Document:

Unassociated Document

Exhibit 10.3

 

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT, dated May 9, 2011 (the “Agreement”), is made and entered into by and between Apricus Biosciences, Inc., a Nevada corporation (the “Company”), and Randy Berholtz (the “Executive”).

WHEREAS, the Company and the Executive entered into an Offer of Employment dated December 20, 2010 (the “Offer of Employment”), which provided for a 90-day probationary period following the commencement of Executive’s employment on January 4, 2011;

WHEREAS, the Company desires to continue to employ Executive and the Company considers it essential to its best interests and the best interests of its stockholders for the Company to employ Executive during the term of this Agreement; and

WHEREAS, Executive is willing to accept his employment with the Company on the terms hereinafter set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants herein and for other good and valuable consideration, the parties agree as follows:

	
1.

	
Term of Employment.  Subject to the terms and conditions set forth in Section 6 of this Agreement, Executive’s employment with the Company shall be “at will,” and the Company and Executive shall each have the right to terminate Executive’s employment hereunder.  The term of Executive’s employment hereunder is referred to herein as the “Employment Term.”

	
2.

	
Position.

	 	
(a)

	
During the Employment Term, Executive shall be employed by the Company as Executive Vice President, General Counsel and Secretary, and shall have such duties, authority, and responsibility as are commensurate with his position, subject to the direction of the Company’s President and Chief Executive Officer.

	 	
(b)

	
During the Employment Term, Executive shall devote all of his business time and attention to the performance of his duties hereunder faithfully and to the best of his abilities and shall not undertake employment with, or participate in, the conduct of the business affairs of any other person, corporation, or entity; provided, that nothing shall preclude Executive from (i) with the prior approval of the Company’s Chief Executive Officer, serving as a director, trustee or member of another business organization or (ii) participating in the affairs of any recognized charitable organizations, non-profit or in any community affairs, of Executive’s choice.

	 	
(c)

	
Executive’s duties hereunder shall be performed for the Company worldwide, with principal business activities expected to be at the Company’s offices in San Diego, California.

 

  

 

  

Exhibit 10.3

 

	
3.

	
Compensation.

	 	
(a)

	
Base Salary.  During the Employment Term, the Company shall pay Executive a base salary, subject to increase at the discretion of the Board of Directors of the Company (the “Board”), at the initial annual rate of $250,000 (the “Base Salary”), payable in regular installments in accordance with the Company’s usual payroll practices.

	 	
(b)

	
Annual Bonus.  With respect to each calendar year during the Employment Term, Executive shall be eligible to earn an annual bonus award (the “Bonus”) in a target amount equal to 30% of Executive’s annual Base Salary.  The amount of the Bonus shall be determined by the Board, or the Compensation Committee of the Board (the “Compensation Committee”), in its sole discretion, based upon the achievement by the Company of objective performance measures established and determined by the Board or the Compensation Committee no later than the end of the first month of such calendar year.  The Bonus, if any, with respect to each calendar year in the Employment Term shall be paid as promptly as practicable following the delivery of the Company’s audited financial statements for such year, but not later than March 15 of the calendar year following the calendar year for which the Bonus is payable.  Unless otherwise stated herein, the Bonus shall not accrue until the date on which it is paid, and Executive must be employed on the date the Bonus is paid in order to receive the Bonus.

	 	
(c)

	
Equity Awards.  The Compensation Committee shall consider annually whether to grant any equity-based compensation awards to the Executive in accordance with the terms and subject to the conditions of the Company’s equity compensation plans.

	
4.

	
Employee Benefits.  During the Employment Term, Executive shall be eligible for inclusion, to the extent permitted by law, as a full-time employee of the Company or any of its subsidiaries, in any and all of the following plans, programs, and policies in effect at the time: (i) pension, profit sharing, savings, and other retirement plans and programs, (ii) life and health (medical, dental, hospitalization, short-term and long-term disability) insurance plans and programs, (iii) stock option and stock purchase plans and programs, (iv) accidental death and dismemberment protection plans and programs, (v) travel accident insurance plans and programs, (vi) vacation policy (Executive shall have four weeks of paid vacation per calendar year), and (vii) other plans and programs sponsored by the Company or any subsidiary for employees or executives generally, including any and all plans and programs that supplement any or all of the foregoing types of plans or programs.  Nothing in this Agreement shall preclude the Company or any of its subsidiaries or affiliates from terminating or amending any employee benefit plan or program from time to time after the date of this Agreement.

	
5.

	
Business Expenses and Perquisites.  The Company shall reimburse to Executive, or pay directly, all reasonable expenses incurred by Executive in connection with the business of the Company, and its subsidiaries and affiliates, in each case subject to Company travel and expense reimbursement policies.

 

  

 

  

Exhibit 10.3

 

	
6.

	
Termination.  Subject to this Section 6, either party may terminate this Agreement at any time and from time to time.  In the event of the termination of Executive’s employment, the Employment Term shall end on the day of such termination.

	
 

	
(a)

	
By the Company for Cause. The Company may, for Cause, terminate Executive’s employment hereunder at any time by written notice to Executive.  For purposes of this Agreement, the term “Cause” shall mean Executive’s (i) engaging in fraud against the Company or misappropriation of funds of the Company, (ii) disregard or failure to follow specific and reasonable directives of the Board, (iii) willful failure to perform his duties as General Counsel of the Company, (iv) willful misconduct resulting in material injury to the Company, (v) violation of the terms of the Confidential Information and Intellectual Property Agreement between Executive the Company referred to in Section 11 below, (vi) conviction of, or Executive’s plea of guilty or no contest to, a felony or any crime involving as a material element fraud or dishonesty, or (vii) material breach (not covered by clauses (i) through (vi) of this paragraph) of any of the other provisions of this Agreement; provided, that, in the case of subclauses (ii), (iii) or (vii), Cause shall not exist if the act or omission deemed to constitute Cause is cured (if curable) by Executive within thirty (30) days after written notice thereof to Executive by the Company.  For purposes of the foregoing, no act, or failure to act, on Executive’s part shall be considered “willful” unless done, or omitted to be done, by Executive other than in good faith, and without reasonable belief that his action or omission was in furtherance of the interests of the Company.

