Contract
Exhibit
10.5
THIS
SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OR EXERCISE OF HEREOF
HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON CONVERSION OR EXERCISE HEREOF MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT HERETO OR THERETO UNDER SAID ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO DR. TATTOFF, LLC THAT SUCH
REGISTRATION IS NOT REQUIRED.
|
Certificate
No. PN-[__]
|
|
|
Principal
Amount $150,000
|
Issue
Date: July 20, 2007
|
FOR
VALUE
RECEIVED, DrTattoff, LLC, a California limited liability company, located at
0000 Xxxxxxxx Xxxx, Xxxxxxx Xxxxx XX 00000 (hereinafter called “Borrower”),
hereby promises to pay to Xxxx
Xxxxxxx, located at 00
Xxxxx
Xxxxxxx, Xx. Xxxxxx Beach, FL 32548 (the “Holder”),
without demand, the sum of One Hundred and Fifty Thousand Dollars ($150,000),
plus all accrued and unpaid interest, on the earlier of (i) the date which
is
180 days following Issue Date, or (ii) the date which is two (2) days after
the
effective date of the Merger (as defined below) (the “Maturity
Date”),
unless the Holder elects to convert this Note as set forth in Article II.
ARTICLE
I
GENERAL
PROVISIONS
1.1 Interest
Rate.
Interest on the outstanding principal balance of this Note shall accrue,
beginning from the date hereof, at a rate of 10% per annum, compounded
quarterly. Interest on the outstanding principal balance of the Note shall
be
computed on the basis of the actual number of days elapsed and a year of three
hundred and sixty (360) days and shall be payable on the Maturity Date, upon
earlier prepayment of this Note or in the form of shares of New Securities
or
Conversion Shares (each as defined below), upon conversion of this Note as
set
forth in Section 1.2 below.
1.2 Conversion
Privileges.
The
Note shall be payable in full on the Maturity Date, unless previously converted
into New Securities or Conversion Shares, in accordance with Article II
hereof.
1.3 Prepayment.
This
Note shall not be subject to any prepayment penalty in the event the Company
determines in its sole discretion to prepay all or any portion of this
Note.
1.4 In
no
event shall the Borrower be obligated to pay interest and fees in excess of
the
amount permitted by law. Regardless of any provision herein or in any agreement
made in connection herewith, Holder shall never be entitled to receive, charge
or apply, as interest on any indebtedness relating hereto, any amount in excess
of the maximum amount of interest permissible under applicable law. If Holder
ever receives, collects or applies any such excess, it shall be deemed a partial
repayment of principal and treated as such; and if principal is paid in full,
any remaining excess shall be refunded to the Borrower. This paragraph shall
control every other provision hereof and of any other agreement made in
connection herewith.
ARTICLE
II
CONVERSION
RIGHTS
The
Holder shall have the right to convert the principal and any interest due under
this Note into New Securities or Conversion Shares as set forth
below.
2.1. Xxxxxxxx's
Proposed Merger. The Borrower intends to merge itself with and into Lifesciences
Opportunities, Inc., a Delaware corporation (the "Merger"). The rights provided
in this Article II shall not be exercisable unless and until completion of
the
Merger. For purposes of this Article II, the term Borrower shall refer to the
surviving entity after completion of the Merger.
2.2 Conversion
into the Borrower’s New Securities.
(a)
Conversion
Right.
Provided that the Merger is consummated, upon written notice to the Borrower,
the Holder may, at its sole option, at the effective date of the Merger (as
defined below), or at any time thereafter until the principal balance of this
Note, together with all accrued and unpaid interest, is paid in full, convert
the entire outstanding principal hereunder and all accrued and unpaid interest
thereon into such number of shares of fully paid and non-assessable equity
securities issued by the Borrower to its members in connection with the
conversion of their Membership Interests in the Company pursuant to the Merger
(the “New
Securities”),
that
is equal to the quotient of (A) the outstanding principal hereunder plus
all
accrued and unpaid interest thereon divided
by
(B) the
Conversion Price (as defined below). In addition, in connection with such
conversion, the Holder shall receive rights as a purchaser and holder of New
Securities (including, without limitation, customary registration rights) no
less favorable in the aggregate and in any single instance than those granted
to
any other purchaser of New Securities. The Borrower agrees that it has no right
to prevent the Holder from effecting such conversion without the Holder’s
consent, whether by attempting to prepay this Note (whether or not there shall
have been a default hereunder) or otherwise. The “Conversion
Price”
shall
(i) if the New Securities are common stock, par value $0.001 per share (the
“Common
Stock”),
be
equal to the Common Stock Equivalent Price (as defined below) or (ii) if the
New
Securities are convertible capital stock, the Conversion Price shall be an
amount equal to the Common Stock Equivalent Price multiplied by the number
of
shares of Common Stock into which one share of such convertible capital stock
is
convertible. The “Common
Stock Equivalent Price”
shall
initially be the closing offering price in the Next Financing and shall be
adjusted as set forth in Section 2.2(d) below.
(b)
Fractional
Shares.
Upon the
conversion of this Note, fractional shares representing New Securities shall
be
issued only if fractional shares are issuable in connection with the Next
Financing to investors generally. If no fractional shares are so issuable,
then
with respect to any fraction of a share called for upon the conversion of this
Note or any portion hereof, a cash amount equal to such fraction shall be paid
to the Holder.
(c)
Conversion
Mechanics.
(i)
Notice
of Merger.
The
Borrower shall notify the Holder in writing not less than 5 business days prior
to the expected effective date of the Merger (the “Effective
Date”).
Such
notice shall include all of the material terms of the Merger and shall include,
as promptly as such documents are available, then-current drafts of the
transaction documents for the Merger. Following such notice, the Borrower shall
provide the Holder with any transaction documents or revised drafts thereof
at
the same time that such transaction documents or drafts are made generally
available to Members of the Company in connection with the Merger.
2
(ii)
Conversion
Notice.
The
right of conversion shall be exercised by the Holder by delivering to the
Borrower, no later than the business day prior to the date of which this Note,
including all accrued and unpaid interest thereon, is paid in full, a conversion
notice substantially in the form attached hereto as Exhibit
A
(the
“Conversion
Notice”),
appropriately completed and duly signed, and by surrender not later than five
(5) business days thereafter of this Note (or if the original Note has been
lost
or destroyed, an affidavit of Holder in customary form certifying as to such
loss or destruction). Promptly after the receipt of the Conversion Notice and
the original Note (or if the original Note has been lost or destroyed, an
affidavit of Holder in customary form certifying as to such loss or
destruction), the Borrower shall issue and deliver, or cause to be delivered,
to
the Holder, a certificate or certificates for the number of shares of New
Securities issuable to such Holder in accordance with Section 2.2(a). Such
conversion shall be deemed to have been effected as of the date of consummation
of surrender of the Original Note, or affidavit, as the case may be (the
“Conversion
Date”),
and
the person or persons entitled to receive the shares of New Securities issuable
upon conversion shall be treated for all purposes as the holder or holders
of
record of such shares as of the close of business on the Conversion
Date.
(d)
The
number and kind of shares or other securities to be issued upon conversion
determined pursuant to Section 2.2(a), shall be subject to adjustment from
time
to time upon the happening of certain events while this conversion right remains
outstanding, as follows:
(i) Merger,
Sale of Assets, etc.
If the
Borrower at any time shall consolidate with or merge into or sell or convey
all
or substantially all its assets to any other corporation, this Note, as to
the
unpaid principal portion thereof and accrued interest thereon, shall thereafter
be deemed to evidence the right to purchase such number and kind of shares
or
other securities and property as would have been issuable or distributable
on
account of such consolidation, merger, sale or conveyance, upon or with respect
to the securities subject to the conversion or purchase right immediately prior
to such consolidation, merger, sale or conveyance. The foregoing provision
shall
similarly apply to successive 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 consolidation, merger, sale or
conveyance.
(ii) 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.
(iii) 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 Common Stock Equivalent 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.
(e) Whenever
any action is taken pursuant to Section 2.2(d) above, the Borrower shall
promptly 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.
3
2.3 Most
Favored Nations Conversion Right.
(a) At
any
time after the Effective Date until this Note, including all accrued and unpaid
interest hereon, is paid in full, if the Borrower completes an offering of
equity securities, then, on the date of the consummation by the Borrower of
such
offering of the Borrower’s equity securities (which for purposes of this Section
2.3 includes any securities convertible into or exercisable for any of the
Borrower’s capital stock, but does not include any Exempt Securities, as defined
below), this Note and all accrued and unpaid interest thereon shall be
convertible, in whole or in part and at the option of the Holder, into a number
of shares of such equity securities equal to the quotient obtained by dividing
(i) the principal amount of this Note being converted by the Holder (together
with all accrued and unpaid interest thereon), by (ii) the price per security
at
which such equity securities are sold to other investors in such offering.
The
Borrower shall notify the Holder of the proposed closing date of any such
offering no less than 3 business days, but no more than 5 business days, prior
to such date.
(b) In
the
event that the Holder elects to convert all or a portion of the Note pursuant
to
Section 2.3(a), the Holder shall surrender the Note to the Company, along with
a
written notice to the Company, in the manner specified in Section 2.1(c)(ii)
hereof, at least 1 day prior to the date on which conversion is sought to become
effective (the “MFN Conversion
Date”)
that
such Holder elects to convert the Note or a specified portion thereof on the
MFNConversion Date, and such notice shall specify the names (and addresses)
in
which certificates for Conversion Shares (as defined below) are to be
issued.
(c) If
the
Note is surrendered for conversion pursuant to Section 2.3(b), then promptly
after the MFN Conversion Date, the Borrower shall deliver or cause to be
delivered to the Holder certificates representing the number of fully paid
and
non-assessable shares of the applicable equity securities (the “Conversion
Shares”),
into
which the Note may be converted. Such conversion shall be deemed to have been
made immediately prior to the close of business on the MFN Conversion Date,
so
that the rights of the Holder as a holder of the Note shall cease with respect
to the Note at such time (including, without limitation, the right to receive
the principal amounts of the Note other than in the form of Conversion Shares),
interest shall cease to accrue hereon and the person or persons entitled to
receive the Conversion Shares deliverable upon conversion of the Note shall
be
treated for all purposes as having become the record holders of such Conversion
Shares at such time. If this Note shall have been converted in part, the
Borrower shall, at the time of delivery of the certificate or certificates
representing Conversion Shares, deliver to the Holder a new Note evidencing
the
rights of the Holder with respect to the remaining principal amount (and all
accrued and unpaid interest thereon), which new Note shall in all other respects
be identical with this Note, or at the request of the Holder, appropriate
notation may be made on this Note and the same returned to the
Holder.
(d) “Exempt
Securities”
means
any shares of Common Stock issued by the Borrower after the date of issuance
of
this Note that are: (i) shares issued or issuable upon the exercise of any
warrants or options outstanding as of the original date of the issuance of
this
Note (including any warrants issued in connection with the issuance of the
Promissory Notes); (ii) shares of Common Stock or common stock equivalents
issued in connection with a bona-fide strategic transaction, partnership, joint
venture or acquisition or (iii) shares of Common Stock issued in connection
with
any stock-based compensation plans of the Borrower, or any issuance of Common
Stock, stock awards or options under, or the exercise of options granted
pursuant to, any Board approved employee stock option or similar plan for the
issuance of options or capital stock of the Borrower.
4
ARTICLE
III
EVENT
OF DEFAULT
3.1 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:
(a) Failure
to Pay Principal or Interest.
The
Borrower fails to pay principal, interest or other sum due under this Note
when
due and such failure continues for a period of five (5) business days after
the
due date.
(b) Breach
of Covenant.
The
Borrower breaches any material covenant or other term or condition of the
Subscription Agreement dated as of the date hereof by and between the Borrower
and the Holder (the "Subscription Agreement") or this Note in any material
respect and such breach, if capable of cure, continues for a period of thirty
(30) days after written notice to the Borrower from the Holder.
(c) Breach
of Representations and Warranties.
Any
material representation or warranty of the Borrower made herein, in the
Subscription Agreement, 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 Closing Date.
(d) Receiver
or Trustee.
The
Borrower shall make an assignment for the benefit of creditors, or apply for
or
consent to the appointment of a receiver or trustee for it or for a substantial
part of its property or business; or such a receiver or trustee shall otherwise
be appointed.
(e) Judgments.
Any
money judgment, writ or similar final process shall be entered or filed against
Borrower or any of its property or other assets for more than $100,000, and
shall remain unvacated, unbonded or unstayed for a period of thirty (30)
days.
(f) 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 and if instituted against Borrower are
not
dismissed within 45 days of initiation.
(g) Failure
to Deliver.
Xxxxxxxx’s failure to timely deliver New Securities or Conversion Shares to the
Holder pursuant to and in the form required by this Note.
3.2 Remedies
Upon An Event of Default.
If an
Event of Default shall have occurred and shall be continuing, the Holder of
this
Note may at any time at its option, declare the entire unpaid principal balance
of this Note, together with all interest accrued hereon, due and payable, and
thereupon, the same shall be accelerated and so due and payable; provided,
however,
that
upon the occurrence of an Event of Default described in Section 3.1(f), without
presentment, demand, protest, or notice, all of which are hereby expressly
unconditionally and irrevocably waived by the Borrower, the outstanding
principal balance and accrued interest hereunder shall be automatically due
and
payable. In addition, if an Event of Default shall have occurred and be
continuing, the
Holder
may
exercise or otherwise enforce any one or more of the Holder’s rights, powers,
privileges, remedies and interests under this Note or applicable law and
institute
such actions or proceedings in law or equity as it shall deem expedient for
the
protection of its rights and may prosecute and enforce its claims against all
assets and property of the Borrower, and in connection with any such action
or
proceeding shall be entitled to receive from the Borrower, payment of the
principal amount of this Note plus accrued interest to the date of payment
plus
reasonable expenses of collection, including, without limitation, attorneys'
and
experts' fees and expenses.
No
course of delay on the part of the Holder shall operate as a waiver thereof
or
otherwise prejudice the right of the Holder. No remedy conferred hereby shall
be
exclusive of any other remedy referred to herein or now or hereafter available
at law, in equity, by statute or otherwise.
5
ARTICLE
IV
MISCELLANEOUS
4.1 Failure
or Indulgence Not Waiver.
No
failure or delay on the part of 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.
4.2 Notices.
All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) 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 second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be the addresses set forth in the Subscription
Agreement.
4.3 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. This
Note may not be assigned by the Holder without the prior written consent of
the
Company, except to an Affiliate of Holder that is an “accredited investor” as
such term is defined in Regulation D under the 1933 Act.
4.4 Cost
of Collection.
If
default is made in the payment of this Note, Borrower shall pay the Holder
hereof its reasonable costs of collection, including reasonable attorneys’
fees.
4.5 Remedies,
Characterizations, Other Obligations, Breaches and Injunctive
Relief.
The
remedies provided in this Note shall be cumulative and in addition to all other
remedies available under this Note, at law or in equity (including, without
limitation, a decree of specific performance and/or other injunctive relief),
no
remedy contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing herein shall limit a Holder’s
right to pursue actual damages for any failure by the Borrower to comply with
the terms of this Note. Amounts set forth or provided for herein with respect
to
payments and the like (and the computation thereof) shall be the amounts to
be
received by the Holder. The Borrower acknowledges that a breach by it of its
obligations hereunder will cause irreparable and material harm to the Holder
and
that the remedy at law for any such breach may be inadequate. Therefore the
Borrower agrees that, in the event of any such breach or threatened breach,
the
Holder shall be entitled, in addition to all other available rights and
remedies, at law or in equity, to such equitable relief, including but not
limited to an injunction restraining any such breach or threatened breach,
without the necessity of showing economic loss and without any bond or other
security being required.
6
4.6 Payment
Not Subject to Set-Off.
The
Borrower acknowledges that it has no and will not be permitted to assert any
right of set-off or counterclaim with respect to its obligation to pay the
principal and interest as of the Maturity Date as set forth herein and hereby
waives any and all defenses it may have in the future with respect to such
payment, except to the extent that (a) this Note is converted in accordance
with
Article II prior to the Maturity Date, (b) Borrower’s defense is that Borrower
has paid all principal and interest hereon in accordance with the terms hereof
or (c) the Holder has expressly waived its right to such payment in a writing
signed by Xxxxxx.
4.7 Governing
Law.
This
Note shall be governed by and construed in accordance with the laws of the
State
of California. