Attached files
| file | filename |
|---|---|
| 8-K - Intellect Neurosciences, Inc. | v167847_8k.htm |
| EX-5.2 - Intellect Neurosciences, Inc. | v167847_ex5-2.htm |
| EX-5.3 - Intellect Neurosciences, Inc. | v167847_ex5-3.htm |
Exhibit
5.1
NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
|
Principal
Amount: $[ ]
|
Issue
Date: November [ ], 2009
|
CONVERTIBLE PROMISSORY
NOTE
FOR VALUE
RECEIVED, INTELLECT NEUROSCIENCES, INC., a Delaware corporation (hereinafter
called “Borrower”),
hereby promises to pay to the order of [Name and Address] (the “Holder”), without demand, the
sum of [ ] Dollars ($XX) (“Principal Amount”), with
interest accruing thereon, on February [ ], 2010 (the “Maturity Date”), if not sooner
paid.
This Note
has been issued by the Borrower to the Holder simultaneously with the Borrower’s
issuing to another holder (the “Other Holder”) a convertible
promissory note (the “Other
Note”), dated of even date herewith substantially identical to this Note
except for the principal amount of the Other Note. The following terms shall
apply to this Note:
ARTICLE
I
GENERAL
PROVISIONS
1.1 Interest
Rate. Interest payable on this Note shall accrue at the annual
rate of fourteen percent (14%) from the Issue Date through the Maturity
Date. Interest shall be payable quarterly in arrears on the last day
of each calendar quarter commencing December 31, 2009, and on the Maturity Date,
accelerated or otherwise, when the principal and remaining accrued but unpaid
interest shall be due and payable, or sooner as described below.
1.2 Payment Grace
Period. The Borrower shall not have any grace period to pay
any monetary amounts due under this Note. After the Maturity Date and
during the pendency of an Event of Default (as described in Article III), a
default interest rate of eighteen percent (18%) per annum shall be in
effect.
1.3 Conversion
Privileges. The Conversion Rights set forth in Article II
shall remain in full force and effect immediately from the date hereof and until
the Note is paid in full regardless of the occurrence of an Event of
Default. This Note shall be payable in full on the Maturity Date,
unless previously converted into Common Stock in accordance with Article II
hereof.
1
1.4 Presentment. The
Holder may, at any time, present this Note or any sum payable hereunder to the
Borrower in satisfaction of any sum due or payable by the Holder to Borrower for
any reason whatsoever including but not limited to the payment for securities
subscriptions.
ARTICLE
II
CONVERSION
RIGHTS
The
Holder shall have the right to convert the principal and any interest due under
this Note into Shares of the Borrower's Common Stock, $0.001 par value per share
(“Common Stock”) as set
forth below.
2.1. Conversion into the
Borrower's Common Stock.
(a) The
Holder shall have the right from and after the Issue Date and then at any time
until this Note is fully paid, to convert any outstanding and unpaid principal
portion of this Note, and accrued interest, at the election of the Holder (the
date of giving of such notice of conversion being a “Conversion Date”) into fully
paid and non-assessable shares of Common Stock as such stock exists on the Issue
Date, or any shares of capital stock of Borrower into which such Common Stock
shall hereafter be changed or reclassified (“Conversion Shares”), at the
conversion price as defined in Section 2.1(b)
below. Upon delivery to the Borrower of a completed Notice of
Conversion, a form of which is annexed hereto as Exhibit A, Borrower
shall issue and deliver to the Holder within three (3) business days after the
Conversion Date (such third day being the “Delivery Date”) that number of
shares of Common Stock for the portion of the Note converted in accordance with
the foregoing. The number of shares of Common Stock to be issued upon
each conversion of this Note shall be determined by dividing that portion of the
principal of the Note and interest, if any, to be converted, by the Conversion
Price. Holder will give notice of its decision to exercise its right
to convert its Note, interest, or part thereof by telecopying or otherwise
delivering a completed Notice of Conversion to the Borrower via confirmed
telecopier transmission or otherwise pursuant to Section 6.2 of this
Note. Holder will not be required to surrender the Note until the
Note has been fully converted or satisfied. In the event the Conversion
Shares are electronically transferable, then delivery of the Shares must be made by
electronic transfer provided request for such electronic transfer has been made
by the Holder. A Note representing the balance of the Note not so
converted will be provided by the Borrower to Holder if requested by Holder,
provided Holder delivers the original Note to the Borrower.
(b) Subject
to adjustment as provided in Section 2.1(c)
hereof, the conversion price (“Conversion Price”) per share shall be
$1.75.
(c)
The Conversion Price and number and kind of shares or other securities to be
issued upon conversion determined pursuant to Section 2.1(a), shall
be subject to adjustment from time to time upon the happening of certain events
while this conversion right remains outstanding, as follows:
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A. Merger, Sale of Assets,
etc. If (A) the Borrower effects any merger
or consolidation of the Borrower with or into another entity, (B) the
Borrower effects any sale of all or substantially all of its assets in one or a
series of related transactions, (C) any tender offer or exchange
offer (whether by the Borrower or another entity) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, (D) the Borrower consummates a stock
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with one
or more persons or entities whereby such other persons or entities acquire more
than the 50% of the outstanding shares of Common Stock (not including any shares
of Common Stock held by such other persons or entities making or party to, or
associated or affiliated with the other persons or entities making or party to,
such stock purchase agreement or other business combination), (E) any “person”
or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of
the 1934 Act) is or shall become the “beneficial owner” (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate
Common Stock of the Borrower, or (F) the Borrower effects any reclassification
of the Common Stock or any compulsory share exchange pursuant to which the
Common Stock is effectively converted into or exchanged for other securities,
cash or property (in any such case, a “Fundamental Transaction”), this
Note, as to the unpaid principal portion thereof and accrued interest thereon,
if any, shall thereafter be deemed to evidence the right to convert into such
number and kind of shares or other securities and property as would have been
issuable or distributable on account of such Fundamental Transaction, upon or
with respect to the securities subject to the conversion right immediately prior
to such Fundamental Transaction. The foregoing provision shall
similarly apply to successive Fundamental Transactions of a similar nature by
any such successor or purchaser. Without limiting the generality of
the foregoing, the anti-dilution provisions of this Section shall apply to such
securities of such successor or purchaser after any such Fundamental
Transaction.
B. Reclassification,
etc. If the Borrower at any time shall, by reclassification or
otherwise, change the Common Stock into the same or a different number of
securities of any class or classes that may be issued or outstanding, this Note,
as to the unpaid principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase an adjusted number of
such securities and kind of securities as would have been issuable as the result
of such change with respect to the Common Stock immediately prior to such
reclassification or other change.
C. Stock Splits, Combinations
and Dividends. If the shares of Common Stock are subdivided or
combined into a greater or smaller number of shares of Common Stock, or if a
dividend is paid on the Common Stock in shares of Common Stock, the Conversion
Price shall be proportionately reduced in case of subdivision of shares or stock
dividend or proportionately increased in the case of combination of shares, in
each such case by the ratio which the total number of shares of Common Stock
outstanding immediately after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event. Upon the
occurrence of a Fundamental Transaction, then in addition to the Holder’s rights
described in Section 2.1(c)(A) until twenty (20) business days after the
Borrower notifies the Holder of the occurrence of the Fundamental Transaction,
the Holder may elect to accelerate the Maturity Date as of the date of the
Fundamental Transaction and receive as payment for the then outstanding
Principal Amount, and at the Holder’s election any other amount owed to the
Holder pursuant to the Transaction Documents, an amount equal to the
Black-Scholes Value of the Note as calculated by Bloomberg L.P., and if elected,
such other amounts.