In the event of the termination of Executive’s employment under this Section 6(a) for Cause, the Employment Term shall end on the day of such termination and the Company shall pay to Executive, no later than the payroll cycle following Executive’s termination, in one lump sum: (i) any accrued but unpaid Base Salary, less applicable deductions, including salary in respect of any accrued and accumulated vacation due to Executive at the date of such termination; and (ii) any amounts owing, but not yet paid, pursuant to Section 5 hereof.

Except as specifically set forth in Section 9 hereof, the Company shall have no further obligations to Executive under this Agreement.

	 	
(b)

	
Disability or Death.  If Executive should suffer a Permanent Disability, the Company may terminate Executive’s employment hereunder upon ten (10) or more days’ prior written notice to Executive.  If Executive should pass away during the term of this Agreement, Executive’s employment shall be deemed terminated on his date of death.  For purposes of this Agreement, a “Permanent Disability” shall be deemed to have occurred only when Executive has qualified for benefits (including satisfaction of any applicable waiting period) under the Company’s or a subsidiary’s long-term disability insurance arrangement.  In the event of the termination of Executive’s employment hereunder by reason of Permanent Disability or death, the Employment Term shall end on the day of such termination and the Company shall pay, no later than the payroll cycle following Executive’s termination, to Executive or Executive’s legal representative (in the event of Permanent Disability), or any beneficiary or beneficiaries designated by Executive to the Company in writing, or to Executive’s estate if no such beneficiary has been so designated (in the event of Executive’s death), a single lump sum payment of: (i) any accrued but unpaid Base Salary, less applicable deductions, including salary in respect of any accrued and accumulated vacation, due to Executive at the date of such termination; (ii) any amounts owing, but not yet paid, pursuant to Section 5 hereof.

 

  

 

  

Exhibit 10.3

 

In addition, upon a termination under this Section 6(b), and upon the satisfaction of the conditions set forth herein: (1) Executive shall receive a pro rata Bonus for the calendar year in which such termination occurs, equal to the Bonus he would have received, to the extent all criteria for such a Bonus have been met (with the exception of the requirement that Executive be employed on the date the Bonus is to be paid), for the calendar year of said termination multiplied by a fraction, the numerator of which is the number of days in such year preceding and including the date of termination, and the denominator of which is 365.  Said pro-rata Bonus shall be paid at the same time as the Bonus would have been paid had Executive remained employed by the Company through the date of payment, but in any event, not later than March 15 of the calendar year following the calendar year for which the Bonus is payable; (2) Executive shall receive any unpaid Bonus for the calendar year preceding his termination, to the extent that all criteria for such bonus have been met (with the exception of the requirement that Executive be employed on the date the Bonus is to be paid).  Said Bonus shall be paid at the same time as the Bonus would have been paid had Executive remained employed by the Company through the date of payment; and (3) all of Executive’s outstanding but unvested equity awards granted pursuant to the Offer of Employment and Section 3(c) of this Agreement shall vest immediately.  The payment of any Bonus pursuant to clause (1) or clause (2) above and the acceleration of Executive’s options and stock pursuant to clause (3), are conditioned upon Executive (or his legal representative) signing a release in favor of the Company, as provided for in Section 6(f).

	 	
(c)

	
By the Company without Cause.  The Company may, without Cause, terminate Executive’s employment hereunder at any time upon ten (10) or more days’ written notice to Executive.  The Company, in its sole discretion, may provide the Executive with ten (10) days’ pay in lieu of notice.  In the event Executive’s employment is terminated pursuant to this Section 6(c), the Employment Term shall end on the day of such termination and the Company shall pay to Executive, no later than the payroll cycle following Executive’s termination, in one lump sum: (i) any accrued but unpaid Base Salary, less applicable deductions, including salary in respect of any accrued and accumulated vacation, due to Executive at the date of such termination, and (ii) any amounts owing, but not yet paid, pursuant to Section 5 hereof.

 

  

 

  

Exhibit 10.3

 

In addition, upon a termination under this Section 6(c) and upon the satisfaction of the conditions set forth herein: (1) Executive shall receive a pro rata Bonus for the calendar year in which such termination occurs, equal to the Bonus he would have received, to the extent all criteria for such a Bonus have been met (with the exception of the requirement that Executive be employed on date the Bonus is to be paid), for the calendar year of said termination multiplied by a fraction, the numerator of which is the number of days in such year preceding and including the date of termination, and the denominator of which is 365.  Said pro-rata Bonus shall be paid at the same time as the Bonus would have been paid had Executive remained employed by the Company through the date of payment, but in any event, not later than March 15 of the calendar year following the calendar year for which the Bonus is payable; (2) Executive shall receive any unpaid Bonus for the calendar year preceding his termination, to the extent that all criteria for such bonus have been met (with the exception of the Executive being employed on the date the Bonus is to be paid).  Said Bonus shall be paid at the same time as the Bonus would have been paid had Executive remained employed by the Company through the date of payment; (3) all of Executive’s outstanding but unvested equity awards granted pursuant to the Offer of Employment and Section 3(c) of this Agreement shall vest immediately; and (4) the Company shall pay Executive (A) an amount equal to six (6) months of Executive’s Base Salary at the time of such termination and (B) an amount equal to the product of the number of whole years that Executive has been employed by the Company multiplied by a fraction, the numerator of which is the Executive’s Base Salary at the time of such termination and the denominator of which is fifty-two (52) (the “Severance”).  The payment of any Bonus pursuant to clause (1) or clause (2) above and the acceleration of Executive’s options and stock pursuant to clause (3), are conditioned upon Executive signing a release in favor of the Company, as provided for in Section 6(f), and the Severance shall be payable in a single lump sum within 60 days after the effective date of termination of the Employment Term, subject to Executive’s execution, delivery and non-revocation of a release in favor of the Company, as provided for in Section 6(f).

Except as specifically set forth in Section 9 hereof, the Company shall have no further obligations to Executive under this Agreement.

