Document:

Exhibit

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

                      PATENT AND TECHNOLOGY LICENSE AGREEMENT     Exh.10.2

This AGREEMENT ("AGREEMENT") is made on this 12th day of February, 2018, by and between THE BOARD OF REGENTS ("BOARD") of THE UNIVERSITY OF TEXAS SYSTEM ("SYSTEM"), an agency of the State of Texas, whose address is 201 West 7th Street, Austin, Texas 78701, on behalf of THE UNIVERSITY OF TEXAS M. D. ANDERSON CANCER CENTER ("UTMDACC"), a member institution of SYSTEM, and Moleculin Biotech, Inc., a corporation organized and existing under the laws of the state of Delaware, having a principal place of business located at 2575 West Bellfort, Suite 333, Houston, Texas  77054 ("LICENSEE").
RECITALS
		
	A.
	BOARD owns certain PATENT RIGHTS and TECHNOLOGY RIGHTS related to LICENSED SUBJECT MATTER developed at UTMDACC.

		
	B.
	BOARD, through UTMDACC, desires to have the LICENSED SUBJECT MATTER developed in the LICENSED FIELD and used for the benefit of LICENSEE, BOARD, SYSTEM, UTMDACC, the inventor(s), and the public as outlined in BOARD’s Intellectual Property Policy.

		
	C.
	LICENSEE wishes to obtain a license from BOARD to practice LICENSED SUBJECT MATTER.

NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, the parties agree as follows:
I.    EFFECTIVE DATE
		
	1.1
	This AGREEMENT is effective as of the date written above ("EFFECTIVE DATE").

1

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

II.    DEFINITIONS
As used in this AGREEMENT, the following terms have the meanings indicated:
		
	2.1
	AFFILIATE means any business entity more than fifty percent (50%) owned by LICENSEE, any business entity which owns more than fifty percent (50%) of LICENSEE, or any business entity that is more than fifty percent (50%) owned by a business entity that owns more than fifty percent (50%) of LICENSEE. 

		
	2.2
	AMENDMENT means any agreement that: (a) identifies at least one IMPROVEMENT to be included within LICENSED SUBJECT MATTER and (b) is executed by an authorized representative of each of LICENSEE and BOARD, on behalf of UTMDACC; with the proviso that any one such agreement can include only such IMPROVEMENTS that have identity of creatorship and third-party encumbrances.

		
	2.3
	GENERIC PRODUCT means any pharmaceutical product that: (a) competes directly with a LICENSED PRODUCT in the country of SALE; (b) contains an active ingredient that is covered by the TECHNOLOGY RIGHTS and/or PATENT RIGHTS and such active ingredient in the pharmaceutical product is the same active ingredient contained in the LICENSED PRODUCT; (c) has obtained marketing approval on an expedited or abbreviated basis in connection with the MARKETING APPROVAL of the LICENSED PRODUCT; and (d) is SOLD in the same country as the LICENSED PRODUCT by a third party that is not a sublicensee of LICENSEE or its AFFILIATES and who did not purchase such pharmaceutical product in a chain of distribution that included any of LICENSEE, its AFFILIATES or sublicensees. 

		
	2.4
	IMPROVEMENT means [*****]

2

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

		
	2.5
	IND means the application submitted to the United States Food and Drug Administration (“FDA”) for approval to conduct a clinical investigation with an investigational new drug, as more specifically defined by 21 C.F.R. §312 et seq., or any future revisions or substitutes thereof, or an equivalent foreign filing in any jurisdiction other than the United States.

		
	2.6
	LICENSED FIELD means all fields of use.

		
	2.7
	LICENSED PRODUCT means any product or service sold by LICENSEE or its AFFILIATES or sublicensees comprising, using or made through the use of LICENSED SUBJECT MATTER pursuant to this AGREEMENT. 

		
	2.8
	LICENSED SUBJECT MATTER means PATENT RIGHTS and/or TECHNOLOGY RIGHTS within LICENSED FIELD.

		
	2.9
	LICENSED TERRITORY means worldwide.

		
	2.10
	MARKETING APPROVAL means the regulatory approval necessary to market and sell a LICENSED PRODUCT in a country.

		
	2.11
	NDA means the application submitted to the FDA for approval to market a new drug, as more specifically defined in 21 C.F.R. § 314 et seq., or any future revisions or substitutes thereof, or an equivalent foreign filing in any jurisdiction other than the United States. 

		
	2.12
	NET SALES means the gross revenues received by LICENSEE or its AFFILIATES or sublicensees from a SALE less: (a) [*****]; (b) [*****]; (c) [*****]; (d) [*****]; (e) [*****]; (f) [*****]; (g) [*****]; and (h) [*****], all as recorded by LICENSEE or its AFFILIATES or sublicensees in their official books and records in accordance 

3

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

with generally accepted accounting practices and consistent with their published financial statements and/or regulatory filings with the United States Securities and Exchange Commission, if applicable.
		
	2.13
	OTHER SUBLICENSEE CONSIDERATION shall mean any and all consideration, other than royalties for NET SALES (provided that UTMDACC has been paid the royalty specified in Section 4.1(d) for such NET SALES), debt, research and development funds, and EXCLUDED AMOUNTS, as defined below, received by LICENSEE from any sublicensee pursuant to Sections 3.3 and 3.4 as consideration for the sublicense, including, but not limited to, up-front, marketing, distribution, franchise, and option payments, license and documentation fees, and bonus and milestone payments.  Notwithstanding the foregoing, if LICENSEE receives a bona fide milestone payment from a sublicensee for achieving one of the milestones specified in Section 4.1(f), then for purposes of calculating OTHER SUBLICENSEE CONSIDERATION, LICENSEE may deduct the amount actually paid to UTMDACC by LICENSEE for achieving such milestone from the amount received by LICENSEE from the sublicensee for achieving the milestone.  In addition, if LICENSEE receives a payment from a sublicense as a bona fide reimbursement for patent prosecution expenses for PATENT RIGHTS, then for purposes of calculating OTHER SUBLICENSEE CONSIDERATION, LICENSEE may deduct the amount actually paid to UTMDACC by LICENSEE as reimbursement for patent prosecution expenses from the amounts received by LICENSEE from the sublicensee as reimbursement of patent prosecution expenses.  For purposes of clarification, consideration received by LICENSEE from a sublicensee for equity securities of LICENSEE shall not be considered OTHER 

4

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

SUBLICENSEE CONSIDERATION, except that premiums paid by a sublicensee for equity securities of LICENSEE over the fair market value of such securities shall be considered OTHER SUBLICENSEE CONSIDERATION. As used herein, “EXCLUDED AMOUNTS” shall mean: (1) any payment received by or on behalf of LICENSEE from a sublicensee for the supply of goods and/or services (including LICENSED PRODUCTS) to such sublicensee, provided that the sublicensee is not the end user of such goods or services, and provided further that UTMDACC has been paid the royalty specified in Section 4.1(d) for NET SALES upon SALE of the LICENSED PRODUCT to the end user; and (2) payment received by LICENSEE from a sublicensee for providing LICENSED PRODUCT to said sublicensee for use in a clinical study or other research necessary or useful to obtain MARKETING APPROVAL of a LICENSED PRODUCT, provided that such payment does not exceed LICENSEE’s actual cost for providing such LICENSED PRODUCT to said sublicensee.
		
	2.14
	PATENT RIGHTS  means BOARD's rights in (i) the information and discoveries described in invention disclosures, or claimed in any patents and/or patent applications, whether domestic or foreign, as identified in Exhibit I attached hereto and as Exhibit I may be augmented from time to time subject to execution by the parties of an AMENDMENT and LICENEE’S timely payment of the AMENDMENT FEE, and all divisionals, continuations, continuations-in-part (to the extent the claims of such continuations-in-part are entitled to claim priority to the aforesaid patents and/or patent applications identified in Exhibit I), reissues, reexaminations, or extensions of the 

5

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

patents and/or patent applications identified in Exhibit I, any foreign equivalents of the foregoing and any letters patent, domestic or foreign that issue thereon.
		
	2.15
	PHASE I STUDY means: (a) that portion of the FDA submission and approval process which provides for the first introduction into humans of a product with the purpose of determining human toxicity, metabolism, absorption, elimination and other pharmacological action as more specifically defined in 21 C.F.R. § 312.21(a) or any future revisions or substitutes thereof; or (b) a similar clinical study in any national jurisdiction other than the United States.

