Document:

Exhibit 10.31

 

Exhibit 10.31

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO CHAD THERAPEUTICS, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED.

SECURED REVOLVING NOTE

     FOR VALUE RECEIVED, CHAD THERAPEUTICS, INC., a California corporation (the “Parent”), promises
to pay to CALLIOPE CAPITAL CORPORATION, c/o United Corporate Services, Inc. 874 Walker Road, Suite
C Dover Delaware 19904 (the “Holder”) or its registered assigns or successors in interest, the sum
of Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000), or, if different, the aggregate
principal amount of all Loans (as defined in the Security Agreement referred to below), together
with any accrued and unpaid interest hereon, on July 30, 2010 (the “Maturity Date”) if not sooner
indefeasibly paid in full.

     Capitalized terms used herein without definition shall have the meanings ascribed to such
terms in the Security Agreement between the Parent and the Holder dated as of the date hereof (as
amended, modified and/or supplemented from time to time, the “Security Agreement”).

     The following terms shall apply to this Secured Revolving Note (this “Note”):

ARTICLE I

CONTRACT RATE

     1.1 Contract Rate. Subject to Sections 2.2 and 3.9, interest payable on the
outstanding principal amount of this Note (the “Principal Amount”) shall accrue at a rate per annum
equal to the “prime rate” published in The Wall Street Journal from time to time (the
“Prime Rate”), plus one and one half percent (1.50%) (the “Contract Rate”). The Contract Rate
shall be increased or decreased as the case may be for each increase or decrease in the Prime Rate
in an amount equal to such increase or decrease in the Prime Rate; each change to be effective as
of the day of the change in the Prime Rate. The Contract Rate shall not at any time be less than
nine percent (9.0%) per annum and no more than twelve and one half percent (12.5%) per annum.
Interest shall be (i) calculated on the basis of a 360 day year, and (ii) payable monthly, in
arrears, commencing on September 1, 2007 on the first business day of each consecutive calendar
month thereafter through and including the Maturity Date, and on the Maturity Date, whether by
acceleration or otherwise.

     1.2 Contract Rate Payments. The Contract Rate shall be calculated on the last
business day of each calendar month hereafter (other than for increases or decreases in the Prime

Secured Revolving Note

 

 

Rate which shall be calculated and become effective in accordance with the terms of Section 1.1)
until the Maturity Date and shall be subject to adjustment as set forth herein.

ARTICLE II

EVENTS OF DEFAULT AND DEFAULT RELATED PROVISIONS

     2.1 Events of Default. The occurrence of an Event of Default under the Security
Agreement shall constitute an event of default (“Event of Default”) hereunder.

     2.2 Default Interest. Following the occurrence and during the continuance of an Event
of Default, the Parent shall pay additional interest on the outstanding principal balance of this
Note in an amount equal to one percent (1%) per month, and all outstanding Obligations, including
unpaid interest, shall continue to accrue interest at such additional interest rate from the date
of such Event of Default until the date such Event of Default is cured or waived.

     2.3 Default Payment. Following the occurrence and during the continuance of an Event
of Default, the Holder, at its option, may elect, in addition to all rights and remedies of the
Holder under the Security Agreement and the other Ancillary Agreements and all obligations and
liabilities of the Parent under the Security Agreement and the other Ancillary Agreements, to
accelerate the maturity of all amounts due hereunder and to require payment in full of such amounts
within thirty (30) days (“Default Payment”). The Default Payment shall be one hundred twenty
percent (120%) of the outstanding principal amount of the Note, plus accrued but unpaid interest
and all other fees then remaining unpaid, and all amounts payable hereunder, under the Security
Agreement or any other Ancillary Agreement. The Default Payment shall be applied first to any fees
due and payable to the Holder pursuant to the Note, the Security Agreement and/or the Ancillary
Agreements, then to accrued and unpaid interest due on the Notes and then to the outstanding
principal balance of the Note. The Default Payment shall be due and payable immediately on the
date that the Holder has demanded payment of the Default Payment pursuant to this Section 2.3.

ARTICLE III

MISCELLANEOUS

     3.1 Issuance of New Note. Upon any partial redemption of this Note, a new Note
containing the same date and provisions of this Note shall, at the request of the Holder, be issued
by the Parent to the Holder for the principal balance of this Note and interest which shall not
have been paid. Subject to the provisions of Article II of this Note, the Parent shall not pay any
costs, fees or any other consideration to the Holder for the production and issuance of a new Note.

