Document:

exv10w2

Exhibit 10.2

APPENDIX B

NON-EMPLOYEE DIRECTOR STOCK OPTION AND RETAINER PLAN

OF

PFSWEB, INC.

          WHEREAS, PFSweb, Inc., a Delaware corporation (the “Company”) has adopted that certain 1999
Non-Employee Director Stock Option and Retainer Plan (as amended to date, the “Plan”); and

          WHEREAS, subject to the requisite approval of the Company’s stockholders at the Company’s
2009 Annual Meeting of Stockholders, the Company has authorized and adopted certain amendments to
the Plan;

          NOW, THEREFORE, in order to implement and effectuate said amendments, the Plan, as so amended,
shall read as follows:

          PFSweb, Inc., a corporation organized under the laws of the State of Delaware, hereby adopts
this Non-Employee Director Stock Option and Retainer Plan. The purposes of this Plan are as
follows:

          (1) To further the growth, development and financial success of the Company by providing
incentives to its non-employee Directors by assisting them to become owners of the Company’s Common
Stock and thus to benefit directly from its growth, development and financial success.

          (2) To enable the Company to obtain and retain the services of qualified non-employee
Directors in order to contribute to the long-range success of the Company by providing and offering
them an opportunity to become owners of the Company’s Common Stock.

ARTICLE I

DEFINITIONS

          Whenever the following terms are used in this Plan, they shall have the meaning specified
below unless the context clearly indicates to the contrary. The masculine pronoun shall include
the feminine and neuter and the singular shall include the plural, where the context so indicates.

Section 1.1 — Board

          “Board” shall mean the Board of Directors of the Company.

Section 1.2 — Code

          “Code” shall mean the Internal Revenue Code of 1986, as amended.

Section 1.3 — Committee

          “Committee” shall mean the Committee appointed by the Board, as provided in Section 6.1.

Section 1.4 — Company

          “Company” shall mean PFSweb, Inc., a Delaware corporation.

Section 1.5 — Director

          “Director” shall mean a member of the Board who is not an Employee.

Section 1.6 — Effective Date

 

 

          “Effective Date” shall mean July 1, 1999.

Section 1.7 — Employee

          “Employee” shall mean any employee (as defined in accordance with the regulations and revenue
rulings then applicable under Section 3401(c) of the Code) of the Company, or of any corporation
which is then a Subsidiary.

Section 1.8 — Exchange Act

          “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

Section 1.9 — Non-Qualified Option

          “Non-Qualified Option” shall mean an Option which is not an incentive stock option and is not
qualified under Section 422 of the Code.

Section 1.10 — Officer

          “Officer” shall mean an officer of the Company, as defined in Rule 16a-1(f) under the Exchange
Act, as such Rule may be amended in the future.

Section 1.11 — Option

          “Option” shall mean an option to purchase Common Stock of the Company granted under the Plan.

Section 1.12 — Optionee

          “Optionee” shall mean a Director to whom an Option is granted under the Plan.

Section 1.13 — Parent Corporation

          “Parent Corporation” shall mean any corporation in an unbroken chain of corporations ending
with the Company if each of the corporations other than the Company then owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one of the other corporations
in such chain.

Section 1.14 — Plan

          “Plan” shall mean this Non-Employee Director Stock Option and Retainer Plan of PFSweb, Inc.

Section 1.15 — Retainer

          “Retainer” shall mean the annual cash retainer payable to each Director for services as a
member of the Board and any committee or committees of the Board.

Section 1.16 — Rule 16b-3

          “Rule 16b-3” shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be
amended in the future.

Section 1.17 — Secretary

          “Secretary” shall mean the Secretary of the Company.

Section 1.18 — Securities Act

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          “Securities Act” shall mean the Securities Act of 1933, as amended.

Section 1.19 — Shares

          “Shares” shall mean shares of the Company’s Common Stock.

Section 1.20 — Subsidiary

          “Subsidiary” shall mean any corporation in an unbroken chain of corporations beginning with
the Company if each of the corporations other than the last corporation in the unbroken chain then
owns stock possessing 50% or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.

