ends; and, provided further, that no
Grace Period shall exceed thirty (30) consecutive Trading Days and
during any three hundred sixty five (365) day period such Grace
Periods shall not exceed an aggregate of sixty (60) Trading Days
and the first day of any Grace Period must be at least five (5)
Trading Days after the last day of any prior Grace Period (each, an
"Allowable Grace Period").
For purposes of determining the length of a Grace Period above, the
Grace Period shall begin on and include the date the Investors
receive the notice referred to in clause (i) and shall end on and
include the later of the date the Investors receive the notice
referred to in clause (ii) and the date referred to in such notice.
The provisions of Section 3(g) hereof shall not be applicable
during the period of any Allowable Grace Period. Upon expiration of
the Grace Period, the Company shall again be bound by the first
sentence of Section 3(f) with respect to the information giving
rise thereto unless such material, non-public information is no
longer applicable. Notwithstanding anything to the contrary, the
Company shall cause its transfer agent to deliver unlegended shares
of Common Stock to a transferee of an Investor in accordance with
the terms of the Securities Purchase Agreement in connection with
any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale, prior to the
Investor's receipt of the notice of a Grace Period and for which
the Investor has not yet settled.

 

 

11

 

 

 

 

 

(s)           Except
as required by applicable law, neither the Company nor any
Subsidiary or affiliate thereof shall identify any Investor as an
underwriter in any public disclosure or filing with the SEC, the
Principal Market or any
Eligible Market and any Purchaser being deemed an underwriter by
the SEC shall not relieve the Company of any obligations it has
under this Agreement or any other Transaction Document (as defined in the Securities Purchase
Agreement); provided,
however,
that the foregoing shall not prohibit the Company from including
the disclosure found in the "Plan of Distribution" section attached
hereto as Exhibit B
in the Registration Statement.
If the Company is required by law to identify any Investor as an
underwriter in any public disclosure or filing with the SEC, the
Principal Market or any Eligible Market, prior to so identifying
any such Investor, the Company shall promptly notify each such
Investor of the legal requirement and give each such Investor a
reasonable opportunity to persuade the applicable regulator that
said disclosure is not required. If the applicable Investors are
unable to eliminate the legal requirement to be identified as an
underwriter, the applicable Investor shall have five (5) Business
Days, or such shorter time as required by the applicable regulator
or applicable law, to consent to such disclosure or to agree to
withdraw as a selling shareholder under the Registration Statement.
If an Investor agrees to withdraw as a selling shareholder under
the Registration Statement, the Company shall not be responsible
for any such Failures with respect to any such
Investor.

 

(t)           Neither
the Company nor any of its Subsidiaries has entered, as of the date
hereof, nor shall the Company or any of its Subsidiaries, on or
after the date of this Agreement, enter into any agreement with
respect to its securities, that would have the effect of preventing
the Company from performing its obligations hereunder.

 

4.           Obligations
of the Investors.

 

(a)           At
least five (5) Business Days prior to the first anticipated Filing
Date of a Registration Statement, the Company shall notify each
Investor in writing of the information the Company requires from
each such Investor if such Investor elects to have any of such
Investor's Registrable Securities included in such Registration
Statement. It shall be a condition precedent to the obligations of
the Company to complete any registration pursuant to this Agreement
with respect to the Registrable Securities of a particular Investor
that such Investor shall timely furnish to the Company such
information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required by the
Company to effect and maintain the effectiveness of the
registration of such Registrable Securities and shall timely
execute such documents in connection with such registration as the
Company may reasonably request.

 

(b)           Each
Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and
filing of any Registration Statement hereunder, unless such
Investor has notified the Company in writing of such Investor's
election to exclude all of such Investor's Registrable Securities
from such Registration Statement.

 

(c)           Each
Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(g)
or the first sentence of 3(f) (a “No Sale Notice”), such Investor
will immediately discontinue disposition of Registrable Securities
pursuant to any Registration Statement(s) covering such Registrable
Securities until such Investor's receipt of copies of the
supplemented or amended prospectus as contemplated by Section 3(g)
or the first sentence of 3(f) or receipt of notice that no
supplement or amendment is required. Notwithstanding anything to
the contrary, the Company shall cause its transfer agent to deliver
unlegended shares of Common Stock to a transferee of an Investor in
accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities with respect to
which an Investor has entered into a contract for sale prior to the
Investor's receipt of a notice from the Company of the happening of
any event of the kind described in Section 3(g) or the first
sentence of 3(f) and for which the Investor has not yet
settled.

 

 

12

 

 

 

 

 

(d)           Each
Investor covenants and agrees that it will comply with the
prospectus delivery requirements of the 1933 Act as applicable to
it or an exemption therefrom in connection with sales of
Registrable Securities pursuant to the Registration
Statement.

 

5.           Expenses
of Registration.

 

All
reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without
limitation, all registration, listing and qualifications fees,
printers and accounting fees, and fees and disbursements of counsel
for the Company shall be paid by the Company.

 

6.           Indemnification.

 

In the
event any Registrable Securities are included in a Registration
Statement under this Agreement:

 

(a)           To
the fullest extent permitted by law, the Company will, and hereby
does, indemnify, hold harmless and defend each Investor, the
directors, officers, partners, members, employees, agents,
representatives of, and each Person, if any, who controls any
Investor within the meaning of the 1933 Act or the 1934 Act (each,
an "Indemnified Person"),
against any losses, claims, damages, liabilities, judgments, fines,
penalties, charges, costs, reasonable attorneys' fees, amounts paid
in settlement or expenses, joint or several (collectively,
"Claims"), incurred in
investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or
other regulatory agency, body or the SEC, whether pending or
threatened, whether or not an indemnified party is or may be a
party thereto ("Indemnified
Damages"), to which any of them may reasonably become
subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are
based upon: (i) any untrue statement or alleged untrue statement of
a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other "blue
sky" laws of any jurisdiction in which Registrable Securities are
offered ("Blue Sky Filing"),
or the omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary
prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which
the statements therein were made, not misleading, (iii) any
violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to
the offer or sale of the Registrable Securities pursuant to a
Registration Statement or (iv) any violation of this Agreement (the
matters in the foregoing clauses (i) through (iv) being,
collectively, "Violations").
Subject to Section 6(c), the Company shall reimburse the
Indemnified Persons, promptly as such expenses are incurred and are
due and payable, for any legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any
such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section
6(a): (i) shall not apply to a Claim by an Indemnified Person
arising out of or based upon a Violation which occurs in reliance
upon and in conformity with information furnished to the Company by
such Indemnified Person for such Indemnified Person expressly for
use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; and
(ii) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of
the Company, which consent shall not be unreasonably withheld or
delayed. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section
9.

 

 

13

 

 

 

 

 

(b)           In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and
in the same manner as is set forth in Section 6(a), the Company,
each of its directors, each of its officers who signs the
Registration Statement and each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each,
an "Indemnified Party"),
against any Claim or Indemnified Damages to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim or Indemnified Damages arise out of or are
based upon any Violation, in each case to the extent, and only to
the extent, that such Violation occurs in reliance upon and in
conformity with information furnished to the Company by such
Investor expressly for use in connection with such Registration
Statement; and, subject to Section 6(c), such Investor shall
reimburse the Indemnified Party for any legal or other expenses
reasonably incurred by an Indemnified Party in connection with
investigating or defending any such Claim; provided, however, that
the indemnity agreement contained in this Section 6(b) and the
agreement with respect to contribution contained in Section 7 shall
not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld or
delayed; provided, further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such
Investor as a result of the sale of Registrable Securities pursuant
to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on
behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section
9.

 

 (c)           Promptly
after receipt by an Indemnified Person or Indemnified Party under
this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Person or Indemnified Party
shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires and has
acknowledged its indemnification obligations hereunder in writing,
jointly with any other indemnifying party similarly noticed, to
assume control of the defense thereof with counsel mutually
satisfactory to the indemnifying party and the Indemnified Person
or the Indemnified Party, as the case may be; provided, however,
that an Indemnified Person or Indemnified Party shall have the
right to retain its own counsel with the fees and expenses of not
more than one counsel for all such Indemnified Person or
Indemnified Party to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the Indemnified Person or
Indemnified Party, as applicable, the representation by such
counsel of the Indemnified Person or Indemnified Party and the
indemnifying party would be inappropriate due to differing
interests between such Indemnified Person or Indemnified Party and
any other party represented by such counsel in such proceeding. In
the case of an Indemnified Person, legal counsel referred to in the
immediately preceding sentence shall be selected by the Investors
holding at least a majority in interest of the Registrable
Securities included in the Registration Statement to which the
Claim relates. The Indemnified Party or Indemnified Person shall
reasonably cooperate with the indemnifying party in connection with
any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party or
Indemnified Person which relates to such action or Claim. The
indemnifying party shall keep the Indemnified Party or Indemnified
Person fully apprised at all times as to the status of the defense
or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its prior written
consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No
indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person, consent to entry of any
judgment or enter into any settlement or other compromise which
does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party or Indemnified
Person of a release from all liability in respect to such Claim or
litigation and such settlement shall not include any admission as
to fault on the part of the Indemnified Party. Following
indemnification as provided for hereunder, the indemnifying party
shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or
corporations relating to the matter for which indemnification has
been made. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.

 

 

14

 

 

 

(d)           The
indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or
Indemnified Damages are incurred.

 

(e)           The
indemnity agreements contained herein shall be in addition to (i)
any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and
(ii) any liabilities the indemnifying party may be subject to
pursuant to the law.

 

7.           Contribution.

 

To the
extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 6 to the fullest extent permitted
by law; provided, however, that: (i) no Person involved in the sale
of Registrable Securities which Person is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933
Act) in connection with such sale shall be entitled to contribution
from any Person involved in such sale of Registrable Securities who
was not guilty of fraudulent misrepresentation; and (ii)
contribution by any seller of Registrable Securities shall be
limited in amount to the amount of net proceeds received by such
seller from the sale of such Registrable Securities pursuant to
such Registration Statement.

 

8.           Reports
Under the 1934 Act.

 

With a
view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to
sell securities of the Company to the public without registration
("Rule 144"), the Company
agrees to:

 

(a)           make
and keep public information available, as those terms are
understood and defined in Rule 144;

 

(b)           file
with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long
as the Company remains subject to such requirements and the filing
of such reports and other documents is required for the applicable
provisions of Rule 144; and

 

(c)           furnish
to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, a written statement by the
Company, if true, that it has complied with the reporting
requirements of the 1933 Act and the 1934 Act and that it has
satisfied the current public information provisions set forth in
Rule 144.

 

 

15

 

 

 

 

 

9.           Assignment
of Registration Rights.

 

The
rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of such
Investor's Registrable Securities if: (i) the Investor agrees in
writing with the transferee or assignee to assign such rights, and
a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within
a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii)
immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is
restricted under the 1933 Act or applicable state securities laws;
(iv) at or before the time the Company receives the written notice
contemplated by clause (ii) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of
the provisions contained herein; and (v) such transfer shall have
been made in accordance with the applicable requirements of the
Securities Purchase Agreement.

 

10.           Amendment
of Registration Rights.

 

Provisions of this
Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of
the Company and the Required Holders; provided that any such
amendment or waiver that complies with the foregoing but that
disproportionately, materially and adversely affects the rights and
obligations of any Investor relative to the comparable rights and
obligations of the other Investors shall require the prior written
consent of such adversely affected Investor. Any amendment or
waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company. No such amendment shall be
effective to the extent that it applies to less than all of the
holders of the Registrable Securities. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or
modification of any provision of this Agreement unless the same
consideration (other than the reimbursement of legal fees) also is
offered to all of the parties to this Agreement.

 

11.           Miscellaneous.

 

(a)           A
Person is deemed to be a holder of Registrable Securities whenever
such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the
same Registrable Securities, the Company shall act upon the basis
of instructions, notice or election received from such record owner
of such Registrable Securities.

 

(b)           Any
notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party);
(iii) when sent, if sent by electronic mail; or (iv) one Business
Day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive
the same. The addresses, facsimile numbers and email addresses for
such communications shall be:

 

If to
the Company:

 

GT
Biopharma, Inc.

9350
Wilshire Blvd, Suite 203

Beverly
Hills, CA 90212

Attn:
Chief Financial Officer

Email:
sww@gtbiopharma.com

 

 

16

 

 

 

If to
the Transfer Agent:

Computershare

350
Indiana Street, Suite 800

Golden,
Colorado 80401

Fax:
(303) 262-0610

 

If to
Legal Counsel:

 

Gary
R. Henrie, Esq.

P.O.
Box 107

Nauvoo,
IL 62354

Email:
grhlaw@hotmail.com

 

If to a
Purchaser, to its address, facsimile number and/or email address
set forth on the Schedule of Purchasers attached hereto or on the
signature pages of the Securities Purchase Agreement, with copies
to such Purchaser's representatives as set forth on the Schedule of
Purchasers, or to such other address, facsimile number and/or email
address to the attention of such other Person as the recipient
party has specified by written notice given to each other party
five (5) days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine or email
containing the time, date, recipient facsimile number and an image
of the first page of such transmission or (C) provided by a courier
or overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause
(i), (ii) or (iii) above, respectively.

 

(c)           Failure
of any party to exercise any right or remedy under this Agreement
or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.

 

(d)           All
questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal
laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State
of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of
New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in
an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in
any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

 

 

17

 

 

 

 

 

(e)           If
any provision of this Agreement is prohibited by law or otherwise
determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited,
invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the
invalidity or unenforceability of such provision shall not affect
the validity of the remaining provisions of this Agreement so long
as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the
subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal
obligations of the parties or the practical realization of the
benefits that would otherwise be conferred upon the parties. The
parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable
provision(s).

 

(f)           This
Agreement, the other Transaction Documents (as defined in the
Securities Purchase Agreement) and the instruments referenced
herein and therein constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and
therein. This Agreement, the other Transaction Documents and the
instruments referenced herein and therein supersede all prior
agreements and understandings among the parties hereto with respect
to the subject matter hereof and thereof.

 

(g)           Subject
to the requirements of Section 9, this Agreement shall inure to the
benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.

 

(h)           The
headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning
hereof.

 

(i)           This
Agreement may be executed in identical counterparts, each of which
shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of
the party so delivering this Agreement.

 

(j)           Each
party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.

 

(k)      
   All consents and other determinations required to be
made by the Investors pursuant to this Agreement shall be made,
unless otherwise specified in this Agreement, by the Required
Holders.

 

(l)           The
language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent and no rules
of strict construction will be applied against any
party.

 

(m)         
This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by,
any other Person.

 

(n)           The
obligations of each Investor hereunder are several and not joint
with the obligations of any other Investor, and no provision of
this Agreement is intended to confer any obligations on any
Investor vis-à-vis any other Investor. Nothing contained
herein, and no action taken by any Investor pursuant hereto, shall
be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create
a presumption that the Investors are in any way acting in concert
or as a group with respect to such obligations or the transactions
contemplated herein.

 

(o)           Legal
Counsel may resign as Legal Counsel on five (5) calendar
days’ prior notice to the Company and Alpha Capital Anstalt.
Legal Counsel may rely on instructions from Alpha Capital Anstalt
without communicating or verifying such instructions with any other
Purchaser.

 

* * * *
* *

 

[Signature Page Follows]

 

18

 

 

 

IN
WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

 

 

 

	
 

	

COMPANY:

 

	
 

	

GT BIOPHARMA, INC.

By:
                                                            

       
Name: Steven Weldon 

       
Title: Chief Financial Officer

 

	
 

	
 

 

 

[SIGNATURE
PAGE OF HOLDERS FOLLOWS]

 

 

 

19

 

 

[SIGNATURE
PAGE OF PURCHASERS TO GT BIOPHARMA, INC. RRA]

 

 

 

Name of
Purchaser:
______________________________________________________________

 

 

Address
of Purchaser:
____________________________________________________________

 

 

Signature
of Authorized Signatory of Purchaser:
________________________________________

 

 

Name of
Authorized Signatory:
______________________________________________________

 

 

Title
of Authorized Signatory:
_______________________________________________________

 

 

 

 

[SIGNATURE PAGES
CONTINUE]

 

 

 

20

 

 

EXHIBIT A

 

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

 

Computershare

350
Indiana Street, Suite 800

Golden,
Colorado 80401

Fax:
(303) 262-0610

 

Re:           

GT Biopharma, Inc.

 

Ladies
and Gentlemen:

 

We have
been requested by GT Biopharma, Inc., a Delaware corporation (the
“Company”), and
have represented the Company in connection with that certain
Securities Purchase Agreement, dated as of ______________ (the
"Securities Purchase Agreement"), entered into by
and among the Company and the purchasers named therein
(collectively, the "Holders") pursuant to which the Company
issued to the Holders convertible promissory notes
(“Notes”)
convertible for shares of the Company's common stock, par value
$0.001 per share (the "Common
Stock") (the shares of Common Stock issuable pursuant to the
terms of the Notes and Securities Purchase Agreement, collectively,
the "Conversion Shares").
Pursuant to the Securities Purchase Agreement, the Company also has
entered into a Registration Rights Agreement with the Holders (the
"Registration Rights
Agreement") pursuant to which the Company agreed, among
other things, to register the resale of the Registrable Securities
(as defined in the Registration Rights Agreement), including the
Conversion Shares issuable pursuant to the Securities Purchase
Agreement under the Securities Act of 1933, as amended (the
"1933 Act"). The description
of the Registrable Securities are set forth on Schedule A hereto [Selling Shareholder
Table]. In connection with the Company's obligations under the
Registration Rights Agreement, on ______________, the Company filed
a Registration Statement on Form S-3 (File No. 333-229667) (the
"Registration Statement")
with the Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities which names each of the Holders as a selling shareholder
thereunder.

 

In
connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an
order declaring the Registration Statement effective under the 1933
Act at [ENTER TIME OF
EFFECTIVENESS] on
[ENTER DATE OF
EFFECTIVENESS]. We have no
knowledge, subsequent to such telephonic conversation with the
SEC's staff, that any stop order suspending its effectiveness has
been issued or that any proceedings for that purpose are pending
before, or threatened by, the SEC. Based on the foregoing, the
Registrable Securities set forth on Schedule A hereto are available for
resale under the 1933 Act pursuant to the Registration
Statement.

 

This
letter, unless and until subsequently revoked or modified orally by
the Company’s securities counsel or in writing from any
member of this firm (which writing may include email
correspondence), shall serve as our standing instruction to you
that the Registrable Securities set forth on Schedule A hereto are freely
transferable by the Holders pursuant to the Registration Statement.
You need not require further letters from us to effect any future
legend-free issuance or reissuance of Registrable Securities to the
Holders as contemplated by the Company's Irrevocable Transfer Agent
Instructions dated July [●], 2019.

