Document:

Exhibit 4.5

 

MODIFICATION AGREEMENT
 OF

CONVERTIBLE PROMISSORY NOTE

 

This Modification Agreement of Convertible Promissory Note (the “Modification”) is made as of May 1, 2016 by and between EMMAUS LIFE SCIENCES, INC., a Delaware corporation, located at 21250 Hawthorne Blvd., Suite 800, Torrance CA 90503 (hereafter “Borrower” or “Company”) and Yutaka Niihara, M.D., an individual (the “Guarantor”), on the one hand, and HISAKO TERASAKI, as Trustee of the PAUL AND HISAKO TERASAKI TRUST dated February 15, 1985, as amended and restated, as a successor in interest to Paul Terasaki (“Lender”), on the other hand.

 

RECITALS

 

1.             Borrower executed that certain Convertible Promissory Note (the “Note”) in favor of Paul Terasaki, as Lender, on March 5, 2015, in the original principal amount of $656,052.05. As additional security to Lender, the Note is personally guaranteed by Guarantor.

 

2.             Concurrently with the Note, Company issued a Warrant to Paul Terasaki to purchase 100,000 shares of common stock of the Company (the “Warrant”). The Expiration Date of the Warrant is March 5, 2020.

 

3.             By an Assignment of Assets executed by Paul I. Terasaki and Hisako Terasaki on February 26, 2011, Paul I. Terasaki assigned all currently owned and after-acquired tangible and intangible personal property-including the Note, Warrant, and all prior agreements executed by and between Borrower and Lender-to the Trustees of the Paul and Hisako Terasaki Trust dated February 15, 1985, as amended and restated.

 

4.             The Note became due and payable in full on November 1, 2015 (the “Maturity Date”). As of the date hereof, Borrower is in default and no payments have been made under the Note.

 

5.             Paul I. Terasaki died on January 25, 2016. Hisako Terasaki, as Trustee of the Paul and Hisako Terasaki Trust, as assignee, is the holder of the Note and the Warrant.

 

6.             The parties hereto desire to make certain modifications to the Note upon the terms and conditions described herein.

 

NOW, THEREFORE, in consideration of the mutual covenants of the parties, the parties hereto do hereby agree as follows:

 

1.             Capitalized Terms. All capitalized terms used herein, unless otherwise defined, shall have the meanings ascribed to them in the Note.

 

 

2.             Consent to Assignment. Borrower and Guarantor hereby consent to the assignment of the Note and Warrant by Paul Terasaki to the Paul and Hisako Terasaki Trust.

 

3.             Confirmation of Outstanding Balance. The parties hereto acknowledge and agree that as of May 1, 2016, the outstanding balance of principal is $656,052.05, plus accrued unpaid interest of $76,030.14.

 

4.             Modification of Warrant. Pursuant to Paragraph 6 of the Note, upon a default, Borrower is required to issue a Warrant to Lender for 25,000 shares of common stock of the Company, at $4.90 per share (the “Default Warrant”), but as of the date hereof the Default Warrant has not been issued. Lender hereby waives all rights to the Default Warrant, and in lieu of the Default Warrant, Borrower shall issue to Lender in connection with this Modification a Warrant to purchase 75,000 shares of common stock of the Company, at $4.70 per share (the “Modification Warrant”). Borrower represents that the purchase price of $4.70 per share is the current fair market value of the shares of the Company. The Date of Issuance of the Modification Warrant shall be as of May 1, 2016, and the Expiration Date shall be May 1, 2021. Borrower shall prepare all documents necessary to memorialize the issuance of the Modification Warrant described in this Paragraph 4.

 

5.             Extension of Maturity Date. The parties hereto agree that the payments otherwise due under the Note shall be modified as follows:

 

a.              The Maturity Date of the loan shall be extended for a period of six (6) months to October 1, 2016, at which time the entire outstanding principal and accrued interest payable under the Note shall become due and payable in full.