Section 1.21 — Termination

          “Termination” shall mean the time when the Director no longer serves as a member of the Board,
including, but not by way of limitation, a termination by resignation, discharge, death or
retirement.

ARTICLE II

SHARES SUBJECT TO PLAN

Section 2.1 — Shares Subject to Plan

          The Shares of stock subject to this Plan shall be shares of the Company’s Common Stock. The
aggregate number of such Shares which may be issued pursuant to this Plan shall be 155,643.

Section 2.2 — Unexercised Options

          If any Option expires or is canceled without having been fully exercised, the number of Shares
subject to such Option but as to which such Option was not exercised prior to its expiration or
cancellation, may again be optioned hereunder, subject to the limitations of Section 2.1.

Section 2.3 — Changes in Company’s Shares

          In the event that the outstanding Shares of Common Stock of the Company are hereafter changed
into or exchanged for a different number or kind of shares or other securities of the Company, or
of another corporation, or in the event of any other capital transaction involving the outstanding
shares of Common Stock of the Company as the Committee shall determine in its sole discretion,
whether by reason of reorganization, merger, consolidation, recapitalization, reclassification,
stock split-up, stock dividend, combination of shares or otherwise, appropriate adjustments shall
be made by the Committee in the number and kind of Shares which may be issued hereunder, including
adjustment to the number, exercise price and kind of shares for the purchase of which Options may
be granted, and further including adjustments of the limitations in Section 2.1 on the maximum
number and kind of shares which may be issued hereunder and adjustments to the number of Options
set forth in Section 3.5 below.

ARTICLE III

RETAINER FEES AND GRANTING OF OPTIONS

Section 3.1 — Payment of Retainer

          (a) Each Director may elect under the Plan to receive payment of any Retainer (in such
installments as such Retainer shall be payable) in Shares, in lieu of cash, by submitting a written
election (the

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“Notice of Election”) to the Company. The Notice of Election shall become effective six months
following the date of the Notice of Election or such earlier date as may be permitted under Rule
16b-3 (the “Election Effective Date”) and, from and after the Election Effective Date, all
Retainers payable to the electing Director (whether in installments or otherwise) shall be payable
in Shares in the manner set forth herein.

          (b) Subject to the foregoing, each Notice of Election shall become effective on its Election
Effective Date and shall continue in effect until revoked by the electing Director in a written
notice of revocation (the “Notice of Revocation”) delivered to the Company; provided, however, that
no Notice of Revocation shall become effective until six months following the date of the Notice of
Revocation or such earlier date as may be permitted under Rule 16b-3.

          (c) If no Notice of Election is submitted to the Company, and prior to any Election Effective
Date, all Retainers shall be payable in cash.

Section 3.2 — Number of Shares

          The number of Shares to be issued to each Director electing to have his or her Retainer paid
in Shares shall be determined by dividing the dollar amount of the then payable Retainer by the
fair market value of the Shares as of the most recent trading day immediately prior to the date the
Retainer is otherwise payable. No fractional Shares shall be issued and any fractional Share shall
be rounded to the nearest whole Share. Subject to the terms and provisions hereof, all Shares
shall be issued in certificate form in the name of the Director (or any designee) as promptly as
practicable following the date of payment. For purposes of this Section, fair market value shall
be determined in accordance with Section 4.2(b) below.

Section 3.3 — Eligibility

          Each Director shall be granted Options in accordance with the provisions set forth herein.

Section 3.4 — Non-Qualification of Options

          Each Option shall be a Non-Qualified Option.

Section 3.5 — Granting of Options

          Each person who is a Director immediately following each annual meeting of stockholders of the
Company shall receive an Option to purchase 4,255 Shares as of the date of such annual meeting;
provided that such Director shall have attended at least 75% of the meetings of the Board (which
may include committee meetings) during the most recent completed fiscal year prior to such annual
meeting (or such shorter period of time as such Director held office during such fiscal year).

ARTICLE IV

TERMS OF OPTIONS

Section 4.1 — Option Agreement

          Each Option shall be evidenced by a written Stock Option Agreement, which shall be executed by
the Optionee and an authorized Officer of the Company and which shall contain such terms and
conditions as are consistent with the Plan.