D. Share
Issuance. So long as this Note is outstanding, if the Borrower
shall issue any Common Stock, prior to the complete conversion or payment of
this Note, for a consideration per share that is less than the Conversion Price
that would be in effect at the time of such issue, then, and thereafter
successively upon each such issuance, the Conversion Price shall be reduced to
such other lower issue price. For purposes of this adjustment, the
issuance of any security or debt instrument of the Borrower carrying the right
to convert such security or debt instrument into Common Stock or of any warrant,
right or option to purchase Common Stock shall result in an adjustment to the
Conversion Price upon the issuance of the above-described security, debt
instrument, warrant, right, or option and again upon the issuance of shares of
Common Stock upon exercise of such conversion or purchase rights if such
issuance is at a price lower than the then applicable Conversion Price. Common
Stock issued or issuable by the Borrower for no consideration will be deemed
issuable or to have been issued for $0.001 per share of Common
Stock
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(d) When
ever the Conversion Price is adjusted pursuant to Section 2.1(c) above,
the Borrower shall promptly but not later than the third day after the
effectiveness of the adjustment, mail to the Holder a notice setting forth the
Conversion Price after such adjustment and setting forth a statement of the
facts requiring such adjustment. Failure to timely provide the
foregoing notice is an Event of Default under this Note.
(e) For
so long as this Note is outstanding, Borrower will reserve from its authorized
and unissued Common Stock not less than an amount of Common Stock equal to 150%
of the amount of shares of Common Stock issuable upon the full conversion of
this Note. Borrower represents that upon issuance, such shares will
be duly and validly issued, fully paid and non-assessable. Borrower
agrees that its issuance of this Note shall constitute full authority to its
officers, agents, and transfer agents who are charged with the duty of executing
and issuing stock certificates to execute and issue the necessary certificates
for shares of Common Stock upon the conversion of this Note.
(f) The
Borrower understands that a delay in the delivery of the Conversion Shares in
the form required pursuant to Section 2.1(a) hereof later than the Delivery Date
could result in economic loss to the Holder. As compensation to
Holder for such loss, the Borrower agrees to pay (as liquidated damages and not
as a penalty) to Holder for late issuance of Conversion Shares in the form
required pursuant to Section 2.1(a) hereof upon Conversion of the Note, the
amount of $100 per business day after the Delivery Date for each $10,000 of Note
principal amount and interest (and proportionately for other amounts) being
converted of the corresponding Conversion Shares which are not timely
delivered. The Borrower shall pay any payments incurred under this
Section 2.1(f) upon demand. Furthermore, in addition to any other
remedies which may be available to the Holders, in the event that the Borrower
fails for any reason to effect delivery of the Conversion Shares within seven
(7) business days after the Delivery Date, the relevant Holder will be entitled
to revoke all or part of the Notice of Conversion by delivery of a notice to
such effect to the Borrower whereupon the Borrower and Holder shall each be
restored to their respective positions immediately prior to the delivery of such
notice, except that the damages payable in connection with the Borrower’s
default shall be payable through the date notice of revocation or rescission is
given to the Borrower.
2.2 Method of
Conversion. This Note may be converted by the Holder in whole
or in part as described in Section 2.1(a)
hereof. Upon the conversion of this Note or part thereof, the
Borrower shall, at its own cost and expense, take all necessary action,
including obtaining and delivering an opinion of counsel, to assure that the
Borrower's transfer agent shall issue stock certificates in the name of a Holder
(or its permitted nominee) or such other persons as designated by Holder and in
such denominations to be specified at conversion representing the number of
shares of Common Stock issuable upon such conversion. The Borrower
warrants that no instructions other than these instructions have been or will be
given to the transfer agent of the Borrower's Common Stock and that the
certificates representing such shares shall contain no legend other than a
customary Securities Act of 1933 legend, if applicable. If and when
the Holder sells the Conversion Shares, assuming (i) a registration statement
including such Conversion Shares for registration has been filed with the
Commission, is effective and the prospectus, as supplemented or amended,
contained therein is current and (ii) Holder or its agent confirms in writing to
the transfer agent that Holder has complied with the prospectus delivery
requirements, the Borrower will reissue the Conversion Shares without
restrictive legend and the Conversion Shares will be free-trading, and freely
transferable. In the event that the Conversion Shares are sold in a
manner that complies with an exemption from registration, the Borrower will
promptly instruct its counsel to issue to the transfer agent an opinion
permitting removal of the legend indefinitely if such sale is pursuant to Rule
144(b)(1)(i) promulgated under the 1933 Act, provided that Holder delivers
reasonably requested representations in support of such
opinion.
