Document:

Exhibit 10.17

 

CONFIDENTIAL TREATMENT REQUESTED

 

November 30, 2015

 

Via Email

 

Jennifer Low, M.D., Ph.D., M.H.Sc.

 

Re:                             Terms of Transition and Separation

 

Dear Dr. Low:

 

This letter confirms the agreement (“Agreement”) between you and Loxo Oncology, Inc. (the “Company”) concerning the terms of your transition and separation from employment and offers you certain benefits to which you would not otherwise be entitled, conditioned upon your provision of a general release of claims and covenant not to sue now and upon the Separation Date (defined below) as provided herein.  If you agree to the terms outlined herein, please sign and return this Agreement to me in the timeframe outlined below.

 

1.                                      Separation from Employment:  As you know, your employment with the Company will soon end.  The Company has discussed with you the terms under which your employment will continue through the Transition Period, as described further below.

 

2.                                      Continued Employment; Other Release Consideration:  In exchange for your agreement to the general release and waiver of claims and covenant not to sue set forth below and your other promises herein, the Company agrees to continue your employment on the following terms:

 

a.                                      Separation Date; Transition Period and Services:  Your last day of employment with the Company will be the earliest of (i) the date upon which you or the Company terminate your employment pursuant to Paragraph 2(c) below, or (ii) December 31, 2015 (the “Separation Date”).  Between now and the Separation Date (the “Transition Period”), you agree to carry out the duties and responsibilities of the Acting Chief Medical Officer position (including, but not limited to providing back-up advice regarding clinical trial, operational and safety issues; providing limited regulatory advice; representing the Company as a clinical development consultant or acting Chief Medical Officer (“CMO”)at global regulatory meetings; providing CMO signature for SOPS, internal documentation of medical approval, letters to investigators and health authorities regarding safety related issues; consulting with Company staff on compassionate use requests; acting Principal Investigator certain applications and activities) as directed principally by the Chief Executive Officer, to whom you will report; and providing other transition services as may reasonably be requested by the Company, including 

 

 

transition of the responsibilities, duties, and knowledge relative to your position to  other employees of the Company (the “Transition Services”).  You will maintain a full-time schedule until November 12, 2015.  Thereafter during the Transition Period, you will maintain a part-time schedule based on an approximate average of 8 hours/week.  Effective on the first day of the Transition Period, your title will change from Chief Medical Officer to Acting Chief Medical Officer, and you will no longer hold the title of Executive Vice President, Research and Development.

 

b.                                      Compensation and Benefits:  During the period November 13, 2015 to December 31, 2015, the Company will pay you a $15,916.67 semi-monthly salary, less applicable taxes and withholding and payable in accordance with the Company’s regular payroll schedule, and you will continue to be eligible to participate in the benefits for which you are currently eligible, including participation in the Company-sponsored health benefits plan and continued vesting of stock options, to the fullest extent allowed by the governing plans, agreements, or policies, except that you will no longer continue to accrue paid vacation after November 12, 2015.  Furthermore, pursuant to paragraph 4 of the offer letter between you and the Company dated June 30, 2014 (the “Offer Letter”), you will continue to be eligible to receive your 2015 management by objectives bonus prorated to November 12, 2015 if (i) you carry out the Transition Services cooperatively and diligently as determined by the Company in good faith and in its sole discretion in full, (ii) the Consultancy commences, and (iii) you do not terminate the Consultancy (defined below) prior to March 15, 2016.  The compensation described in this Paragraph 2(b) will be your sole compensation from the Company during the Transition Period, and supersedes and replaces all other compensation arrangements, including those provided for in the Offer Letter.

 

c.                                       At-Will Employment; Post-Separation Consultancy:  During the Transition Period, your employment with the Company will remain at-will, meaning either you or the Company may terminate your employment at any time with or without notice or reason.  Provided that you cooperatively and diligently provide the Transition Services as determined by the Company in good faith and in its sole discretion, then in exchange for your agreement to the general release and waiver of claims and covenant not to sue set forth in Exhibit A (the “Second Release”), to be signed on the Separation Date, and your other promises herein, the Company agrees to engage you as a consultant (the “Consultancy”) pursuant to the terms and conditions of the Consultant Agreement (Exhibit C) and for the period January 1, 2016 to March 31, 2016 (the “Consultant Period”).  In the event the Company either (i) terminates your employment prior to the Separation Date and you have cooperatively and diligently provided the Transition Services as determined by the Company in good faith and in its sole discretion, or (ii) if the Consultancy commences, terminates the Consultancy prior to the end of the Consultant Period and you have cooperatively and diligently carried out the consulting services set forth in Exhibit C, the Company will provide to you the compensation and benefits described in Paragraph 2(b) that you would have received had you, in the case of (i), remained employed until the Separation Date, and in the case of (ii), remained engaged as a consultant until the end of the Consultant Period. The Consultancy will commence immediately following the effective date of your separation.  In the event that the Company terminates your employment prior to the Separation Date for failing to provide the Transition Services (including for failing to do so in a diligent and cooperative fashion, as determined by the Company in good faith and in its sole discretion) or you resign

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

 

from employment for any reason prior to the Separation Date, you will not be eligible to receive,  and the Company will not be obligated to offer to you, the benefits described in Paragraph 2(b), nor will you be eligible for the Consultancy.

 

d.                                      Insider Trading; Indemnification:  During the Transition Period, you will continue to be subject to all insider trading rules and regulations applicable to officers of the Company, including, but not limited to, trading blackout dates, and you will be entitled to continued indemnification as an officer of the Company.  You acknowledge that as an executive officer, you may have come into possession of material, non-public information regarding the Company and that in accordance with Company’s Insider Trading Policy and applicable law, you will not trade in Company securities until the first open trading window following your cessation of employment, and will not trade in Company securities while otherwise in possession of material nonpublic information.  For the six-month period following the Transition Period, you are required to report certain transactions involving the securities of the Company and are still subject to laws and regulations regarding “short swing” profit liability.

 

By signing below, you acknowledge that you are receiving the release consideration outlined in this paragraph in consideration for waiving your rights to claims referred to in this Agreement (and the Second Release, if applicable) and that you would not otherwise be entitled to the release consideration.

 

3.                                      Final Pay:  On the Separation Date, the Company will pay you for all wages, salary, bonuses, commissions, reimbursable expenses, accrued vacation and any similar payments due you from the Company as of the Separation Date, except for any 2015 management by objectives bonus, which, if earned, will be paid by March 15, 2016. By signing below, you acknowledge that the Company does not owe you any other amounts, except as otherwise may become payable under this Agreement.

 

4.                                      Return of Company Property:  You hereby warrant to the Company that, no later than the Separation Date, you will return to the Company all property or data of the Company of any type whatsoever that has been in your possession or control.  Furthermore, upon commencement of the transitional role described in this Agreement, you will return any property and data of the Company in your possession or control, other than the property and data required to carry out the Transition Services and the Consultancy.

 

5.                                      Proprietary Information:  You hereby acknowledge that you are and will continue to be bound by the attached Employee Invention Assignment and Confidentiality Agreement (“EIACA”) (Exhibit B hereto) and that as a result of your employment with the Company you have had access to the Company’s Proprietary Information (as defined in the agreement, which includes, without limitation, any information about the Company’s drug development programs that is not made public by the Company), that you will hold all Proprietary Information in strictest confidence and that you will not make use of such Proprietary Information on behalf of anyone, except as required in the course of your employment with the Company.  You hereby acknowledge that for as long as you are providing Transition Services and through the term of the Consultancy you remain subject to Section 13 of your EIACA regarding opportunities of the Company and your obligation not to compete. For the avoidance of doubt, and not by way of 

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

 

limitation, the parties agree that (i) participation in a drug development program targeting TRK, RET, of FGFR1, 2 or 3 or (ii) provide services for [*], [*],[*] or [*], or (iii) raising capital from  the funds affiliated with the following investors, shall be considered competition or preparation to compete with the Company: [*], [*], [*], [*], [*], [*], and [*]. You further acknowledge that you remain subject to Section 12 of your EIACA with regards to solicitation of employees or consultants of the Company. You further confirm that, subject to Paragraph 4, you will deliver to the Company, no later than the Separation Date, all documents and data of any nature containing or pertaining to such Proprietary Information and that you will not take with you any such documents or data or any reproduction thereof.

 

6.                                      Stock Options:

 

a.                                      You have been granted, pursuant to the Company’s 2013 Equity Incentive Plan (the “Plan”) and the respective Notices of Stock Option Grant and Stock Option Agreements (collectively with the Plan, the “Stock Option Agreements”), the following options to purchase shares of the Company’s common stock (with vesting calculations as of December 31, 2015 and reflecting post stock split figures):

 

i.                              A stock option granted on July 9, 2014 to purchase 128,953 shares as to which 48,357 shares will be vested on December 31, 2015 and 80,596 shares will remain unvested (the “First Option”).

 

ii.                           A stock option granted on December 19, 2014 to purchase 100,000 shares as to which 25,000 shares will be vested on December 31, 2015 and 75,000 shares will remain unvested (the “Second Option,” and, collectively with the First Option, the “Options”).

 

b.                                      The Options will continue to vest until December 31, 2015, provided you remain employed, as provided in the Stock Option Agreements, at which time you and the Company agree that vesting shall cease, notwithstanding any services you may provide during the Consultancy.

 

c.                                       Except as provided above, your rights concerning the Options above will continue to be governed by the Stock Option Agreements, as amended by this Agreement, if applicable and provided this Agreement becomes effective.

 

7.                                      Mutual General Release and Waiver of Claims:

 

a.                                      Release by Dr. Low: The payments and promises set forth in this Agreement are in full satisfaction of all accrued salary, vacation pay, bonus and commission pay, profit-sharing, stock, stock options or other ownership interest in the Company, termination benefits or other compensation to which you may be entitled by virtue of your employment with the Company or your separation from the Company, including pursuant to the Offer Letter.  To the fullest extent permitted by law, you hereby release and waive any other claims you may have against the Company and its owners, agents, officers, shareholders, employees, directors, attorneys, subscribers, subsidiaries, affiliates, successors and assigns (collectively “Releasees”), whether known or not known, including, without limitation, claims under any employment laws,

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

 

including, but not limited to, claims of unlawful discharge, breach of contract, breach of the covenant of good faith and fair dealing, fraud, violation of public policy, defamation, physical injury, emotional distress, claims for additional compensation or benefits under the Offer Letter or otherwise arising out of your employment or your separation of employment, including pursuant to the Offer Letter, claims under Title VII of the 1964 Civil Rights Act, as amended, the California Fair Employment and Housing Act and any other laws and/or regulations relating to employment or employment discrimination, including, without limitation, claims based on age or under the Age Discrimination in Employment Act or Older Workers Benefit Protection Act, and/or claims based on disability or under the Americans with Disabilities Act.

 

b.                                      By signing below, you expressly waive any benefits of Section 1542 of the Civil Code of the State of California, which provides as follows:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

 

c.                                       To the fullest extent permitted by law, the Company hereby releases and waives any claims it may have against you and your successors and assigns, whether known or not known, including, but not limited to claims relating to your employment with the Company and separation therefrom but excluding claims of fraud, misappropriation of trade secrets, and breach of your Employee Invention Assignment and Confidentiality Agreement.

 

d.                                      You and the Company do not intend to release claims that you may not release as a matter of law, including but not limited to claims for indemnity, or any claims for enforcement of this Agreement.  To the fullest extent permitted by law, any dispute regarding the scope of this general release shall be determined by an arbitrator under the procedures set forth in the arbitration clause below.

 

8.                                      Covenant Not to Sue:

 

a.                                      To the fullest extent permitted by law, at no time subsequent to the execution of this Agreement will you pursue, or cause or knowingly permit the prosecution, in any state, federal or foreign court, or before any local, state, federal or foreign administrative agency, or any other tribunal, of any charge, claim or action of any kind, nature and character whatsoever, known or unknown, which you may now have, have ever had, or may in the future have against Releasees, which is based in whole or in part on any matter released by this Agreement.

 

b.              Nothing in this paragraph shall prohibit you from filing a charge or complaint with a government agency where, as a matter of law, the parties may not restrict your ability to file such administrative complaints.  However, you understand and agree that, by entering into this Agreement, you are releasing any and all individual claims

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

 

                        for relief, and that any and all subsequent disputes between you and the Company shall be resolved through arbitration as provided below.

 

c.               Nothing in this paragraph shall prohibit or impair you or the Company from complying with all applicable laws, nor shall this Agreement be construed to obligate either party to commit (or aid or abet in the commission of) any unlawful act.

 

9.                                      Mutual Nondisparagement:  You agree that you will not disparage Releasees or their products, services, agents, representatives, directors, officers, shareholders, attorneys, employees, vendors, affiliates, successors or assigns, or any person acting by, through, under or in concert with any of them, with any written or oral statement.  The Company agrees that its current officers and directors will not disparage you with any written or oral statement.  Nothing in this paragraph shall prohibit you from providing truthful information in response to a subpoena or other legal process.

 

10.                               Arbitration:  Except for any claim for injunctive relief arising out of a breach of a party’s obligations to protect the other’s proprietary information, the parties agree to arbitrate, in San Mateo County, California through JAMS, any and all disputes or claims arising out of or related to the validity, enforceability, interpretation, performance or breach of this Agreement, whether sounding in tort, contract, statutory violation or otherwise, or involving the construction or application or any of the terms, provisions, or conditions of this Agreement.  Any arbitration may be initiated by a written demand to the other party.  The arbitrator’s decision shall be final, binding, and conclusive.  The parties further agree that this Agreement is intended to be strictly construed to provide for arbitration as the sole and exclusive means for resolution of all disputes hereunder to the fullest extent permitted by law.  The parties expressly waive any entitlement to have such controversies decided by a court or a jury.

 

11.                               Attorneys’ Fees:  If any action is brought to enforce the terms of this Agreement, the prevailing party will be entitled to recover its reasonable attorneys’ fees, costs and expenses from the other party, in addition to any other relief to which the prevailing party may be entitled.

 

12.                               Confidentiality:  The contents, terms and conditions of this Agreement must be kept confidential by you and may not be disclosed except to your immediate family, accountant or attorneys or pursuant to subpoena or court order, or as otherwise required by law, including with respect to filing this Agreement with the Securities and Exchange Commission.  You and the Company agree that if asked for information concerning this Agreement, party that is so asked will state only that you and the Company reached an amicable resolution of any disputes concerning your separation from the Company. This applies not only to Dr. Low, but also to the current board members or executive officers of the Company. Any breach of this confidentiality provision shall be deemed a material breach of this Agreement.

 

13.                               No Admission of Liability:  This Agreement is not and shall not be construed or contended by you to be an admission or evidence of any wrongdoing or liability on the part of Releasees, their representatives, heirs, executors, attorneys, agents, partners, officers,

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

 

shareholders, directors, employees, subsidiaries, affiliates, divisions, successors or assigns.  This Agreement shall be afforded the maximum protection allowable under Federal Rules of Evidence 408 and/or any other state or federal provisions of similar effect.

 

14.                               Complete and Voluntary Agreement:  This Agreement, together with Exhibits A and B hereto and the Stock Option Agreements, constitute the entire agreement between you and Releasees with respect to the subject matter hereof and supersedes all prior negotiations and  agreements, whether written or oral, relating to such subject matter.  You acknowledge that neither Releasees nor their agents or attorneys have made any promise, representation or warranty whatsoever, either express or implied, written or oral, which is not contained in this Agreement for the purpose of inducing you to execute the Agreement, and you acknowledge that you have executed this Agreement in reliance only upon such promises, representations and warranties as are contained herein, and that you are executing this Agreement voluntarily, free of any duress or coercion.

 

15.                               Severability:  The provisions of this Agreement are severable, and if any part of it is found to be invalid or unenforceable, the other parts shall remain fully valid and enforceable.  Specifically, should a court, arbitrator, or government agency conclude that a particular claim may not be released as a matter of law, it is the intention of the parties that the general release, the waiver of unknown claims and the covenant not to sue above shall otherwise remain effective to release any and all other claims.

 

16.                               Modification; Counterparts; Facsimile/PDF Signatures:  It is expressly agreed that this Agreement may not be altered, amended, modified, or otherwise changed in any respect except by another written agreement that specifically refers to this Agreement, executed by authorized representatives of each of the parties to this Agreement.  This Agreement may be executed in any number of counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument.  Execution of a facsimile or PDF copy shall have the same force and effect as execution of an original, and a copy of a signature will be equally admissible in any legal proceeding as if an original.

 

17.                               Governing Law:  This Agreement shall be governed by and construed in accordance with the laws of the State of California.

 

18.                               Review of Separation Agreement:  You understand that you may take up to twenty-one (21) days to consider this Agreement and, by signing below, affirm that you were advised to consult with an attorney prior to signing this Agreement.  You also understand you may revoke this Agreement within seven (7) days of signing this document and that the consideration to be provided to you pursuant to Paragraph 2 (as applicable) will be provided only at the end of that seven (7) day revocation period.

 

19.                               Effective Date:  This Agreement is effective on the eighth (8th) day after you sign it provided you have not revoked the Agreement as of that time (the “Effective Date”).

 

If you agree to abide by the terms outlined in this letter, please sign this letter below return it to me within the timeframe noted above.  I wish you the best in your future endeavors.

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

 

	
 
    	
Sincerely,
    
	
 
    	
 
    
	
 
    	
Loxo Oncology, Inc.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/  Joshua   Bilenker
    
	
 
    	
 
    	
Joshua H. Bilenker,
    
	
 
    	
 
    	
President and CEO
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
READ, UNDERSTOOD AND   AGREED
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Jennifer Low
    	
 
    	
Date:
    	
12/28/2015
    
	
Jennifer Low, M.D., Ph.D.,   M.H.Sc.
    	
 
    	
 
    
					

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

 

EXHIBIT A

 

SECOND RELEASE

 

This General Release of All Claims and Covenant Not to Sue (the “Second Release”) is entered into between Jennifer Low, M.D., Ph.D., M.H.Sc. (“Employee”) and Loxo Oncology, Inc. (the “Company”) (collectively, “the parties”).

 

WHEREAS, on [Date], Employee and the Company entered into an agreement regarding Employee’s transition and separation from employment with the Company (the “Separation Agreement,” to which this Second Release is attached as Exhibit A);

 

WHEREAS, on [Date], Employee’s employment with the Company terminated (the “Separation Date”);

 

WHEREAS, the Company has determined that Employee cooperatively and diligently provided the Transition Services (as defined in the Separation Agreement);

 

WHEREAS, this agreement serves as the Second Release, pursuant to the Separation Agreement; and

 

WHEREAS, Employee and the Company desire to mutually, amicably and finally resolve and compromise all issues and claims surrounding Employee’s employment and separation from employment with the Company;

 

NOW THEREFORE, in consideration for the mutual promises and undertakings of the parties as set forth below, Employee and the Company hereby enter into this Second Release.

 

1.                                      Acknowledgment of Payment of Wages:  By her signature below, Employee acknowledges that, on the Separation Date, the Company paid her for all wages, salary, vacation, bonuses, commissions, reimbursable expenses, and any similar payments due her from the Company as of the Separation Date.  By signing below, Employee acknowledges that the Company does not owe her any other amounts, except as may become payable under the Separation Agreement and the Second Release.

 

2.                                      Return of Company Property:  Employee hereby warrants to the Company that she has returned to the Company all property or data of the Company of any type whatsoever that has been in her possession, custody or control.

 

3.                                      Consideration:  In exchange for Employee’s agreement to this Second Release and her other promises in the Separation Agreement and herein, the Company agrees to provide Employee with the consideration set forth in Paragraph 2(c) of the Separation Agreement.  By signing below, Employee acknowledges that she is receiving the consideration in exchange for waiving her rights to claims referred to in this Second Release and she would not otherwise be entitled to the consideration.

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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4.                                      General Release and Waiver of Claims:

 

d.                                      The payments and promises set forth in this Second Release are in full satisfaction of all accrued salary, vacation pay, bonus and commission pay, profit-sharing, stock, stock options, restricted stock, restricted stock units, or other ownership interest in the Company, termination benefits or other compensation to which Employee may be entitled by virtue of her employment with the Company or her separation from the Company, including pursuant to the Separation Agreement and the Offer Letter (as defined in the Separation Agreement).  To the fullest extent permitted by law, Employee hereby releases and waives any other claims she may have against the Company and its owners, agents, officers, shareholders, employees, directors, attorneys, subscribers, subsidiaries, affiliates, successors and assigns (collectively “Releasees”), whether known or not known, including, without limitation, claims under any employment laws, including, but not limited to, claims of unlawful discharge, breach of contract, breach of the covenant of good faith and fair dealing, fraud, violation of public policy, defamation, physical injury, emotional distress, claims for additional compensation or benefits arising out of her employment or separation of employment, including for equity or pursuant to the Offer Letter, claims under Title VII of the 1964 Civil Rights Act, as amended, the California Fair Employment and Housing Act and any other laws and/or regulations relating to employment or employment discrimination, including, without limitation, claims based on age or under the Age Discrimination in Employment Act or Older Workers Benefit Protection Act, and/or claims based on disability or under the Americans with Disabilities Act.

 

e.               Employee hereby acknowledges that she is aware of the principle that a general release does not extend to claims that the releasor does not know or suspect to exist in her or her favor at the time of executing the release, which, if known by her, must have materially affected her or her settlement with the releasee.  With knowledge of this principle, Employee hereby agrees to expressly waive any rights she may have to that effect

 

f.                Employee and the Company do not intend to release claims that Employee may not release as a matter of law, including but not limited to claims for indemnity, or any claims for enforcement of this Second Release.  To the fullest extent permitted by law, any dispute regarding the scope of this general release shall be determined by an arbitrator under the procedures set forth in the arbitration clause in the Separation Agreement.

 

5.                                      Covenant Not to Sue:

 

g.                                       To the fullest extent permitted by law, at no time subsequent to the execution of this Second Release will Employee pursue, or cause or knowingly permit the prosecution, in any state, federal or foreign court, or before any local, state, federal or foreign administrative agency, or any other tribunal, of any charge, claim or action of any kind, nature and character whatsoever, known or unknown, which she may now have, have ever had, or may

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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in the future have against Releasees, which is based in whole or in part on any matter released by this Second Release.

 

h.              Nothing in this paragraph shall prohibit Employee from filing a charge or complaint with a government agency where, as a matter of law, the parties may not restrict her right to file such administrative complaints.  However, Employee understands and agrees that, by entering into this Second Release, she is releasing any and all individual claims for relief, and that any and all subsequent disputes between Employee and the Company shall be resolved through arbitration as provided in the Separation Agreement.

 

i.                  Nothing in this paragraph shall prohibit or impair Employee or the Company from complying with all applicable laws, nor shall this Second Release be construed to obligate either party to commit (or aid or abet in the commission of) any unlawful act.

 

6.                                      Review of Second Release:  Employee understands that she may take up to twenty-one (21) days to consider this Second Release and, by signing below, affirms that she was advised to consult with an attorney prior to signing this Second Release.  Employee also understands that she may revoke this Second Release within seven (7) days of signing this document and that the consideration to be provided to her pursuant to Paragraph 2(c) of the Separation Agreement will be provided only at the end of that seven (7) day revocation period.

 

7.                                      Effective Date:  This Second Release is effective on the eighth (8th) day after Employee signs it, provided she has not revoked it as of that time (the “Effective Date”).

 

8.                                      Other Terms of Separation Agreement Incorporated Herein:  All other terms of the Separation Agreement to the extent not inconsistent with the terms of this Second Release are hereby incorporated in this Second Release as though fully stated herein and apply with equal force to this Second Release, including, without limitation, the provisions on Nondisparagement, Arbitration, Governing Law, and Attorneys’ Fees.

 

	
Dated:
    	
1/14/2016
    	
 
    	
/s/ Joshua Bilenker
    
	
 
    	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    	
For the Company
    
	
 
    	
 
    	
 
    	
 
    
	
Dated:
    	
1/7/2016
    	
 
    	
/s/ Jennifer Low
    
	
 
    	
 
    	
 
    	
Jennifer Low, M.D., Ph.D., M.H.Sc.
    

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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EXHIBIT B

 

EMPLOYEE INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT

 

 

EXHIBIT C

 

CONSULTANT AGREEMENT

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

2

 

 

CONSULTING AGREEMENT

 

THIS CONSULTING AGREEMENT (this “Agreement”) is entered into as of January 1, 2016 (the “Effective Date”) between Loxo Oncology, Inc., a Delaware corporation with its principal place of business at 1 Landmark Square, Suite 1122, Stamford, CT (“Company”) and Green Duck Punch LLC (“Consultant”).  Company desires to retain Consultant to perform certain consulting activities as described below, and Consultant desires to serve as a consultant to Company and perform such activities under the terms of this Agreement.

 

NOW, THEREFORE, Consultant and Company agree as follows:

 

1.              SERVICES AND COMPENSATION

 

(a)         Consultant agrees to act as a consultant to Company with respect to such matters and projects as are mutually agreed from time to time by and between Consultant and Company, and perform the services described on Exhibit A hereto (collectively, “Services”).

 

(b)         Consultant Personnel.  Consultant will perform all Services only through Dr. Jennifer Low (the “Consultant Personnel”).

 

(c)          Company agrees to pay Consultant the compensation set forth on Exhibit A hereto for the performance of the Services.

 

2.              CONFIDENTIALITY

 

(d)         “Confidential Information” means any proprietary information technical data, trade secrets or know-how, including, but not limited to, research and product plans, products, services, markets, developments, inventions, processes, formulas, technology, marketing, finances or other business information disclosed to Consultant or Consultant Personnel by Company either directly or indirectly in writing, orally or otherwise.  Confidential Information also includes all Inventions (as defined below) and any other information or materials generated in connection with the Services.  Confidential Information may also include information of a third party that is in Company’s possession and is disclosed to Consultant or Consultant Personnel under this Agreement.

 

(e)          Consultant or Consultant Personnel shall not, during or subsequent to the term of this Agreement, use any Confidential Information for any purpose whatsoever other than the performance of the Services on behalf of Company, or disclose Confidential Information to any third party.  Consultant or Consultant Personnel agree that Confidential Information shall remain the sole property of Company.  Consultant further agrees to take all reasonable precautions to prevent any unauthorized disclosure or use of Confidential Information.  Notwithstanding the above, Consultant’s obligation under this Section 2(b) relating to Confidential Information shall 

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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not apply to information which (i) is known to Consultant at the time of disclosure to Consultant  by Company as evidenced by written records of Consultant, (ii) has become publicly known and made generally available through no wrongful act of Consultant, or (iii) has been rightfully received by Consultant from a third party authorized to make such disclosure.

 

(f)           Consultant agrees that Consultant will not, during the term of this Agreement, improperly use or disclose to Company any proprietary information or trade secrets of any former or current employer or other person or entity to which Consultant has a duty to keep in confidence such information and that Consultant will not bring onto the premises of Company any unpublished document or proprietary information belonging to such employer, person or entity unless consented to in writing by the same.  Consultant will indemnify Company and hold it harmless from and against all claims, liabilities, damages and expenses, including reasonable attorneys’ fees and costs of suit, arising out of or in connection with any violation or claimed violation by Company of such third party’s rights resulting in whole or in part from Company’s use of the work product of Consultant under this Agreement.

 

(g)          Consultant recognizes that Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes.  Consultant agrees that Consultant owes Company and such third parties, during the term of this Agreement and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out the Services for Company consistent with Company’s agreement with such third party.

 

(h)         Consultant agrees that the Consultant will not disclose or use material nonpublic information acquired from Company during the term of this Agreement to make investment decisions concerning Company’s or another company’s securities.  Information is “material” if it would be expected to affect the investment or voting decisions of a reasonable stockholder or investor, or if the disclosure of the information would be expected to alter significantly the total mix of the information in the marketplace about the Company.  Consultant acknowledges and agrees that Consultant is aware that the securities laws of the United States and Company’s Insider Trading Policy prohibit trading while in possession of material nonpublic information and prohibit sharing this information with others to enable them to trade.

 

(i)             Upon the termination of this Agreement, or upon Company’s earlier request, Consultant will deliver to Company all Confidential Information and Company’s property relating thereto and all tangible embodiments thereof, in Consultant’s possession or control.

 

3.              OWNERSHIP

 

(j)            Consultant and Company agree that, to the fullest extent legally possible, all Inventions (as defined below) will be works made for hire owned exclusively by Company.  Consultant agrees that, regardless of whether an Invention is a work made for hire, all Inventions will be the sole and exclusive property of Company. Consultant hereby irrevocably assigns to 

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

4

 

Company all right, title and interest in and to any information (including, without limitation, business plans and/or business information), technology, know-how, materials, notes, records, designs, ideas, inventions, improvements, devices, developments, discoveries, compositions, trade  secrets, processes, methods and/or techniques, whether or not patentable or copyrightable, that are conceived, reduced to practice or made by Consultant alone or jointly with others in the course of performing the Services or through the use of Confidential Information (collectively, “Inventions”).

 

(k)         Consultant agrees to sign, execute and acknowledge or cause to be signed, executed and acknowledged without cost, but at the expense of Company, any and all documents and to perform such acts as may be necessary, useful or convenient for the purposes of perfecting the foregoing assignments and obtaining, enforcing and defending intellectual property rights in any and all countries with respect to Inventions.  It is understood and agreed that Company or Company’s designee shall have the sole right, but not the obligation, to prepare, file, prosecute and maintain patent applications and patents worldwide with respect to Inventions.

 

(l)             Upon the termination of this Agreement, or upon Company’s earlier requests, Consultant will deliver to Company all property relating to, and all tangible embodiments of, Inventions in Consultant’s possession or control or the possession or control of the Consultant Personnel.

 

(m)     Consultant agrees that if, in the course of performing the Services, Consultant incorporates into any Invention developed hereunder any invention, improvement, development concept, discovery or other proprietary subject matter owned by Consultant or in which Consultant or the Consultant Personnel has an interest (“Item”), Consultant will inform Company in writing thereof, and Company is hereby granted and shall have a non-exclusive, royalty-free, perpetual, irrevocable, worldwide license to make, have made, modify, reproduce, display, use and sell such Item as part of or in connection with the exploitation of such Invention.

 

(n)         Consultant agrees that if Company is unable because of Consultant’s unavailability, or the Consultant Personnel’s mental or physical incapacity, or for any other reason, to secure Consultant’s or Consultant Personnel’s signature to apply for or to pursue any application or registration for any intellectual property rights covering any Invention, then Consultant hereby irrevocably designates and appoints Company and its duly authorized officers and agents as Consultant’s agent and attorney-in-fact, to act for and in Consultant’s behalf to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of such intellectual property rights thereon with the same legal force and effect as if executed by Consultant.

 

4.              REPORTS.  Consultant agrees, from time to time during the term of this Agreement, to keep Company advised as to Consultant’s progress in performing the Services and, as reasonably requested by Company, prepare written reports with respect thereto.  It is understood that the time required in the preparation of such written reports shall be considered time devoted to the performance of the Services by Consultant.  All such reports prepared by Consultant shall be the sole property of Company.

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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5.              TERM AND TERMINATION

 

(o)         This Agreement will commence on the Effective Date and will continue until March 31, 2016, or until it is terminated as provided below.

 

(p)         Either Consultant or Company may terminate this Agreement upon prior written notice thereof to the other party.

 

(q)         Upon termination of this Agreement, all rights and duties of the parties hereunder shall cease except:

 

(i)                               Company shall be obliged to pay, within thirty (30) days after receipt of Consultant’s final statement, all amounts owing to Consultant for unpaid Services completed by Consultant and related expenses, if any, in accordance with the provisions of Section 1 hereof,  and

 

(ii)                            Sections 2, 3, 5(c), 6, 7, 8 and 10 shall survive termination of this Agreement.

 

6.              INDEPENDENT CONTRACTOR.  Nothing in this Agreement shall in any way be construed to constitute Consultant as an agent, employee or representative of Company, but Consultant shall perform the Services as an independent contractor.  Consultant acknowledges and agrees that Consultant is obligated to report as income all compensation received by Consultant pursuant to this Agreement.

 

7.              NO DEBARMENT.  Consultant represents and warrants that Consultant has not been debarred under Section (a) or (b) of 21 U.S.C. Section 335a and does not appear on the United States Food and Drug debarment list.  Consultant represents and warrants that Consultant has not committed any crime or conduct that could result in such debarment or Consultant’s exclusion from any governmental healthcare program.  Consultant represents and warrants that, to Consultant’s knowledge, no investigations, claims or proceedings with respect to any such crimes or conduct are pending or threatened against Consultant.  Consultant agrees and undertakes to promptly notify the Company if Consultant becomes debarred or proceedings have been initiated against Consultant with respect to debarment, whether such debarment or initiation of proceedings occurs during or after the term of this Agreement.

 

8.              ARBITRATION AND EQUITABLE RELIEF.  Company and Consultant hereby agree that any dispute arising under this Agreement, or in connection with any breach thereof, shall be finally resolved through binding arbitration conducted in accordance with the rules and procedures of the Judicial Arbitration and Mediation Service (JAMS) by one (1) arbitrator appointed in accordance with said rules.  Any such arbitration shall be held in San Mateo County, California.  The arbitrator shall determine what discovery will be permitted, consistent with the goal of limiting the cost and time which the parties must expend for discovery; provided the arbitrator shall permit such discovery as the arbitrator deems necessary to permit an equitable resolution of the dispute.  Any written evidence originally in a language other than English shall be submitted in English translation accompanied by the original or a true copy thereof.  The costs

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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of the arbitration, including administrative and arbitrators’ fees, shall be shared equally by the parties, and each party shall bear its own costs and attorneys’ and witness’ fees incurred in connection with the arbitration.  Any award may be entered in a court of competent jurisdiction for a judicial recognition of the decision and applicable orders of enforcement.  The parties agree that, any provision of applicable law notwithstanding, they will not request and the arbitrator shall have no authority to award, punitive or exemplary damages against either party.

 

9.              CONFLICTING OBLIGATIONS.  Consultant hereby certifies that Consultant has no outstanding agreement or obligation that is in conflict with any of the provisions of this Agreement, or that would preclude Consultant from complying with the provisions hereof, and further certifies that Consultant will not enter into any such conflicting agreement during the term of this Agreement.  Subject to written waivers that may be provided by the Company upon request, which shall not be unreasonably withheld, Consultant agrees that, during the term of this Agreement, Consultant will not directly or indirectly (i) provide any services targeting TRK A, TRK B, TRK C, RET or FGFR programs or provide services for [*], [*],[*] or [*]  (the “Field of Interest”)to any other business or commercial entity, (ii) provide any services for any company that are in the same Field of Interest as the Company and shall list on Exhibit B hereto any other companies for whom Consultant is providing services (“Outside Companies”), or (iii) participate in the formation of any business or commercial entity with the same targets as the Company.  Without limiting the foregoing, Consultant agrees to use his or her best efforts (A) to segregate Consultant’s Services performed under this Agreement from Consultant’s work done for the Outside so as to minimize any questions of disclosure of, or rights under, any inventions, (B) to notify the Company if at any time the Consultant believes that such questions may result from his or her performance under this Agreement and (C) to assist the Company in fairly resolving any questions in this regard which may arise.  The Services performed hereunder will not be conducted on time that is required to be devoted to any other third party.  The Consultant shall not use the funding, resources and facilities of any other third party, without the prior written consent of the Company, to perform Services hereunder and shall not perform the Services hereunder in any manner that would give any third party rights or access to the product of such Services.

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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10.       GENERAL.  This Agreement (together with the Exhibits hereto) is the sole agreement and understanding between Company and Consultant concerning the subject matter hereof, and it supersedes all prior agreements and understandings with respect to such matter.  Any required notice shall be given in writing by customary means with receipt confirmed at the address of each party set forth below, or to such other address as either party may substitute by written notice to the other.  Consultant shall not subcontract any portion of Consultant’s duties under this Agreement without the prior written consent of Company.  Neither this Agreement nor any right hereunder or interest herein may be assigned or transferred by Consultant without the express written consent of Company.  Company may assign this Agreement to any entity that succeeds to substantially all of the business or assets of Company.  This Agreement shall be governed by the laws of the State of California, without reference to its conflicts of law principles.  This Agreement may only be amended or modified by a writing signed by both parties.  Waiver of any term or provision of this Agreement or forbearance to enforce any term or provision by either party shall not constitute a waiver as to any subsequent breach or failure of the same term or provision or a waiver of any other term or provision of this Agreement.  In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision, provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to either Company or Consultant.

 

[signature page follows]

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.

 

	
LOXO ONCOLOGY, INC. 
    	
 
    	
GREEN DUCK PUNCH LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By: 
    	
/s/ Joshua Bilenker
    	
 
    	
By:   
    	
/s/   Jennifer Low
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
1.
    	
 
    	
 
    	
 
    	
 
    
	
Name: 
    	
Joshua Bilenker
    	
 
    	
Name:   
    	
Jennifer   Low
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Title: 
    	
CEO
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
Address: 
    	
1 Landmark Square
    	
 
    	
Address:   
    	
274   Redwood Shores Pkwy
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Suite 1122 
    	
 
    	
 
    	
PMB   641
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Stamford, CT 06901
    	
 
    	
 
    	
Redwood   City, CA 94065
    
	
 
    	
 
    	
 
    
	
Date: 
    	
1/1/2016
    	
 
    	
Date:   
    	
12/28/2015
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Phone: 
    	
(203) 653-3880
    	
 
    	
Phone:   
    	
650-395-8705
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
FAX: 
    	
(203) — 724-2481
    	
 
    	
FAX:
    	
 
    
							

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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EXHIBIT A

 

SERVICES AND COMPENSATION

 

1.                                      Services. Consultant will render to Company the following Services:

 

·                  Consultant will carry out the duties and responsibilities of the Acting Chief Medical Officer position (including, but not limited to providing back-up advice regarding clinical trial, operational and safety issues; providing limited regulatory advice; representing the interests of Company by serving as a clinical development consultant or acting Chief Medical Officer (“CMO”) at global regulatory meetings; providing CMO signature for SOPS, internal documentation of medical approval, letters to investigators and health authorities regarding safety related issues; consulting with Company staff on compassionate use requests; acting Principal Investigator certain applications and activities) as directed principally by the Chief Executive Officer, to whom you will report; and providing other transition services as may reasonably be requested by the Company, including transition of the responsibilities, duties, and knowledge relative to the CMO position to other employees of the Company.

 

2.                                      Compensation.

 

·                  Company shall pay Consultant $600 per hour with a maximum of $4,800/day, including any travel time, as described below.

 

·                  Company shall reimburse Consultant for all reasonable travel and out-of-pocket expenses incurred by Consultant in performing Services pursuant to this Agreement that are pre-approved by Company.  Consultant will be reimbursed for travel time over 2 hours.  Reimbursement for travel time shall be at one half of the hourly rate not to exceed $3,000 daily.  Air fares shall be economy class or equivalent for travel within the United States.  International air fares will be discussed and agreed upon in advance.  Consultant shall submit to Company all statements for expenses incurred and Services performed on a monthly basis in a form prescribed by Company.

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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EXHIBIT B

 

OUTSIDE COMPANIES

 

None

 

[*] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

11Convertible Promissory Note

EXHIBIT 4.1

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS NOTE 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 (I) 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 OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

		
	Principal Amount: US$550,000.00

	Original Issue Date: March 9, 2016

SECURED CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, MAJOR LEAGUE FOOTBALL, INC., a Delaware corporation (hereinafter called the “Borrower”), as of March 9, 2016 (the “Original Issue Date”), hereby promises to pay to the order SBI INVESTMENTS LLC, 2014-1, a statutory series of Delaware limited liability corporation, or its registered assigns (the “Holder”) the principal sum of Five Hundred Fifty Thousand Dollars (US$550,000.00) (the “Principal Amount”) subject to any adjustments set forth in Section 1.9 herein, together with any interest thereon as set forth herein, on or before March 9, 2017 (the “Maturity Date”), and to pay interest (“Interest”) on the unpaid principal balance hereof at the rate of Ten Percent (10%) (the “Interest Rate”) per annum from the Original Issue Date until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise pursuant to the terms of this Note. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.

This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein in Section 1.9.  Any amount of the Principal Amount or Interest on this Note which is not paid when due shall bear Interest at the rate of the lower of Twenty-Two Percent (22%) per annum, or the highest rate permitted by law, from the due date thereof until the same is paid (“Default Interest”).  Interest shall commence accruing on the Original Issue Date and shall be computed on the basis of a 365-day year and the actual number of days elapsed.  Interest payments hereunder shall be paid by the Borrower on a quarterly basis (or sooner as provided herein) after the Original Issue Date to the Holder or its assignee in whose name this Note is registered on the records of the Borrower. All payments due hereunder (to the extent not converted into Common Stock) shall be made in immediately available 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.  Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any Interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of Interest due on such date.  As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed.  Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement between the Borrower and the Holder of even date herewith (the “Purchase Agreement”).

This Note is free from all taxes, liens, claims and encumbrances with respect to the issuance 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, in its sole discretion, and at any time following the Original Issue Date to convert all or any part of the outstanding and unpaid Principal Amount of this Note and/or Interest thereon into fully paid and non-assessable shares of the Borrower’s common stock, par value $0.001 per share (“Common Stock”), as such Common Stock exists on the Original 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 (as defined in Section 1.2) 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, provided, further, however, that the limitations on Conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and the provisions of the Conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). The number of shares of 

2

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”). For purposes of this Section 1.1, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Borrower’s most recent periodic or annual report filed with the U.S. Securities and Exchange Commission (“SEC”), as the case may be, (ii) a more recent public announcement by the Borrower, or (iii) a more recent written notice by the Borrower or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of the Holder, the Borrower, shall within one (1) business day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. 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 Borrower’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 amounts referred to in the immediately preceding clauses (1) and/or (2) plus (3) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. 

1.2 Conversion Price.

(a) Calculation of Conversion Price. The conversion price (the “Conversion Price”) shall equal seventy percent (70%) of the average of the lowest three VWAPs of the Common Stock during the twenty (20) Trading Days immediately preceding a Conversion Date. “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time); (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Borrower. “Trading Day” shall mean any day on which the Common Stock is tradable/quoted for any period on the OTC, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. “Trading Market” means the 

3

Nasdaq Capital Market, the American Stock Exchange, the New York Stock Exchange, the Nasdaq National Market, or the OTC Markets.

(b) Conversion Price During Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement referred to in clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below), be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be determined as set forth in this Section 1.2(b). For purposes hereof, “Adjusted Conversion Price Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.

1.3 Authorized Shares. The Borrower covenants that it will at all times that this Note remains outstanding, keep available and reserve from its authorized and unissued shares of Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock for the sole purpose of issuances upon Conversion of this Note.  The Borrower shall be required at all times to have authorized and reserved five (5) times the number of shares that is actually issuable upon full Conversion of the Note (based on the Conversion Price of the Note in effect from time to time) (the “Reserved Amount”).  The Reserved Amount shall be increased from time to time in accordance with the Company’s obligations. If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Reserved Amount on such date, then the Board of Directors of the Borrower shall amend the Borrower’s certificate of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Reserved Amount at such time, as soon as possible and in any event not later than the ninetieth (90th) day after such date.

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. 

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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. This Note may be converted by the Holder in whole or in part at any time from time to time after the Original Issue Date, 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.

(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. Conversions hereunder shall have the effect of lowering the outstanding Principal Amount of this Note in an amount equal to the applicable Conversion. The Holder and 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. In the event of any dispute or discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following Conversion of a portion of this Note, the unpaid and unconverted Principal Amount of this Note represented by this Note may be less than the amount stated on the face hereof.

(c) Payment of Taxes. The issuance of shares of Common Stock on Conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such shares, provided that the Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on Conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid. The Borrower shall pay all transfer agent fees required for same-day processing of any Notice of Conversion and all fees to the Depository Trust Company (or another 

5

established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion shares.

(d) 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 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.

(e) Obligation of Borrower to Deliver Common Stock. 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 under this Article I, 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. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

(f) 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 contained in Section 1.1 and in this Section 1.4, 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 Withdrawal Agent Commission (“DWAC”) system.

(g) 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 

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delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder US$2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to the 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 quantify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.

(h) Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the Conversion of this Note. As to any fraction of a share of Common Stock which the Holder would otherwise be entitled to purchase upon such Conversion, Borrower shall round up to the next whole share.

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 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 or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) 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 Regulation D of the Securities Act of 1933, as amended). Subject to the removal provisions set forth below, until such time as the shares of Common Stock issuable upon Conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon Conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE 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 (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT 

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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 OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Borrower 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 or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Borrower does not 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 or Regulation S, 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, in its sole discretion, 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 (other than pursuant to the Borrower’s contemplated equity sale transaction with Asian Global Capital, Ltd. and/or with its related entities), 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 either: (i) 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) or (ii) be treated pursuant to Section 1.6(b) hereof. “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, 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 

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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, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of 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 Section 1.6(b). 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.

(d) Adjustment Due to Dilutive Issuance. If, at any time when the Note is issued and outstanding, the Borrower issues or sells any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) or for consideration per share which is less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock, other than in connection with an Exempt Issuance. (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance (as defined in the Purchase Agreement). 

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(e) Purchase Rights. If, at any time when the Note is issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete Conversion of this Note (without regard to any limitations on Conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

(f) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) 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 the Note.

1.7 Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon Conversion of or otherwise pursuant to this Note more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the closing date of the transaction contemplated herein, subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.

1.8 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply 

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with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a Conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies for the Borrower’s failure to convert this Note.

1.9 Repayment of Principal Amount. The Principal Amount of this Note, initially US$550,000.00, may be prepaid in full solely during the dates set forth below, which shall be subject to the following upward adjustments, subject to the payment period upon which the date all amounts hereunder are paid in full by the Borrower occurs, as follows:

		
	Date of Note Satisfaction

	Principal Amount of this Note

	0 to 30 days after the Original Issue Date

	US$605,000.00

	31 to 60 days after the Original Issue Date

	US$632,500.00

	61 to 90 days after the Issue Date

	US$660,000.00

	91 - 120 days after the Issue Date

	US$687,500.00

ARTICLE II CERTAIN COVENANTS

2.1 Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s prior written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.

2.2 Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s prior written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.

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2.3 Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s prior written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade creditors or financial institutions incurred in the ordinary course of business, (c) indebtedness to officers incurred on a basis consistent with prior practices or (d) borrowings, the proceeds of which shall be used to repay this Note.

2.4 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s prior 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.

2.5 Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s prior written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, or (b) made in the ordinary course of business.

2.6 Amendment to Organizational Documents. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s prior written consent, amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder.

2.7 Agreements

. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s prior written consent, enter into any agreement with respect to any of the corporate actions set forth in Sections 2.1 through 2.6 above.

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 or Interest. The Borrower fails to pay the Principal Amount hereof or Interest thereon when due on this Note, whether at the Maturity Date, upon acceleration or otherwise.

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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 issued 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 related documents including but not limited to the Purchase Agreement and Transaction Documents (as defined in the Purchase Agreement) and such breach continues for a period of five (5) 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 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more 

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than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

3.7 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.

3.8 Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC Markets or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

3.9 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.

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

3.11 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.

3.12 Maintenance of Assets. The failure by Borrower to maintain any intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).

3.13 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Original Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.14 Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without at least twenty (20) days prior written notice to the Holder.

3.15 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 in connection with 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.

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3.16 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: the Borrower, and, or for the benefit of, the Holder and any Affiliate of the Holder.

Upon the occurrence of any Event of Default specified in Section 3.1, 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 OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, 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 of any Event of Default, other than Section 3.1 or 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 125% times the sum of (w) the then outstanding principal amount of this Note plus (x) Interest accrued and outstanding 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 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”) (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 and to the extent that there are sufficient authorized shares, to require the Borrower, upon written notice, to convert the Default Amount into shares of Common Stock of the Borrower pursuant to Section 1.1 hereof.

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.

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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) delivered by reputable air courier service with charges prepaid, or (iii) 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, at the address 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:

MAJOR LEAGUE FOOTBALL, INC.

6230 University Parkway, Suite 301

Lakewood Ranch, FL

Attention: Wesley Chandler, President

If to the Holder:

SBI INVESTMENTS LLC, 2014-1

369 Lexington Avenue, 2nd Floor

New York, NY 10017

Attention: Peter Wisniewski

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

K&L Gates LLP

200 South Biscayne Boulevard, Suite 3900

Miami, FL 33131

Attention: John D. Owens III, Esq.

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. 

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 1933 Act). 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.

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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 New York 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, New York or in the federal courts located in New York, New York. 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 or any other Transaction Document 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 Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding Principal Amount (or the portion thereof required to be paid at that time) plus accrued and unpaid Interest plus Default Interest on such Interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon Conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

4.8 Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by 

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way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.8.

4.9 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 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.

4.10 Purchase Agreement. By the delivery and acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

4.11 Security. This Note is secured by all collateral granted by Michael D. Queen to the Holder, including but not limited to 2,000,000 shares of Common Stock, in accordance with the terms and conditions that certain Insider Pledge Agreement by and between such “Pledgor” and the Holder, dated as of the Original Issue Date.

** signature page follows **

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IN WITNESS WHEREOF, Borrower has caused this Note to be executed and delivered in its name by its duly authorized officer as of the Original Issue Date.

MAJOR LEAGUE FOOTBALL, INC.

By:  /s/ Michael D. Queen 

Name: Michael D. Queen

Title: Executive Vice President, Finance

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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 MAJOR LEAGUE FOOTBALL, INC., a Delaware corporation (the “Borrower”) according to the conditions of the secured convertible promissory note of the Borrower dated as of March 9, 2016 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion:

Box Checked as to applicable instructions:

 [ ]

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:

SBI INVESTMENTS LLC, 2014-1

369 Lexington Avenue, 2nd Floor

New York, NY 10017

Attention: Peter Wisniewski

Date of Conversion:

_____________

Applicable Conversion Price:

$____________

Number of Shares of Common Stock to be Issued

Pursuant to Conversion of the Note:

______________

Amount of Principal Balance Due remaining

Under the Note after this conversion:

______________

SBI INVESTMENTS LLC, 2014-1

By:_____________________________

Name:

Title:

Date:

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Schedule 1

CONVERSION SCHEDULE

The Secured Convertible Promissory Note due on March 9, 2017 in the aggregate Principal Amount of US$550,000.00 was issued by Major League Football, Inc., a Delaware corporation.  This Conversion Schedule reflects conversions made under Article 1 of the above referenced Note.

Dated: 

				
	

Date of Conversion

(or for first entry, Original Issue Date)

	

Amount of Conversion

	

Aggregate Principal Amount Remaining Subsequent to Conversion

(or original Principal Amount)

	

Company Attest

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

21

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