	 	
(d)

	
Resignation by Executive for Good Reason. If any of the events described below occurs during the Employment Term, Executive may terminate Executive’s employment hereunder for Good Reason by written notice to the Company identifying the event or omission constituting Good Reason not more than one (1) month following the occurrence of such event and, in the case of subclauses (ii), (iii), or (iv) below, a failure by the Company to cure such act or omission within thirty (30) days after receipt of such written notice.  In the event that Executive elects to terminate employment pursuant to this Section 6(d), the Employment Term and Executive’s employment hereunder will be terminated effective as of the later of thirty-one (31) days after the Company’s receipt of Executive’s notice of termination or thirty-one (31) days after the event, and Executive’s resignation for Good Reason pursuant to this Section 6(d) shall be treated for all purposes as a termination without Cause pursuant to Section 6(c) and the provisions of Section 6(c) shall apply to such termination, including the payment of Severance.  The occurrence of any of the following events without Executive’s consent shall permit Executive to terminate Executive’s employment for “Good Reason” pursuant to this Section 6(d):

 

  

 

  

Exhibit 10.3

 

	 	
(i)

	
The failure by the Company to observe or comply in any material respect with any of the material provisions of this Agreement;

	 	
(ii)

	
A material diminution in Executive’s duties;

	 	
(iii)

	
The assignment to Executive of duties that are materially inconsistent with Executive’s duties or that materially impair Executive’s ability to function as the General Counsel of the Company; or

	 	
(iv)

	
The relocation of Executive’s primary office from a location that is more than 50 miles from both (a) the Company’s executive office that constitutes Executive’s primary office location at the time of relocation and (b) Executive’s primary residence at the time of such relocation.

Except as specifically set forth in Section 9 hereof, the Company shall have no further obligations to Executive under this Agreement.

	 	
(e)

	
By Executive without Good Reason.  Executive may terminate the Employment Term and Executive’s employment hereunder at any time without Good Reason upon thirty (30) days advance written notice to the Company.  In the event Executive’s employment is terminated pursuant to this Section 6(e), the Company shall pay to Executive, no later than ten (10) days after the last day of Executive’s employment, in one lump sum, the sum of (i) any accrued but unpaid Base Salary, less applicable deductions, including salary in respect of any accrued and accumulated vacation, due to Executive at the date of such termination, and (ii) any amounts owing, but not yet paid, pursuant to Section 5 hereof.

Except as specifically set forth in Section 9 hereof, the Company shall have no further obligations to Executive under this Agreement.

	 	
(f)

	
Release.  Notwithstanding any other provision of this Agreement to the contrary, Executive acknowledges and agrees that any and all payments and benefits to which Executive is entitled under Section 6(b), 6(c) or 6(d), with the exception of accrued salary, accrued vacation payments, and payments pursuant to Section 5 of this Agreement, are conditioned upon and subject to Executive’s first executing a general waiver and release (and the expiration of any associated revocation period), in such reasonable and customary form as shall be prepared by the Company, of all claims Executive may have against the Company, and related entities and individuals.

	
7.

	
Required Postponement for Specified Executives.

	 	
(a)

	
Specified Executive Delay.  Notwithstanding anything in this Agreement to the contrary, if required by section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and if Executive is considered a Specified Executive (as defined herein) and payment of any amounts under this Agreement is required to be delayed for a period of six months after separation from service pursuant to Section 409A of the Code, payment of such amounts shall be delayed as required by section 409A, and the accumulated amounts shall be paid in a lump sum payment within five days after the end of the six-month period.  If Executive dies during the postponement period prior to the payment of benefits, the amounts withheld on account of section 409A shall be paid to the personal representative of Executive’s estate within 60 days after the date of Executive’s death.

 

  

 

  

Exhibit 10.3

 

	 	
(b)

	
“Specified Executive” shall mean an employee who, at any time during the 12-month period ending on the identification date, is a “specified employee” under section 409A of the Code, as determined by the Compensation Committee of the Board or its delegate.  The determination of Specified Executives, including the number and identity of persons considered officers and the identification date, shall be made by the Compensation Committee or its delegate in accordance with the provisions of section 409A of the Code and the regulations issued thereunder.

	
8.

	
No Mitigation; Employee Benefit Plans.  Executive shall not be required to mitigate amounts payable to him under this Agreement by seeking other employment or otherwise, and there shall be no offset against amounts payable to Executive under this Agreement on account of Executive’s subsequent employment.  Amounts payable to Executive under this Agreement shall not be offset by any claims that the Company may have against Executive, and such amounts payable to Executive under this Agreement shall not be affected by any other circumstances, including, without limitation, any counterclaim, recoupment, defense, or other right that the Company may have against Executive or others; provided, however, that payments made to Executive as a result of the termination of Executive’s employment hereunder shall not be considered as includible compensation with respect to any employee benefit plans maintained by the Company, except to the extent otherwise required by law.

 

  

 

  

Exhibit 10.3

 

	
9.

	
Indemnification.  In the event that Executive is made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (a “Proceeding”), by reason of Executive’s employment with, or serving as an officer of, the Company, the Company shall indemnify and hold Executive harmless, and defend Executive to the fullest extent authorized by the laws of the state in which the Company is incorporated, as the same exist and may hereafter be amended, against any and all claims, demands, suits, judgments, assessments, and settlements (collectively the “Claims”), including all expenses incurred or suffered by Executive in connection therewith (excluding, however, any legal fees incurred by Executive for Executive’s own counsel, except as otherwise provided in this Section 9, and excluding any Proceedings initiated by executive), and such indemnification shall continue as to Executive even after Executive is no longer employed by the Company hereunder, and shall inure to the benefit of Executive’s heirs, executors, and administrators; provided, however, that Executive promptly gives written notice to the Company of any such Claims (although Executive’s failure to promptly give notice shall not affect the Company’s obligations under this Section 9 except to the extent that such failure prejudices the Company or its ability to defend such Claims).  The Company shall have the right to undertake, with counsel or other representatives of its own choosing, the defense or settlement of any Claims.  In the event that the Company shall fail to notify Executive, within ten days of its receipt of Executive’s written notice, that the Company has elected to undertake such defense or settlement, or if at any time the Company shall otherwise fail to diligently defend or pursue settlement of such Claims, then Executive shall have the right to undertake the defense, compromise, or settlement of such Claims, in which event the Company shall hold Executive harmless from any legal fees incurred by Executive for Executive’s counsel.  Neither Executive nor the Company shall settle any Claims without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed.  In the event that the Company submits to Executive a bona fide settlement offer from the claimant of Claims (which settlement offer shall include as an unconditional term thereof the giving by the claimant or the plaintiff to Executive a release from all liability in respect of such Claims), and Executive refuses to consent to such settlement, then thereafter the Company’s liability to Executive for indemnification hereunder with respect to such Claims shall not exceed the settlement amount included in such bona fide settlement offer, and Executive shall either assume the defense of such Claims or pay the Company’s attorneys’ fees and other out-of-pocket costs incurred thereafter in continuing the defense of such Claims.  Regardless of which party is conducting the defense of any such Claims, the other party, with counsel or other representatives of its own choosing and at its sole cost and expense, shall have the right to consult with the party conducting the defense of such Claims and its counsel or other representatives concerning such Claims and Executive and the respective counsel or other representatives shall cooperate with respect to such Claims.  The party conducting the defense of any such Claims and its counsel shall in any case keep the other party and its counsel (if any) fully informed as to the status of such Claims and any matters relating thereto.  Executive and the Company shall provide to the other such records, books, documents, and other materials as shall reasonably be necessary for each to conduct or evaluate the defense of any Claims, and will generally cooperate with respect to any matters relating thereto.  This Section 9 shall remain in effect after this Agreement is terminated, regardless of the reasons for such termination.  The indemnification provided to Executive pursuant to this Section 9 shall not supersede or reduce any indemnification provided to Executive under any separate agreement, or the By-Laws of the Company; in this regard, it is intended that this Agreement shall expand and extend Executive’s rights to receive indemnification.

	
10.

	
Withholding.  The Company shall have the right to deduct and withhold from all payments to Executive hereunder all payroll taxes, income tax withholding and other federal, state and local taxes and charges which currently are or which hereafter may be required by law to be so deducted and withheld.

	
11.

	
Additional Agreements.  As a condition to his employment hereunder, Executive shall execute and deliver to the Company a Confidential Information and Intellectual Property Agreement in the form attached hereto as Exhibit A, which shall be incorporated herein by reference.

 

  

 

  

Exhibit 10.3

 

	
12.

	
Non-Assignability.  Executive’s rights and benefits hereunder are personal to Executive, and shall not be alienated, voluntarily or involuntarily assigned, or transferred.

	
13.

	
Binding Effect.  This Agreement shall be binding upon the parties hereto, and their respective assigns, successors, executors, administrators, and heirs.  In the event the Company becomes a party to any merger, consolidation, or reorganization, this Agreement shall remain in full force and effect as an obligation of the Company or its successor(s) in interest.  None of the payments provided for by this Agreement shall be subject to seizure for payment of any debts or judgments against Executive or Executive’s beneficiary or beneficiaries, nor shall Executive or any such beneficiary or beneficiaries have any right to transfer or encumber any right or benefit hereunder.

	
14.

	
Entire Agreement; Modification.

	 	
(a)

	
This Agreement supersedes all prior agreements, including the Offer of Employment between the Company and Executive relating to the subject matter hereof, with the exception of the Confidential Information and Intellectual Property Agreement; provided, however, that the stock options granted pursuant to the Offer of Employment shall not be affected, except as specifically provided herein.  This Agreement sets forth the entire understanding among the parties hereto with respect to the subject matter hereof, may not be changed orally, and may be changed only by an agreement in writing signed by the parties hereto.

	 	
(b)

	
Executive acknowledges that from time to time, the Company may establish, maintain and distribute manuals, handbooks or personnel policies, and officers or other representatives of the Company may make written or oral statements relating to personnel policies and procedures.  Such manuals, handbooks and statements are intended only for general guidance.  No policies, procedures or statements of any nature by or on behalf of the Company (whether written or oral, and whether or not contained in any manual or handbook or personnel policies), and no acts or practices of any nature, shall be construed to modify this Agreement or to create express or implied obligations of any nature to Executive.

	
15.

	
Notices.  All notices and communications hereunder shall be in writing, sent by certified or registered mail, return receipt requested, postage prepaid; by facsimile transmission, with proof of the time and date of receipt retained by the transmitter; or by hand-delivery properly receipted.  The actual date of receipt as shown by the return receipt therefore, the facsimile transmission sheet, or the hand-delivery receipt, as the case may be, shall determine the date on which (and, in the case of a facsimile, the time at which) notice was given.  All payments required hereunder by the Company to Executive shall be sent postage prepaid, or, at Executive’s election, shall be transferred to Executive electronically to such bank account as Executive may designate in writing to the Company, including designation of the applicable electronic address.  The foregoing items (other than any electronic transfer to Executive) shall be addressed as follows (or to such other address as the Company and Executive may designate in writing from time to time):

  

 

  

Exhibit 10.3

 

To the Company:

Apricus Biosciences, Inc.

6330 Nancy Ridge Drive, Suite 103

San Diego, CA 92121

Facsimile: (858) 866-0482

Attention: Chief Executive Officer

To Executive:

Randy Berholtz

XXXXXXXXXXXX

XXXXXXXXXXX

Facsimile: XXX-XXX-XXXX

 

	
16.