 

b.              Borrower shall make payments to Lender in six (6) equal monthly installments $124,580.03, beginning on May 1, 2016, in accordance with the amortization schedule attached hereto as Exhibit A .

 

c.              In connection with such modification, Paragraph 1 of the Note shall be deleted in its entirety and the following shall be substituted therefor:

 

1.         Terms of Repayment. Commencing on May 1, 2016, Borrower shall pay to Lender principal and interest on the first day of each month, for a period of six (6) months), in the amount of $124,580.03 per month. The entire unpaid balance of principal, and all accrued but unpaid interest thereon, shall become immediately due and payable on October 1, 2016 (the “Maturity Date”).

 

6.             All Other Provisions of Convertible Promissory Note and Warrant to Purchase Shares of Common Stock Remain in Effect. Except as otherwise modified herein, all of the terms and provisions of the Note and Warrant shall remain in full force and effect and are ratified and confirmed in all respects.

 

2

 

7.                Guaranty.      As additional security to Lender, Guarantor hereby consents to the Modification and ratifies and confirms the Guaranty in all respects.

 

8.               Binding Effect. This Modification, and all rights and obligations hereunder, shall be binding upon the parties hereto, and all of their respective successors-in-interest and assigns.

 

9.               Governing Law. This Modification shall be governed by and construed in accordance with the laws of the State of California.

 

IN WITNESS WHEREOF, the parties hereto have executed this Modification as of the date first written above.

 

	
“Borrower”
    	
 
    	
“Lender”
    
	
 
    	
 
    	
 
    
	
EMMAUS LIFE SCIENCES,   INC., a Delaware Corporation
    	
 
    	
PAUL AND HISAKO   TERASAKI TRUST dated February 15, 1985, as amended and restated
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
HISAKO TERASAKI,   Trustee
    
	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
“Guarantor”
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
YUTAKA NIIHARA, M.D.,   an individual
    	
 
    	
 
    

 

3

 

EXHIBIT A

 

04-20-16

 

Emmaus Conv Note

 

	
Starting Loan Amount:
    	
 
    	
$ 656,052.05
    	
Loan Date:
    	
 
    	
03-05-2015
    
	
Amortization Method:
    	
 
    	
Normal, 365 D/Y
    	
First Payment Date:
    	
 
    	
05-01-2016
    
	
Starting Interest Rate:
    	
 
    	
10.000%
    	
Starting Accrual Rate:
    	
 
    	
0.000 %
    
	
Term of Loan:
    	
 
    	
6
    	
Starting Payment Period:
    	
 
    	
Monthly
    

 

	
PMT
    	
 
    	
Due Date
    	
 
    	
Payment Amount
    	
 
    	
Interest
    	
 
    	
Principal
    	
 
    	
Balance
    	
 
    
	
1
    	
 
    	
05-01-16
    	
 
    	
124,580. 03
    	
 
    	
76,030.14
    	
 
    	
48,549.89
    	
 
    	
607,502.16
    	
 
    
	
2
    	
 
    	
06-01-16
    	
 
    	
124,580.03
    	
 
    	
5,159.61
    	
 
    	
119,420.42
    	
 
    	
488,081.74
    	
 
    
	
3
    	
 
    	
07-01-16
    	
 
    	
124,580.03
    	
 
    	
4,011.63
    	
 
    	
120,568.40
    	
 
    	
367,513.34
    	
 
    
	
4
    	
 
    	
08-01-16
    	
 
    	
124,580.03
    	
 
    	
3,121.35
    	
 
    	
121,458.68
    	
 
    	
246,054.66
    	
 
    
	
5
    	
 
    	
09-01-16
    	
 
    	
124,580. 03
    	
 
    	
2, 089.78
    	
 
    	
122,490.25
    	
 
    	
123,564,41
    	
 
    
	
6
    	
 
    	
10-01-16
    	
 
    	
124,580.01
    	
 
    	
1,015.60
    	
 
    	