 

Very
truly yours,

 

 

 

EXHIBIT B

SELLING SHAREHOLDERS

 

The
shares of Common Stock being offered by the selling stockholders
are those issued upon conversion of the Notes that were issued to
the selling stockholders pursuant to the Securities Purchase
Agreement dated as of August 16,2019 (the “Securities Purchase Agreement”),
by and among the Company and the investors named therein. We are
registering the shares of Common Stock in order to permit the
selling stockholders to offer the shares for resale from time to
time. Except for the ownership of the shares of common stock issued
pursuant to the Securities Purchase Agreement, the selling
shareholders have not had any material relationship with us within
the past three years.

 

 The table
below lists the selling stockholders and other information
regarding the beneficial ownership of the shares of Common Stock by
each of the selling stockholders. The second column lists the
number of shares of Common Stock beneficially owned by each selling
stockholder, based on its ownership of the Notes as of August
16,2019.

 

The
third column lists the shares of Common Stock being offered by this
prospectus by the selling stockholders and does not take in account
any limitations on conversion of the Notes or issuance of Common
Stock.

 

 In accordance
with the terms of a registration rights agreement with the selling
stockholders (the “Registration Rights Agreement”),
this prospectus generally covers the resale of at least the sum of
the number of shares of Common Stock issued upon conversion of the
Notes issued pursuant to the Securities Purchase Agreement as of
the trading day immediately preceding the date the registration
statement is initially filed with the SEC. The fourth column assumes the sale
of all of the shares offered by the selling stockholders pursuant
to this prospectus.

 

Under
the terms of the Notes, a selling stockholder may not convert the
Notes to the extent such exercise would cause such selling
stockholder, together with its affiliates, to beneficially own a
number of shares of Common Stock which would exceed 9.99% of our
then outstanding shares of Common Stock following such exercise.
The number of shares in the second column does not reflect these
limitations. The selling stockholders may sell all, some or none of
their shares in this offering. See “Plan of
Distribution.” 

 

 

	

Name of Selling
Shareholder

	

Number of Shares
of Common Stock Owned Prior to Offering

	

Maximum Number
of Shares of Common Stock to be Sold Pursuant to this
Prospectus

	

Number of Shares
of Common Stock Owned After Offering

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

 

 

 

 

 

 

PLAN
OF DISTRIBUTION

 

We are
registering the shares of Common Stock that may be issued upon
conversion of the Notes issued pursuant to the Securities Purchase
Agreement to permit the resale of these shares of Common Stock by
the holders of such shares from time to time after the date of this
prospectus. We will not receive any of the proceeds from the sale
by the selling stockholders of the shares of Common Stock. We will
bear all fees and expenses incident to our obligation to register
the shares of Common Stock. 

 

The
selling stockholders may sell all or a portion of the shares of
Common Stock beneficially owned by them and offered hereby from
time to time directly or through one or more underwriters,
broker-dealers or agents. If the shares of Common Stock are sold
through underwriters or broker-dealers, the selling stockholders
will be responsible for underwriting discounts or commissions or
agent's commissions. The shares of Common Stock may be sold in one
or more transactions at fixed prices, at prevailing market prices
at the time of the sale, at varying prices determined at the time
of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions,
pursuant to one or more of the following methods:

 

	
 

	

●

	

on any
national securities exchange or quotation service on which the
securities may be listed or quoted at the time of
sale;

 

	
 

	

●

	

in the
over-the-counter market;

 

	
 

	

●

	

in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market;

 

	
 

	

●

	

through
the writing of options, whether such options are listed on an
options exchange or otherwise;

 

	
 

	

●

	

ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

 

	
 

	

●

	

block
trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;

 

	
 

	

●

	

purchases
by a broker-dealer as principal and resale by the broker-dealer for
its account;

 

	
 

	

●

	

an
exchange distribution in accordance with the rules of the
applicable exchange;

 

	
 

	

●

	

privately
negotiated transactions;

 

	
 

	

●

	

short
sales effected after the effective date of this Registration
Statement;

 

	
 

	

●

	

sales
pursuant to Rule 144;

 

	
 

	

●

	

broker-dealers
may agree with the selling securityholders to sell a specified
number of such shares at a stipulated price per share;

 

	
 

	

●

	

a
combination of any such methods of sale; and

 

	
 

	

●

	

any
other method permitted pursuant to applicable law.

 

If the
selling stockholders effect such transactions by selling shares of
Common Stock to or through underwriters, broker-dealers or agents,
such underwriters, broker-dealers or agents may receive commissions
in the form of discounts, concessions or commissions from the
selling stockholders or commissions from purchasers of the shares
of Common Stock for whom they may act as agent or to whom they may
sell as principal (which discounts, concessions or commissions as
to particular underwriters, broker-dealers or agents may be in
excess of those customary in the types of transactions involved).
In connection with sales of the shares of Common Stock or
otherwise, the selling stockholders may enter into hedging
transactions with broker-dealers, which may in turn engage in short
sales of the shares of Common Stock in the course of hedging in
positions they assume. The selling stockholders may also sell
shares of Common Stock short and deliver shares of Common Stock
covered by this prospectus to close out short positions and to
return borrowed shares in connection with such short sales. The
selling stockholders may also loan or pledge shares of Common Stock
to broker-dealers that in turn may sell such shares.

 

 

 

 

 

 

The
selling stockholders may pledge or grant a security interest in
some or all of the shares of Common Stock or Notes owned by them
and, if they default in the performance of their secured
obligations, the pledgees or secured parties may offer and sell the
shares of Common Stock from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling stockholders
to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus. The selling
stockholders also may transfer and donate the shares of Common
Stock in other circumstances in which case the transferees, donees,
pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.

 

The
selling stockholders and any broker-dealer participating in the
distribution of the shares of Common Stock may be deemed to be
"underwriters" within the meaning of the Securities Act, and any
commission paid, or any discounts or concessions allowed to, any
such broker-dealer may be deemed to be underwriting commissions or
discounts under the Securities Act. At the time a particular
offering of the shares of Common Stock is made, a prospectus
supplement, if required, will be distributed which will set forth
the aggregate amount of shares of Common Stock being offered and
the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other
terms constituting compensation from the selling stockholders and
any discounts, commissions or concessions allowed or re-allowed or
paid to broker-dealers.

 

Under
the securities laws of some states, the shares of Common Stock may
be sold in such states only through registered or licensed brokers
or dealers. In addition, in some states the shares of Common Stock
may not be sold unless such shares have been registered or
qualified for sale in such state or an exemption from registration
or qualification is available and is complied with.

 

There
can be no assurance that any selling stockholder will sell any or
all of the shares of Common Stock registered pursuant to the
registration statement, of which this prospectus forms a
part.