Section 4.2 — Option Price

          (a) The price of the Shares subject to each Option shall be equal to 100% of the fair market
value of such Shares on the date such Option is granted.

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          (b) For purposes of the Plan, the fair market value of a Share of the Company’s Common Stock
as of a given date shall be: (i) the closing price of a Share of the Company’s Common Stock on the
principal exchange on which Shares of the Company’s Common Stock are then trading; or (ii) if such
Common Stock is not traded on an exchange but is quoted on NASDAQ or a successor quotation system,
(1) the last sales price (if the Company’s Common Stock is then listed as a National Market Issue
under the NASD National Market System) or (2) the mean between the closing representative bid and
asked prices (in all other cases) for the Company’s Common Stock, in each case, on such date as
reported by NASDAQ or such successor quotation system; or (iii) if such Common Stock is not
publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the mean
between the closing bid and asked prices for the Company’s Common Stock, on such date, as
determined in good faith by the Committee; or (iv) if the Company’s Common Stock is not publicly
traded, the fair market value established by the Committee acting in good faith.

Section 4.3 — Commencement of Exercisability

          (a) No Option may be exercised in whole or in part during the six months after such Option is
granted.

          (b) Subject to the provisions hereof, each Option granted hereunder shall be subject to the
following cumulative vesting schedule:

               (i) Until the date which is one year from the date of grant, the Option shall not be vested
and shall not be exercisable as to any of the shares subject thereto; and

               (ii) From and after the date which is one year from the date of grant, the Option shall vest
and be fully exercisable.

Section 4.4 — Expiration of Options

          No Option may be exercised to any extent after the first to occur of the following events:

               (i) The expiration of ten years from the date the Option was granted; or

               (ii) Except in the case of any Optionee who is disabled (within the meaning of Section
22(e)(3) of the Code), the expiration of three months from the date of the Optionee’s Termination
for any reason other than such Optionee’s death; or

               (iii) With respect to an Option held by an Optionee who is disabled (within the meaning of
Section 22(e)(3) of the Code), the expiration of one year from the date of the Optionee’s
Termination for any reason other than such Optionee’s death unless the Optionee dies within said
one-year period; or

               (iv) The expiration of one year from the date of the Optionee’s death with respect to all
Options held by such Optionee.

Section 4.5 — Adjustments in Outstanding Options

          In the event that the outstanding Shares of the stock subject to Options are changed into or
exchanged for a different number or kind of shares of the Company or other securities of the
Company, or in the event of any other capital transaction involving the outstanding shares of
Common Stock of the Company as the Committee shall determine in its sole discretion, whether by
reason of merger, consolidation, recapitalization, reclassification, stock split-up, stock
dividend, combination of shares or otherwise, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares as to which all outstanding Options, or portions
thereof then unexercised, shall be exercisable, to the end that after such event the Optionee’s
proportionate interest shall be maintained as before the occurrence of such event. Such adjustment
in an outstanding Option shall be made without change in the total price applicable to the Option
or the unexercised portion of the Option (except for any change in the aggregate price resulting
from rounding-off of share quantities or prices) and with any

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necessary corresponding adjustment in Option price per share. Any such adjustment made by the
Committee shall be final and binding upon all Optionees, the Company and all other interested
persons.

Section 4.6 — No Repricing

     Except in connection with a corporate transaction involving the Company (including, without
limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the
terms of outstanding Options may not be amended to reduce the exercise price of outstanding Options
or cancel outstanding Options in exchange for cash, other awards or Options with an exercise price
that is less than the exercise price of the original Options without stockholder approval.

ARTICLE V

EXERCISE OF OPTIONS

Section 5.1 — Person Eligible to Exercise

          During the lifetime of the Optionee, only such Optionee may exercise an Option (or any portion
thereof) granted to him; provided, however, that, unless otherwise prohibited by Rule 16b-3, an
Optionee may transfer all or any portion of an Option to his spouse or immediate family member or
any trust for the benefit thereof or as the Committee may otherwise permit in its sole discretion.
After the death of the Optionee, any exercisable portion of an Option may, prior to the time when
such portion becomes unexercisable under the Plan, be exercised by his personal representative or
by any person empowered to do so under the deceased Optionee’s will or under the then applicable
laws of descent and distribution.

Section 5.2 — Partial Exercise

          At any time and from time to time prior to the time when any exercisable Option or exercisable
portion thereof becomes unexercisable under the Plan, such Option or portion thereof maybe
exercised in whole or in part; provided, however, that the Company shall not be required to issue
fractional shares and the Committee may, by the terms of the Option, require any partial exercise
to be with respect to a specified minimum number of shares.

Section 5.3 — Manner of Exercise

          An exercisable Option, or any exercisable portion thereof, may be exercised solely by delivery
to the Secretary or his office of all of the following prior to the time when such Option or such
portion becomes unexercisable under the Plan or the applicable Stock Option Agreement:

          (a) Notice in writing signed by the Optionee or other person then entitled to exercise such
Option or portion, stating that such Option or portion is exercised, such notice complying with all
applicable rules established by the Committee; and

          (b) (i) Full payment (in cash or by check) for the Shares with respect to which such Option or
portion is thereby exercised; or

               (ii) Subject to the consent of the Committee, (A) Shares of the Company’s Common
Stock owned
by the Optionee duly endorsed for transfer to the Company or (B) subject to the timing requirements
of Section 5.4, Shares of the Company’s Common Stock issuable to the Optionee upon exercise of the
Option, with a fair market value (as determined under Section 4.2(b)) on the date of Option
exercise equal to the aggregate Option price of the Shares with respect to which such Option or
portion is thereby exercised; or

               (iii) Any combination of the consideration provided in the foregoing subsections (i) and
(ii);
and

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          (c) The payment to the Company (or other employer corporation) of all amounts which it is
required to withhold under federal, state or local law in connection with the exercise of the
Option; provided, that, with the consent of the Committee, any combination of the following may be
used to make all or part of such payment: (i) Shares of the Company’s Common Stock owned by the
Optionee duly endorsed for transfer or (ii) subject to the timing requirements of Section 5.4,
Shares of the Company’s Common Stock issuable to the Optionee upon exercise of the Option, valued
in accordance with Section 4.2(b) at the date of Option exercise; and

          (d) Such representations and documents as the Committee, in its absolute discretion, deems
necessary or advisable to effect compliance with all applicable provisions of the Securities Act
and any other federal or state securities laws or regulations. The Committee may, in its absolute
discretion, also take whatever additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on Share certificates and issuing stop-transfer
orders to transfer agents and registrars; and

          (e) In the event that the Option or portion thereof shall be exercised pursuant to Section 5.1
by any person or persons other than the Optionee, appropriate proof of the right of such person or
persons to exercise the Option or portion thereof.

Section 5.4 — Certain Timing Requirements

          Shares of the Company’s Common Stock issuable to the Optionee upon exercise of the Option may
be used to satisfy the Option price or the tax withholding consequences of such exercise only with
the consent of the Committee and (i) during the trading window period following the date of release
of the quarterly or annual summary statement of sales and earnings of the Company as may be
established by the Company for its senior executives from time to time or (ii) pursuant to an
irrevocable written election by the Optionee to use Shares of the Company’s Common Stock issuable
to the Optionee upon exercise of the Option to pay all or part of the Option price or the
withholding taxes made at least six months prior to the payment of such Option price or withholding
taxes.

Section 5.5 — Conditions to Issuance of Stock Certificates

          The Shares of stock issuable and deliverable upon the exercise of an Option, or any portion
thereof, may be either previously authorized but unissued Shares or issued Shares which have then
been reacquired by the Company. The Company shall not be required to issue or deliver any
certificate or certificates for Shares of stock issued in payment of any Retainer or purchased upon
the exercise of any Option or portion thereof prior to the fulfillment of all of the following
conditions:

          (a) The admission of such Shares to listing on all stock exchanges on which such class of
stock is then listed; and

          (b) The completion of any registration or other qualification of such Shares under any state
or federal law or under the rulings or regulations of the Securities and Exchange Commission or any
other governmental regulatory body, if any such registration or qualification may be necessary or
advisable; and

          (c) The obtaining of any approval or other clearance from any state or federal governmental
agency which may be necessary or advisable; and

          (d) The payment to the Company (or other employer corporation) of all amounts which it is
required to withhold under federal, state or local law in connection with the exercise of the
Option; and

          (e) The lapse of such reasonable period of time following the exercise of the Option as the
Secretary of the Company may establish from time to time for reasons of administrative convenience.