123,564.41
    	
 
    	
0.00
    	
 
    
	
2016 totals
    	
 
    	
 
    	
 
    	
747,480.16
    	
 
    	
91,428.11
    	
 
    	
656,052.05
    	
 
    	
 
    	
 
    
	
Grand totals
    	
 
    	
 
    	
 
    	
$
    	
747,480.16
    	
 
    	
$
    	
91,428.11 
    	
 
    	
$
    	
656,052.05
    	
 
    	
 
    	
 
    
															

 

1Exhibit 10.1

 

EMMAUS LIFE SCIENCES, INC.

Promissory Note

 

	
Principal   Amount:
    	
 
    	
Loan   Date:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Currency:
    	
US   dollar
    	
Term:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Interest   Rate:
    	
11.0%
    	
Loan   Due Date:
    	
 
    

 

Interest Payment Period:   Annually

 

Lender:

 

FOR VALUE RECEIVED, Emmaus Life Sciences, Inc., a Delaware corporation, located at 21250 Hawthorne Blvd., Suite 800, Torrance, CA  90503 (“Borrower”) agrees to pay to Lender the sum of the Principal Amount in the stated Currency, together with any accrued interest at the stated Interest Rate, under the following terms and conditions of this this Promissory Note (“Note”).

 

1. Terms of Repayment (Balloon Payment): The entire unpaid Principal Amount and any accrued interest shall become immediately due and payable upon the stated Loan Due Date. Simple interest at the stated Interest Rate will accrue on the outstanding Principal Amount commencing on the Loan Date of this Note and the Borrower shall make payments of interest only as per the stated Interest Payment Period.

 

2. Prepayment: This Note may be prepaid in whole or in part at any time after six months of the Loan Date without premium or penalty. All prepayments shall first be applied to interest, and then to principal payments.

 

3. Place of Payment: All payments due under this Note shall be sent to the Lender’s address, as noted in Attachment 1 hereto, or at such other place as the Lender or subsequently assigned holder of this Note may designate in writing in the future.

 

4. Default: In the event of default, the Borrower agrees to pay all costs and expenses incurred by the Lender, including all reasonable attorney fees as permitted by law for the collection of this Note upon default.

 

5. Acceleration of Debt: If the Borrower (i) fails to make any payment due under the terms of this Note or seeks relief under the U.S. Bankruptcy Code, (ii) fails to deliver shares to the Lender by the deadline set forth in Section 4 hereof, (iii) suffers an involuntary petition in bankruptcy or receivership that is not vacated within thirty (30) days, (iv) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official or such appointment is not discharged or stayed within 30 days, (v) makes a general assignment for the benefit of its creditors or (vi) admits in writing that it is generally unable to pay its debts as they become due, the

 

 

entire balance of this Note and any interest accrued thereon shall be immediately due and payable to the holder of this Note.

 

6. Modification: No modification or waiver of any of the terms of this Note shall be allowed unless by written agreement signed by the parties. No waiver of any breach or default hereunder shall be deemed a waiver of any subsequent breach or default of the same or similar nature.

 

7. Complete Note: This Note is the complete and exclusive statement of agreement of the parties with respect to matters in this Note. This Note replaces and supersedes all prior written or oral agreements or statements by and among the parties with respect to the matters covered by it. No representation, statement, condition or warranty not contained in this Note is binding on the parties.

 

8. Transfer of the Note: This Note may be transferred, in whole or in part, at any time or from time to time, by the Lender. The Borrower hereby waives any notice of the transfer of this Note by the Lender or by any subsequent holder of this Note, agrees to remain bound by the terms of this Note subsequent to any transfer, and agrees that the terms of this Note may be fully enforced by any subsequent holder of this Note. If this Note is to be transferred, the Lender shall surrender this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Lender a new Note registered as the Lender may request, representing the outstanding Principal Amount being transferred by the Lender and, if less then the entire outstanding Principal Amount is being transferred, a new Note to the Lender representing the outstanding Principal Amount not being transferred. This Note may not be transferred by the Borrower, by operation of law or otherwise, without the prior written consent of the Lender.

