Document:

CERTIFICATE OF DESIGNATION OF RIGHTS AND PREFERENCES

FOR SERIES G CONVERTIBLE PREFERRED STOCK

OF

ACCELPATH, INC.

Pursuant to Section 151 of the Delaware General Corporation Law, AccelPath, Inc., a Delaware corporation (the “Company”), does hereby certify:

FIRST: That pursuant to authority expressly vested in it by the Articles of Incorporation of the Company, the Board of Directors of the Company has adopted the following resolution establishing a new series of Preferred Stock of the Company, consisting of One Thousand Two Hundred Fifty (1,250) shares designated “Series G Convertible Preferred Stock,” with such powers, designations, preferences, and relative participating, optional, or other rights, if any, and the qualifications, limitations, or restrictions thereof, as are set forth in the resolutions:

RESOLVED, that the Company's Board of Directors hereby approves the designation and issuance of the Series G Convertible Preferred Stock according to the terms and conditions as set forth in Exhibit A and authorizes and instructs the Company's Executive Officers to proceed in filing the Certificate of Designation with the State of Delaware and to take such other action as shall be appropriate in connection with the issuance of the Series G Convertible Preferred Stock.

SECOND: That said resolutions of the directors of the Company were duly adopted in accordance with the provisions of Sections 141 and 151 of the Delaware General Corporation Law.

IN WITNESS WHEREOF, the undersigned hereby affirms, under penalties of perjury, that the foregoing instrument is the act and deed of the Company and that the facts stated therein are true.  Dated as of the 18th day of September, 2012.

				
	 

	ACCELPATH, INC.,

	 

	 
	 
	 

	 
	a Delaware corporation,

	 

	 
	 
	 
	 

	 

	By: 

	/s/ Shekhar Wadekar

	 

	 

	 

	Name: Shekhar Wadekar 

	 

	 

	 

	Title: Chief Executive Officer

	 

EXHIBIT A

SERIES G CONVERTIBLE PREFERRED STOCK TERMS

Section 1.

Designation, Amount and Par Value.  The series of preferred stock shall be designated as the Series G Convertible Preferred Stock (the “Series G Preferred Stock”), and the number of shares so designated and authorized shall be One Thousand Two Hundred Fifty (1,250).  Each share of Series G Preferred Stock shall have a par value of $0.001 per share and a stated value of $1,000 per share (the “Stated Value”).

Section 2.

Ranking.  The Series G Preferred Stock will, with respect to rights on liquidation, dissolution and winding-up of the Company, rank (i) junior to (A) the Company’s Series E 5% Convertible Preferred Stock (the “Series E Preferred Stock”) and (B) all capital stock issued by the Company the terms of which expressly provide that such capital stock shall rank senior to the Series G Preferred Stock (collectively, “Senior Securities”); (ii) on a parity with (A) the Company’s Series F Convertible Preferred Stock and (B) each other class or series of capital stock of the Company the terms of which do not expressly provide that such class or series shall rank senior or junior to the Series G Preferred Stock (collectively, “Parity Securities”); and (iii) senior to the Company’s Junior Securities.

Section 3.

Dividends.  Except for distributions in the event of a Liquidation in accordance with Section 5, Holders of Series G Preferred Stock shall not be entitled to receive dividends on the Series G Preferred Stock.

Section 4.

Voting Rights; Negative Covenants.  The Series G Preferred Stock shall not have the right to vote on any matter that may from time to time be submitted to the Company’s shareholders for a vote, either by written consent or by proxy.  So long as any shares of Series G Preferred Stock are outstanding, the Company shall not and shall cause its subsidiaries not to, without the affirmative vote of the Requisite Holders, (a) alter or change adversely the powers, preferences or rights given to the Series G Preferred Stock, (b) alter or amend this Certificate of Designation, (c) amend its certificate of incorporation, bylaws or other charter documents so as to affect adversely any rights of any Holders of the Series G Preferred Stock, (d) increase the authorized or designated number of shares of Series G Preferred Stock, (e) issue any additional shares of Series G Preferred Stock (including the reissuance of any shares of Series G Preferred Stock converted for Common Stock) or (f) enter into any agreement with respect to the foregoing.

Section 5.

Liquidation.  Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary or a Sale (as defined below) (a “Liquidation”), the holders of the Series G Preferred Stock shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Series G Preferred Stock an amount equal to the Stated Value, after any distribution or payment with respect to such Liquidation shall be made to the holders of any Senior Securities and prior to any distribution or payment with respect to such Liquidation shall be made to the holders of any Junior Securities, and if the assets of the Company shall be insufficient to pay in full such amounts and amounts payable on any Parity Securities, then the entire assets to be distributed to the holders of Series G Preferred Stock and the holders of such Parity Securities shall be distributed among the holders of Series G Preferred Stock and the holders of such Parity Securities ratably in accordance

with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.  The Company shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each record Holder of Series G Preferred Stock.  A “Sale” shall mean a merger or consolidation by the Company with another corporation or other entity (in each case, other than where the Company is the surviving entity).