ARTICLE VI

ADMINISTRATION

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Section 6.1 — Committee

          The Plan shall be administered by the Committee which shall consist of two or more members of
the Board, as the Board may appoint from time to time; provided, however that, in the absence of
such appointment, the Plan shall be administered by the Board (in which event the term “Committee”
as used herein shall mean the Board); provided, further, however, that, notwithstanding the
foregoing, the Plan shall be construed, interpreted, implemented and administered in a manner
sufficient to comply with the provisions of Rule 16b-3, and, in particular, in order to provide
that the members of the Committee shall at all times satisfy the requirements set forth therein.

Section 6.2 — Duties and Powers of Committee

          It shall be the duty of the Committee to conduct the general administration of the Plan in
accordance with its provisions. The Committee shall have the power to interpret the Plan and the
Options and to adopt such rules for the administration, interpretation and application of the Plan
as are consistent therewith and to interpret, amend or revoke any such rules.

Section 6.3 — Majority Rule

          The Committee shall act by a majority of its members in office. The Committee may act either
by vote at a meeting or by a memorandum or other written instrument signed by a majority of the
Committee.

Section 6.4 — Compensation; Professional Assistance; Good Faith Actions

          Members of the Committee shall receive such compensation for their services as members as may
be determined by the Board. All expenses and liabilities incurred by members of the Committee in
connection with the administration of the Plan shall be borne by the Company. The Committee may
employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee,
the Company and its Officers and Directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All actions taken and all interpretations and determinations made
by the Committee in good faith shall be final and binding upon all Optionees, the Company and all
other interested persons. No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or the Options, and all
members of the Committee shall be fully protected by the Company in respect to any such action,
determination or interpretation.

ARTICLE VII

OTHER PROVISIONS

Section 7.1 — Options Not Transferable

          Except as set forth in Section 5.1 hereof, no Option or interest or right therein or part
thereof shall be liable for the debts, contracts or engagements of the Optionee or his successors
in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or
by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void
and of no effect; provided, however, that nothing in this Section 7.1 shall prevent transfers by
will or by the applicable laws of descent and distribution.

Section 7.2 — Amendment, Suspension or Termination of the Plan

          The Plan may be wholly or partially amended or otherwise modified, suspended or terminated at
any time or from time to time by the Committee; provided, however, that no amendment or
modification which requires shareholder approval under Rule 16b-3, if any, shall be effective in
the absence of such approval. Neither the amendment, suspension nor termination of the Plan shall,
without the consent of the holder of the Option, impair any rights or obligations under any Option
theretofore granted. No Option may be granted during any period of

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suspension nor after termination of the Plan. The Plan shall terminate and no Option be granted
under this Plan after December 31, 2017.

Section 7.3 — Approval of Plan by Shareholder(s)

          This Plan will be submitted for the approval of the Company’s shareholder(s) within 12 months
after the date of the Board’s initial adoption of the Plan. No Options shall be granted prior to
such shareholder approval. The Company shall take such actions with respect to the Plan as may be
necessary to satisfy the requirements of Rule 16b-3(b).

Section 7.4 — Effect of Plan Upon Other Option and Compensation Plans

          The adoption of this Plan shall not affect any other compensation or incentive plans in effect
for the Company, any Parent Corporation or any Subsidiary. Nothing in this Plan shall be construed
to limit the right of the Company, any Parent Corporation or any Subsidiary to (a) establish any
other forms of incentives or compensation for employees and Directors of the Company, any Parent
Corporation or any Subsidiary or (b) grant or assume options otherwise than under this Plan in
connection with any proper corporate purpose, including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition by purchase, lease, merger, consolidation
or otherwise, of the business, stock or assets of any corporation, firm or association.

Section 7.5 — Titles

          Titles are provided herein for convenience only and are not to serve as a basis for
interpretation or construction of the Plan.

Section 7.6 — Conformity to Securities Laws and Section 409A(d) of the Code

          The Plan is intended to conform to the extent necessary with all provisions of the Securities
Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and
Exchange Commission thereunder, including without limitation Rule 16b-3, as well as of Section
409A(d) of the Code. Notwithstanding anything herein to the contrary, the Plan shall be
administered, and Options shall be granted and may be exercised, only in such a manner as to
conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan
and Options granted hereunder shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.

9Exhibit 4.1

Ex. 4.1

FORM OF CONVERTIBLE NOTE

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR APPLICABLE STATE SECURITIES
LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
THAT THERE IS AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT.

			
	 
	 	 
	Amount: $XX,XXX.XX
	 	Irvine, California
	 
	 	Date:
 _____, 2009

FOR VALUE RECEIVED, BIOLARGO, INC., a
corporation organized under the laws of the state of
Delaware (“Issuer”), promises to pay to the order of xxxxxx (hereafter, together with
any subsequent holder hereof, called “Holder”), at its office, at “Holder’s Address” (as that term
is defined below), or at such other place as Holder may direct, the “Amount” noted above (the “Loan
Amount”), payable on June 1, 2012, or at an earlier date as provided herein (the “Maturity Date”).
This convertible note is duly authorized issue of the Issuer, issued on the “Date” noted (the
“Issuance Date”), and designated as its Convertible Note due June 1, 2012 (the “Note”).

The Issuer agrees to pay interest on the unpaid principal amount of the Loan Amount from time
to time outstanding hereunder at the following rates per year, compounded annually: (i) before
maturity of the Loan Amount, whether by acceleration or otherwise, at the rate per annum equal to
ten percent (10%); (ii) after the maturity of the Loan Amount, whether by acceleration or
otherwise, until paid, at a rate per annum equal to fifteen percent (15%).

Payments of both principal and interest are to be made in immediately available funds in
lawful money of the United States of America, or in Common Stock of the Issuer as set forth below.

Accrual of interest shall commence as of the Issuance Date. Interest will accrue monthly and
be paid annually on the Note on June 1st (pro-rated based on the actual number of days elapsed in a
365-day year), such interest to be paid, at the Company’s option, in cash or in that number of
shares of Common Stock of the Issuer (the “Common Stock”) at a price per share equal to the average
closing price of the Company’s common stock for the 20 trading days preceding a given interest due
date. Unless otherwise agreed in writing by both parties hereto, the interest so payable will be
paid to the person in whose name this Note (or one or more predecessor Notes) is registered on the
records of the Issuer regarding registration and transfers of the Note (the “Note Register”),
provided, however, that the Issuer’s obligation to a transferee of this Note arises only if such
transfer, sale or other disposition is made in accordance with the terms and conditions contained
in this Note and the Subscription Agreement (the “Agreement”) that the Holder executed at the time
of making an investment in the Issuer.

 

 

 

The Note is subject to the following additional provisions:

1. The Issuer shall be entitled to withhold from all payments of principal and/or interest of
this Note any amounts required to be withheld under the applicable provisions of the Internal
Revenue Code of 1986, as amended, or other applicable laws at the time of such payments.

2. This Note has been issued subject to investment representations of the original Holder
hereof and may be transferred or exchanged only in compliance with the Securities Act and
applicable state securities laws and in compliance with the restrictions on transfer provided in
the Agreement. Prior to the due presentment for such transfer of this Note, the Issuer and any
agent of the Issuer may treat the person in whose name this Note is duly registered in the Note
Register as the owner hereof for the purpose of receiving payment as herein provided and all other
purposes, whether or not this Note is overdue, and neither the Issuer nor any such agent shall be
affected by notice to the contrary. The transferee shall be bound, as the original Holder by the
same representations and terms described herein and under the Agreement.