	
Section 409A of the Code.  This Agreement is intended to comply with section 409A of the Code and its corresponding regulations, to the extent applicable.  Accordingly, all provisions herein, or incorporated herein by reference, shall be construed and interpreted to comply with section 409A of the Code and any applicable exceptions thereunder.  Notwithstanding anything in this Agreement to the contrary, payments may only be made under this Agreement upon an event and in a manner permitted by section 409A of the Code, to the extent applicable.  As used in the Agreement, the term “termination of employment” shall mean Executive’s separation from service with the Company within the meaning of section 409A of the Code and the regulations promulgated thereunder.  For purposes of section 409A, the right to a series of payments under the Agreement shall be treated as a right to a series of separate payments.  Any amounts payable solely on account of an involuntary separation from service of Executive within the meaning of section 409A of the Code shall be excludible from the requirements of section 409A of the Code, either as involuntary separation pay or as short-term deferral amounts to the maximum possible extent.  All reimbursements and in-kind benefits provided under the Agreement shall be made or provided in accordance with the requirements of section 409A of the Code, including, where applicable, the requirement that (i) any reimbursement shall be for expenses incurred during Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

	
17.

	
Governing Law; Jurisdiction.  This Agreement shall be governed by, and construed and enforced according to, the domestic laws of the State of California without giving effect to the principles of conflict of laws thereof, or such principles of any other jurisdiction, which could cause the application of the substantive law of any jurisdiction other than the State of California.  The Company and Executive agree that the state or federal courts located in San Diego, California shall have exclusive jurisdiction to hear and determine any dispute which may arise under this Agreement.

 

  

 

  

Exhibit 10.3

 

	
18.

	
Severability.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of the Agreement shall be severable and enforceable to the extent permitted by law.

	
19.

	
Headings.  The headings of the Sections hereof are provided for convenience only and are not to serve as a basis for interpretation or construction, and shall not constitute a part, of this Agreement.

	
20.

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

IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written.

	  	
/S/ RANDY BERHOLTZ

	  	
Randy Berholtz

	  	  
	  	
Apricus Biosciences, Inc.

	  	  	  
	  	
By:

	
 /S/ BASSAM DAMAJ

	  	
Name:

	
Bassam Damaj, Ph.D.

	  	
Title:

	
Chief Executive Officer

  

 

  

Exhibit 10.3

EXHIBIT A

CONFIDENTIALITY AND INTELLECTUAL PROPERTY AGREEMENT

APRICUS BIOSCIENCES, INC.

Employee Confidentiality and Assignment Agreement

In consideration and as a condition of my employment or continued employment by Apricus Biosciences, Inc. (the “Company”), I agree as follows:

1.         Proprietary Information.  I agree that all information, whether or not in writing, concerning the Company’s business, technology, business relationships or financial affairs which the Company has not released to the general public (collectively, “Proprietary Information”) is and will be the exclusive property of the Company.  By way of illustration, Proprietary Information may include information or material which has not been made generally available to the public, such as:  (a) corporate information, including plans, strategies, methods, policies, resolutions, negotiations or litigation; (b) marketing information, including strategies, methods, customer identities or other information about customers, prospect identities or other information about prospects, or market analyses or projections; (c) financial information, including cost and performance data, debt arrangements, equity structure, investors and holdings, purchasing and sales data and price lists; and (d) operational and technological information, including plans, specifications, manuals, forms, templates, software, designs, methods, procedures, formulas, discoveries, inventions, improvements, concepts and ideas; and (e) personnel information, including personnel lists, reporting or organizational structure, resumes, personnel data, compensation structure, performance evaluations and termination arrangements or documents.  Proprietary Information also includes information received in confidence by the Company from its customers or suppliers or other third parties.

2.         Recognition of Company’s Rights.  I will not, at any time, without the Company’s prior written permission, either during or after my employment, disclose any Proprietary Information to anyone outside of the Company, or use or permit to be used any Proprietary Information for any purpose other than the performance of my duties as an employee of the Company.  I will cooperate with the Company and use my best efforts to prevent the unauthorized disclosure of all Proprietary Information.  I will deliver to the Company all copies of Proprietary Information in my possession or control upon the earlier of a request by the Company or termination of my employment.

3.         Rights of Others.  I understand that the Company is now and may hereafter be subject to non-disclosure or confidentiality agreements with third persons which require the Company to protect or refrain from use of Proprietary Information.  I agree to be bound by the terms of such agreements in the event I have access to such Proprietary Information.

  

 

  

Exhibit 10.3

 

4.         Commitment to Company; Avoidance of Conflict of Interest.  While an employee of the Company, I will devote my full-time efforts to the Company’s business and I will not engage in any other business activity that conflicts with my duties to the Company.  I will advise the president of the Company (or, if I am an executive officer of the Company, the Company’s Board of Directors) or his or her nominee at such time as any activity of either the Company or another business presents me with a conflict of interest or the appearance of a conflict of interest as an employee of the Company.  I will take whatever action is requested of me by the Company to resolve any conflict or appearance of conflict which it finds to exist.

5.         Developments.  I will make full and prompt disclosure to the Company of all inventions, discoveries, designs, developments, methods, modifications, improvements, processes, algorithms, databases, computer programs, formulae, techniques, trade secrets, graphics or images, and audio or visual works and other works of authorship (collectively “Developments”), whether or not patentable or copyrightable, that are created, made, conceived or reduced to practice by me (alone or jointly with others) or under my direction during the period of my employment.  I acknowledge that all work performed by me is on a “work for hire” basis, and I hereby do assign and transfer and, to the extent any such assignment cannot be made at present, will assign and transfer, to the Company and its successors and assigns all my right, title and interest in all Developments that (a) relate to the business of the Company or any customer of  the Company or any of the products or services being researched, developed, manufactured or sold by the Company or which may be used with such products or services; or (b) result from tasks assigned to me by the Company; or (c) result from the use of premises or personal property (whether tangible or intangible) owned, leased or contracted for by the Company (“Company-Related Developments”), and all related patents, patent applications, trademarks and trademark applications, copyrights and copyright applications, and other intellectual property rights in all countries and territories worldwide and under any international conventions (“Intellectual Property Rights”).