     3.2 Cumulative Remedies. The remedies under this Note shall be cumulative.

     3.3 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder
hereof 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

Secured Revolving Note

2

 

other or further exercise thereof or of any other right, power or privilege. All rights
and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

     3.4 Notices. Any notice herein required or permitted to be given shall be in writing
and shall be deemed effective given (a) upon personal delivery to the party notified, (b) when sent
by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then
on the next business day, (c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written verification of receipt.
All communications shall be sent to the Parent at the address provided in the Security Agreement
executed in connection herewith, and to the Holder at the address provided in the Security
Agreement for the Holder, with a copy to Laurus Capital Management, LLC, Attn: Portfolio Services,
335 Madison Avenue, 10th Floor, New York, New York 10017, facsimile number (212)
581-5037, or at such other address as the respective Parent or the Holder may designate by ten days
advance written notice to the other parties hereto.

     3.5 Amendment Provision. The term “Note” and all references 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, and any successor instrument as such successor
instrument may be amended or supplemented.

     3.6 Assignability. This Note shall be binding upon the Parent and its subsidiaries,
successors and assigns, and shall inure to the benefit of the Holder and its successors and
assigns, and may be assigned by the Holder in accordance with the requirements of the Security
Agreement. The Parent may not assign any of its obligations under this Note without the prior
written consent of the Holder, any such purported assignment without such consent being null and
void.

     3.7 Cost of Collection. In case of an occurrence of an Event of Default under this
Note, the Parent shall pay the Holder the Holder’s reasonable costs of collection, including
reasonable attorneys’ fees.

     3.8 Governing Law, Jurisdiction and Waiver of Jury Trial.

          (a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF
THE STATE OF NEW YORK, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.

          (b) THE PARENT HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE
COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN THE PARENT, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND,
PERTAINING TO THIS NOTE, THE SECURITY AGREEMENT OR ANY OF THE OTHER ANCILLARY AGREEMENTS OR TO ANY
MATTER ARISING OUT OF OR RELATED TO THIS NOTE, THE SECURITY
AGREEMENT OR ANY OF THE OTHER ANCILLARY AGREEMENTS; PROVIDED,

Secured Revolving Note

3

 

THAT, EACH
PARENT ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED,
THAT, NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM BRINGING
SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF THE HOLDER. THE PARENT EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE PARENT HEREBY WAIVES ANY
OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM
NON CONVENIENS. THE PARENT HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND
OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE PARENT AT THE ADDRESS
SET FORTH IN THE SECURITY AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF THE PARENT’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS,
PROPER POSTAGE PREPAID

          (c) THE PARENT DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARENT HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN
THE HOLDER, AND/OR THE PARENT ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, THE SECURITY AGREEMENT, ANY
OTHER ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

     3.9 Severability. In the event that any provision of this Note 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 this Note.

     3.10 Maximum Payments. Nothing contained herein shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest required to be paid or other charges
hereunder exceed the maximum rate permitted by such law, any payments in excess of such maximum
rate shall be credited against amounts owed by the Parent to the Holder and thus refunded to the
Companies.

Secured Revolving Note

4

 

     3.11 Security Interest. The Holder has been granted a security interest in certain
assets of the Parent as more fully described in the Security Agreement.

     3.12 Construction. Each party acknowledges that its legal counsel participated in the
preparation of this Note and, therefore, stipulates that the rule of construction that ambiguities
are to be resolved against the drafting party shall not be applied in the interpretation of this
Note to favor any party against the other.

     3.13 Registered Obligation. This Note is intended to be a registered obligation within
the meaning of Treasury Regulation Section 1.871-14(c)(1)(i) and the Parent (or its agent) shall
register this Note (and thereafter shall maintain such registration) as to both principal and any
stated interest. Notwithstanding any document, instrument or agreement relating to this Note to
the contrary, transfer of this Note (or the right to any payments of principal or stated interest
thereunder) may only be effected by (i) surrender of this Note and either the reissuance by the
Parent of this Note to the new holder or the issuance by the Parent of a new instrument to the new
holder, or (ii) transfer through a book entry system maintained by the Parent (or its agent),
within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).

[Balance of page intentionally left blank; signature page follows]

Secured Revolving Note

5

 

     IN WITNESS WHEREOF, the Parent has caused this Secured Revolving Note to be signed in its name
effective as of this 30th day of July, 2007.