 

The
selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may
limit the timing of purchases and sales of any of the shares of
Common Stock by the selling stockholders and any other
participating person. Regulation M may also restrict the ability of
any person engaged in the distribution of the shares of Common
Stock to engage in market-making activities with respect to the
shares of Common Stock. All of the foregoing may affect the
marketability of the shares of Common Stock and the ability of any
person or entity to engage in market-making activities with respect
to the shares of Common Stock.

 

We will
pay all expenses of the registration of the shares of Common Stock
pursuant to the Registration Rights Agreement, estimated to be
$10,000 in total, including, without limitation, SEC filing fees
and expenses of compliance with state securities or "blue sky"
laws; provided, however, that a selling stockholder will pay all
underwriting discounts and selling commissions, if any. We will
indemnify the selling stockholders against liabilities, including
some liabilities under the Securities Act, in accordance with the
Registration Rights Agreement, or the selling stockholders will be
entitled to contribution. We may be indemnified by the selling
stockholders against civil liabilities, including liabilities under
the Securities Act, that may arise from any written information
furnished to us by the selling stockholder specifically for use in
this prospectus, in accordance with the Registration Rights
Agreement, or we may be entitled to contribution.

  

Once
sold under the registration statement, of which this prospectus
forms a part, the shares of Common Stock will be freely tradable in
the hands of persons other than our affiliates.

 

 

 

 

TRANSFER AGENT INSTRUCTIONS

 

GT BIOPHARMA, INC.

 

August
16,2019

 

 

Computershare
Trust Company, N.A.

250
Royall Street

Canton,
MA 02021

Attn:
Kathy Heagerty

 

Ladies
and Gentlemen:

 

Reference is made
to that certain Securities Purchase Agreement, dated as of August
16,2019 (the "Agreement"),
by and among GT Biopharma, Inc., a Delaware corporation (the
"Company"), and the
purchasers identified on the signature pages thereto (collectively,
the "Purchasers"), pursuant
to which the Company is issuing to the Purchasers (i) the 10%
senior secured convertible notes (the “Notes”), which are convertible
into shares of the common stock of the Company, par value $0.001
per share (the "Common
Stock").

 

This
letter shall serve as our irrevocable authorization and direction
to you (provided that you are the transfer agent of the Company at
such time) to issue shares of the Common Stock upon conversion of
the Notes (the "Conversion
Shares"), promptly upon your receipt of an instruction
letter on Company letterhead and signed by a duly authorized
officer of the Company, which the Company shall provide to you upon
its receipt of a properly completed and duly executed conversion
notice, in the form attached hereto as Exhibit I. The Company shall
instruct you as to whether such shares of the Common Stock will
contain a restrictive legend or legends, and the details of such
legend(s), if applicable.

 

Subject
to compliance with Computershare’s issuance, transfer, and
restricted stock processing requirements, including, but not
limited to, documents being submitted in good order, you
acknowledge and agree that so long as you have previously received
(a) written confirmation from the Company's legal counsel that
either (i) a registration statement covering resales of the
Conversion Shares has been declared effective by the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act"),
or (ii) sales of the Conversion Shares may be made in conformity
with Rule 144 under the 1933 Act ("Rule 144") and (b) if applicable, a copy
of such registration statement, then within two (2) business days
for routine items of your receipt of a Company issuance
instruction, you shall issue the certificates representing the
Conversion Shares registered in the names of such transferees, and
such certificates shall not bear any legend restricting transfer of
the Conversion Shares thereby and should not be subject to any
stop-transfer restriction; provided, however, that if such
Conversion Shares are not registered for resale under the 1933 Act
or able to be sold under Rule 144, then the certificates for such
Conversion Shares shall bear the following legend:

 

“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (1) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL SELECTED BY THE
HOLDER, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT, OR (II) UNLESS SOLD PURSUANT TO RULE 144
OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH
SECURITIES.”

 

 

 

 

 

A form
of written confirmation from the Company's outside legal counsel
that a registration statement covering resales of the Conversion
Shares has been declared effective by the SEC under the 1933 Act is
attached hereto as Exhibit
A.

 

The
Company issues this instruction in accordance with, and this
instruction and your performance hereunder are subject to, the
terms of the Transfer Agency and Service Agreement currently in
effect between you and the Company.

 

Please
execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you
have any questions concerning this matter, please contact me at
sww@gtbiopharma.com.

 

Very
truly yours,

 

GT
BIOPHARMA, INC.

 

 

 

By:
_______________________________________

Name:
Anthony Cataldo

Title:
Chief Executive Officer

 

THE
FOREGOING INSTRUCTIONS ARE

ACKNOWLEDGED
AND AGREED TO

THIS
____ day of _____________, 2019

 

COMPUTERSHARE
TRUST COMPANY, N.A.

 

 

 

By:
_____________________________________

Name:

Title:

 

 

Enclosuresgtbp_ex103

 

Exhibit 10.3

 

NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
CONVERTIBLE HAVE 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: ______________
2020

 

Principal Amount: ______________.00

 

Original Conversion Price (subject to adjustment herein):
$0.20

 

CONVERTIBLE NOTE

DUE ______________

 

THIS
CONVERTIBLE NOTE is one of a series of duly authorized and validly
issued Notes of GT BIOPHARMA,
INC., a Delaware corporation, (the “Borrower”), having its
principal place of business at 9350 Wilshire Blvd, Suite 203,
Beverly Hills, CA 90212, due
______________ (this note,
the “Note” and, collectively
with the other notes of such series, the “Notes”).

 

FOR
VALUE RECEIVED, Borrower promises to pay to ______________
or its registered assigns (the “Holder”), with an address
at: _________________________, or shall have paid pursuant to the
terms hereunder, the principal sum of ________________________ (______________.00) on ______________ (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).

 

 

 

1

 

 

 

 

“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(d).

 

“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 required by law or other
governmental action to close.

 

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

 

“Conversion” shall have
the meaning ascribed to such term in Section 4.

 

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

 

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

 

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

 

“Debentures” means those
certain 10% Senior Convertible Debentures of the Borrower issued on
August 2, 2018, September 7, 2018, September 24, 2018, and the
Senior Convertible Notes issued on February 4, 2019.

 

 

2

 

 

 

 

“Dilutive Issuance” shall
have the meaning set forth in Section 5(e).

 

“Equity Conditions” means,
during the period in question, (a)
Borrower shall have duly honored all conversions scheduled to occur
or occurring by virtue of one or more Notices of Conversion of the
applicable Holder on or prior to the dates so requested or
required, if any, (b) Borrower shall have paid all liquidated
damages and other amounts owing to the applicable Holder in respect
of this Note and the other Transaction Documents, (c) all of
the Underlying Shares (and shares issuable in lieu of cash payments
of interest) may be resold by Persons other than Affiliates of the
Borrower pursuant to Rule 144 without volume or manner-of-sale
restrictions or current public information requirements as
confirmed by counsel to Borrower in a written opinion letter to
such effect, addressed and acceptable to the Borrower’s
Transfer Agent and the affected Holders, (d) the Common Stock is
listed or quoted for trading on a Trading Market (and Borrower
believes, in good faith, that trading of the Common Stock on a
Trading Market will continue uninterrupted for the foreseeable
future), (e) there is a sufficient number of authorized, but
unissued and otherwise unreserved, shares of Common Stock for the
issuance of all of the shares then issuable pursuant to the
Transaction Documents, (f) an Event of Default has not occurred,
whether or not such Event of Default has been cured, (g) there is
no existing event which, with the passage of time or the giving of
notice, would constitute an Event of Default, (h) the issuance of
the shares in question to the applicable Holder would not exceed
the Beneficial Ownership Limitation, (i) there has been no public announcement of a
pending or proposed Fundamental Transaction or Change of Control
Transaction that has not been consummated, (j) the applicable
Holder, if not an Affiliate of the Borrower is not in possession of
any information provided by Borrower that constitutes, or may
constitute, material non-public information, and (k) a Public
Information Failure has not occurred.

 

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

 

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

 

“Interest Payment Date”
shall have the meaning set forth in Section 2(1).

 

“Majority in Interest”
means, at any given time, the Holders then holding at least 51% in
principal amount of the then outstanding Notes and Other Notes
which must include Alpha Capital Anstalt and Bristol Investment
Fund Ltd. of the component of the affected Securities then
outstanding.

 

“Mandatory Default Amount”
means the sum of (a) the greater of (i) the outstanding principal
amount of this Note divided by the Conversion Price on the date the
Mandatory Default Amount is either (A) demanded (if demand or
notice is required to create an Event of Default) or otherwise due
or (B) paid in full, whichever has a lower Conversion Price,
multiplied by the VWAP on the date the Mandatory Default Amount is
either (x) demanded (if demand or notice is required to create an
Event of Default) or otherwise due or (y) paid in full, whichever
has a higher VWAP, or (ii) 130% of the outstanding principal amount
of this Note and (b) all other amounts, costs, expenses and
liquidated damages due in respect of this Note.

 

“New York Courts” shall
have the meaning set forth in Section 10(d).

 

“Note Register” shall have
the meaning set forth in Section 2(c).

 

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

 

 

3

 

 

 

 

“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 Indebtedness”
shall have the meaning provided in the Purchase
Agreement.

 

“Permitted Lien” shall
have the meaning provided in the Purchase Agreement.

 

 “Purchase
Agreement” means the Securities Purchase Agreement,
dated as of May __, 2019 among Borrower and the original Holders,
as amended, modified or supplemented from time to time in
accordance with its terms.

 

“Registration Statement”
shall have the meaning set forth in the Purchase Agreement and
Registration Rights Agreement.

 

“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(c)(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 OTC
Bulletin Board, the OTCQB, the OTCQX or the OTC Pink Marketplace
(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 any of the Nasdaq markets or exchanges 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 Majority in Interest and reasonably acceptable to Borrower, the
fees and expenses of which shall be paid by Borrower.

 

 

4

 

 

 

 

Section
2.            
Interest and General
Provisions.

 

a)           Payment
of Interest in Cash or Kind. The Borrower shall pay interest
to the Holder on the aggregate unconverted and then outstanding
principal amount of this Note at the rate of 10% per annum, payable
on each Conversion Date (as to that principal amount then being
converted), and on the Maturity Date (each such date, an
“Interest Payment
Date”) (if any Interest Payment Date is not a Business
Day, then the applicable payment shall be due on the next
succeeding Business Day), in cash or, at the Holder’s option,
in duly authorized, validly issued, fully paid and non-assessable
shares of Common Stock based on the Conversion Price then in
effect. Borrower may not pay any interest in shares of Common Stock
in excess of the Beneficial Ownership Limitation when applicable,
unless waived by Holder. Following the occurrence and during the
continuance of an Event of Default, then from the first date of
such occurrence, the annual interest rate on this Note shall be
eighteen percent (18%). Such interest shall be due and payable on
the Maturity Date, whether by acceleration or
otherwise.

 

b)           Payment
Grace Period. Except as described in this Note, the Borrower
shall not have any grace period to pay any monetary amounts due
under this Note.

 

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. 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. Interest on this Note shall be calculated on the
basis of a 360-day year and the actual number of days elapsed.
Payments made in connection with this Note shall be applied first
to amounts due hereunder other than principal and interest,
thereafter to interest and finally to principal.

 

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. Notwithstanding anything to the contrary
contained herein or in the Transaction Documents, it shall not be
considered non-pari passu for a Holder or Other Holder to elect to
receive interest paid in Common Stock or for Borrower to actually
pay interest in Common Stock to such electing Holder or Other
Holder.

 

f)           Manner
and Place of Payment. Principal and interest 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.

 

g)           Prepayment.
Except as otherwise set forth in this Note, the Borrower may not
prepay any portion of the principal amount of this Note without the
prior written 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.

 

 

 

5

 

 

 

 

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 Issue Date until this Note is no longer
outstanding, this Note including interest accrued hereon 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
Section 4(d) 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 and accrued
interest, if any, 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 delivery of
such Notice of Conversion. In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error. The Holder, and any assignee by acceptance of
this Note, acknowledges and agrees 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)
         Conversion Price. The
conversion price for the principal and interest, if any, in
connection with voluntary conversions by the Holder shall be
$0.20 per share of Common
Stock, subject to adjustment herein (the “Conversion
Price”).

 

c)
         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 (x) the
outstanding principal amount of this Note to be converted plus
interest, if any, elected by the Holder to be converted by (y) the
Conversion Price.

 

ii.         Delivery
of Certificate Upon Conversion. In connection with sales of
the Underlying Shares, not later than two (2) Trading Days after
each Conversion Date (the “Share Delivery Date”),
Borrower shall deliver, or cause to be delivered, to the Holder a
certificate or certificates representing the Conversion Shares
which, on or after the earlier of the one year or six month
anniversary of the Original Issue Date in accordance with Rule 144,
shall be free of restrictive legends and trading restrictions
(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. Borrower shall use its
best efforts to deliver any certificate or certificates required to
be delivered by Borrower under this Section 4(c) electronically
through the Depository Trust Company or another established
clearing corporation performing similar functions.

 

 

 

6

 

 

 

 

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(c)(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.

 

 

7

 

 

 

 

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(c)(ii), 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(c)(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 150% 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 and interest
which has accrued and would accrue on such principal amount
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.

 

 

 

8

 

 

 

 

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.

 

d)
          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) beneficially owned by the
Holder or any of its Affiliates.  Except as set forth in the
preceding sentence, for purposes of this Section 4(d), 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(d) 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(d), 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: (i) Borrower’s
most recent periodic or annual report filed with the Commission, as
the case may be, (ii) a more recent public announcement by
Borrower, or (iii) 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 9.99% 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 upon not less than 61 days’
prior notice to Borrower, and may increase the Beneficial Ownership
Limitation 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(d) 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(d) 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.

 

 

9

 

 

 

 

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
Equity Sales. In addition to the reductions of the
Conversion Price described in Section 4(b), if, at any time while
this Note is outstanding, the Borrower or any Subsidiary, as
applicable, sells or grants any option to purchase or sells or
grants any right to reprice, or otherwise disposes of or issues (or
announces any sale, grant or any option to purchase or other
disposition), any Common Stock or Common Stock Equivalents
entitling any Person to acquire Common Stock at an effective price
per share that is lower than the then Conversion Price (such lower
price, the “Base
Conversion Price” and such issuances, collectively, a
“Dilutive
Issuance”) (if the holder of the Common Stock or
Common Stock Equivalents so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which are issued in
connection with such issuance, be entitled to receive Common Stock
at an effective price per share that is lower than the Conversion
Price, such issuance shall be deemed to have occurred for less than
the Conversion Price on such date of the Dilutive Issuance), then
the Conversion Price shall be reduced to equal the Base Conversion
Price, subject to adjustment for reverse and forward stock splits
and the like. Such adjustment shall be made whenever such Common
Stock or Common Stock Equivalents are issued. Notwithstanding the
foregoing, no adjustment will be made under this Section 5(b) in
respect of an Exempt Issuance. If the Borrower enters into a
Variable Rate Transaction, despite the prohibition set forth in the
Purchase Agreement, the Borrower shall be deemed to have issued
Common Stock or Common Stock Equivalents at the lowest possible
conversion price at which such securities may be converted or
exercised. The Borrower shall notify the Holder in writing, no
later than the Trading Day following the issuance of any Common
Stock or Common Stock Equivalents subject to this Section 5(b),
indicating therein the applicable issuance price, or applicable
reset price, exchange price, conversion price and other pricing
terms (such notice, the “Dilutive Issuance
Notice”). For purposes of clarification, whether or
not the Borrower provides a Dilutive Issuance Notice pursuant to
this Section 5(b), upon the occurrence of any Dilutive Issuance,
the Holder is entitled to receive a number of Conversion Shares
based upon the Base Conversion Price on or after the date of such
Dilutive Issuance, regardless of whether the Holder accurately
refers to the Base Conversion Price in the Notice of
Conversion.

 

 

10

 

 

 

 

c)
         Subsequent Rights Offerings.
In addition to any adjustments
pursuant to Sections 5(a) and (b) 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 whether
or not permitted, or makes any 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).

 

 

11

 

 

 

 

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(d) 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(d) 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 Majority in
Interest (which approval shall not be unreasonably withheld,
delayed or conditioned) 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
“Borrower” 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.

 

 

 

12

 

 

 

 

 

             

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, cash or property or (E) Borrower shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of Borrower, then, in each case, Borrower shall cause to be filed
at each office or agency maintained for the purpose of conversion
of this Note, and shall cause to be delivered to the Holder at its
last 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 delivery
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 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.

 

h)           Reset.
Provided the Holder has acquired from the Borrower a Note in the
principal amount of not less than ______________, then for so long
as this Note is outstanding, if from and after the Issue Date of
this Note the Holder converts any or all of a Debenture, then with
respect to an aggregate amount of such conversions of the Debenture
not exceeding the initial Principal Amount of this Note, upon the
occurrence of a Dilutive Issuance (as defined in the Debenture),
Borrower shall issue to Holder additional shares of Common Stock
(the “Additional Shares”) for no additional
consideration, so that the average price per share of the shares of
Common Stock issued and issuable upon the aforedescribed conversion
of the Debenture when added to the Additional Shares shall be equal
to the Base Conversion Price (as defined in the
Debenture).

 

Section
6.             
Registration
Rights. The Company shall file a registration statement
pursuant to the terms of the Purchase Agreement and Registration
Rights Agreement.

 

 

13

 

 

 

 

Section
7.           
Negative Covenants.
As long as any portion of this Note remains outstanding, unless the
Majority in Interest shall have otherwise given prior written
consent, Borrower shall not directly or indirectly:

 

a)           other
than Permitted Indebtedness, 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)         
  other than Permitted Liens,
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;

 

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, provided
however, the consent of a Majority in Interest shall not be
required in connection with an increase in the authorized shares by
the Company;

 

d)      
     repay, repurchase or offer to repay, repurchase
or otherwise acquire any shares of its Common Stock or Common Stock
Equivalents other than as to the Conversion Shares as permitted or
required under the Transaction Documents;

 

e)           redeem,
defease, repurchase, repay or make any payments in respect of, by
the payment of cash or cash equivalents (in whole or in part,
whether by way of open market purchases, tender offers, private
transactions or otherwise), all or any portion of any Indebtedness
(other than Permitted Indebtedness or the Notes if on a pro-rata
basis), whether by way of payment in respect of principal of (or
premium, if any) or interest on, such Indebtedness, the foregoing
restriction shall also apply to Permitted Indebtedness from and
after the occurrence of an Event of Default;

 

f)      
     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, liquidation, distribution,
preferential payments in connection with any securities or debt
issuances, corporate rearrangement, scheme of arrangement or other
similar transaction;

 

g)     
      issue any Common Stock or Common Stock
Equivalents in violation of the terms of the Purchase
Agreement;

 

h)        
   enter into any transaction with any Affiliate of
Borrower which would be required to be disclosed by a company
subject to the reporting requirements of Section 12(g) of the
Exchange Act in any public filing with the Commission, unless such
transaction is made on reasonable commercial terms and expressly
approved by either (i) a majority of the disinterested directors of
Borrower (even if less than a quorum otherwise required for board
approval) or (ii) all of the directors; or

 

i)       
    enter into any agreement with respect to any of the
foregoing.