To preclude any possible uncertainty, I have set forth on Exhibit A attached hereto a complete list of Developments that I have, alone or jointly with others, conceived, developed or reduced to practice prior to the commencement of my employment with the Company that I consider to be my property or the property of third parties and that I wish to have excluded from the scope of this Agreement (“Prior Inventions”). If disclosure of any such Prior Invention would cause me to violate any prior confidentiality agreement, I understand that I am not to list such Prior Inventions in Exhibit A but am only to disclose a cursory name for each such invention, a listing of the party(ies) to whom it belongs and the fact that full disclosure as to such inventions has not been made for that reason.  I have also listed on Exhibit A all patents and patent applications in which I am named as an inventor, other than those which have been assigned to the Company (“Other Patent Rights”).  If no such disclosure is attached, I represent that there are no Prior Inventions or Other Patent Rights.  If, in the course of my employment with the Company, I incorporate a Prior Invention into a Company product, process or machine or other work done for the Company, I hereby grant to the Company a nonexclusive, royalty-free, paid-up, irrevocable, worldwide license (with the full right to sublicense) to make, have made, modify, use, sell, offer for sale and import such Prior Invention.  Notwithstanding the foregoing, I will not incorporate, or permit to be incorporated, Prior Inventions in any Company-Related Development without the Company’s prior written consent.

  

 

  

Exhibit 10.3

 

As required pursuant to Section 2872 of the California Labor Code, I acknowledge that the Company has notified me that the provisions of this paragraph 5 do not apply to an invention which qualifies fully under the provisions of Section 2870 of the California Labor Code.  Specifically, such provisions do not apply to, and I am not required to transfer to the Company, any invention developed entirely on my own time without using the Company’s equipment, supplies, facilities, or trade secret information except for those inventions that either (a) relate at the time of conception or reduction to practice of the invention to the Company’s business, or actual or demonstrably anticipated research or development of the Company; or (b) result from any work performed by the Employee for the Company.  However, I will also promptly disclose to the Company any such Developments for the purpose of determining whether they qualify for such exclusion.  I understand that to the extent this Agreement is required to be construed in accordance with the laws of any state which precludes a requirement in an employee agreement to assign certain classes of inventions made by an employee, this paragraph 5 will be interpreted not to apply to any invention which a court rules and/or the Company agrees falls within such classes.  I also hereby waive all claims to any moral rights or other special rights which I may have or accrue in any Company-Related Developments.

6.         Documents and Other Materials.  I will keep and maintain adequate and current records of all Proprietary Information and Company-Related Developments developed by me during my employment, which records will be available to and remain the sole property of the Company at all times.

All files, letters, notes, memoranda, reports, records, data, sketches, drawings, notebooks, layouts, charts, quotations and proposals, specification sheets, or other written, photographic or other tangible material containing Proprietary Information, whether created by me or others, which come into my custody or possession, are the exclusive property of the Company to be used by me only in the performance of my duties for the Company.  Any property situated on the Company’s premises and owned by the Company, including without limitation computers, disks and other storage media, filing cabinets or other work areas, is subject to inspection by the Company at any time with or without notice.  In the event of the termination of my employment for any reason, I will deliver to the Company all files, letters, notes, memoranda, reports, records, data, sketches, drawings, notebooks, layouts, charts, quotations and proposals, specification sheets, or other written, photographic or other tangible material containing Proprietary Information, and other materials of any nature pertaining to the Proprietary Information of the Company and to my work, and will not take or keep in my possession any of the foregoing or any copies.

7.         Enforcement of Intellectual Property Rights.  I will cooperate fully with the Company, both during and after my employment with the Company, with respect to the procurement, maintenance and enforcement of Intellectual Property Rights in Company-Related Developments.  I will sign, both during and after the term of this Agreement,  all papers, including without limitation copyright applications, patent applications, declarations, oaths, assignments of priority rights, and powers of attorney, which the Company may deem necessary or desirable in order to protect its rights and interests in any Company-Related Development.  If the Company is unable, after reasonable effort, to secure my signature on any such papers, I hereby irrevocably designate and appoint each officer of the Company as my agent and attorney-in-fact to execute any such papers on my behalf, and to take any and all actions as the Company may deem necessary or desirable in order to protect its rights and interests in any Company-Related Development.

  

 

  

Exhibit 10.3

 

8.         Non-Solicitation.  During my employment and for a period of twelve (12) months following the termination of my employment for any reason (the “Restricted Period”), I will not, directly or indirectly, in any manner, other than for the benefit of the Company, solicit, entice or attempt to persuade any other employee or consultant of the Company to leave the services of the Company for any reason.  I acknowledge and agree that if I violate any of the provisions of this paragraph 8, the running of the Restricted Period will be extended by the time during which I engage in such violation(s).

9.        Government Contracts.  I acknowledge that the Company may have from time to time agreements with other persons or with the United States Government or its agencies which impose obligations or restrictions on the Company regarding inventions made during the course of work under such agreements or regarding the confidential nature of such work.  I agree to comply with any such obligations or restrictions upon the direction of the Company. In addition to the rights assigned under paragraph 5, I also assign to the Company (or any of its nominees) all rights which I have or acquired in any Developments, full title to which is required to be in the United States under any contract between the Company and the United States or any of its agencies.

10.       Prior Agreements.  I hereby represent that, except as I have fully disclosed previously in writing to the Company, I am not bound by the terms of any agreement with any previous employer or other party to refrain from using or disclosing any trade secret or confidential or proprietary information in the course of my employment with the Company or to refrain from competing, directly or indirectly, with the business of such previous employer or any other party.  I further represent that my performance of all the terms of this Agreement as an employee of the Company does not and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by me in confidence or in trust prior to my employment with the Company. I will not disclose to the Company or induce the Company to use any confidential or proprietary information or material belonging to any previous employer or others.

11.       Remedies upon Breach.   I understand that the restrictions contained in this Agreement are necessary for the protection of the business and goodwill of the Company and I consider them to be reasonable for such purpose.  Any breach of this Agreement is likely to cause the Company substantial and irrevocable damage and therefore, in the event of such breach, the Company, in addition to such other remedies which may be available, will be entitled to specific performance and other injunctive relief.

12.       Use of Voice, Image and Likeness.   I give the Company permission to use any and all of my voice, image and likeness, with or without using my name, in connection with the products and/or services of the Company, for the purposes of advertising and promoting such products and/or services and/or the Company, and/or for other purposes deemed appropriate by the Company in its reasonable discretion, except to the extent expressly prohibited by law.

  

 

  

Exhibit 10.3

 

13.       Publications and Public Statements.  I will obtain the Company’s written approval before publishing or submitting for publication any material that relates to my work at the Company and/or incorporates any Proprietary Information.  To ensure that the Company delivers a consistent message about its products, services and operations to the public, and further in recognition that even positive statements may have a detrimental effect on the Company in certain securities transactions and other contexts, any statement about the Company which I create, publish or post during my period of employment and for six (6) months thereafter, on any media accessible by the public, including but not limited to electronic bulletin boards and Internet-based chat rooms, must first be reviewed and approved by an officer of the Company before it is released in the public domain.

14.       No Employment Obligation.  I understand that this Agreement does not create an obligation on the Company or any other person to continue my employment.  I acknowledge that, unless otherwise agreed in a formal written employment agreement signed on behalf of the Company by an authorized officer, my employment with the Company is at will and therefore may be terminated by the Company or me at any time and for any reason.

15.       Survival and Assignment by the Company.  I understand that my obligations under this Agreement will continue in accordance with its express terms regardless of any changes in my title, position, duties, salary, compensation or benefits or other terms and conditions of employment. I further understand that my obligations under this Agreement will continue following the termination of my employment regardless of the manner of such termination and will be binding upon my heirs, executors and administrators.  The Company will have the right to assign this Agreement to its affiliates, successors and assigns.  I expressly consent to be bound by the provisions of this Agreement for the benefit of the Company or any parent, subsidiary or affiliate to whose employ I may be transferred without the necessity that this Agreement be resigned at the time of such transfer.

16.       Disclosure to Future Employers. I will provide a copy of this Agreement to any prospective employer, partner or coventurer prior to entering into an employment, partnership or other business relationship with such person or entity.

17.       Severability.  In case any provisions (or portions thereof) contained in this Agreement shall, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.  If, moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear.

18.       Interpretation.  This Agreement will be deemed to be made and entered into in the State of California, and will in all respects be interpreted, enforced and governed under the laws of the State of California.  I hereby agree to consent to personal jurisdiction of the state and federal courts situated within San Diego County, California for purposes of enforcing this Agreement, and waive any objection that I might have to personal jurisdiction or venue in those courts.

[End of Text]

  

 

  

Exhibit 10.3

I UNDERSTAND THAT THIS AGREEMENT AFFECTS IMPORTANT RIGHTS. BY SIGNING BELOW, I CERTIFY THAT I HAVE READ IT CAREFULLY AND AM SATISFIED THAT I UNDERSTAND IT COMPLETELY.

IN WITNESS WHEREOF, the undersigned has executed this agreement as a sealed instrument as of the date set forth below.

	
Signed:

	
/S/ RANDY BERHOLTZ

	  
	  	
(Employee’s full name)

	
Type or print name:

	
Randy Berholtz

	  	  
	
Social Security Number:

	
XXX-XX-XXX

	  	
Date:

	
5/10/11

	  

  

 

  

Exhibit 10.3

EXHIBIT A

	
To:

	
Apricus Biosciences, Inc.

	
From:

	
____________________

	
Date:

	
_____________________

 

	
SUBJECT:

	
Prior Inventions

The following is a complete list of all inventions or improvements relevant to the subject matter of my employment by the Company that have been made or conceived or first reduced to practice by me alone or jointly with others prior to my engagement by the Company:

No inventions or improvements

See below:

	  
	  
	  
	  
	  

Additional sheets attached

  

 

  

Exhibit 10.3

 

The following is a list of all patents and patent applications in which I have been named as an inventor:

None

See below:Unassociated Document

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN  AND  WILL  NOT  BE  REGISTERED  WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF 1933,   AS   AMENDED,   AND   THE   RULES   AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT)

 

US $40,000

 

PROPELL CORPORATION

6% CONVERTIBLE REDEEMABLE NOTE

 

DUE JUNE 7, 2012

 

FOR VALUE RECEIVED, Propell Corporation (the “Company”) promises to pay to the order of the Prolific Group, LLC and its authorized successors and permitted assigns ("Hold- er"), the aggregate principal face amount of Forty Thousand Dollars Exactly (U.S. $40,000.00) on June 7, 2012 ("Maturity Date") and to pay interest on the principal amount outstanding here- under at the rate of 6% per annum commencing on June 7, 2011.  Interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registra- tion and transfers of this Note.  The principal of, and interest on, this Note are payable at 500 W. Silver Spring Drive, Suite K200, Glendale, WI 53217, initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address ap- pearing on the records of the Company.  The forwarding of such check or wire transfer shall con- stitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer.  In- terest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.

 

This Note is subject to the following additional provisions:

 

1.         This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith.

 

  

  

  

 

2.         The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.

 

3.         This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended ("Act") and applicable state securities laws.  Any attempted transfer to a non-qualifying party shall be treated by the Company as void.  Prior to due present- ment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company's records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary.  Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted ("Notice of Conversion") in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.

 

4.         (a)       The Holder of this Note is entitled, at its option at any time after December 7, 2011, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") without restric- tive legend of any nature, at a conversion price ("Conversion Price") for each share of Common Stock equal to 65% of the lowest closing bid price of the Common Stock as reported on the Na- tional Quotations Bureau Bulletin Board on which the Company’s shares are traded or any ex- change upon which the Common Stock may be traded in the future ("Exchange") for any of the five trading days including the day upon which a Notice of Conversion is received by the Com- pany, provided (i) such Notice of Conversion is delivered by fax or other electronic means to the Company between the hours of 4 P.M. Eastern Standard or Daylight Savings Time and 8 P.M. Eastern Standard or Daylight Savings Time, or (ii) the trading day on which a Notice of Conver- sion is received by the Company provided such Notice of Conversion is delivered by fax or other electronic means to the Company between the hours of 4 P.M. Eastern Standard or Daylight Sav- ings Time and 8 P.M. Eastern Standard or Daylight Savings Time.  The Conversion Price may be adjusted downward if, within 3 business days of the transmittal of the Notice of Conversion to the Company, the Common Stock has a closing bid which is 5% or lower than that set forth in the Notice of Conversion. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion.  Once the Holder has received such shares of Common Stock, the Holder shall surrender to the Company this Note, executed by the Holder evidencing such Holder's in- tention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in blank together with any resolutions of the Company’s board of directors held by the Holder or its counsel authorizing the issuance of any additional shares.  Accrued but unpaid in- terest shall be subject to conversion.   No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share.