	 	 	 	 	 
	 	CHAD THERAPEUTICS, INC.

 	 
	 	By:  	/s/ Earl L. Yager
 	 
	 	 	Name:  	Earl L. Yager 	 
	 	 	Title:  	Chief Executive Officer 	 
	 

WITNESS:

	 	 	 
	/s/ Tracy A. Kern
	 	 
	 

	 	 

Secured Revolving Note

6Exhibit 10.32

 

Exhibit 10.32

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
CHAD THERAPEUTICS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

Right to Purchase up to 976,744 Shares of Common Stock of

CHAD THERAPEUTICS, INC.

(subject to adjustment as provided herein)

COMMON STOCK PURCHASE WARRANT

	 	 	 
	No. 1

	 	Issue Date: July 30, 2007

     Chad Therapeutics, Inc. , a corporation organized under the laws of the State of California
(the “Company”), hereby certifies that, for value received, CALLIOPE CAPITAL CORPORATION, or
assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the
Company (as defined herein) from and after the Issue Date of this Warrant and at any time or from
time to time before 5:00 p.m., New York time, through the close of business on July 30, 2014 (the
“Expiration Date”), up to 976,744 fully paid and nonassessable shares of Common Stock (as
hereinafter defined), $0.01 par value per share, at the applicable Exercise Price per share (as
defined below). The number and character of such shares of Common Stock and the applicable
Exercise Price per share are subject to adjustment as provided herein.

     As used herein the following terms, unless the context otherwise requires, have the following
respective meanings:

     (a) The term “Common Stock” includes (i) the Company’s Common Stock, par value $0.01
per share; and (ii) any other securities into which or for which any of the securities
described in the preceding clause (i) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.

     (b) The term “Company” shall include Chad Therapeutics, Inc. and any person or entity
which shall succeed, or assume the obligations of, Chad Therapeutics, Inc. hereunder.

     (i) The “Exercise Price” applicable under this Warrant shall be $1.24.

Warrant

 

 

     (c) The term “Other Securities” refers to any stock (other than Common Stock) and other
securities of the Company or any other person (corporate or otherwise) which the holder of
the Warrant at any time shall be entitled to receive, or shall have received, on the
exercise of the Warrant, in lieu of or in addition to Common Stock, or which at any time
shall be issuable or shall have been issued in exchange for or in replacement of Common
Stock or Other Securities pursuant to Section 4 or otherwise.

     (d) The term “Security Agreement” means the Security Agreement dated as of the date
hereof among the Holder, the Company and various Subsidiaries of the Company party thereto,
as amended, modified, restated and/or supplemented from time to time.

1. Exercise of Warrant.

          1.1 Number of Shares Issuable upon Exercise. From and after the date hereof through
and including the Expiration Date, the Holder shall be entitled to receive, upon exercise of this
Warrant in whole or in part, by delivery of an original or fax copy of an exercise notice in the
form attached hereto as Exhibit A (the “Exercise Notice”), shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.

          1.2 Fair Market Value. For purposes hereof, the “Fair Market Value” of a share of
Common Stock as of a particular date (the “Determination Date”) shall mean:

     (a) If the Company’s Common Stock is traded on the American Stock Exchange or another
national exchange or is quoted on the National or Capital Market of The Nasdaq Stock Market,
Inc. (“Nasdaq”), then the closing or last sale price, respectively, reported for the last
business day immediately preceding the Determination Date.

     (b) If the Company’s Common Stock is not traded on the American Stock Exchange or
another national exchange or on the Nasdaq but is traded on the NASD Over The Counter
Bulletin Board, then the mean of the average of the closing bid and asked prices reported
for the last business day immediately preceding the Determination Date.

     (c) Except as provided in clause (d) below, if the Company’s Common Stock is not
publicly traded, then as the Holder and the Company agree or in the absence of agreement by
arbitration in accordance with the rules then in effect of the American Arbitration
Association, before a single arbitrator to be chosen from a panel of persons qualified by
education and training to pass on the matter to be decided.

     (d) If the Determination Date is the date of a liquidation, dissolution or winding up,
or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s
charter, then all amounts to be payable per share to holders of the
Common Stock pursuant to the charter in the event of such liquidation, dissolution or
winding up, plus all other amounts to be payable per share in respect of the Common Stock in
liquidation under the charter, assuming for the purposes of this clause (d) that all

Warrant

 

 

of the shares of Common Stock then issuable upon exercise of the Warrant are
outstanding at the Determination Date.