Section 6.

Conversion.

(a)

Conversion at Option of Holder.  At any time and from time to time, from and after the six month anniversary of the Issuance Date, each share of Series G Preferred Stock shall, at the option of the Holder (a “Voluntary Conversion”), be convertible into a number of shares of Common Stock equal to the quotient determined by dividing (i) the Stated Value by (ii) the Conversion Price (as defined below) at such time.  A Holder shall effect a conversion by surrendering to the Company the original certificate or certificates representing the shares of Series G Preferred Stock to be converted to the Company, together with a completed form of conversion notice attached hereto as Exhibit B (the “Conversion Notice”).  Each Conversion Notice shall specify the number of shares of Series G Preferred Stock to be converted, the date on which such conversion is to be effected, which date may not be prior to the date the Holder delivers such Conversion Notice (the “Voluntary Conversion Date”), and the Conversion Price determined as specified in Section 6(d) hereof.  If no Voluntary Conversion Date is specified in a Conversion Notice, the Voluntary Conversion Date shall be the date that the Conversion Notice is delivered pursuant to this Section 6(a).  Subject to Section 6(c) hereof, each Conversion Notice, once given, shall be irrevocable.

(b)

Mandatory Conversion.  Effective as of the close of business on the Mandatory Conversion Date (as defined in Section 9 below), all outstanding shares of Series G Preferred Stock shall automatically convert into shares of Common Stock as set forth below (a “Mandatory Conversion”).  The number of shares of Common Stock into which a share of Series G Preferred Stock shall be convertible in connection with a Mandatory Conversion shall be determined by dividing (i) the Stated Value by (ii) the Conversion Price at such time.  On the Mandatory Conversion Date, the outstanding shares of Series G Preferred Stock shall be converted automatically without any further action by the Holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its agent; provided, however, that the Company shall not be obligated to issue shares of Common Stock issuable upon conversion of shares of Series G Preferred Stock unless certificates evidencing such shares of Series G Preferred Stock have been delivered to the Company or its agent. .  Upon a Mandatory Conversion, the Holders of the Series G Preferred Stock shall surrender the original certificates representing the Series G Preferred Stock so converted.

(c)

Not later than five (5) Trading Days after a Conversion Date, the Company will deliver to the Holder (i) a certificate or certificates representing the number of shares of Common Stock being issued upon the conversion of shares of Series G Preferred Stock, and (ii) one or more certificates representing the number of shares of Series G Preferred Stock not converted, if any.  The Company shall, upon request of the Holder, use reasonable efforts to deliver any certificate or certificates required to be delivered by the Company under this Section electronically through the Depository Trust Company or another established clearing corporation performing similar functions (to the extent legended physical certificates are not required).  If in the case of any Voluntary Conversion (i) such certificate or certificates

representing the number of shares of Common Stock being issued upon the conversion of shares of Series G Preferred Stock are not delivered to or as directed by the applicable Holder and (ii) the Holder or its designee has not received other evidence of its ownership of the shares of Common Stock being issued upon the conversion of shares of Series G Preferred Stock by the close of business on the fifth Trading Day after the Conversion Date, the Holder shall be entitled by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such conversion, in which event the Company shall immediately return the certificates representing the shares of Series G Preferred Stock tendered for conversion.

(d)

The conversion price for each share of Series G Preferred Stock (the “Conversion Price”) on any Conversion Date shall be the Per Share Market Value of the Common Stock on the Trading Day immediately preceding (i) in the case of a Voluntary Conversion, the date of the Conversion Notice or (ii) in the case of a Mandatory Conversion, the Mandatory Conversion Date (provided that if the Per Share Market Value on the Trading Day immediately preceding the date of the Conversion Notice or the Mandatory Conversion Date, as applicable, is less than $0.02, then the Conversion Price shall equal $0.02), subject to Section 6(e) and Section 7 below.  All calculations under this Section 6 shall be made to the nearest whole share of common stock.

(e)

If at any time conditions shall arise by reason of action taken by the Company which in the sole opinion of the Board of Directors are not adequately covered by the other provisions hereof and which would be reasonably expected to materially and adversely affect the rights of the holders of Series G Preferred Stock (different than or distinguished from the effect generally on rights of holders of any class of the Company's capital stock) or if at any time any such conditions would be reasonably expected to arise by reason of any action contemplated by the Company, the Company shall mail a written notice briefly describing the action contemplated and the material adverse effects of such action on the rights of the holders of Series G Preferred Stock at least 30 calendar days prior to the effective date of such action, and an Appraiser selected by the holders of majority in interest of the Series G Preferred Stock shall give its opinion as to the adjustment, if any (not inconsistent with the standards established in this Section 6), of the Conversion Price (including, if necessary, any adjustment as to the securities into which shares of Series G Preferred Stock may thereafter be convertible) and any distribution which is or would be required to preserve without diluting the rights of the holders of shares of Series G Preferred Stock; provided, however, that the Company, after receipt of the determination by such Appraiser, shall have the right to select an additional Appraiser, in good faith, in which case the adjustment shall be equal to the average of the adjustments recommended by each such Appraiser.  The Board of Directors shall make the adjustment recommended forthwith upon the receipt of such opinion or opinions or the taking of any such action contemplated, as the case may be.