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2.3.
Maximum
Conversion. The Holder shall not be entitled to convert on a
Conversion Date that amount of the Note in connection with that number of shares
of Common Stock which would be in excess of the sum of (i) the number of shares
of Common Stock beneficially owned by the Holder and its affiliates on a
Conversion Date, (ii) any Common Stock issuable in connection with the
unconverted portion of the Note, and (iii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock of the Borrower on such Conversion
Date. For the purposes of the provision to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. Subject to the foregoing, the Holder shall not be limited
to aggregate conversions of 4.99%. The Holder shall have the
authority and obligation to determine whether the restriction contained in this
Section 2.3
will limit any conversion hereunder and to the extent that the Holder determines
that the limitation contained in this Section applies, the determination of
which portion of the Notes are convertible shall be the responsibility and
obligation of the Holder. The Holder may waive the conversion
limitation described in this Section 2.3, in whole
or in part, upon and effective after 61 days prior written notice to the
Borrower to increase such percentage to up to 9.99%.
2.4.
Mandatory Redemption at
Holder’s Election. In the event (i) the Borrower is prohibited
from issuing Conversion Shares, (ii) upon the occurrence of any other Event of
Default, that continues for more than thirty (30) business days, (iii) a Change
in Control (as defined below), or (iv) of the liquidation, dissolution or
winding up of the Borrower or any Material Subsidiary (For purposes of this
Note, “Material Subsidiary” means, with
respect to any entity at any date from the Issue Date until this Note is fully
paid, any direct or indirect corporation, limited or general partnership,
limited liability company, trust, estate, association, joint venture or other
business entity of which (A) more than 30% of (i) the
outstanding capital stock having ordinary voting power to elect a majority of
the board of directors or other managing body of such entity, (ii) in the
case of a partnership or limited liability company, the interest in the capital
or profits of such partnership or limited liability company or (iii) in the
case of a trust, estate, association, joint venture or other entity, the
beneficial interest in such trust, estate, association or other entity business
is, at the time of determination, owned or controlled directly or indirectly
through one or more intermediaries, by Borrower, or (B) is under the actual
control of the Borrower.), then at the Holder's election, the Borrower must pay
to Holder not later than ten (10) business days after request by Holder, a sum
of money determined by multiplying up to the outstanding principal amount of the
Note designated by Holder by 115%, plus accrued but unpaid interest and any
other amounts due under this Note (“Mandatory Redemption
Payment”). The Mandatory Redemption Payment must be received by Holder on
the same date as the Conversion Shares otherwise deliverable or within ten (10)
business days after request, whichever is sooner (“Mandatory Redemption Payment
Date”). Upon receipt of the Mandatory Redemption Payment, the
corresponding Note principal, interest and other amounts will be deemed paid and
no longer outstanding. The Holder may rescind the election to receive
a Mandatory Redemption Payment at any time until such payment is actually
received. For purposes of this Section 2.4, “Change in Control” shall mean
(i) the Borrower becoming a subsidiary of another entity (other than
a corporation formed by the Borrower for purposes of reincorporation in another
U.S. jurisdiction), (ii) the sale, lease or transfer of substantially all the
assets of the Borrower or its Subsidiaries taken as a whole, or (iii) a majority
of the members of the Borrower’s board of directors as of the Issue Date no
longer serving as directors of the Borrower, except as a result of natural
causes.