          1.3 Company Acknowledgment. The Company will, at the time of the exercise of this
Warrant, upon the request of the holder hereof acknowledge in writing its continuing obligation to
afford to such holder any rights to which such holder shall continue to be entitled after such
exercise in accordance with the provisions of this Warrant. If the holder shall fail to make any
such request, such failure shall not affect the continuing obligation of the Company to afford to
such holder any such rights.

          1.4 Trustee for Warrant Holders. In the event that a bank or trust company shall have
been appointed as trustee for the holders of this Warrant pursuant to Subsection 3.2, such bank or
trust company shall have all the powers and duties of a warrant agent (as hereinafter described)
and shall accept, in its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such successor, as the case may
be, on exercise of this Warrant pursuant to this Section 1.

2. Procedure for Exercise.

          2.1 Delivery of Stock Certificates, Etc., on Exercise. The Company agrees that the
shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to the
Holder as the record owner of such shares as of the close of business on the date on which this
Warrant shall have been surrendered and payment made for such shares in accordance herewith. As
soon as practicable after the exercise of this Warrant in full or in part, and in any event within
three (3) business days thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to the Holder, or as
such Holder (upon payment by such Holder of any applicable transfer taxes) may direct in compliance
with applicable securities laws, a certificate or certificates for the number of duly and validly
issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such
Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which such
holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market
Value of one full share, together with any other stock or other securities and property (including
cash, where applicable) to which such Holder is entitled upon such exercise pursuant to Section 1
or otherwise.

          2.2 Exercise.

          (a) Payment may be made either (i) in cash by wire transfer of immediately available
funds or by certified or official bank check payable to the order of the Company equal to
the applicable aggregate Exercise Price, (ii) by delivery of this Warrant, or shares of
Common Stock and/or Common Stock receivable upon exercise of this Warrant in accordance with
the formula set forth in subsection (b) below, or (iii) by a combination of any of the
foregoing methods, for the number of Common Shares specified in such
Exercise Notice (as such exercise number shall be adjusted to reflect any adjustment in
the total number of shares of Common Stock issuable to the Holder per the terms of this
Warrant) and the Holder shall thereupon be entitled to receive the number of duly

Warrant

 

 

authorized, validly issued, fully-paid and non-assessable shares of Common Stock (or
Other Securities) determined as provided herein.

     (b) Notwithstanding any provisions herein to the contrary, if the Fair Market Value of
one share of Common Stock is greater than the Exercise Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant for cash, the Holder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the portion
thereof being exercised) by surrender of this Warrant at the principal office of the Company
together with the properly endorsed Exercise Notice in which event the Company shall issue
to the Holder a number of shares of Common Stock computed using the following formula:

	 	 	 
	X=

	 	Y(A-B) 
	 

	 	A
	 
	 	 
	Where X =

	 	the number of shares of Common Stock to be issued to the Holder
	 
	 	 
	Y =

	 	the number of shares of Common Stock purchasable under this Warrant or, if
only a portion of this Warrant is being exercised, the portion of this Warrant being
exercised (at the date of such calculation)
	 
	 	 
	A =

	 	the Fair Market Value of one share of the Company’s Common Stock (at the date
of such calculation)
	 
	 	 
	B =

	 	the Exercise Price per share (as adjusted to the date of such calculation)

Notwithstanding anything to the contrary set forth in Section 2.2(a) above, to the extent that a
registration statement registering all the shares of Common Stock of the Company issuable upon
exercise of this Warrant has been declared effective by the Securities and Exchange Commission and
remains effective as of the date of the proposed exercise set forth in an Exercise Notice, the
Holder shall upon such proposed exercise, make payment to the Company of each respective Exercise
Price set forth in such Exercise Notice in cash by wire transfer of immediately available funds or
by certified or official bank check only.

3. Effect of Reorganization, Adjustment of Exercise Price.

          3.1 Reorganization, Consolidation, Merger, Etc. (a) In case at any time or from time
to time, the Company shall (i) effect a reorganization, (ii) consolidate with or merge into any
other person (other than as contemplated in Section 3.1(b) below), or (iii) transfer all or
substantially all of its properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, as a condition to the
consummation of such a transaction, proper and adequate provision shall be made by the Company
whereby the Holder, on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or Other Securities)
issuable on such exercise prior to such consummation or such effective date, the stock and other
securities and property (including cash, where applicable) to which such Holder would have been

Warrant

 

 

	entitled upon such consummation or in connection with such dissolution, as the case may be, if
such Holder had so exercised this Warrant immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4.