(f)

The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of Series G Preferred Stock, as herein provided, free from preemptive rights or any other actual or contingent purchase rights of persons other than the holders of Series G Preferred Stock, not less than 100% of such number of shares of Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section 6(g)) upon the conversion of all outstanding shares of Series G Preferred Stock hereunder.  The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid and nonassessable.

(g)

Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may if otherwise permitted and unless waived by the Holder of the Series G Preferred Stock, make a cash payment in respect of any final fraction of a share based on the Per Share Market Value at such time.  If the Company elects not, or is unable, to make such a cash payment, the Holder of a share of Series G Preferred Stock shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.  

(h)

The issuance of certificates for shares of Common Stock on conversion of Series G Preferred Stock shall be made without charge to the Holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such shares of Series G Preferred Stock so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

(i)

Shares of Series G Preferred Stock converted into Common Stock shall be canceled and shall have the status of authorized but unissued shares of undesignated preferred stock.

(j)

Any and all notices or other communications or deliveries to be provided by the Holders of the Series G Preferred Stock hereunder, including, without limitation, any Conversion Notice, shall be in writing and delivered by facsimile, sent by a nationally recognized overnight courier service, or sent by certified or registered mail, postage prepaid, addressed to the attention of the President of the Company at the facsimile telephone number or address of the principal place of business of the Company.  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered by facsimile, sent by a nationally recognized overnight courier service or sent by certified or registered mail, postage prepaid, addressed to each Holder of Series G Preferred Stock at the facsimile telephone number or address of such Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder.  Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 5:00 p.m. (New York time), (ii) the date after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section later than 5:00 p.m. (New York time) on any date and earlier than 11:59 p.m. (New York time) on such date, (iii) four business days after deposit in the United States mails, (iv) the second Business Day (as defined in Section 9) following the date of mailing, if sent by nationally recognized overnight courier service, or (v) upon actual receipt by the party to whom such notice is required to be given.

Section 7.

Adjustments to Conversion Price.

(a)

The Conversion Price shall be subject to adjustment from time to time as follows: 

(i).

Spin Off.  If, for as long as any shares of Series G Preferred Stock remain outstanding  the Company consummates a spin off or otherwise divests itself of a part of its business or

operations or disposes of all or of a part of its assets in a transaction (the “Spin Off”) in which the Company, in addition to or in lieu of any other compensation received by the Company for such business, operations or assets, causes securities of another entity (the “Spin Off Securities”) to be issued to security holders of the Company, then the Company shall cause (a) to be reserved Spin Off Securities equal to the number thereof which would have been issued to all Holders had all shares  of Series G Preferred Stock outstanding on the record date (the “Record Date”) for determining the amount and number of Spin Off Securities to be issued to security holders of the Company (such outstanding shares of Series G Preferred Stock, the “Outstanding Preferred Stock”) been converted as of the close of business on the Trading Day immediately before the Record Date, using, in the conversion formula, a “Conversion Price” equal to the Per Share Market Value of the Common Stock on such Trading Day (provided that if the Per Share Market Value on such Trading Day is less than $0.02, then the Conversion Price shall equal $0.02) (the “Reserved Spin Off Securities”), and (b) to be issued to each Holder upon the conversion of all or any of the Outstanding Preferred Stock, such amount of the Reserved Spin Off Securities equal to (1) the Reserved Spin Off Securities multiplied by (2) a fraction, of which (A) the numerator is the aggregate Stated Value of the Outstanding Preferred Stock then being converted by such Holder, and (B) the denominator is the aggregate Stated Value of the Outstanding Preferred Stock.

(ii).

Stock Splits, etc.  If, at any time while any shares of Series G Preferred Stock remain outstanding, the Company effectuates a stock split or reverse stock split of its Common Stock or issues a dividend on its Common Stock consisting of shares of Common Stock, the Conversion Price and any other amounts calculated as contemplated by this Certificate of Designations shall be equitably adjusted to reflect such action (unless the Conversion Price already reflects such split).  By way of illustration, and not in limitation, of the foregoing (a) if the Company effectuates a 2:1 split of its Common Stock, thereafter, with respect to any conversion for which the Company issues shares after the record date of such split, the Conversion Price shall be adjusted to equal one-half of what it had been calculated to be immediately prior to such split (unless the Conversion Price already reflects such split); (b) if the Company effectuates a 1:10 reverse split of its Common Stock, thereafter, with respect to any conversion for which the Company issues shares after the record date of such reverse split, the Conversion Price shall be adjusted to equal ten times what it had been calculated to be immediately prior to such split (unless the Conversion Price already reflects such split); and (c) if the Company declares a stock dividend of one share of Common Stock for every 10 shares outstanding, thereafter, with respect to any conversion for which the Company issues shares after the record date of such dividend, the Conversion Price shall be adjusted (unless the Conversion Price already reflects such dividend) to equal such amount multiplied by a fraction, of which the numerator is the number of shares (10 in the example) for which a dividend share will be issued and the denominator is such number of shares plus the dividend share(s) issuable or issued thereon (11 in the example).

(iii).

Notice of Adjustments.  Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 7, the Company, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to each Holder of Series G Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based.  The Company shall, upon the written request at any time of any Holder of Series G Preferred Stock, furnish to such Holder a like certificate setting forth (a) such adjustment or readjustment, (b) the Conversion Price in effect at the time and (c) the number of shares of

Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of a share of Series G Preferred Stock.

Section 8.

Redemption at the Option of the Company.

(a)

Optional Redemption. At any time and from time to time after the Issuance Date, and subject to the consent right of the holders of the Series E Preferred Stock (to the extent any shares of Series E Preferred Stock are outstanding at such time), the Company, at its option, may redeem, in whole or in part, the shares of Series G Preferred Stock at the time outstanding, upon notice given as provided in Section 8(c) below, at a redemption price per share payable in cash equal to the Stated Value. The redemption price for any shares of Series G Preferred Stock shall be payable on the redemption date to the Holder of such shares against surrender of the certificate(s) evidencing such shares to the Company or its agent.  If notice of redemption has been duly given as provided in Section 8(c) and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, so as to be and continue to be available therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date (unless the Company defaults in the payment of the redemption price, in which case such rights shall continue until the redemption price is paid), all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption, without interest.

(b)

No Sinking Fund. The Series G Preferred Stock will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Series G Preferred Stock will have no right to require redemption of any shares of Series G Preferred Stock.

(c)

Notice of Redemption. Notice of every redemption of shares of Series G Preferred Stock shall be given by first class mail, postage prepaid, addressed to the Holders of the shares to be redeemed at their respective last addresses appearing on the books of the Company. Such mailing shall be at least 10 days before the date fixed for redemption; provided, that failure to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series G Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series G Preferred Stock to be so redeemed except as to the Holder to whom the Company has failed to give such notice or except as to the Holder to whom notice was defective. Notwithstanding the foregoing, if the Series G Preferred Stock or any depositary shares representing interests in the Series G Preferred Stock are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the Holders of Series G Preferred Stock at such time and in any manner permitted by such facility. Each such notice given to a Holder shall state: (1) the redemption date; (2) the number of shares of Series G Preferred Stock to be redeemed and, if less than all the shares held by such Holder are to be redeemed, the number of such shares to be redeemed from such Holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.

(d)

Partial Redemption. In case of any redemption of only part of the shares of Series G Preferred Stock at the time outstanding, the shares to be redeemed shall be selected on a pro rata basis or such other method as the depositary shall require that approximates a pro rata basis. If fewer than all the

shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the Holder thereof.

(e)

Conversions Prior to Redemption Date. Notwithstanding anything to the contrary in this Section 8, but subject to Section 6(d), until the applicable redemption date, a Holder may elect to convert shares of Series G Preferred Stock subject to redemption into Common Stock in accordance with Section 6.

Section 9.

Definitions.  For the purposes hereof, the following terms shall have the following meanings:

“Business Day” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of Delaware are authorized or required by law or other government action to close.

“Change of Control” shall mean any one of the following events:

(i)

the acquisition by any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act) of any amount of the Common Stock so that it holds or controls fifty percent (50%) or more of the Common Stock;

(ii)

a merger or consolidation after which fifty percent (50%) or more of the voting stock of the surviving corporation is held by persons who were not stockholders of the Company immediately prior to such merger or consolidation;

(iii)

the sale or disposition by the Company of all or substantially all of the Company’s assets to an entity in which immediately after such sale or disposition, the Company’s stockholders hold less than 50% of the combined voting power of such entity’s outstanding securities;

(iv)

such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term “Continuing Director” means a member of the Board who was a member of the Board on the Issuance Date; or

(v)

approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

“Closing Bid Price” shall mean the closing bid price (as reported by Bloomberg L.P.) of the Common Stock on the OTC Bulletin Board or such other exchange or trading facility on which the common stock is traded. 

“Common Stock” means the common stock, $.001 par value per share, of the Company, and stock of any other class into which such shares may hereafter have been reclassified or changed.

“Conversion Date” means either a Voluntary Conversion Date or a Mandatory Conversion Date.

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

“Issuance Date” means the earliest date on which a Holder receives shares of the Series G Preferred Stock, regardless of the number of certificates which may be issued to evidence such Series G Preferred Stock.

“Holder” means a registered holder of a share or shares of Series G Preferred Stock

“Junior Securities” means the Common Stock and all other equity securities of the Company ranking junior to the Series G Preferred Stock in terms of payment of liquidation proceeds.

“Mandatory Conversion Date” means the earlier of (i) the fifth anniversary of the Issuance Date and (ii) the occurrence of a Change of Control.

“Per Share Market Value” means on any particular date (a) the Closing Bid Price per share of the Common Stock on such date on the OTC Bulletin Board or other principal stock exchange or quotation system on which the Common Stock is then listed or quoted or if there is no such price on such date, then the Closing Bid Price on such exchange or quotation system on the date nearest preceding such date, or (b) if the Common Stock is not listed then on the OTC Bulletin Board or any stock exchange or quotation system, the Closing Bid Price for a share of Common Stock in such other over-the-counter market, as reported by the Nasdaq Stock Market or in the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices at the close of business on such date, or (c) if the Common Stock is not then reported by the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices, then the average of the "Pink Sheet" quotes for the relevant conversion period, as determined in good faith by the Board of Directors, or (d) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined in good faith by the Board of Directors.

“Person” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

“Trading Day” means (a) a day on which the Common Stock is traded on the OTC Bulletin Board or other stock exchange or market on which the Common Stock has been listed, or (b) if the Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices).

EXHIBIT B

CONVERSION NOTICE

Date of Conversion Notice:  ___________________________

(To be executed by the registered holder

to convert shares of Series G Preferred Stock)

The undersigned hereby elects, in accordance with the terms and conditions of the Certificate of Designation, to convert the number of shares of Series G Convertible Preferred Stock indicated below, into shares of Common Stock, par value $0.001 per share (the “Common Stock”), of AccelPath, Inc. (the “Company”), as of the date written below.  If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.  No fee will be charged to the undersigned for any conversion, except for such transfer taxes, if any.

 

Conversion calculations:

Date to effect conversion:  __________________________________

Number of shares of Series G Convertible Preferred Stock to be converted:  _______________________

Applicable Conversion Price:  _______________________

Number of shares of Common Stock to be issued:  _________________________________________

Name of Holder:  ____________________________________________________________________

Address of Holder:  ___________________________________________________________________

		
	 
	 

	Authorized SignatureLOAN AGREEMENT

This Loan Agreement (the “Agreement”), effective as of September 18, 2012 (the “Effective Date”), is entered into by and among AccelPath, Inc., a Delaware corporation (the “Company”), Digipath Solutions, LLC (“Digipath”) and the member of Digipath, Rishi Reddy (the “Lender”).

PRELIMINARY STATEMENT

WHEREAS, the Company is acquiring all of the outstanding  Equity Interest of Digipath pursuant to the Equity Purchase Agreement among the Company, Digipath and the member of Digipath dated the date hereof (the “Equity Purchase Agreement”) and part of the consideration for the acquisition is the issuance of convertible promissory note in the aggregate principal amount of $1,050,000; and

WHEREAS, Lender is willing to make such loan under the terms and conditions set forth in this Agreement, together the Equity Purchase Agreement and the unsecured convertible promissory note of the Company attached hereto as Exhibit B.

NOW, THEREFORE, in consideration of the premises and promises set forth in this Agreement, the parties hereto agree as follows:

1.  The Loan

1.1

The Loan.  Capitalized terms not defined herein shall have the meaning ascribed to such terms in the Equity Purchase Agreement. Subject to the terms and conditions of this Agreement and the Equity Purchase Agreement as well as the representations and warranties made therein and the prior satisfaction of the conditions precedent set forth in the Equity Purchase Agreement, the Lender agrees to make the loan the “Loan”) in an aggregate principal amount set forth opposite the name of the Lender on Exhibit A hereto (each such amount being hereinafter referred to as such Lender’s “Commitment”) to the Company at the Closing.

1.2

The Notes.  The Loan made by the Lender shall  be evidenced by an unsecured convertible promissory note of the Company (the “Note”) in principal face amount of the Loan, payable to the order of the  Lender and otherwise substantially in the form attached hereto as Exhibit B. 

1.3

Interest.  The Company will pay interest on the unpaid principal balance of the Loan, accrued from the date such Loan is first made hereunder, until the principal amount thereof is paid in full, at a rate of 5% per annum and in accordance with such other terms specified in the Note. Interest shall be computed on the basis of a 365-day year for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. At the option of the Company, the accrued interest shall be paid in either cash or Common Stock as provided in Section 1.4, provided however that in no event shall the cash portion be less than 30% of any interest payment.

1

1.4

Principal and Interest Repayment.  Subject to Section 2, the outstanding principal balance of the Note, together with all accrued and unpaid interest thereon, shall be payable in full on the earlier to occur of (i) March 18, 2014, 18 months from the Effective Date (the “Maturity Date”), (ii) the occurrence of an Event of Default (defined herein), or (iii) the occurrence of a Change of Control (defined herein) (collectively, the “Due Date”); provided that the Company shall extend the Maturity Date with the written consent of the Lender. Subject to Section 1.3, if the Company elects to pay all or a portion of the accrued interest in shares of Common Stock, the number of shares of Common Stock of the Company to be issued to the Lender shall be determined by dividing (i) the unpaid accrued interest on the Note being converted by (ii) the Per Share Market Price (defined herein) on the Trading Day immediately prior to the Due Date; provided the Per Share Market Price shall not be less than $0.065 per share. The Company agrees to prepay a portion of the principal and accrued and unpaid interest thereon on a monthly basis depending on the EBITDA generated by the assets acquired from Digipath pursuant to the Equity Purchase Agreement in accordance with the following formula: If such EBITDA is $50,000 or lower, 35% of such EBITDA will be applied to the prepayment of the principal and accrued interest; if such EBITDA is greater than $50,000, 50% of such EBITDA will be applied to the prepayment of the principal and accrued interest. The prepayment will be made thirty (30) days after the monthly EBITDA is calculated. With respect to the Company’s calculation of EBITDA for purposes of this Section, the Company hereby agrees that the operating expenses used therein shall be commensurate with the business generated by the assets acquired from Digipath pursuant to the Equity Purchase Agreement.

2.  Conversion

2.1

Conversion at Option of Lender.  At the option of the Lender, the entire outstanding principal amount of the Note shall be convertible upon surrender to, and cancellation thereof by, the Company into shares of Common Stock, at any time and from time to time, from and after the issuance of the Note determined by dividing (i) the entire outstanding principal amount of the Note by (ii) the Per Share Market Price (defined below) on the Trading Day (defined below) immediately prior to the Company’s receipt of the Conversion Notice (defined below); provided in no event shall the Per Share Market Price be less than $0.065 per share. 

2.2.

Conversion on the Event of Default or Change of Control.  If (i) an Event of Default (defined herein) has occurred and remains uncured beyond any applicable cure period, or (ii) a Change of Control has occurred, and the Lender elects to convert all amounts due under the Note, then, upon notice to the Company of such election and upon surrender to, and cancellation thereof by, the Company, the entire outstanding principal amount shall be converted into the number of shares of Common Stock of the Company determined by dividing  (i) the entire outstanding principal amount of the Note by (ii) the Per Share Market Price on the Trading Day immediately prior to the Company’s receipt of the Conversion Notice; provided the Per Share Market Price shall not be less than $0.065 per share.

2.3

[Reserved]

2.4

Mechanics and Effect of Conversion.  The conversion of the outstanding principal amount of the Note is subject to the following provisions:

2

(a)

The Lender shall effect a conversion by surrendering to the Company or its transfer agent the original Note, duly endorsed, together with a completed form of conversion notice attached hereto as Exhibit B (the “Conversion Notice”).  Each Conversion Notice shall specify the principal amount to be converted and once given, shall be irrevocable. Not later than five (5) Trading Days after the Company’s receipt of the Conversion Notice, as the case may be, the Company will deliver to the Lender a certificate or certificates representing the number of shares of Common Stock being issued upon the conversion of the outstanding principal amount of the Notes.  The Lender agrees that if the Company delivers a Conversion Notice, it shall surrender to the Company or its transfer agent the original Note, duly endorsed within five (5) Trading Days and the Company will deliver to the Lender a certificate or certificates representing the number of shares of Common Stock being issued upon the conversion of the outstanding principal amount of the Note within five (5) Trading Days of receipt of the original Note.

(b)

The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of outstanding principal amount and unpaid accrued interest on the Note, as herein provided, free from preemptive rights or any other actual or contingent purchase rights of persons other than the Lender, not less than 100% of such number of shares of Common Stock as shall be issuable upon the conversion of the Notes hereunder.  The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issuance, be duly and validly authorized, issued and fully paid and non-assessable.

(c)

 Upon a conversion hereunder, the Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may if otherwise permitted and unless waived by the Lender, make a cash payment in respect of any final fraction of a share based on the Per Share Market Price at such time.  If the Company elects not, or is unable, to make such cash payment, the Lender shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

(d)

The issuance of certificates for shares of Common Stock on conversion of the Note shall be made without charge to the Lender thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Lender of the Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

(e)  

Upon conversion of the Note, the Company will be forever released from all of its obligations and liabilities under the Note with regard to that portion of the principal amount and accrued interest being converted including, without limitation, the obligation to pay such portion of the principal amount and accrued interest.

2.5

Definitions.  For the purposes hereof, the following terms shall have the following

3

meanings: 

(a)

“Business Day” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close.

(b)

“Change of Control” shall mean any one of the following events:

(i)

the acquisition by any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934) of any amount of the Company’s Common Stock so that it holds or controls fifty percent (50%) or more of the Company’s Common Stock; 

(ii)

a merger or consolidation after which fifty percent (50%) or more of the voting stock of the surviving corporation is held by persons who were not stockholders of the Company immediately prior to such merger or consolidation; 

(iii)

the sale or disposition by the Company of all or substantially all of the Company’s assets to an entity in which immediately after such sale or disposition, the Company’s stockholders hold less than 50% of the combined voting power of such entity’s outstanding securities; 

(iv)

such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term “Continuing Director” means a member of the Board who was a member of the Board on the date of the execution of this Agreement; or

(v)

approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

(c)

“Closing Bid Price” shall mean the closing bid price (as reported by Bloomberg L.P.) of the Common Stock on the OTC Bulletin Board or such other exchange or trading facility on which the Common Stock is traded.

(d)

“Common Stock” means the common stock, $.001 par value per share, of the Company, and stock of any other class into which such shares may hereafter have been reclassified or changed.

(e)

“Per Share Market Price” means on any particular date (a) the Closing Bid Price per share of the Common Stock on such date on the OTC Bulletin Board or other principal stock exchange or quotation system on which the Common Stock is then listed or quoted or if there is no such price on such date, then the Closing Bid Price on such exchange or quotation system on the date nearest preceding such date, or (b) if the Common Stock is not listed then on the OTC Bulletin Board or any stock exchange or quotation system, the Closing Bid Price for a share of Common Stock in such other over-the-counter market, as reported by the Nasdaq Stock Market

4

or in the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices at the close of business on such date, or (c) if the Common Stock is not then reported by the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices, then the "Pink Sheet" quotes for the relevant date, as determined in good faith by the Board of Directors, or (d) if the Common Stock is not then publicly traded the fair market value of a share of Common Stock as determined in good faith by the Board of Directors.

(f)

“Trading Day” means (a) a day on which the Common Stock is traded on the OTC Bulletin Board or other stock exchange or market on which the Common Stock has been listed, or (b) if the Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices).

3.  Default

3.1

Events of Default.  The Company shall be in default if any one or more of the following events (each an “Event of Default”) occurs:

(a)

Payments.  The Company fails to pay the principal of or interest on the Note when due and payable, or any other amount payable under the Note and such failure continues for five (5) Business Days after receipt of written notice thereof from the Lender.

(b)

Bankruptcy.  The Company generally fails to pay its debts as its debts become due, is dissolved or liquidated, makes an assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions or applies to any tribunal for any receiver or trustee, commences any proceeding relating to itself under any bankruptcy, reorganization, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, has commenced against it any such proceeding which remains undismissed for a period of ninety (90) days, or indicates its consent to, approval of or acquiescence in any such proceeding, or any receiver of or trustee for the Company or any substantial part of the property of the Company is appointed, or if any such receivership or trusteeship continues undischarged for a period of ninety (90) days.

(c)

Covenants.  The Company fails to observe or perform any term, condition or covenant contained in this Agreement or the Note or the Equity Purchase Agreement, and such failure continues for fifteen (15) Business Days after receipt of written notice thereof from the holders of a majority of the principal amount of the Note then outstanding.

(d)

Misrepresentations.  Any representation made by the Company in the Equity Purchase Agreement shall have been incorrect in any material respect when made.

3.2

Termination upon Default.  In every event set forth in subsections 3.1(a)-(d) above, upon the written notice of the Lenders, subject to Section 3.3 below, the outstanding principal amount of and any unpaid accrued interest on the Note shall, at the option of the

5

Lender, (a) become due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company or (b) be converted pursuant to Section 2.2 above. Upon the occurrence of an Event of Default, the Company hereby agrees to pay all reasonable costs which may be incurred by the Lender in enforcing their rights under this Agreement or the Note. 

3.3

Notwithstanding the foregoing, if the event set forth in subsection 3.1 (a) occurs, the parties hereto agree that (i) the Note shall be automatically adjusted to increase the interest rate paid thereunder from a rate of 5% per annum to 10% per annum commencing after the stated cure period in subsection 3.1(a) above, and (ii) 70% of EBITDA generated by the assets acquired from Digipath pursuant to the Equity Purchase Agreement will be applied to the prepayment of the principal and accrued interest on a monthly basis.

4. Change of Control

4.1 

Termination upon Change of Control. In the event of a Change of Control, upon written notice by the Company of the occurrence thereof to the Lender, the outstanding principal amount of and any unpaid accrued interest on the Note shall, at the option of the Lender, (a) become due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company or (b) be converted pursuant to Section 2.2 above.

5.  Miscellaneous

5.1

Amendments.  No amendment, modification, termination or waiver of this Agreement or any provision hereof nor any consent to any departure by the Company herefrom shall be effective unless the same is in writing and signed by the Lender and the Company and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

5.2

Governing Law.  This Agreement and all rights and obligations of the parties hereunder shall be governed by and be construed and enforced in accordance with the laws of the State of Delaware.

5.3

Notices.  All notices, requests, demands, directions, declarations and other communications between the Lender and the Company provided for in this Agreement, except as otherwise expressly provided, shall be mailed by registered or certified mail, return receipt requested, or by overnight courier or telegraphed, or faxed, or delivered in hand to the applicable party at its address indicated opposite its name on the signature pages hereto.  The foregoing shall be effective and deemed received three days after being deposited in the mails, postage prepaid, addressed as aforesaid and shall whenever sent by telegram, telegraph or fax delivered in hand, or by overnight courier be effective when sent.  Any party may change its address by a communication in accordance herewith.

5.4

Severability.  The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Agreement shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Agreement or of such provision or obligation in any other jurisdiction.

6

5.5

Counterparts.  This Agreement and any amendment hereto or waiver hereof may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

5.6

Entire Agreement.  This Agreement, together with Equity Purchase Agreement, the Related Agreements and the Note, embody the entire agreement and understanding between the Company and the Lender and supersede all prior agreements and understandings between the Company and the Lender relating to the subject matter thereof.

5.7

Expenses.  Each party hereto shall be responsible for their own expenses incurred in connection with the preparation, execution and delivery of this Agreement and the Note and all related instruments and documents executed and delivered in connection herewith.  

5.8

WAIVER OF JURY TRIAL.  THE LENDER AND THE COMPANY HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

5.9

Further Assurances.  The Company, at its own expense, shall do, make, execute and deliver all such additional and further acts, deeds, assurances, documents, instruments and certificates as the Lender may reasonably require, including, without limitation, obtaining governmental and other third party consents and approvals.

5.10

Successors and Assigns.  The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Company and the Lender and their respective successors and assigns, subject to Section 4.14 of the Equity Purchase Agreement. 

5.11

Maximum Rate.  All agreements between the Company and the Lender are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the indebtedness evidenced hereby or otherwise, shall the amount paid or agreed to be paid to the Lender for the use, forbearance or detention of the indebtedness evidenced hereby exceed the maximum permissible under applicable law.  As used herein, the term “applicable law” shall mean the law in effect as of the date hereof.  If, from any circumstance whatsoever, fulfillment of any provision hereof or the Agreement at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law, then the obligation to be fulfilled shall automatically be reduced to the limit of such validity, and if from any circumstances the Lenders should ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the principal balance evidenced hereby and not to the payment of interest.  This provision shall control every other provision of all agreements between the Company and the Lender.

5.12

Conflict. If there are any conflicts between the terms set forth in this Agreement and the Equity Purchase Agreement, the terms and conditions of the Equity Purchase Agreement shall govern.

7

IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be duly executed on the date first above written.

				
	 
	COMPANY:

	 
	 

	 
	AccelPath, Inc.

	 
	 

	 
	By:

	/s/Shekhar Wadekar

	 

	 
	Name: Shekhar Wadekar

	 
	Title: President

8

			
	 
	LENDER:

	 
	 

	 
	By:

	/s/ Rishi Reddy

	 
	Name: Rishi Reddy

	 
	Title:

	 
	Address:

9

EXHIBIT A

LENDER’S COMMITMENT

			
	Lender Name and

Address

	Commitment (US $)

	 

	Rishi Reddy

	$1,050,000

	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	TOTAL

	 
	 

10

EXHIBIT B

NOTICE OF CONVERSION

(To be executed by the registered holder to convert the outstanding principal of the Notes dated September18, 2012 or the Company if it is electing to convert the outstanding principal of the Notes)

The undersigned hereby elects, in accordance with the terms and conditions of the Loan Agreement dated September18, 2012 and the Promissory Note dated September18, 2012 (the “Note”), to convert the outstanding principal amount of the Note into shares of Common Stock, par value $0.001 per share (the “Common Stock”), of AccelPath, Inc. (the “Company”), as of the date written below.  If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.  No fee will be charged to the undersigned for any conversion, except for such transfer taxes, if any.

			
	Conversion calculations:

	 

	 
	 

	 
	Date to effect conversion

	 
	 

	 
	 

	 
	Amount of principal to be converted

	 
	 

	 
	 

	 
	Number of shares of Common Stock to be issued

	 
	 

	 
	 

	 
	Applicable conversion price

	 
	 

	 
	 

	 
	Name of Holder

	 
	 

	 
	 

	 
	 

	 
	Address of Holder

	 
	 

	 
	 
	 

	 
	Authorized Signature

	 

11

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