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2.5.
Injunction Posting of
Bond. In the event a Holder shall elect to convert this Note
or part thereof, the Borrower may not refuse conversion based on any claim that
Holder or any one associated or affiliated with Holder has been engaged in any
violation of law, or for any other reason, unless, a final non-appealable
injunction from a court made on notice to Holder, restraining and or enjoining
conversion of all or part of this Note shall have been sought and obtained by
the Borrower and the Borrower has posted a surety bond for the benefit of
Holder in the amount of 120% of the outstanding principal and accrued but unpaid
interest of the Note, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to Holder to the extent the judgment or decision is in Holder’s favor; provided, however, that,
notwithstanding the provisions of this Section 2.5, the Borrower shall be
permitted to refuse conversion in accordance with, and during the pendency of,
any temporary restraining order forbidding such conversion issued by a court of
competent jurisdiction which temporary restraining order was not obtained or
supported by the Borrower or any affiliate of the Borrower.
2.6.
Buy-In. In
addition to any other rights available to Holder, if the Borrower fails to
deliver to Holder the Conversion Shares by the Delivery Date and if after the
Delivery Date Holder or a broker on Holder’s behalf purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
bona fide arms-length
sale by Holder to a purchaser not affiliated with Holder of the Common Stock
which Holder was entitled to receive upon such conversion (a “Buy-In”), then the Borrower
shall pay to Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (A) Holder's total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased
exceeds (B) the aggregate principal and/or interest amount of the Note for which
such conversion request was not timely honored together with interest thereon at
a rate of 15% per annum, accruing until such amount and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated damages and
not as a penalty). For example, if a Holder purchases shares of
Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted conversion of $10,000 of Note principal and/or interest,
the Borrower shall be required to pay Holder $1,000 plus interest. Holder
shall provide the Borrower written notice and evidence reasonably satisfactory
to the Borrower indicating the amounts payable to Holder in respect of the
Buy-In.
2.7.
144
Default. At any time commencing six months after the Issue
Date, in the event the Holder is not permitted to sell any of the Conversion
Shares without any restrictive legend or if such sales are permitted but subject
to volume limitations or further restrictions on resale as a result of the
unavailability to Holder of Rule 144(b)(1)(i) under the 1933 Act or any
successor rule and provided that the Holder is not at the time of such sale, and
has not been at any time during the 90 days preceding such sale, an “affiliate”
of the Borrower as such term is defined under such Rule 144 (a “144 Default”), for any reason
including but not limited to failure by the Borrower to file quarterly, annual
or any other filings required to be made by the Borrower by the required filing
dates, or the Borrower’s failure to make information publicly available which
would allow Holder’s reliance on Rule 144 in connection with sales of Conversion
Shares, except due to a change in current applicable securities laws, then the
Borrower shall pay Holder as liquidated damages and not as a penalty for each
thirty days (or such lesser pro-rata amount for any period less than thirty
days) an amount equal to two percent (2%) of the then outstanding principal
amount of this Note. Liquidated Damages shall not be payable pursuant
to this Section 2.7 in connection with Conversion Shares for such times as such
Conversion Shares may be sold by the holder thereof without any legend or volume
or other restrictions pursuant to Section 144(b)(1)(i) of the 1933 Act or
pursuant to an effective registration statement.
ARTICLE
III
PREPAYMENT
3.1. Redemption. This
Note may not be prepaid, redeemed or called without the consent of the
Holder.
6
ARTICLE
IV
EVENT
OF DEFAULT
The
occurrence of any of the following events of default (“Event of Default”) shall, at
the option of the Holder hereof, make all sums of principal and interest then
remaining unpaid hereon and all other amounts payable hereunder immediately due
and payable, upon demand, without presentment or grace period, all of which
hereby are expressly waived, except as set forth below:
4.1 Failure to Pay Principal or
Interest. The Borrower fails to pay any installment of
principal, interest or other sum due under this Note when due.