3. The Holder may, at its option, at any time convert the principal amount of this Note or any
portion thereof, and any accrued and unpaid interest thereon, into such number of shares of fully
paid and non-assessable Common Stock of the Issuer (“Conversion Shares”) as is obtained by dividing
the Loan Amount by $0.55 (“Conversion Price”). The right to convert the Note may be exercised by
the Issuer by telecopying, mailing (via first class mail, postage prepaid) or personally delivering
an executed and completed notice of conversion (the “Notice of Voluntary Conversion”) to the
Issuer. The business day (a “Business Day”) on which a Notice of Voluntary Conversion is delivered
in accordance with the provisions hereof shall be deemed the “Voluntary Conversion Date”. The
Issuer will transmit the certificates representing Conversion Shares issuable upon such conversion
of the Note (together with the certificates representing the Note not so converted) to the Holder
via express courier, by electronic transfer (if applicable) or otherwise, within ten Business Days
after the later to occur of (i) the Voluntary Conversion Date or (ii) the Business Day on which the
Issuer has received from the Holder the original Note being so converted.

4. The Issuer may, at its option, (i) on or after December 15, 2009, if the Company has
received one or more written firm commitments, or has closed on one or more transactions, or a
combination of the foregoing, of at least $3 million gross proceeds of equity or debt; or (ii) on
the Maturity Date, require the Holder to convert the Note or any portion thereof, and any accrued
and unpaid interest thereon, into such number of Conversion Shares as is obtained by dividing the
Loan Amount by the Conversion Price. The obligation of the Holder to convert the Note may be
exercised by the Company by telecopying, mailing (via first class mail, postage prepaid) or
personally delivering an executed and completed notice of conversion (the “Notice of Mandatory
Conversion”) to the Holder’s Address maintained in the Note Register. The Holder covenants and
agrees to acknowledge a Notice of Mandatory Conversion in writing by completing, dating and signing
such Notice of Mandatory Conversion and returning it to the Company by telecopier, first class mail
(postage prepaid) or personal delivery (the “Holder Acknowledgment Date”). The business day on
which a Notice of Mandatory Conversion is delivered in accordance with the provisions hereof shall
be deemed the “Mandatory Conversion Date”. The Issuer will transmit the certificates representing
Conversion Shares issuable upon such conversion of the Note (together with the certificates
representing any portion of the Note not so converted) to the Holder via express courier, by
electronic transfer (if applicable) or otherwise within ten Business Days after the later to occur
of (i) the Holder Acknowledgment Date or (ii) the date that the Issuer has
received from the Holder the original Note being so converted.

5. The principal amount of this Note, and any accrued interest thereon, shall be reduced as
per that principal amount indicated on the Notice of Voluntary Conversion or Notice of Mandatory
Conversion, as the case may be, upon the proper receipt by the Holder of such
Conversion Shares due upon such Notice of Voluntary Conversion or Notice of Mandatory Conversion.

 

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6. The number of Conversion Shares shall be adjusted as follows. If the Issuer shall at any
time subdivide its outstanding shares of Common Stock into a greater number of shares of Common
Stock, the number of Conversion Shares in effect immediately prior to such subdivision shall be
proportionately increased, and conversely, in case the outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the number of Conversion Shares in effect
immediately prior to such subdivision shall be proportionately decreased.

7. No provision of this Note shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, upon an Event of Default (as defined below), to pay the principal of,
and interest on this Note at the place, time, and rate, and in the coin or currency herein
prescribed.

8. Events of Default. Each of the following occurrences is hereby defined as an “Event of
Default”:

a. Nonpayment. The Issuer shall fail to make any payment of principal, interest, or
other amounts payable hereunder when and as due; or

b. Dissolutions, etc. The Issuer or any subsidiary shall fail to comply with any
provision concerning its existence or any prohibition against dissolution, liquidation,
merger, consolidation or sale of assets; or

c. Noncompliance with this Agreement. The Issuer shall fail to comply in any material
respect with any provision hereof, which failure does not otherwise constitute an Event of
Default, and such failure shall continue for ten (10) days after the occurrence of such
failure; or

d. Bankruptcy. Any bankruptcy, insolvency, reorganization, arrangement, readjustment,
liquidation, dissolution, or similar proceeding, domestic or foreign, is instituted by or
against the Issuer or any of its subsidiaries, or the Issuer or any of its subsidiaries
shall take any step toward, or to authorize, such a proceeding; or

e. Insolvency. The Issuer shall make a general assignment for the benefit of its
creditors, shall enter into any composition or similar agreement, or shall suspend the
transaction of all or a substantial portion of its usual business.

9. If one or more “Events of Default” shall occur, then, or at any time thereafter, and in
each and every such case, unless such Event of Default shall have been waived in writing by the
Holder (which waiver shall not be deemed to be a waiver of any subsequent default) or cured as
provided herein, at the option of the Holder, and in the Holder’s sole discretion, the Holder may
elect to consider this Note (and all interest through such date) immediately due and
payable. In order to so elect, the Holder must deliver written notice of the election and the
amount due to the Issuer via certified mail, return receipt requested, at the Issuer’s address as
set forth herein (or any other address provided to the Holder), and thereafter the Issuer shall
have ten business days upon receipt to cure the Event of Default, pay the Note, or convert the
amount due on the Note pursuant to the conversion formula set forth above. It is agreed that in the
event of such action, such Holder shall be entitled to receive all reasonable fees, costs and
expenses incurred, including without limitation such reasonable fees and expenses of attorneys. The
parties acknowledge that a change in control of the Issuer shall not be deemed to be an Event of
Default as set forth herein.

 

- 3 -

 

10. In case any provision of this Note is held by a court of competent jurisdiction to be
excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather
than voided, if possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Note will not in any way be
affected or impaired thereby.

11. This Note does not entitle the Holder hereof to any voting rights or other rights as a
stockholder of the Issuer prior to the conversion into Common Stock thereof, except as provided by
applicable law. If, however, at the time of the surrender of this Note and conversion the Holder
hereof shall be entitled to convert this Note, the Conversion Shares so issued shall be and be
deemed to be issued to such holder as the record owner of such shares as of the close of business
on the Conversion Date.

12. This Note and all other notes in this series may be subordinated to up to $10 million of
additional debt financing that the Issuer may incur prior to the Maturity Date.

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

	 	 	 	 	 	 	 
	 	 	BIOLARGO, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	XXXXXX
 

	 	 
	 

	 	Name:
	Dennis P. Calvert, President	 	 
	 
	 	 	 	 	 	 
	 	 	ACCEPTED:	 	 
	 
	 	 	 	 	 	 
	 

	 	Signature:	 	 	 	 
	 

	 	 	 

	 	 
	 

	 	Print Name: 	 	 	 	 
	 

	 	 	 

	 	 
	 

	 	Holder’s Address:	 	 	 
	 

	 	 	 	 

	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 

 

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NOTICE OF VOLUNTARY CONVERSION

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

The undersigned hereby irrevocably elects to convert $_____ 
of the principal amount of
the above Note, and $_____ of accrued and unpaid interest, into
_____ Shares of Common Stock of BioLargo, Inc. (the “Company”) according to the conditions hereof, as of the date written
below.

The undersigned represents and warrants to the Company that, as of the date hereof, the
undersigned is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D
under the Securities Exchange Act of 1934, as amended.

	 	 	 	 	 	 	 
	Date of Voluntary Conversion:                                    

	 	Signature:	 	 	 	 
	 

	 	 	 

	 	 
	 

	 	Print Name:	 	 	 	 
	 

	 	 	 

	 	 
	 

	 	Holder’s Address: 	 	 	 
	 

	 	 	 	 

	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Social Security No.: 	 	 	 
	 
	 	 	 	 	 	 
	 	 	ACCEPTED:	 	 
	 
	 	 	 	 	 	 
	 	 	BIOLARGO, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By (Signature):
	 

	 	 
	 

	 	
Print Name: 	 	 	 	 
	 

	 	 	 

	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 

	 	 

 

- 1 -

 

NOTICE OF MANDATORY CONVERSION

(To be Executed by the Company in order to required the Holder to convert the Note)

The undersigned hereby notifies you of its irrevocably election to require you to convert
$_____ 
of the principal amount of the above Note, and $_____ 
of accrued and unpaid
interest, into
 _____ 
Shares of Common Stock of BioLargo, Inc. according to the conditions
hereof, as of the date written below.

	 	 	 	 	 	 	 
	Date of Mandatory Conversion:                                    	 	BIOLARGO, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By (Signature):	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Print Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

	 	 

 

- 2 -

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