		
	2.16
	PHASE II STUDY means: (a) that portion of the FDA submission and approval process which provides for early controlled clinical studies conducted to obtain preliminary data on the effectiveness of a product for a particular indication, as more specifically defined by the rules and regulations of the FDA, including 21 C.F.R. § 312.21(b) or any future revisions or substitutes thereof; or (b) a similar clinical study in any national jurisdiction other than the United States. 

		
	2.17
	PHASE III STUDY means: (a) that portion of the FDA submission and approval process in which expanded clinical studies are conducted to gather the additional information about effectiveness and safety that is needed to evaluate the overall benefit-risk relationship of a product, as more specifically defined by the rules and regulations of the FDA, including 21 C.F.R. § 312.21(c) or any future revisions or substitutes thereof; or (b) a similar clinical study in any national jurisdiction other than the United States.

		
	2.18
	SALE or SOLD means the transfer or disposition of a LICENSED PRODUCT for value to a party other than LICENSEE, an AFFILIATE, or a sublicensee (provided that 

6

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

the transfer to the sublicensee is not for end use by the sublicensee for purposes other than research or development).
		
	2.19
	TECHNOLOGY RIGHTS means BOARD's rights in any and all technical information, know-how, processes, procedures, compositions, devices, methods, formulae, protocols, techniques, software, designs, drawings or data (i) that were created by the inventor(s) listed in Exhibit I at UTMDACC before the EFFECTIVE DATE, which are not claimed in PATENT RIGHTS but that are necessary for practicing PATENT RIGHTS, as may be augmented from time to time subject to execution by the parties of an AMENDMENT and LICENSEE’S timely payment of the AMENDMENT FEE.

		
	2.20
	VALID CLAIM means a claim of: (i) an issued and unexpired patent included within the PATENT RIGHTS, unless: the claim has been held unenforceable or invalid by the final, un-reversed decision of a court or other government body of competent jurisdiction from which no appeal can be taken, or with respect to which an appeal is not taken within the time allowed for appeal; the claim has been irretrievably  abandoned or disclaimed; or the claim has been otherwise finally admitted or determined to be invalid, un-patentable or unenforceable, whether through reissue, reexamination, disclaimer or otherwise; or (ii) a pending patent application within the PATENT RIGHTS to the extent the claim continues to be prosecuted in good faith and has not been pending for more than seven (7) years from its priority date.

III.    LICENSE
		
	3.1
	BOARD, through UTMDACC, hereby grants to LICENSEE a royalty-bearing, exclusive license under LICENSED SUBJECT MATTER to research, develop, 

7

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

manufacture, have manufactured, use, import, offer to sell and/or sell LICENSED PRODUCTS within LICENSED TERRITORY for use within LICENSED FIELD.  This grant is subject to Sections 14.2 and 14.3 hereinbelow, the timely payment by LICENSEE to UTMDACC of all consideration as provided herein (subject to the thirty (30) calendar day cure period provided in Section 13.3(b), if applicable), the timely payment of all amounts due under any related sponsored research agreement between UTMDACC and LICENSEE in effect during this AGREEMENT (subject to any cure period provided in such sponsored research agreement), and is further subject to the following rights retained by BOARD and UTMDACC to: 
		
	(a)
	Publish the general scientific findings from research related to LICENSED SUBJECT MATTER, subject to the terms of ARTICLE XI–Confidential Information and Publication; and 

		
	(b)
	Use LICENSED SUBJECT MATTER for patient care at UTMDACC facilities, and for non-commercial research, teaching and other academically-related purposes.  For purposes of clarification, and not by way of limitation, the rights retained by the BOARD and UTMDACC pursuant to this Section 3.1 do not include the right to engage in research sponsored by a commercial, for-profit entity. 

		
	3.2
	LICENSEE may extend the license granted herein to any AFFILIATE provided that the AFFILIATE consents in writing to be bound by this AGREEMENT to the same extent as LICENSEE.  LICENSEE agrees to deliver such written consent to UTMDACC within thirty (30) calendar days following execution thereof.

8

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

		
	3.3
	LICENSEE may grant sublicenses under LICENSED SUBJECT MATTER consistent with the terms of this AGREEMENT provided that LICENSEE is responsible for its sublicensees relevant to this AGREEMENT, and for diligently collecting all amounts due LICENSEE from sublicensees. If a sublicensee pursuant hereto becomes bankrupt, insolvent or is placed in the hands of a receiver or trustee, LICENSEE, to the extent allowed under applicable law and in a timely manner, agrees to use commercially reasonable efforts to collect all consideration owed to LICENSEE and to have the sublicense agreement confirmed or rejected by a court of proper jurisdiction. 

		
	3.4
	LICENSEE must deliver to UTMDACC a true and correct copy of each sublicense granted by LICENSEE, and any modification or termination thereof, within thirty (30) calendar days after execution, modification, or termination.  

		
	3.5
	LICENSEE shall have a right to amend the AGREEMENT to add IMPROVEMENTS as in the following manner:  During the term of the AGREEMENT, UTMDACC shall promptly disclose each IMPROVEMENT in writing to LICENSEE.  LICENSEE shall have thirty (30) calendar days from the disclosure of said IMPROVEMENT to notify UTMDACC in writing of its desire to amend the AGREEMENT to include such IMPROVEMENT. [*****]  In the event that LICENSEE does not send written notice to UTMDACC of its desire to add the IMPROVEMENT to the AGREEMENT during the thirty (30) calendar day period, then BOARD shall have the right to freely license its rights to the IMPROVEMENT to third parties, with no further obligation or consideration due to LICENSEE.

9

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

		
	3.6
	If this AGREEMENT is terminated pursuant to ARTICLE XIII - Term and Termination, BOARD and UTMDACC agree to accept as successors to LICENSEE, existing sublicensees in good standing at the date of termination provided that each such sublicensee consents in writing to be bound by all applicable terms and conditions of this AGREEMENT.

IV.    CONSIDERATION, PAYMENTS AND REPORTS
		
	4.1
	In consideration of rights granted by BOARD to LICENSEE under this AGREEMENT, LICENSEE agrees to pay UTMDACC the following:

		
	(a)
	All out-of-pocket expenses incurred by UTMDACC in filing, prosecuting, and maintaining PATENT RIGHTS, and all such future expenses incurred by UTMDACC, for so long as, and in such countries as this AGREEMENT remains in effect. UTMDACC will invoice LICENSEE after the AGREEMENT has been fully executed by all parties for expenses incurred as of the EFFECTIVE DATE, which amount shall not exceed $[*****], and on a quarterly basis thereafter for expenses incurred on or after the EFFECTIVE DATE.  Together with each such invoice, UTMDACC will provide reasonable documentation of such expenses, including copies of the original invoices from the corresponding law firm.  The invoiced amounts will be due and payable by LICENSEE within thirty (30) calendar days of the receipt of the invoice; and 

		
	(b)
	A nonrefundable license documentation fee in the amount of $[*****].  This fee will not reduce the amount of any other payment provided for in this ARTICLE IV, and is due and payable within sixty (60) calendar days after the AGREEMENT has been fully executed by all parties.  This license 

10

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

documentation fee is not subject to the thirty (30) calendar day cure period set forth in Section 13.3(b); and
		
	(c)
	The following nonrefundable annual maintenance fees (“Annual Maintenance Fee(s)”) due and payable (without invoice) within thirty (30) calendar days of the applicable anniversary of the EFFECTIVE DATE until the first SALE following MARKETING APPROVAL in any country of any LICENSED PRODUCT as follows:  

(i)    $[*****] due and payable within thirty (30) calendar days of the first anniversary of the EFFECTIVE DATE; and
(ii)    Thereafter, the Annual Maintenance Fee shall be due and payable within thirty (30) calendar days of each subsequent anniversary of the EFFECTIVE DATE, and shall increase by $[*****] per year up to a maximum of $[*****] until the first SALE following MARKETING APPROVAL in any country of any LICENSED PRODUCT (i.e., $[*****] shall be due and payable within thirty (30) calendar days of the second anniversary of the EFFECTIVE DATE, $[*****] shall be due and payable within thirty (30) calendar days of the third anniversary of the EFFECTIVE DATE, $[*****] shall be due and payable within thirty (30) calendar days of the fourth anniversary of the EFFECTIVE DATE, etc.). The Annual Maintenance Fee will not reduce the amount of any other payment provided for in this ARTICLE IV; and
		
	(d)
	A running royalty due and payable quarterly as set forth in Section 4.4, calculated as follows: 

11

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

		
	(i) 
	FOR LICENSED PRODUCTS APPROVED FOR DERMATOLOGICAL USE: a running royalty of [*****] percent ([*****]%) of NET SALES, whether made by LICENSEE, a sublicensee or AFFILIATE; and

		
	(ii) 
	FOR ALL OTHER LICENSED PRODUCTS: a running royalty of [*****] percent ([*****]%) of NET SALES whether made by LICENSEE, a sublicensee or AFFILIATE.

In the event that a LICENSED PRODUCT is not covered by a VALID CLAIM in the country of SALE at the time of SALE, and LICENSEE is not taking any deductions under Section 4.2 or 4.3, below, then LICENSEE may reduce the running royalties specified in this Section 4.1 (d)(i) and (ii) for NET SALES of such LICENSED PRODUCT to [*****] percent ([*****]%) of the original amount, i.e., to [*****] percent ([*****]%) and [*****] percent ([*****]%), respectively, in the country of such SALE.  In addition, if a LICENSED PRODUCT is not covered by a VALID CLAIM in the country of SALE, LICENSEE is not taking any deductions under Section 4.2 or 4.3, below, and a GENERIC PRODUCT that competes with such LICENSED PRODUCT is being SOLD in that country, then LICENSEE may reduce the running royalties specified in this Section 4.1 (d)(i) and (ii) for NET SALES of those LICENSED PRODUCTS with which the GENERIC PRODUCT competes (1) to [*****] percent ([*****]%) of the original amount for NET SALES by LICENSEE or its AFFILIATES, i.e., to [*****] divided by one thousand percent ([*****]%) and [*****] percent ([*****]%), respectively, in the country of such SALE, 

12

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

and (2) to [*****] percent ([*****]%) of the royalties received by LICENSEE from a sublicensee for NET SALES by sublicensee.  Notwithstanding anything to the contrary in this AGREEMENT, LICENSEE’s royalty obligation with respect to NET SALES by any sublicensee shall not exceed the royalties received by LICENSEE from such sublicensee for such NET SALES.   Beginning on the fifteenth anniversary of the EFFECTIVE DATE, LICENSEE shall not be obligated to pay running royalties pursuant to this Section 4.1(d) for NET SALES of LICENSED PRODUCTS if the LICENSED PRODUCT is no longer covered by a VALID CLAIM in the country of SALE; and
		
	(e)
	Following the first SALE after MARKETING APPROVAL has been obtained in any country for any LICENSED PRODUCT, minimum annual royalties ("Minimum Annual Royalties") of $[*****], due and payable (without invoice) within thirty (30) calendar days of the first and subsequent anniversaries of the EFFECTIVE DATE which follow the first SALE to occur after MARKETING APPROVAL has been obtained in any country for any LICENSED PRODUCT.  Running royalties accrued under Section 4.1(d) and actually paid to UTMDACC for NET SALES made during the twelve month period preceding an anniversary of the EFFECTIVE DATE may be credited against the Minimum Annual Royalties due on that anniversary date.  Notwithstanding the foregoing, beginning on the fifteenth anniversary of the EFFECTIVE DATE, LICENSEE’s obligation to pay a  Minimum Annual Royalty pursuant to this Section 4.1(e) shall cease if there are no VALID CLAIMS in any country covering any 

13

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

LICENSED PRODUCT being sold by LICENSEE, its sublicensees or AFFILIATES; and 
		
	(f)
	The following one-time milestone payments, regardless of whether the milestone is achieved by LICENSEE, a sublicensee or AFFILIATE:

(1)     Commencement of the first PHASE III STUDY for a LICENSED PRODUCT within the United States, Europe, China or Japan: $[*****]; 
(2)     Submission of the first NDA for a LICENSED PRODUCT within the United States: $[*****]; and
(3)     Receipt of the first MARKETING APPROVAL of a LICENSED PRODUCT in the United States: $[*****].
Each of the foregoing milestone payments shall be made by LICENSEE to UTMDACC (without invoice) within thirty (30) calendar days of achieving the milestone event and shall not reduce the amount of any other payment provided for in this ARTICLE IV, except as provided Section 2.11.  Each of the foregoing milestone payments shall be paid only once regardless of the number of different LICENSED PRODUCTS that achieve such milestone; and  
		
	(g) 
	The following percentages of OTHER SUBLICENSEE CONSIDERATION, as defined above: 

		
	(1)
	[*****] percent ([*****]%) of all OTHER SUBLICENSEE CONSIDERATION received prior to the Commencement of the first PHASE II STUDY of a LICENSED PRODUCT; and

14

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

		
	(2)
	[*****] percent ([*****]%) of all OTHER SUBLICENSEE CONSIDERATION received on or after the Commencement of the first PHASE II STUDY of a LICENSED PRODUCT; and 

		
	(h)
	An Assignment Fee of $[*****] (in consideration for UTMDACC allowing the assignment), due and payable prior to any assignment of this AGREEMENT that requires UTMDACC’s consent pursuant to Section 12.1 below; and

		
	(i) 
	In the event of a liquidation event that is above $[*****] in value, a payment of $[*****] due within thirty (30) calendar days of such liquidation event.  This Section 4.1(i) shall not reduce the amount of any other payment provided for in this ARTICLE IV, except that no Assignment Fee shall be due under Section 4.1(h) if the $[*****] payment provided in this Section 4.1(i) is timely paid to UTMDACC; and

		
	(j) 
	A nonrefundable AMENDMENT FEE in the amount of $[*****] for each AMENDMENT.  The AMENDMENT FEE will not reduce the amount of any other payment provided for in this ARTICLE IV, and is due and payable within sixty (60) calendar days after any AMENDMENT is fully executed by both parties. 

As used in this Section 4.1, “Commencement” shall be deemed to occur upon first administration of a LICENSED PRODUCT or placebo to any patient enrolled in the applicable study.
		
	4.2
	If LICENSEE or its AFFILIATE or sublicensee is obligated to pay running royalties to a third party in order to SELL a LICENSED PRODUCT to avoid infringing such third party’s rights which dominate BOARD’S PATENT RIGHTS (the basis for such 

15

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

obligation to be communicated to BOARD, orally or in writing, at LICENSEE’s discretion, by an independent, qualified patent attorney in a manner that preserves the content of such communication as confidential and attorney-client privileged), then the running royalty rate due UTMDACC under Section 4.1(d)(i) or 4.1(d)(ii) (whichever is applicable) shall be reduced by the running royalty rate actually being paid to such third party, provided, however, the running royalty rate due UTMDACC under Section 4.1(d)(i) or 4.1(d)(ii) will not be reduced by more than one-half the rates stated above. 
		
	4.3
	In the event that a LICENSED PRODUCT is sold in combination with one or more other functional components for which no royalty would be due hereunder if sold separately (“Combination Product(s)”) and no deduction is being made pursuant to Section 4.2, then the running royalty due for NET SALES of the Combination Product will be calculated by multiplying the royalty rate set forth in Section 4.1(d)(i) or 4.1(d)(ii) above (whichever is applicable) by the total NET SALES received for the Combination Product, and then multiplying the resulting product by the fraction, A/(A+B), where A is the average sale price of the LICENSED PRODUCT when sold by LICENSEE separately, and B is the average sale price of all other functional component(s) included in the Combination Product when sold by LICENSEE separately.   In the event either the component that is a LICENSED PRODUCT or the other functional component(s) included in the Combination Product are not sold separately, then the running royalty due for NET SALES of the LICENSED PRODUCT sold as part of a Combination Product will be calculated by multiplying the royalty rate set forth in 4.1(d)(i) or 4.1(d)(ii) above (whichever is applicable) by the NET 

16

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

SALES received for the Combination Product, and then multiplying the resulting product by the fraction, F/(F+G) where F is the fair market value of the component that is a LICENSED PRODUCT, and G is the fair market value for each of the other functional component(s) included in the Combination Product, such fair market values to be mutually agreed in good faith by LICENSEE and UTMDACC prior to sales of such Combination Products.  LICENSEE will not sell LICENSED PRODUCTS as a Combination Product until the applicable fair market values have been resolved.  Notwithstanding the foregoing, in no event shall the running royalty payment due to UTMDACC for the sale of a Combination Product be less than one half of the rates specified in 4.1(d)(i) or 4.1(d)(ii) above (whichever is applicable).  
		
	4.4
	Unless otherwise provided, all such payments are payable within sixty (60) calendar days after March 31, June 30, September 30, and December 31 of each year during the term of this AGREEMENT, at which time LICENSEE will also deliver to UTMDACC a true and accurate report, giving such particulars of the business conducted by LICENSEE, its AFFILIATES and its sublicensees, if any exist, during the preceding three (3) calendar months under this AGREEMENT as necessary for UTMDACC to account for LICENSEE's payments hereunder.  This report will include pertinent data, including, but not limited to: 

		
	(a)
	the accounting methodologies used to account for and calculate the items included in the report and any differences in such accounting methodologies used by LICENSEE since the previous report; and

		
	(b)
	a list of LICENSED PRODUCTS SOLD in the three (3) preceding calendar months categorized by (i) the technology it relates to under PATENT RIGHTS; 

17

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

(ii) whether such LICENSED PRODUCTS have been approved for dermatological use, and (iii) whether such LICENSED PRODUCTS were SOLD by (1) LICENSEE or its AFFILIATES or (2) LICENSEE’s sublicensees; and
		
	(c)
	the total quantities of LICENSED PRODUCTS SOLD by the categories listed in Section 4.4(b); and

		
	(d)
	the total SALES by the categories listed in Section 4.4(b); and 

		
	(e)
	the calculation of NET SALES by the categories listed in Section 4.4(b); and

		
	(f)
	the royalties so computed and due UTMDACC by the categories listed in Section 4.4(b) and/or minimum royalties; and

		
	(g)
	all consideration received from each sublicensee and a calculation of the payments due UTMDACC; and

(h)    all other amounts due UTMDACC herein.
Simultaneously with the delivery of each such report, LICENSEE agrees to pay UTMDACC the amount due, if any, for the period of such report.  These reports are required even if no payments are due.
		
	4.5
	During the term of this AGREEMENT and for one (1) year thereafter, LICENSEE agrees to keep complete and accurate records of its and its AFFILIATES' and sublicensees' SALES and NET SALES and amounts received from its sublicensees hereunder, each in sufficient detail to enable the royalties and other payments due hereunder to be determined. LICENSEE agrees to permit UTMDACC or its representatives, at UTMDACC's expense, to periodically examine, no more than once 

18

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

per calendar year, LICENSEE’s books, ledgers, and records during regular business hours for the purpose of and to the extent necessary to verify any report required under this AGREEMENT, provided, however, that any reexamination of books, ledgers or records previously examined for verification of a report pursuant to this Section 4.5 shall be solely for the purposes of comparing such previously examined books, ledgers or records with those other books, ledgers or records that have not yet been examined, and such reexamination shall not include any verification of any report covered by such previously examined books, ledgers, or records. If any amounts due UTMDACC are determined to have been underpaid in an amount equal to or greater than five percent (5%) of the total amount due during the period so examined, then LICENSEE will pay the cost of the examination, the past due amount and accrued interest at the lesser rate of either: (1) the prime rate as published in the Wall Street Journal plus two percent ([*****]) the highest rate allowed by law, provided, however, that LICENSEE will not owe any accrued interest upon any amounts that should have been paid five (5) or more years before the date of the examination.
		
	4.6
	Within thirty (30) calendar days following each anniversary of the EFFECTIVE DATE, LICENSEE will deliver to UTMDACC a true and accurate, signed, written progress report that summarizes: (i) LICENSEE’s efforts and accomplishments during the prior year to diligently commercialize LICENSED PRODUCTS; and (ii) LICENSEE’s development and commercialization plans with respect to LICENSED PRODUCTS for the next year.  The report shall also cover such activities by AFFILIATES and sublicensees. The report shall contain the following information to the extent relevant to the activities under the AGREEMENT:

19

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

		
	(a)
	The name of the LICENSEE, the names of any AFFILIATES and sublicensees, and the products and services being developed and/or commercialized;

		
	(b)
	The progress toward completing and the plans for completing the applicable milestone events specified in Section 4.1(f) and 13.2(b); and

		
	(c)
	The research and development activities, including status and plans for obtaining any necessary MARKETING APPROVALS, performed during the past year, and the plans for research and development activities for the next year.

		
	4.7
	All amounts payable hereunder by LICENSEE will be paid in United States funds without deductions for taxes, assessments, fees, or charges of any kind; provided, however, that if LICENSEE has used good faith, diligent efforts to seek all available exemptions from or reductions in withholding taxes to which BOARD and/or UTMDACC are entitled, then LICENSEE may deduct those withholding taxes LICENSEE is required by law to withhold from the amounts payable to UTMDACC.  Checks are to be made payable to “The University of Texas M. D. Anderson Cancer Center,” and sent by United States mail to Box 4390, Houston, Texas, 77210-4390, or by wire transfer to:

REFERENCE:  include title and EFFECTIVE DATE of AGREEMENT and type of payment (e.g., license documentation fee, milestone payment, royalty [including applicable patent/application identified by MDA reference number and patent number or application serial number], or maintenance fee, etc.). 

20

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

		
	4.8
	No payments due or royalty rates owed under this AGREEMENT will be reduced as the result of co-ownership of LICENSED SUBJECT MATTER by BOARD and another party, including, but not limited to, LICENSEE.

V.    SPONSORED RESEARCH
		
	5.1
	If LICENSEE desires to sponsor research for or related to the LICENSED SUBJECT MATTER, LICENSEE will notify UTMDACC, and the parties will negotiate in good faith the terms of such sponsored research.

VI.    PATENTS AND INVENTIONS
		
	6.1
	(a)  If after consultation with LICENSEE both parties agree that a new patent application should be filed for LICENSED SUBJECT MATTER, UTMDACC will prepare and file appropriate patent applications, and LICENSEE will pay the cost of searching, preparing, filing, prosecuting and maintaining same. If LICENSEE notifies UTMDACC that it does not intend to pay the cost of a patent application in a specific country, or if LICENSEE does not respond or make an effort to agree with UTMDACC on the disposition of rights of the subject invention in such country, then UTMDACC may, but is not obligated to, file such patent application at its own expense and such patent application in such country shall cease to be included in the PATENT RIGHTS under this AGREEMENT.  UTMDACC will consult with and keep LICENSEE fully informed of the status of any patent application or patent directed to the PATENT RIGHTS, and will provide LICENSEE with a copy of any patent applications for which LICENSEE has paid the cost of filing, as well as copies of any material documents received or filed during prosecution thereof, such as patent applications, office actions, 

21

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

and responses.  UTMDACC will request that copies of all documents prepared by prosecution counsel for submission to governmental patent offices be provided to LICENSEE for review and comment prior to filing, to the extent practicable under the circumstances.  UTMDACC shall consider comments made by LICENSEE regarding prosecution of the PATENT RIGHTS in good faith, but shall not be required to implement them.  UTMDACC will not knowingly abandon any patent application or patent for which LICENSEE is paying the costs of prosecution without reasonable notice to LICENSEE.  If LICENSEE is not in default on any of its obligations under this AGREEMENT, UTMDACC shall consider in good faith any requests made by LICENSEE to continue prosecution, but the final decision to continue or abandon shall be in UTMDACC’s sole discretion. The parties agree that they share a common legal interest to get valid enforceable patents and that each party will maintain as privileged all information received pursuant to this Section 6.1.  In addition, such information shall be considered to fall within the definition of “Confidential Information” as set forth in Section 11.1, last paragraph, whether or not marked “confidential."
(b)  Provided that (1) LICENSEE is not in breach or default of its obligations under this AGREEMENT, and (2) LICENSEE has made advance payment of anticipated patent expenses when requested by UTMDACC, then with respect to any patent application or patent under PATENT RIGHTS:
		
	(i)
	UTMDACC and LICENSEE shall confer in good faith regarding the filing of new applications, the prosecution of pending applications, and the maintenance and post-grant activities of issued patents;

22

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

		
	(ii)
	UTMDACC shall not abandon a patent application or patent under PATENT RIGHTS that is timely funded by LICENSEE so long as there is a bona fide basis, consistent with applicable laws, rules, and regulations, for continuing prosecution of the respective patent application or maintaining the respective patent, but the foregoing shall not prohibit UTMDACC from abandoning a patent application in favor of further prosecution via a related continuation or continuation in part application claiming priority to such abandoned application or from seeking reissue of a patent via a reissue proceeding for an issued patent; and

		
	(iii)
	UTMDACC shall not refuse to file a patent application under PATENT RIGHTS that is timely funded and timely requested in writing by LICENSEE so long as there is a bona fide basis, consistent with applicable laws, rules, and regulations, for such filing.

VII.    INFRINGEMENT BY THIRD PARTIES
		
	7.1
	LICENSEE, at its expense, shall have the first right to enforce any patent exclusively licensed hereunder against infringement by third parties and is entitled to retain recovery from such enforcement, which right may be granted by LICENSEE to its AFFILIATE or sublicensee.  After reimbursement of reasonable legal costs and expenses related to such recovery incurred by LICENSEE, its AFFILIATE or sublicensee, LICENSEE agrees to pay UTMDACC either:  (a) the applicable royalty detailed in Section 4.1(d) for any monetary recovery that is for sales of LICENSED PRODUCTS lost due to the 

23

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

infringement and [*****] percent ([*****]%) of related punitive damages received by LICENSEE or its AFFILIATE; or (b) [*****] percent ([*****]%) of reasonable royalties awarded and received by LICENSEE or its AFFILIATE, and [*****] percent ([*****]%) of related punitive damages received by LICENSEE or its AFFILIATE in any monetary recovery in which the award is for reasonable royalties. If either LICENSEE or UTMDACC’s Office of Technology Commercialization becomes aware of any infringement or potential infringement of the PATENT RIGHTS, each shall promptly notify the other of such in writing.    If LICENSEE does not file suit against a substantial infringer or take alternative action reasonably acceptable to UTMDACC to end such infringement, within twelve (12) months of knowledge thereof, then, provided that such infringement is still on going, BOARD or UTMDACC may, at its sole discretion, enforce any patent licensed hereunder on behalf of itself and LICENSEE, with UTMDACC retaining all recoveries from such enforcement.  In addition, as part of the resolution of such infringement, BOARD and UTMDACC may grant non-exclusive license rights to the alleged infringer notwithstanding LICENSEE’s exclusive license rights.
		
	7.2
	In any suit or dispute involving an infringer, the parties agree to cooperate fully with each other.  At the request and expense of the party bringing suit, the other party will permit access during regular business hours, to all relevant personnel, records, papers, information, samples, specimens, and the like in its possession.

VIII.    PATENT MARKING
		
	8.1
	LICENSEE agrees that all packaging containing individual LICENSED PRODUCT(S), documentation therefor, and, when possible, actual LICENSED 

24

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

PRODUCT(S) sold by LICENSEE, AFFILIATES, and/or sublicensees of LICENSEE will be permanently and legibly marked with the number of any applicable patent(s) licensed hereunder in accordance with each country's patent laws, including Title 35, United States Code, to the extent such marking is necessary or required to fully preserve PATENT RIGHTS in each such country.
IX.    INDEMNIFICATION AND INSURANCE
		
	9.1
	LICENSEE agrees to hold harmless, defend and indemnify BOARD, SYSTEM, UTMDACC, their Regents, officers, employees, students and agents (“Indemnified Parties”) from and against any liabilities, damages, causes of action, suits, judgments, liens, penalties, fines, losses, costs and expenses (including, without limitation, reasonable attorneys’ fees and other expenses of litigation) (collectively “Liabilities”) resulting from claims or demands brought by third parties against an Indemnified Party on account of any injury or death of persons, damage to property, or any other damage or loss arising out of or in connection with this AGREEMENT or the exercise or practice of the rights granted hereunder by or under authority of LICENSEE, its AFFILIATES, or their sublicensees, or third party wholesalers or distributors, or physicians, hospitals or other healthcare providers who purchase a LICENSED PRODUCT, provided however, that the following is excluded from LICENSEE’s obligation to indemnify and hold harmless:

		
	(a)
	the negligent failure of UTMDACC or SYSTEM to substantially comply with any applicable governmental requirements; and

		
	(b)
	the negligence or willful malfeasance by a Regent, officer, agent or employee of UTMDACC or SYSTEM. 

25

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

		
	9.2
	In no event shall BOARD, SYSTEM or UTMDACC be liable for any indirect, special, consequential, incidental, exemplary, or punitive damages (including, without limitation, damages for loss of profits or revenue) arising out of or in connection with the AGREEMENT or its subject matter, regardless of whether any such party knows or should know of the possibility of such damages.   Other than for claims against LICENSEE for indemnification (Section 9.1) or for misuse or misappropriation or infringement of BOARD and/or UTMDACC’s intellectual property rights, LICENSEE will not be liable to BOARD and/or UTMDACC for any indirect, special, consequential or punitive damages (including, without limitation, damages for loss of profits or revenue) arising out of or in connection with the AGREEMENT or its subject matter, regardless of whether LICENSEE knows or should have known of the possibility of such damages.

		
	9.3
	Beginning at the time when any LICENSED PRODUCT is being distributed or sold (including for the purpose of obtaining regulatory approvals) by LICENSEE, an AFFILIATE, or by a sublicensee, LICENSEE shall, at its sole cost and expense, procure and maintain commercial general liability insurance in amounts not less than [*****] per incident and [*****] annual aggregate, and LICENSEE shall use reasonable efforts to have the BOARD, SYSTEM, UTMDACC, their Regents, officers, employees, students and agents named as additional insureds. Such commercial general liability insurance shall provide: (i) product liability coverage; (ii) broad form contractual liability coverage for LICENSEE's indemnification under this AGREEMENT; and (iii) coverage for litigation costs. The minimum amounts of insurance coverage required 

26

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

herein shall not be construed to create a limit of LICENSEE's liability with respect to its indemnification under this AGREEMENT. 
		
	9.4
	LICENSEE shall provide UTMDACC with written evidence of such insurance within thirty (30) calendar days of its procurement.  Additionally, LICENSEE shall provide UTMDACC with written notice of at least fifteen (15) calendar days prior to the cancellation, non-renewal or material change in such insurance.  

		
	9.5
	LICENSEE shall maintain such commercial general liability insurance beyond the expiration or termination of this AGREEMENT during: (i) the period that any LICENSED PRODUCT developed pursuant to this AGREEMENT is being commercially distributed or sold by LICENSEE, an AFFILIATE or by a sublicensee or agent of LICENSEE; and (ii) the five (5) year period immediately after such period.

		
	X.
	USE OF BOARD AND UTMDACC’S NAME

		
	10.1
	LICENSEE will not use the name of (or the name of any employee of) UTMDACC, SYSTEM or BOARD in any advertising, promotional or sales literature, on its Web site, or for the purpose of raising capital without the advance express written consent of BOARD secured through:

Notwithstanding the above, LICENSEE may use the name of (or name of employee of) UTMDACC, SYSTEM or BOARD to disclose the existence or status of this AGREEMENT in routine business correspondence, as needed in appropriate regulatory submissions, or as required by law, in each case without express written consent.
XI.    CONFIDENTIAL INFORMATION AND PUBLICATION

27

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

		
	11.1
	UTMDACC and LICENSEE each agree that Confidential Information of the other party, as defined below in this Section 11.1, which is disclosed to it by the other party pursuant to this AGREEMENT:  (i) shall be received in strict confidence, (ii) shall be used only for the purposes of this AGREEMENT, and (iii) will not be disclosed by the recipient party (except as required by law, court order or regulation), its agents or employees without the prior written consent of the disclosing party, except to the extent that the recipient party can establish by competent written proof that such information:

		
	(a)
	was in the public domain at the time of disclosure; or

		
	(b)
	later became part of the public domain through no act or omission of the recipient party, its employees, agents, successors or assigns; or

		
	(c)
	was lawfully disclosed to the recipient party by a third party having the right to disclose it; or

		
	(d)
	was already known by the recipient party at the time of disclosure; or

		
	(e)
	was independently developed by the recipient party without use of the disclosing party’s Confidential Information; or 

		
	(f)
	is required by law, court order or regulation to be disclosed, provided that such party shall promptly notify the other party of such requirement and provide the other party an opportunity to challenge or limit the disclosure requirement and to seek confidential treatment or protection order, and that the Confidential Information so disclosed shall remain otherwise subject to the confidentiality and non-use obligations set forth above in this Section 11.1. 

“Confidential Information” of a party shall mean: (1) all information contained in documents marked “confidential” and disclosed by such party to the other party 

28

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

pursuant to this AGREEMENT; (2) orally disclosed information which is disclosed by such party to the other party pursuant to this AGREEMENT, summarized in writing, identified as “confidential” and delivered to recipient party; and (3) any confidential information disclosed by such party to the other party pursuant to the Sponsored Laboratory Study Agreement between the parties and dated April 19, 2007, as amended.  
		
	11.2
	Subject to full compliance with Section 11.3, LICENSEE may disclose UTMDACC’s Confidential Information in confidence to its employees, consultants, AFFILIATES and potential or actual sublicensees, investors or other commercial partners, and in connection with the procurement of MARKETING APPROVAL for LICENSED PRODUCTS.

		
	11.3
	Each party’s obligation of confidence hereunder will be fulfilled by using at least the same degree of care with the disclosing party's Confidential Information as it uses to protect its own confidential information, but always at least a reasonable degree of care. This obligation will exist while this AGREEMENT is in force and for a period of three (3) years thereafter.

		
	11.4
	UTMDACC reserves the right to publish the general scientific findings from research related to LICENSED SUBJECT MATTER, with due regard to the protection of LICENSEE’s Confidential Information. UTMDACC will submit the manuscript of any proposed publication to LICENSEE at least thirty (30) calendar days before publication, and LICENSEE shall have the right to review and comment upon the publication in order to protect LICENSEE’s Confidential Information. Upon LICENSEE’s request, publication may be delayed up to sixty (60) additional calendar days to enable 

29

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

LICENSEE to secure adequate intellectual property protection of LICENSEE’s Confidential Information that would otherwise be affected by the publication.    
XII.    ASSIGNMENT
		
	12.1
	Except to an AFFILIATE or in connection with the merger or acquisition of LICENSEE by a third party, or the sale of all or substantially all of LICENSEE's assets to which this AGREEMENT relates to a third party, this AGREEMENT may not be assigned by LICENSEE without the prior written consent of UTMDACC, which will not be unreasonably withheld. For any assignment to be effective: (a) the LICENSEE must timely pay UTMDACC the Assignment Fee specified in Section 4.1(h), if applicable; and (b) the assignee must assume in writing (a copy of which writing will be provided to UTMDACC) all of LICENSEE's interests, rights, duties, and obligations under the AGREEMENT and agree to comply with all terms and conditions of the AGREEMENT as if the assignee were the original party (i.e., the LICENSEE) to the AGREEMENT.

XIII.    TERM AND TERMINATION
		
	13.1
	Subject to Sections 13.3 and 13.4 hereinbelow, the term of this AGREEMENT is from the EFFECTIVE DATE until the later of: (1) full end of the term or terms for which PATENT RIGHTS have not expired; or (2) if only TECHNOLOGY RIGHTS are licensed and no PATENT RIGHTS are applicable, for a term of [*****] years. Beginning on the fifteenth anniversary of the EFFECTIVE DATE, LICENSEE’s obligation to pay running royalties for NET SALES and Minimum Annual Royalties shall be governed by Section 4.1.

		
	13.2
	(a)  LICENSEE, directly or through its AFFILIATES and sublicensees, will use diligent efforts to make LICENSED PRODUCTS commercially available in the LICENSED 

30

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

FIELD within the LICENSED TERRITORY. Without limiting the foregoing, LICENSEE, directly or through its AFFILIATES and sublicensees, will maintain a bona fide, funded, ongoing and active research, development, manufacturing, regulatory, marketing or sales program (all as commercially reasonable) to make LICENSED PRODUCTS commercially available to the public as soon as commercially practicable. LICENSEE shall promptly provide the annual progress reports specified in Section 4.6.  If LICENSEE materially fails to fulfill these obligations, UTMDACC may treat such failure as a breach and terminate in accordance with Section 13.3.  
(b)  UTMDACC shall have the right to terminate this AGREEMENT in accordance with Section 13.3 if LICENSEE fails to file an IND for a PHASE I STUDY in the United States, any major country in Europe (i.e. France, Germany, Italy, Span or the United Kingdom) or China for a LICENSED PRODUCT within [*****]of the EFFECTIVE DATE, provided that such date may be extended as follows:  LICENSEE may purchase a first twelve (12) month extension if LICENSEE pays UTMDACC the sum of $[*****] no later than [*****] after the EFFECTIVE DATE (“First Extension Fee”);  and LICENSEE may purchase a second twelve (12) month extension (if licensee has timely paid the First Extension Fee) by paying an additional $[*****] to UTMDACC no later than [*****] after the EFFECTIVE DATE (“Second Extension Fee”).  LICENSEE may purchase one or more additional 12-month extensions upon request (if licensee has timely paid all prior extension fees) by paying an additional $[*****] to UTMDACC prior to expiry of the current extension.  It is understood that time is of the essence with respect to the First and Second Extension Fees. Nevertheless, 

31

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

any failure eto pay a fee under this section is curable according to the thirty (30) calendar day cure period specified in Section 13.3(b).
		
	13.3
	Subject to any rights herein which survive termination, this AGREEMENT will earlier terminate in its entirety:

		
	(a)
	automatically, if LICENSEE becomes bankrupt or insolvent and/or if the business of LICENSEE shall be placed in the hands of a receiver or trustee, whether by voluntary act of LICENSEE or otherwise; or

		
	(b)
	upon thirty (30) calendar days written notice from UTMDACC, if LICENSEE materially breaches or defaults on the payment or report obligations of ARTICLE IV (excluding the license documentation fee specified in Section 4.1(b)), or use of name obligations of ARTICLE X, or any obligation set forth in Section 13.2(b), unless, before the end of the such thirty (30) calendar day notice period, LICENSEE has cured the material default or breach to UTMDACC’s reasonable satisfaction, and so notifies UTMDACC, stating the manner of the cure; or 

		
	(c)
	upon ninety (90) calendar days written notice from UTMDACC if LICENSEE materially breaches or defaults on any other obligation under this AGREEMENT, unless, before the end of the such ninety (90) calendar-day notice period, LICENSEE has cured the material default or breach to UTMDACC’s reasonable satisfaction and so notifies UTMDACC, stating the manner of the cure; or 

32

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

		
	(d)
	at any time by mutual written agreement between LICENSEE and UTMDACC upon one hundred eighty (180) calendar days written notice to all parties and subject to any terms herein which survive termination; or

		
	(e)
	immediately, upon written notice from UTMDACC, if Section 15.9 is invoked; or

		
	(f)
	immediately, upon written notice from UTMDACC, if LICENSEE fails to timely pay the license documentation fee specified in Section 4.1(b); or

		
	(g)
	If LICENSEE has defaulted or been late on its payment obligations pursuant to this AGREEMENT on any two (2) occasions in a twelve (12)-month period.  Notwithstanding the foregoing, LICENSEE may avoid termination under this Section 13.3(g), if LICENSEE pays all past due amounts and a default waiver fee of $[*****] within thirty (30) calendar days following the receipt of written notice from UTMDACC identifying the second payment default in the twelve (12) month period. LICENSEE may avoid termination as provided in the foregoing sentence (by payment of all past due amounts and default waiver fee) a maximum of three (3) times during the term of this AGREEMENT.  For purposes of clarification, a separate default waiver fee of $[*****] shall be due each time LICENSEE seeks to avoid termination under this provision.  It is understood that time is of the essence with respect to the default waiver fees, and these fees are not subject to the thirty (30) day cure period specified in Section 13.3(b); or

33

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

		
	(h)
	for any reason upon thirty (30) calendar days written notice from LICENSEE to UTMDACC, provided that LICENSEE is not in default on or in breach of any of its obligations under this AGREEMENT.

13.4    Upon termination of this AGREEMENT:
		
	(a)
	nothing herein will be construed to release either party of any obligation maturing prior to the effective date of the termination; and

		
	(b)
	The parties agree that the provisions of ARTICLES IX (Indemnification and Insurance), X (Use of Board and UTMDACC’s Name) and XI (Confidential Information and Publication) of this AGREEMENT shall survive termination of this AGREEMENT; and

		
	(c)
	LICENSEE, its AFFILIATES and sublicensees may, for a period of one year after the effective date of the termination, sell all LICENSED PRODUCTS and parts therefor that it has on hand at the date of termination, if LICENSEE pays the earned royalty thereon and any other amounts due pursuant to ARTICLE IV of this AGREEMENT; and 

		
	(d)
	Subject to Section 13.4(c), LICENSEE agrees to cease and desist any use and all SALE of the LICENSED SUBJECT MATTER and LICENSED PRODUCTS upon termination of this AGREEMENT.; and 

		
	(e)
	LICENSEE grants to BOARD and UTMDACC a nonexclusive royalty bearing license with the right to sublicense others with respect to improvements made by LICENSEE (including improvements licensed by LICENSEE from third parties) in the LICENSED SUBJECT MATTER, but only to the extent licensable or sublicensable by LICENSEE.  LICENSEE and UTMDACC agree 

34

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

to negotiate in good faith the royalty rate for the nonexclusive license.  BOARD's and UTMDACC’s right to sublicense others hereunder is solely for the purpose of permitting others to develop and commercialize the entire technology package.
XIV.    WARRANTY: SUPERIOR-RIGHTS
		
	14.1
	Except for the rights, if any, of the Government of the United States of America as set forth below, BOARD represents and warrants its belief that (a) it is the owner of the entire right, title, and interest in and to LICENSED SUBJECT MATTER, (b) it has the sole right to grant licenses thereunder, and (c) it has not knowingly granted licenses thereunder to any other entity that would restrict rights granted hereunder except as stated herein.

		
	14.2
	LICENSEE understands that the LICENSED SUBJECT MATTER may have been developed under a funding agreement with the Government of the United States of America ("Government") and, if so, that the Government may have certain rights relative thereto.  This AGREEMENT is explicitly made subject to the Government's rights under any such agreement and any applicable law or regulation.  To the extent that there is a conflict between any such agreement, applicable law or regulation and this AGREEMENT, the terms of such Government agreement, applicable law or regulation shall prevail.  LICENSEE agrees that LICENSED PRODUCTS used or SOLD in the United States, to the extent such LICENSED PRODUCTS were developed under a funding agreement with the Government, will be manufactured substantially in the United States, unless a written waiver is obtained in advance from the GOVERNMENT.  LICENSEE will promptly advise UTMDACC if such a written 

35

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

waiver is requested and/or obtained.  If LICENSEE can establish that, under the circumstances, domestic manufacture is not commercially feasible, then upon LICENSEE’s request and at LICENSEE’s expense, UTMDACC will assist LICENSEE as reasonably necessary to obtain such a waiver.
		
	14.3
	LICENSEE understands and agrees that BOARD and UTMDACC, by this AGREEMENT, make no representation as to the operability or fitness for any use, safety, efficacy, approvability by regulatory authorities, time and cost of development, patentability, and/or breadth of the LICENSED SUBJECT MATTER. BOARD and UTMDACC, by this AGREEMENT, also make no representation as to whether any patent covered by PATENT RIGHTS is valid or as to whether there are any patents now held, or which will be held, by others or by BOARD or UTMDACC in the LICENSED FIELD, nor do BOARD and UTMDACC make any representation that the inventions contained in PATENT RIGHTS do not infringe any other patents now held or that will be held by others or by BOARD.

		
	14.4
	LICENSEE, by execution hereof, acknowledges, covenants and agrees that LICENSEE has not been induced in any way by BOARD, SYSTEM, UTMDACC or employees thereof to enter into this AGREEMENT, and further warrants and represents that (a) LICENSEE is entering into this AGREEMENT voluntarily; (b) LICENSEE has conducted sufficient due diligence with respect to all items and issues pertaining to this AGREEMENT; and (c) LICENSEE has adequate knowledge and expertise, or has used knowledgeable and expert consultants, to adequately conduct such due diligence, and agrees to accept all risks inherent herein.

XV.    GENERAL

36

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

		
	15.1
	This AGREEMENT constitutes the entire and only agreement between the parties for LICENSED SUBJECT MATTER and, as of the EFFECTIVE DATE, all other prior negotiations, representations, agreements and understandings are superseded hereby.  No agreements altering or supplementing the terms hereof will be made except by a written document signed by both parties. 

		
	15.2
	Any notice required by this AGREEMENT must be given by prepaid, first class, certified mail, return receipt requested, and addressed in the case of UTMDACC to:

or in the case of LICENSEE to:

Moleculin Biotech, Inc.
2575 West Bellfort, Suite 333
Houston, Texas   77054
ATTENTION:  Jonathan Foster, Executive Vice President of Operations and Chief Financial Officer

or other addresses as may be given from time to time under the terms of this notice provision.
		
	15.3
	LICENSEE must comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this AGREEMENT. LICENSEE acknowledges that the LICENSED SUBJECT MATTER is subject to U. S. export control jurisdiction.  LICENSEE agrees to comply with all applicable international and national laws that apply to the LICENSED SUBJECT MATTER, including U.S. Export Administration Regulations, as well as end-user, end-use, and destination restrictions applied by the United States.

		
	15.4
	This AGREEMENT will be construed and enforced in accordance with the laws of the United States of America and of the State of Texas, without regard to its conflict of law 

37

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

provisions.  The Texas State Courts of Harris County, Texas (or, if there is exclusive federal jurisdiction, the United States District Court for the Southern District of Texas) shall have exclusive jurisdiction and venue over any dispute arising out of this AGREEMENT, and LICENSEE consents to the jurisdiction and venue of such courts and hereby explicitly waives the rights to any other venue to which it might be entitled by cause of action, domicile or otherwise.  Nothing in this AGREEMENT shall be deemed as a waiver by BOARD, SYSTEM or UTMDACC of its sovereign immunity.
		
	15.5
	Any dispute or controversy arising out of or relating to this AGREEMENT, its construction or its actual or alleged breach will be decided by mediation.  If the mediation does not result in a resolution of such dispute or controversy, it will be finally decided by an appropriate method of alternate dispute resolution, including without limitation, arbitration, conducted in the city of Houston, Harris County, Texas, in accordance with the applicable, then-current procedures of the American Arbitration Association.  The arbitration panel will include members knowledgeable in the evaluation of the LICENSED SUBJECT MATTER.  Judgment upon the award rendered may be entered in the highest court or forum having jurisdiction, state or federal.  The provisions of this Section 15.5 will not apply to decisions on the validity of patent claims or to any dispute or controversy as to which any treaty or law prohibits such arbitration.  The decision of the arbitration must be sanctioned by a court of law having jurisdiction to be binding upon and enforceable by the parties.

		
	15.6
	Failure of BOARD, UTMDACC or LICENSEE to enforce a right under this AGREEMENT will not act as a waiver of right or the ability to later assert that right relative to the particular situation involved.

38

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

		
	15.7
	Headings included herein are for convenience only and will not be used to construe this AGREEMENT.

		
	15.8
	If any part of this AGREEMENT is for any reason found to be unenforceable, all other parts nevertheless will remain enforceable. 

		
	15.9
	In the event that LICENSEE brings an action before any court, agency or tribunal seeking to invalidate or otherwise challenge the enforceability of or BOARD’s ownership of any patent included in the PATENT RIGHTS, then UTMDACC may immediately terminate this AGREEMENT upon written notice to LICENSEE.    Any dispute regarding the validity, enforceability or ownership of any patent included in the PATENT RIGHTS shall be litigated in the courts located in Houston, Texas, and LICENSEE agrees not to challenge personal jurisdiction in that forum.  To the extent that LICENSEE unsuccessfully challenges the validity or enforceability of any patent included in the PATENT RIGHTS, LICENSEE agrees to reimburse UTMDACC and BOARD for all costs and fees (including attorney’s fees) paid by UTMDACC and BOARD in defending against such challenge. LICENSEE understands and agrees that, in the event LICENSEE successfully challenges the validity or enforceability of any patent included in the PATENT RIGHTS, all payments or other consideration made or otherwise provided by LICENSEE to UTMDACC prior to a final, non-appealable adjudication of invalidity and/or unenforceability shall be non-refundable. The obligations of this Section shall survive the expiration or termination of this AGREEMENT. 

39

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

IN WITNESS WHEREOF, the parties hereto have caused their duly authorized representatives to execute this AGREEMENT.
	
		
	BOARD OF REGENTS OF THE 
UNIVERSITY OF TEXAS SYSTEM, 
on behalf of 
THE UNIVERSITY OF TEXAS  
M. D. ANDERSON CANCER CENTER 

By________________________________ 
      Ben Melson 
      SVP and Chief Financial Officer
      The University of Texas
      M. D. Anderson Cancer Center 
	MOLECULIN BIOTECH, INC.

By____________________________
   Jonathan Foster
Executive Vice President of Operations and Chief Financial Officer

Date:_______________

	 
	 

	

Approved as to Content: 

By________________________________
      Ferran Prat, J.D., Ph.D.
      Senior Vice President, Strategic Industry
     Ventures and Research Administration
     M. D. Anderson Cancer Center

Date:________________
	 

40

Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

EXHIBIT I
	
			
	Creators
	UTMDACC Reference No. and IDR Title
	U.S. and foreign patent application/patent numbers

	Waldemar Priebe, PhD,
Stanislaw Skora,
Izabela Fokt,
Rafal Zielinski,
Arumugam Jayakumar, and 
Radjendirane Venugopal

	MDA18-010: Novel Anticancer Drugs Structurally Related To WP1066

	U.S. Prov. Appl. No. 62/584,591

41

{Worldox #00035999.DOCX 6}Exhibit 10.1

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE 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 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 (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED 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 THE SECURITIES.

	
Principal Amount: $25,000.00

Purchase Price: $25,000.00

	
Issue Date: May 7, 2018

	
 

	
 

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, XSUNX, INC., a Colorado corporation (hereinafter called the “Borrower”), hereby  promises  to  pay  to  the order of                        , a Virginia corporation, or registered assigns (the “Holder”) the sum of $25,000.00 together with any interest as set forth herein, on February 15, 2019 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of ten percent (10%)(the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the  same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same  is  paid  (“Default Interest”). Interest shall be computed on the basis of a 365 day year and the actual number of days elapsed. Interest shall commence accruing on the Issue Date but shall not be payable until the  Note becomes payable (whether at Maturity Date or upon acceleration or by prepayment). All  payments due hereunder (to the extent not converted into common  stock,  no  par  value  per  share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made  at  such  address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto  in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

This Note is free from all taxes, liens, claims and encumbrances with respect to the  issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

 

The following terms shall apply to this Note:

ARTICLE I. CONVERSION RIGHTS

1.1           Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III), each in respect of the remaining outstanding principal amount of this

Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The beneficial ownership limitations on conversion as set forth in the section may NOT be waived by the Holder. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”); however, if the Notice of Conversion is sent after 6:00pm, New York, New York time the Conversion Date shall be the next business day. The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the principal amount of this Note plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Section 1.4 and Article III hereof.

 

1.2           Conversion Price. The Conversion Price shall be equal to 65% multiplied by the Market Price (as defined herein) (representing a discount rate of 35%) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). “Market Price” means the average of the lowest two (2) VWAP’s (as defined below) for the Common Stock during the fifteen (15) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “VWAP” shall mean the daily dollar volume- weighted average sale price for the Common Stock on the Principal Market on any particular Trading Day during the period beginning at 9:30 a.m., New York City Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York City Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" functions. If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the holder of the Note. All such determinations of VWAP shall to be appropriately and equitably adjusted in accordance with the provisions set forth herein for any stock dividend, stock split, stock combination or other similar transaction occurring during any period used to determine the Market Price (or other period utilizing VWAPs). “Trading Day” shall mean a day on which there is trading on the Principal Market. “Principal Market” shall mean the OTCBB

2

or such other principal market, exchange or electronic quotation system on which the Common Stock is then listed for trading.

1.3           Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved four times the number of shares that would be issuable upon full conversion of the Note (assuming that the 4.99% limitation set forth in Section 1.1 is not in effect)(based on the respective Conversion Price of the Note (as  defined  in  Section  1.2)  in effect from time  to  time,  initially  237,000,000)(the  “Reserved  Amount”).  The  Reserved  Amount  shall be increased (or decreased with the written consent of the Holder) from time to time in  accordance with the Borrower’s obligations hereunder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall  be  a  sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Note. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

1.4           Method of Conversion.

(a)           Mechanics of Conversion. As set forth in Section 1.1 hereof, from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, this Note may be converted by the Holder in whole or in part at any time from time to time, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower (upon payment in full of any amounts owed hereunder).

 

(b)           Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion.

 

(c)           Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this

3

Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations hereunder, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.

(d)           Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions set forth herein, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit and Withdrawal at Custodian (“DWAC”) system.

 

(e)           Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline due to action and/or inaction of the Borrower, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock (the “Fail to Deliver Fee”); provided; however that the Fail to Deliver Fee shall not be due if the failure is a result of a third party (i.e., transfer agent; and not the result of any failure to pay such transfer agent) despite the best efforts of the Borrower to effect delivery of such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1.4(e) are justified.

1.5           Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless: (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions

4

of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration (such as Rule 144 or a successor rule) (“Rule 144”); or (iii) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement).

 

Any restrictive legend on certificates representing shares of Common Stock issuable upon conversion of this Note shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if the Borrower or its transfer agent shall have received an opinion of counsel from Holder’s counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that (i) a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected; or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act. In the event that the Company does not reasonably accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration (such as Rule 144), at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

1.6 Effect of Certain Events.

(a)           Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III). “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

 

(b)           Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, ten (10) days prior written notice (but in any event at least five (5) days prior written notice) of the record date of

5

the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Note. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

(c)           Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

1.7           Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the periods set forth on the table immediately following this paragraph (the “Prepayment Periods”), the Borrower shall have the right, exercisable on not more than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.7. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to Holder, or upon the direction of the Holder as specified by the Holder in a writing to the Borrower (which shall direction to be sent to Borrower by the Holder at least one (1) business day prior to the Optional Prepayment Date). If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash equal to the percentage (“Prepayment Percentage”) as set forth in the table immediately following this paragraph opposite the applicable Prepayment Period, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Section 1.4 hereof (the “Optional Prepayment Amount”). If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.7.

	
Prepayment Period

	
Prepayment Percentage

	
1.          The period beginning on the Issue Date and ending on

the date which is thirty (30) days following the Issue Date.

	
115%

	
2.          The period beginning on the date which is thirty-one

(31) days following the Issue Date and ending on the date which is sixty (60) days following the Issue Date.

	
120%

	
3.          The period beginning on the date which is sixty-one

(61) days following the Issue Date and ending on the date which is ninety (90) days following the Issue Date.

	
125%

6

	
4.          The period beginning on the date that is ninety-one

(91) day from the Issue Date and ending one hundred twenty (120) days following the Issue Date.

	
130%

	
5.          The period beginning on the date that is one hundred twenty-one (121) day from the Issue Date and ending one hundred

eighty (180) days following the Issue Date.

	
135%

After the expiration of one hundred eighty (180) days following the Issue Date, the Borrower shall have no right of prepayment.

ARTICLE II. CERTAIN COVENANTS

2.1           Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

ARTICLE III. EVENTS OF DEFAULT

If any of the following events of default (each, an “Event of Default”) shall occur:

 

3.1 Failure to Pay Principal and Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity or upon acceleration and such breach continues for a period of five (5) days after written notice from the Holder.

 

3.2 Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issuable to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty-eight (48) hours of a demand from the Holder.

 

3.3 Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited

7

to the Purchase Agreement and such breach continues for a period of twenty (20) days after written notice thereof to the Borrower from the Holder.

 

3.4           Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

 

3.5           Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

 

3.6           Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

 

3.7           Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC (which specifically includes the quotation platforms maintained by the OTC Markets Group) or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

 

3.8           Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

 

3.9           Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

 

3.10          Cessation of Operations. Any cessation of  operations  by  Borrower  or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

 

3.11          Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC at any time after 180 days after the Issuance Date for any date or period until this Note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

 

3.12          Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

 

8

3.13          Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

 

Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely upon acceleration), 3.3, 3.4, 3.7, 3.8, 3.10, 3.11, 3.12, 3.13, and/or 3.14 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require

9

the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

ARTICLE IV. MISCELLANEOUS

4.1           Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

4.2           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, or facsimile, 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) 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:

If to the Borrower, to: XSUNX, INC.

65 Enterprise

Aliso Viejo, CA 92656

Attn: Tom Djokovich, Chief Executive Officer Fax:

Email: TomD@XsunX.com 

If to the Holder:

With a copy by fax only to (which copy shall not constitute notice):

10

 

4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the Securities and Exchange Commission). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement; and may be assigned by the Holder without the consent of the Borrower.

 

4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

 

4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Virginia without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in New York and the county of Nassau. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note, any agreement or any other document delivered in connection with this Note 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 law.

 

4.7 Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

 

4.8 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an

11

injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this on May 7, 2018

XSUNX, INC.

 

 

By:                                                            

Tom Djokovich

Chief Executive Officer

 

 

 

12

EXHIBIT A -- NOTICE OF CONVERSION

 

The undersigned hereby elects to convert $                        principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of XSUNX, INC., a Colorado corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of May 7, 2018 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

		☐	
The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

Name of DTC Prime Broker: Account Number:

 

		☐	
The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

 

Date of conversion: 

Applicable Conversion Price:

Number of shares of common stock to be issued 

pursuant to conversion of the Notes:

Amount of Principal Balance due remaining 

under the Note after this conversion:

 

                                    

$                                 

By:                                                                                                                  

Name:

Title: Chief Executive Officer                                                                       

Date:                                     

 

 

 

 

 

13

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00283-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00283-of-00352.parquet"}]]