4.2 Breach of
Covenant. The Borrower or any Subsidiary breaches any material
covenant or other term or condition of this Note in any material respect and
such breach, if subject to cure, continues for a period of five (5) business
days after written notice to the Borrower from the Holder.
4.3 Breach of Representations
and Warranties. Any material representation or warranty of the
Borrower made herein, or in any agreement, statement or certificate given in
writing pursuant hereto or in connection therewith shall be false or misleading
in any material respect as of the date made and the Issue Date.
4.4 Liquidation. Any
dissolution, liquidation or winding up of Borrower or any Material Subsidiary or
any substantial portion of their business taken as a whole.
4.5 Cessation of
Operations. Any cessation of operations by Borrower or any
Material Subsidiary.
4.6 Maintenance of
Assets. The failure by Borrower or any Subsidiary to maintain
any material intellectual property rights, personal, real property or other
assets which are necessary to conduct its business (whether now or in the
future).
4.7 Receiver or
Trustee. The Borrower or any Material Subsidiary shall make an
assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business; or such a receiver or trustee shall otherwise be
appointed.
4.8 Judgments. Any
money judgment, writ or similar final process shall be entered or filed against
Borrower or any Subsidiary or any of its property or other assets for more than
$250,000, unless stayed vacated or satisfied within thirty (30)
days.
4.9 Bankruptcy. Bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings or
relief under any bankruptcy law or any law, or the issuance of any notice in
relation to such event, for the relief of debtors shall be instituted by or
against the Borrower or any Subsidiary.
4.10 Delisting. Delisting
of the Common Stock from the OTC Bulletin Board (the “Principal Market”);
failure to comply with the requirements for continued listing on a Principal
Market for a period of five (5) consecutive trading days; or notification from a
Principal Market that the Borrower is not in compliance with the conditions for
such continued listing on such Principal Market.
4.11 Non-Payment. A
default by the Borrower or any Subsidiary under any one or more obligations in
an aggregate monetary amount in excess of $100,000 for more than twenty days
after the due date, unless the Borrower or such Subsidiary is contesting the
validity of such obligation in good faith and has segregated cash funds equal to
not less than one-half of the contested amount; provided, however, that the
continuation of a default that first occurred prior to the Issue Date shall not
constitute an Event of Default under this Note.
7
4.12 Stop
Trade. An Securities and Exchange Commission (“SEC”) or
judicial stop trade order or Principal Market trading suspension that lasts for
five or more consecutive trading days.
4.13 Failure to Deliver Common
Stock or Replacement Note. Borrower's failures to timely
deliver Common Stock to the Holder pursuant to and in the form required by this
Note or, if required, a replacement Note.
4.14 Reservation
Default. Failure by the Borrower to have reserved for issuance
upon conversion of this Note sufficient shares as required by Section 2.1(e) of
this note.
4.15 Financial Statement
Restatement. The restatement after the date hereof of any
financial statements filed by the Borrower with the SEC for any date or period
from two years prior to the Issue Date of this Note and until this Note is no
longer outstanding, if the result of such restatement would, by comparison to
the unrestated financial statements, have constituted a Material Adverse
Effect
4.16 Reverse
Splits. The Borrower effectuates a reverse split of its Common
Stock without twenty (20) days prior written notice to the Holder; provided, however, that
effectuation of a reverse split of the Common Stock in the range of 1:15 to
1:50, which was approved by the Board of Directors of the Borrower prior to the
Issue Date, shall not constitute an Event of Default under this
Note.
4.17 Executive Officers Breach of
Duties. Any of Borrower’s named executive officers or
directors is convicted of a violation of securities laws, or a settlement in
excess of $250,000 is reached by any such officer or director relating to a
violation of securities laws, breach of fiduciary duties or
self-dealing.
4.18 Notification
Failure. A failure by Borrower to notify Holder of anything
which Borrower is obligated to notify Holder of pursuant to the terms of this
Note.
4.19 Cross
Default. A default, that occurs subsequent to the Issue Date,
by the Borrower of a material term, covenant, warranty or undertaking of any
other agreement to which the Borrower and Holder are parties, or the occurrence
of a material event of default under any such other agreement to which Borrower
and Holder are parties which is not cured after any required notice and/or cure
period. The foregoing prospective limitation of an Event of Default
under this section 4.19 to prospective occurrences shall not apply to any other
Event of Default under this Note.
4.20 Required Reports
Restatement. The restatement after the date hereof of any
report, including but not limited to form a 10-K, 10-Q or 8-K, filed by the
Borrower with the SEC for any date or period from one year prior to the Issue
Date of this Note and until this Note is no longer outstanding, if the result of
such restatement would, by comparison to the unrestated report, have constituted
a Material Adverse Effect. For purposes of this Note, a “Material Adverse Effect” shall
mean a material adverse effect on the financial condition, results of
operations, prospects, properties or business of the Borrower and its
Subsidiaries taken as a whole.
4.21 Other Note
Default. The occurrence of an event of default under
the Other Note.
ARTICLE
V
CONVERSION
OF THE SERIES B PREFERRED SHARES
5.1 Shareholder
Letter. Borrower agrees to promptly use its best efforts to
obtain the consent of the holders of Borrower's Common Stock for the proposals
set forth in the letter to shareholders substantially in the form annexed hereto
as Exhibit B
(the “Shareholder Letter”). Borrower will promptly prepare, file and
distribute all necessary filings and notices with the SEC, other governmental
bodies, holders of Borrower's Common Stock and Series B Preferred Stock and
others whose consent, approval or notification is required to effectuate the
proposals in the Shareholder Letter.
8
5.2 Series B Consent. Provided
Proposal 1 of the Shareholder Letter is adopted by the Borrower’s shareholder,
in the event Borrower, Holder and/or any other person obtains the consent of
holders of not less than eighty percent (80%) of the outstanding Series B
Preferred Stock to convert such holders’ Series B Preferred Stock as set forth
in Exhibit C, then Borrower agrees that it will promptly effectuate such
conversion of the Series B Preferred Stock. In order to effectuate the
terms of this Section 5.2 the Borrower will promptly deliver to all the holders
of Series B Preferred Stock a letter substantially in the form attached hereto
as Exhibit
C.
5.3 Article V
Default. A default by Borrower under this Article V shall be
an Event of Default under this Note and shall also permit Holder at the Holder’s
election, to convert all or a part of this Note and all or a part of any Series
B Preferred Stock held by Holder at a conversion rate of $0.08 per share of
Common Stock, subject to adjustment in the same manner as described in Section
2.1(c) of this Note.
5.4 Enforcement. The
provision of this Article V are for the benefit of the Holder as a holder of the
Borrower’s Series B Preferred, will survive the full satisfaction of this Note
and are enforceable by Holder.
ARTICLE
VI
MISCELLANEOUS
6.1 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 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.
6.2 Notices. All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the first business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be: (i) if to the Borrower to: Intellect
Neurosciences, Inc., 7 West 18th
Street New York, NY 10011, Attn: Elliot Maza, CEO, facsimile: (212)
448-9600, with a copy to: Trachtenberg, Rodes & Friedberg LLP, 545 Fifth
Avenue, Suite 620, New York, NY 10017, Attn: David Trachtenberg, Esq.,
facsimile: (212) 972-7581; and (ii) if to the Holder, to the name, address and
facsimile number set forth on the front page of this Note, with a copy by fax
only to Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New
York 10176, facsimile: (212) 697-3575.
9
6.3 Amendment
Provision. The term “Note” and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or
supplemented.
6.4 Assignability. This
Note shall be binding upon the Borrower and its successors and assigns, and
shall inure to the benefit of the Holder and its successors and
assigns. The Holder is permitted to assign this Note at it sole
discretion. The Borrower may not assign its obligations under this
Note.
6.5 Cost of
Collection. If default is made in the payment of this Note,
Borrower shall pay the Holder hereof reasonable costs of collection, including
reasonable attorneys’ fees.
6.6 Holder’s Attorney’s
Fees. The Borrower shall pay upon the execution of this Note
$5,000, to Grushko & Mittman, P.C., for its work in representing the Holder
and the Other Holder pertaining to the issuance of Note.
6.7 Governing
Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York without regard to conflicts of
laws principles that would result in the application of the substantive laws of
another jurisdiction. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement must be brought
only in the civil or state courts of New York or in the federal courts located
in the State and county of New York. Both parties and the individual
signing this Agreement on behalf of the Borrower agree to submit to the
jurisdiction of such courts. The prevailing party shall be entitled
to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Note 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 unenforceability of any other provision of this Note.
Nothing contained herein shall be deemed or operate to preclude the Holder
from bringing suit or taking other legal action against the Borrower in any
other jurisdiction to collect on the Borrower's obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other decision in favor of the Holder. This Note shall be deemed an
unconditional obligation of Borrower for the payment of money and, without
limitation to any other remedies of Holder, may be enforced against Borrower by
summary proceeding pursuant to New York Civil Procedure Law and Rules Section
3213 or any similar rule or statute in the jurisdiction where enforcement is
sought. For purposes of such rule or statute, any other document or
agreement to which Holder and Borrower are parties or which Borrower delivered
to Holder, which may be convenient or necessary to determine Holder’s rights
hereunder or Borrower’s obligations to Holder are deemed a part of this Note,
whether or not such other document or agreement was delivered together herewith
or was executed apart from this Note.
6.8 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 rate 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 applicable law, any payments in excess of such
maximum rate shall be credited against amounts owed by the Borrower to the
Holder and thus refunded to the Borrower.
10
6.9 Non-Business
Days. Whenever any payment or any action to be made shall be
due on a Saturday, Sunday or a public holiday under the laws of the State of New
York, such payment may be due or action shall be required on the next succeeding
business day and, for such payment, such next succeeding day shall be included
in the calculation of the amount of accrued interest payable on such
date.
6.10 Shareholder
Status. The Holder shall not have rights as a shareholder of
the Borrower with respect to unconverted portions of this
Note. However, the Holder will have the rights of a shareholder of
the Borrower with respect to the Shares of Common Stock to be received after
delivery by the Holder of a Conversion Notice to the Borrower.
IN WITNESS WHEREOF, Borrower
has caused this Note to be signed in its name by an authorized officer as of the
[ ]th day
of November, 2009.
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INTELLECT
NEUROSCIENCES, INC.
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By:
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Name:
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Title:
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WITNESS:
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11
Exhibit
A
NOTICE OF
CONVERSION
(To be
executed by the Registered Holder in order to convert the Note)
The
undersigned hereby elects to convert $_________ of the principal and $_________
of the interest due on the Note issued by INTELLECT NEUROSCIENCES, INC. on
November ___, 2009 into Shares of Common Stock of INTELLECT NEUROSCIENCES, INC.
(the “Borrower”) according to the conditions set forth in such Note, as of the
date written below.
Date of
Conversion:______________________________________________________________________________
Conversion
Price:________________________________________________________________________________
Number of Shares of Common Stock Beneficially Owned on
the Conversion Date: Less than 5% of the outstanding Common Stock of
INTELLECT NEUROSCIENCES, INC.
Shares To
Be
Delivered:___________________________________________________________________________
Signature:______________________________________________________________________________________
Print
Name:_____________________________________________________________________________________
Address:_______________________________________________________________________________________
______________________________________________________________________________________
12
Exhibit
B
Shareholder
Letter
13
Exhibit
C
Letter
to Holders of Series B Preferred Stock
14