 

(b)       Interest on any unpaid principal balance of this Note shall be paid at the rate of 6% per annum.   Interest shall be paid by the Company in Common Stock ("Interest Shares").  The Holder may, at any time, send in a Notice of Conversion to the Company for In- terest Shares based on the formula provided in Section 4(a) above.  The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid prin- cipal balance of this Note to the date of such notice.

 

  

2

  

 

(c)       At any time the Company shall have the option to redeem this Note and pay to the Holder 125% of the unpaid principal amount of this Note, in full. The Company shall give the Holder 5 days written notice and the Holder during such 5 days shall have the option to convert this Note or any part thereof into shares of Common Stock at the Conversion Price set forth in paragraph 4(a) of this Note. Once the Holder has been paid the redemption amount, the Holder shall surrender to the Company this Note, accompanied by proper assignment hereof in blank together with any resolutions of the Company’s board of directors held by the Holder or its counsel authorizing the issuance of any additional shares and such resolutions shall be of no fur- ther force or effect.

 

(d)       Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or ex- change of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a "Sale Event"), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus ac- crued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of ac- crued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.

 

(e)       In case of any Sale Event in connection with which this Note is not re- deemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.

 

5.         No provision of this Note shall alter or impair the obligation of the Com- pany, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.

 

  

3

  

 

6.         The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.

 

7.         The Company agrees to pay all costs and expenses, including reasonable attorneys' fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.

 

8.         If one or more of the following described "Events of Default" shall occur: (a)The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company and such default shall not have been cured within five days; or

 

(b)       Any of the material representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter fur- nished by or on behalf of the Company in connection with the execution and delivery of this Note shall be false or misleading in any respect; or

 

(c)       The Company shall fail to perform or observe, in any respect, any material covenant, term, provision, condition, agreement or obligation of the Company under this Note; or

 

(d)       The Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trus- tee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a peti- tion for  bankruptcy relief, consent to the filing of such petition or have filed against it an invol- untary petition for bankruptcy relief, all under federal or state laws as applicable; or

 

(e)       A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged with- in thirty (30) days after such appointment; or

 

(f)        Any governmental agency or any court of competent jurisdiction at the in- stance of any governmental agency shall assume custody or control of the whole or any substan- tial portion of the properties or assets of the Company; or

 

(g)       One or more money judgments, writs or warrants of attachment, or similar process, in excess of twenty thousand dollars ($20,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or

 

(h)       Bankruptcy, reorganization, insolvency or liquidation proceedings, or other proceedings for relief under any bankruptcy law or any law for the relief of debtors shall be instituted voluntarily by or involuntarily against the Company; or

 

  

4

  

 

(i)       The Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;

 

(j)        If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board; or

 

(j)        The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 4 business days of its receipt of a Notice of Conversion.

 

Then, or at any time thereafter, unless cured, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder's sole discre- tion, the Holder may consider this Note immediately due and payable, without presentment, de- mand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law.  Upon an Event of Default, interest shall be accrue at a de- fault interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law.

 

9.         In case any provision of this Note is held by a court of competent jurisdic- tion to be excessive in scope or otherwise invalid or unenforceable, such provision shall be ad- justed rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.

 

10.       Neither this Note nor any term hereof may be amended, waived, dis- charged or terminated other than by a written instrument signed by the Company and the Holder.

 

11.       The Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information indicating it is no longer a “shell issu- er.  The Company will instruct its counsel upon completion of the requisite holding period to ei- ther (i) write a 144- 3(a)(9) opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.

 

12        This Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed within the State of New York and shall be binding upon the successors and assigns of each party hereto.  The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York.  This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.

 

  

5

  

 

13.       The Company will provide New Venture Attorneys, P.C. six (6) signed and undated resolutions for the issuance of 125,000 shares each (total of 750,000 shares of Com- pany Stock) to be used to secure the conversion obligations under this Note.  New Venture At- torneys shall hold these resolutions and will not submit a resolution until (1) such issuance, along with the number of shares currently held by the Holder would not exceed 4.99% of the outstand- ing shares and (ii) the Holder send the Company a notice of conversion showing the amount of principal and interest paid down and the number of shares converted as a result.  Any shares re- maining after the amounts due under this Note has been fully converted will be returned to the Company and any  resolutions of the Company’s board of directors held by New Venture Attor- neys authorizing the issuance of any additional shares will also be returned to the Company and be of no further force or effect.

.

IN WITNESS WHEREOF, the Company has caused this Note to be duly execut- ed by an officer thereunto duly authorized.

 

Dated: 6/7/11

 

	 	 
PROPELL CORPORATION

	 
	 	 	 	 
	
 

	
By: 

	

	 
	 	 	
Title: Chief Executive Officer

	 

 

  

6

  

 

EXHIBIT A

 

NOTICE OF CONVERSION

 

(To be Executed by the Registered Holder in order to Convert the Note)

 

The undersigned hereby irrevocably elects to convert $______ of the above Note into _____ Shares of Common Stock of Propell Corporation (“Shares”) according to  the conditions set forth in such Note, as of the date written below.

 

If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.

 

	
Date of Conversion:

	  
	
Applicable Conversion Price:

	  
	
Signature:

	  

 

[Print Name of Holder and Title of Signer]

 

	
Address:

	
 

	  	  

 

	
SSN or EIN: 

	  
	
Shares are to be registered in the following name:

	  

 

	
Name:

	  
	
Address:

	  
	
Tel:

	  
	
Fax:

	  
	
SSN or EIN:

	
 

 

Shares are to be sent or delivered to the following account:

 

	
Account Name:

	  
	
Address:

	  

 

  

7

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