     (b) Notwithstanding anything to the contrary contained in Section 3.1(a) above, the Holder
agrees that, in the event of a consolidation or merger of the Company with or into any other person
in which the sole consideration is cash, the Holder shall, upon the written request of the Company,
elect either (i) to exercise this Warrant, in which event such exercise will be deemed effective
immediately prior to the consummation of such transaction or (ii) not to exercise this Warrant, in
which event this Warrant will expire upon the consummation of such transaction. The Company shall
provide the Holder with written notice of its request relating to the foregoing (together with such
reasonable information as the Holder may request in connection with the contemplated transaction
giving rise to such notice), which is to be delivered to the Holder not less than ten (10) days
prior to the closing of the proposed transaction.

          3.2 Dissolution. In the event of any dissolution of the Company following the
transfer of all or substantially all of its properties or assets, the Company, concurrently with
any distributions made to holders of its Common Stock, shall at its expense deliver or cause to be
delivered to the Holder the stock and other securities and property (including cash, where
applicable) receivable by the Holder pursuant to Section 3.1, or, if the Holder shall so instruct
the Company, to a bank or trust company specified by the Holder and having its principal office in
New York, NY as trustee for the Holder.

          3.3 Continuation of Terms. Upon any reorganization, consolidation or merger or
transfer (and any dissolution following any transfer) referred to in this Section 3 (other than
any consolidation or merger referred to in Section 3.1(b) above), this Warrant shall continue in
full force and effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after the consummation of such
reorganization consolidation or merger or transfer or the effective date of dissolution following
any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or
other securities, including, in the case of any such transfer, the person acquiring all or
substantially all of the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the event this Warrant
does not continue in full force and effect after the consummation of the transactions described in
this Section 3 (other than any consolidation or merger referred to in Section 3.1(b) above), then
the Company’s securities and property (including cash, where applicable) receivable by the Holder
will be delivered to the Holder or the Trustee as contemplated by Section 3.2.

     4. Extraordinary Events Regarding Common Stock. In the event that the Company shall
(a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding
Common Stock or any preferred stock issued by the Company, (b) subdivide its outstanding shares of
Common Stock, (c) combine its outstanding shares of the Common Stock into a smaller number of
shares of the Common Stock, then, in each such event, the Exercise Price shall, simultaneously with
the happening of such event, be adjusted by multiplying the then

Warrant

 

 

Exercise Price by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the product so obtained
shall thereafter be the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive event or events described herein
in this Section 4. The number of shares of Common Stock that the holder shall thereafter, on the
exercise hereof as provided in Section 1, be entitled to receive shall be adjusted to a number
determined by multiplying the number of shares of Common Stock that would otherwise (but for the
provisions of this Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Exercise Price that would otherwise (but for the provisions of this Section 4) be in effect,
and (b) the denominator is the Exercise Price in effect on the date of such exercise (taking into
account the provisions of this Section 4). Notwithstanding the foregoing, in no event shall the
Exercise Price be less than the par value of the Common Stock.

     5. Certificate as to Adjustments. In each case of any adjustment or readjustment in
the shares of Common Stock (or Other Securities) issuable on the exercise of this Warrant, the
Company at its expense will promptly cause its Chief Financial Officer or other appropriate
designee to compute such adjustment or readjustment in accordance with the terms of this Warrant
and prepare a certificate setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of Common Stock (or
Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of
Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Exercise
Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in
effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as
provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the
holder and any Warrant agent of the Company (appointed pursuant to Section 11 hereof).

     6. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company will at
all times reserve and keep available, solely for issuance and delivery on the exercise of this
Warrant, shares of Common Stock (or Other Securities) from time to time issuable on the exercise of
this Warrant.

     7. Assignment; Exchange of Warrant. Subject to compliance with applicable securities
laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder
hereof (a “Transferor”) in whole or in part. On the surrender for exchange of this Warrant, with
the Transferor’s endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement
Form”) and together with evidence reasonably satisfactory to the Company demonstrating compliance
with applicable securities laws, which shall include at the Company’s request, without limitation,
a legal opinion from the Transferor’s counsel (at the Company’s expense) that such transfer is
exempt from the registration requirements of applicable securities laws, the Company at its expense
(but with payment by the Transferor of any applicable transfer taxes) will issue and deliver to or
on the order of the Transferor thereof a new Warrant of like tenor, in the name of the Transferor
and/or the transferee(s) specified in

Warrant

 

 

such Transferor Endorsement Form (each a “Transferee”), calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for on the face or faces of the
Warrant so surrendered by the Transferor.

     8. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such
loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security
reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation,
on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver,
in lieu thereof, a new Warrant of like tenor.

     9. Registration Rights. The Holder has been granted certain registration rights by
the Company. These registration rights are set forth in a Registration Rights Agreement entered
into by the Company and Holder dated as of the date hereof, as the same may be amended, modified
and/or supplemented from time to time.

     10. Maximum Exercise. Notwithstanding anything herein to the contrary, in no event
shall the Holder be entitled to exercise any portion of this Warrant in excess of that portion of
this Warrant upon exercise 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 unexercised portion of the Warrant or the
unexercised or unconverted portion of any other security of the Holder subject to a limitation on
conversion analogous to the limitations contained herein) and (2) the number of shares of Common
Stock issuable upon the exercise of the portion of this Warrant with respect to which the
determination of this proviso is being made, would result in beneficial ownership by the Holder and
its Affiliates of any amount greater than 9.99% of the then outstanding shares of Common Stock
(whether or not, at the time of such exercise, the Holder and its Affiliates beneficially own more
than 9.99% of the then outstanding shares of Common Stock). As used herein, the term “Affiliate”
means any person or entity that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a person or entity, as such terms are
used in and construed under Rule 144 under the Securities Act. For purposes of the second
preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder, except as
otherwise provided in clause (1) of such sentence. For any reason at any time, upon written or
oral request of the Holder, the Company shall within one (1) business day confirm orally and in
writing to the Holder the number of shares of Common Stock outstanding as of any given date. The
limitations set forth herein (x) may be waived by the Holder upon provision of no less than
sixty-one (61) days prior written notice to the Company and (y) shall automatically become null and
void following notice to the Company upon the occurrence and during the continuance of an Event of
Default (as defined in the Security Agreement), except that at no time shall the Company be
obligated to issue any shares of Common Stock pursuant to the terms of this Warrant, the Security
Agreement, any Ancillary Agreement (as defined in the Security Agreement) if the issuance of such
shares of Common Stock would exceed the aggregate number of shares of Common Stock which the
Company may issue pursuant to the terms of this Warrant, the Security Agreement, any Ancillary
Agreement or without violating the rules or regulations of the Principal Market (the “Exchange
Cap”), except

Warrant

 

 

that such limitation shall not apply in the event that the Company obtains the approval of its
stockholders as required by the applicable rules or regulations of the Principal Market for
issuances of Common Stock in excess of such amount.

     11. Warrant Agent. The Company may, by written notice to the each Holder of the
Warrant, appoint an agent for the purpose of issuing Common Stock (or Other Securities) on the
exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7, and
replacing this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such office by such agent.

     12. Transfer on the Company’s Books. Until this Warrant is transferred on the books
of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for
all purposes, notwithstanding any notice to the contrary.

     13. Rights of Shareholders. No Holder shall be entitled to vote or receive dividends
or be deemed the holder of the shares of Common Stock or any other securities of the Company which
may at any time be issuable upon exercise of this Warrant for any purpose (the “Warrant Shares”),
nor shall anything contained herein be construed to confer upon the Holder, as such, any of the
rights of a shareholder of the Company or any right to vote for the election of directors or upon
any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon the recapitalization, issuance of shares, reclassification of
shares, change of nominal value, consolidation, merger, conveyance or otherwise) or to receive
notice of meetings, or to receive dividends or subscription rights or otherwise, in each case,
until the earlier to occur of (x) the date of actual delivery to Holder (or its designee) of the
Warrant Shares issuable upon the exercise hereof or (y) the third business day following the date
such Warrant Shares first become deliverable to Holder, as provided herein.

     14. Notices, Etc. All notices and other communications from the Company to the Holder
shall be mailed by first class registered or certified mail, postage prepaid, at such address as
may have been furnished to the Company in writing by such Holder or, until any such Holder
furnishes to the Company an address, then to, and at the address of, the last Holder who has so
furnished an address to the Company.