 

9. Lost, Stolen or Mutilated Note:  Upon receipt by the Borrower of evidence reasonably satisfactory to the Borrower of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Lender to the Borrower in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Borrower shall execute and deliver to the Lender a new Note representing the outstanding Principal Amount and accrued and unpaid interest thereon.

 

10. Remedies:  The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Lender’s right to pursue actual and consequential damages for any failure by the Borrower to comply with the terms of this Note.

 

11. Severability of Provisions: If any portion of this Note is deemed unenforceable, all other provisions of this Note shall remain in full force and effect.

 

12. Choice of Law: All terms and conditions of this Note shall be interpreted under the laws of California, U.S.A., without regard to conflict of law principles.

 

 

Signed Under Penalty of Perjury, this         day of      ,

 

	
Emmaus Life Sciences, Inc.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    

 

 

ATTACHMENT 1

 

Lender’s Name:

 

Lender’s Address:

 

 

[INFORMATION FOR PURPOSES OF FILING WITH THE SECURITIES AND EXCHANGE COMMISSION]

 

SCHEDULE A

 

NOTEHOLDERS

 

	
Lender
    	
 
    	
Annual
   Interest
   Rate
    	
 
    	
Date of
   loan
    	
 
    	
Term of
   Loan
    	
 
    	
Loan Due
   Date
    	
 
    	
Principal Loan
   Amount
    	
 
    	
Interest Payment
   Period
    	
 
    	
Conversion
   Price
    	
 
    
	
Hope   International Hospice, Inc.
    	
 
    	
10.0
    	
%
    	
04/04/2016
    	
 
    	
2 years (1)
    	
 
    	
04/04/2018
    	
 
    	
$
    	
50,000
    	
 
    	
Annually
    	
 
    	
$
    	
N/A
    	
 
    
	
Willis C. Lee
    	
 
    	
10.0
    	
%
    	
04/08/2016
    	
 
    	
Due on demand
    	
 
    	
Due on demand
    	
 
    	
$
    	
79,700
    	
 
    	
Annually
    	
 
    	
$
    	
N/A
    	
 
    
	
Lan T. Tran
    	
 
    	
10.0
    	
%
    	
04/29/2016
    	
 
    	
Due on demand
    	
 
    	
Due on demand
    	
 
    	
$
    	
20,000
    	
 
    	
Annually
    	
 
    	
$
    	
N/A
    	
 
    
	
IRA Services   Trust Company CFBO Peter B Ludlum
    	
 
    	
10.0
    	
%
    	
05/05/2016
    	
 
    	
Due on demand
    	
 
    	
Due on demand
    	
 
    	
$
    	
10,000
    	
 
    	
Annually
    	
 
    	
$
    	
N/A
    	
 
    
	
Ho Shun Mei   Grace & Wan Luen Pak Eric
    	
 
    	
11.0
    	
%
    	
05/31/2016
    	
 
    	
Due on demand
    	
 
    	
Due on demand
    	
 
    	
$
    	
200,000
    	
 
    	
Annually
    	
 
    	
$
    	
N/A
    	
 
    
	
Winnie Suihim   Chan
    	
 
    	
11.0
    	
%
    	
06/02/2016
    	
 
    	
Due on demand
    	
 
    	
Due on demand
    	
 
    	
$
    	
100,000
    	
 
    	
Annually
    	
 
    	
$
    	
N/A
    	
 
    
	
Hope   International Hospice, Inc.
    	
 
    	
10.0
    	
%
    	
06/03/2016
    	
 
    	
Due on demand
    	
 
    	
Due on demand
    	
 
    	
$
    	
250,000
    	
 
    	
Annually
    	
 
    	
$
    	
N/A
    	
 
    

 

(1)         Due on demand up to 2 years

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