 

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):

 

 

14

 

 

 

 

i.           any
default in the payment of (A) the principal amount of this Note, or
(B) interest, 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 aware of such default;

 

ii.         Borrower
shall fail to observe or perform any other material covenant or
agreement contained in the 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 (ix) 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 aware of
such failure;

 

iii.         a
material default or event of default (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
material provisions of the Transaction Documents, or (B) any other
material agreement, lease, document or instrument to which Borrower
or any Subsidiary is obligated (and not covered by clause (vi)
below), which in the case of subsection (B) would reasonably be
expected to have a Material Adverse Effect;

 

iv.         any
material representation or warranty made in this Note, any other
Transaction Documents, any written statement pursuant hereto or
thereto or any other report, financial statement or certificate
made or delivered to the Holder or any Other Holder shall be untrue
or incorrect in any material respect as of the date when made or
deemed made;

 

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 $50,000, 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;

 

vii.         Borrower
shall be a party to any Change of Control Transaction or
Fundamental Transaction or disposition of all or in excess of 30%
of its assets in one transaction or a series of related
transactions (whether or not such sale would constitute a Change of
Control Transaction);

 

viii.        
Borrower does not meet the current public information requirements
under Rule 144;

 

 

 

15

 

 

 

 

ix.        
 Borrower shall fail for any reason to deliver certificates to
a Holder prior to the fifth Trading Day after a Conversion Date
pursuant to Section 4(c) 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;

 

x.       
 any Person shall materially breach any agreement delivered to
the initial Holders pursuant to Section 2.2 of the Purchase
Agreement, which breach is not cured within any allowed cure
period;

 

xi.       
 any monetary judgment, writ or similar final process shall be
entered or filed against Borrower, or any of its respective
property or other assets for more than $50,000, and such judgment,
writ or similar final process shall remain unvacated, unbonded or
unstayed for a period of 90 calendar days;

 

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

 

xiii.       
cessation of operations by Borrower;

 

xiv.        
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) and such breach is not
cured with twenty (20) days after written notice to the Borrower
from the Holder;

 

xv.         
the occurrence of a Listing Default;

 

xvi.    
   a Commission or judicial stop trade order or
suspension from the Borrower’s Principal Trading
Market;

 

xvii.      
the restatement after the date hereof of any financial statements
filed by the Borrower with the Commission for any date or period
from the Original Issue Date 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 shall not constitute a default
under this Section;

 

xviii.  
    the Borrower effectuates a reverse split of its
Common Stock without five (5) days prior written notice to the
Holder;

 

xix.   
     a failure by Borrower to notify Holder of any
material event of which Borrower is obligated to notify Holder
pursuant to the terms of this Note or any other Transaction
Document;

 

xx.   
      a default by the Borrower of a material term,
covenant, warranty or undertaking of any other agreement to which
the Borrower and Holder are parties, 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;

 

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

 

 

16

 

 

 

 

xxii.      
any material 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 Borrower, or the validity or enforceability thereof shall be
contested by Borrower, or a proceeding shall be commenced by
Borrower or any governmental authority having jurisdiction over
Borrower or Holder, seeking to establish the invalidity or
unenforceability thereof, or Borrower shall deny in writing that it
has any liability or obligation purported to be created under any
Transaction Document; or

 

xxiii.     
any default under the Registration Rights Agreement including but
not limited to the timely compliance with all filing and
effectiveness deadlines.

 

In the
event more than one grace, cure or notice period is applicable to
an Event of Default, then the shortest grace, cure or notice period
shall be applicable thereto.

 

b)
         Remedies Upon Event of Default,
Fundamental Transaction and Change of Control Transaction.
If any Event of Default or a Fundamental Transaction or a Change of
Control Transaction occurs, 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 18% 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
electronic mail, 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
or delivery by facsimile, with accurate confirmation generated by
the transmitting facsimile machine, at the address or number
designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to
be received), or (b) upon receipt, when sent by electronic mail
(provided confirmation of transmission is electronically generated
and keep on file by the sending party), 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: GT
Biopharma, Inc., 9350 Wilshire Blvd, Suite 203, Beverly
Hills, CA 90212, Attn: Chief Executive
Officer, with a copy to (which shall not constitute notice): Gary
R. Henrie, Esq., P.O. Box 107, Nauvoo, IL 62354, email:
grhlaw@hotmail.com, and (ii) if to the Holder, to: the
address and fax number indicated on the front page of this
Note.

 

 

 

17

 

 

 

 

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. All questions
concerning the construction, validity, enforcement and
interpretation of this Note shall be governed by and construed and
enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflict of laws thereof.
Each party agrees that all legal proceedings concerning the
interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in
the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”). Each
party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. Each party
hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Note and agrees that
such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by applicable law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Note or the transactions
contemplated hereby. If any party shall commence an action or
proceeding to enforce any provisions of this Note, then the
prevailing party in such action or proceeding shall be reimbursed
by the other party for its attorneys fees and other costs and
expenses incurred in the investigation, preparation and prosecution
of such action or proceeding. 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.

 

 

 

18

 

 

 

 

f)      
Severability. If
any provision of this Note is invalid, illegal or unenforceable,
the balance of this Note shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall
nevertheless remain applicable to all other Persons and
circumstances.

 

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.
This Note may be amended and any provisions hereof may be waived by
written consent of Borrower and the
Majority in Interest.

 

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)

 

 

19

 

IN WITNESS WHEREOF, Borrower has caused
this Note to be signed in its name by an authorized officer as of
______________ 2019.

 

 

	
 

	
 

	

	
 

	
GT
BIOPHARMA, INC.  

	
 

	

	
 

	
 

	
 

	

	
 

	
By: 
___________________________________

	
 

	
 

	
 

	
Name:
Steven Weldon

	
 

	
 

	
 

	
Title:
Chief Financial Officer

	
 

	
 

	
 

	
 

 

  

 

 

 

20

 

 

 

ANNEX A

 

NOTICE OF CONVERSION

 

The
undersigned hereby elects to convert principal under the
Convertible Note Due ______________ of GT Biopharma, Inc., a
Delaware corporation (the “Company”), 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: $__________________

	
 

	
 

	
 

	

Accrued
Interest to be Converted, if any: $______________

	
 

	
 

	
 

	

Conversion
Price: $_________________

	
 

	
 

	
 

	

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: _______________

  

 

 

 

21

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