     15. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. THIS WARRANT 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 CONCERNING THE TRANSACTIONS CONTEMPLATED BY
THIS WARRANT SHALL BE BROUGHT ONLY IN STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN
THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE THIS PROVISION AND
BRING AN ACTION OUTSIDE THE STATE OF NEW YORK. The individuals executing this Warrant on behalf of
the Company agree to submit to the jurisdiction

Warrant

 

 

of such courts and waive trial by jury. The prevailing party shall be entitled to recover
from the other party its reasonable attorneys’ fees and costs. In the event that any provision of
this Warrant 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 this Warrant. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of
any provision hereof shall in no way affect the validity or enforceability of any other provision
hereof. The Company acknowledges that legal counsel participated in the preparation of this
Warrant and, therefore, stipulates that the rule of construction that ambiguities are to be
resolved against the drafting party shall not be applied in the interpretation of this Warrant to
favor any party against the other party.

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;

SIGNATURE PAGE FOLLOWS]

Warrant

 

 

     IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.

	 	 	 	 	 
	 	 	CHAD THERAPEUTICS, INC.
	 
	 	 	 	 
	WITNESS:
	 	 	 	 
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Earl L. Yager
	 

	 	 	 	 
	 

	 	Name:
	 	Earl L. Yager
	 

	 	 	 	 
	/s/ Tracy A. Kern

	 	Title:
	 	Chief Executive Officer
	 

	 	 	 	 

Warrant

 

 

EXHIBIT A

FORM OF SUBSCRIPTION

(To Be Signed Only On Exercise Of Warrant)

	 	 	 	 	 
	TO:

	 	Chad Therapeutics, Inc.	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 

	 	 	 	 

	 	 	 	 
	 	Attention:   Chief Financial Officer
	 	 

     The undersigned, pursuant to the provisions set forth in the attached Warrant (No.___),
hereby irrevocably elects to purchase (check applicable box):

	 	 	 
	                    

	 	                     shares of the common stock covered by such warrant; or
	 
	 	 
	                    

	 	the maximum number of shares of common stock covered by such
warrant pursuant to the cashless exercise procedure set forth in
Section 2.

     The undersigned herewith makes payment of the full Exercise Price for such shares at the price
per share provided for in such Warrant, which is $                    . Such payment takes the form of
(check applicable box or boxes):

	 	 	 
	                    

	 	$                     in lawful money of the United States; and/or
	 
	 	 
	                    

	 	the cancellation of such portion of the attached Warrant as is
exercisable for a total of                      shares of Common Stock (using
a Fair Market Value of $                     per share for purposes of this
calculation); and/or
	 
	 	 
	                    

	 	the cancellation of such number of shares of Common Stock as is
necessary, in accordance with the formula set forth in Section
2.2, to exercise this Warrant with respect to the maximum number
of shares of Common Stock purchasable pursuant to the cashless
exercise procedure set forth in Section 2.

     The undersigned requests that the certificates for such shares be issued in the name of, and
delivered to                                          whose address is
            
              
                
                 
                 
                 
                .

     The undersigned represents and warrants that all offers and sales by the undersigned of the
securities issuable upon exercise of the within Warrant shall be made pursuant to registration of
the Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to
an exemption from registration under the Securities Act.

	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 
	 	 	 	 	   
	 	 	 	 	(Signature must conform to name of holder as
	 	 	 	 	specified on the face of the Warrant)
	 

	 	 	 	Address:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 

Warrant

11

 

EXHIBIT B

FORM OF TRANSFEROR ENDORSEMENT

(To Be Signed Only On Transfer Of Warrant)

     For value received, the undersigned hereby sells, assigns, and transfers unto the person(s)
named below under the heading “Transferees” the right represented by the within Warrant to purchase
the percentage and number of shares of Common Stock of Chad Therapeutics, Inc. into which the
within Warrant relates specified under the headings “Percentage Transferred” and “Number
Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person
Attorney to transfer its respective right on the books of Chad Therapeutics, Inc. with full power
of substitution in the premises.

	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	Percentage
	 	Number
	Transferees
	 	Address
	 	 	 	Transferred
	 	Transferred
	 
	 	 
	 	 	 	 
	 	 

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	(Signature must conform to name of holder as
	 	 	 	 	specified on the face of the Warrant)
	 

	 	 	 	Address:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	SIGNED IN THE PRESENCE OF:
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	 	 	(Name)

	 	 	 
	ACCEPTED AND AGREED:
	 	 
	[TRANSFEREE]
	 	 
	 
	 	 
	 

(Name)

	 	 

Warrant

12

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00127-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00127-of-00352.parquet"}]]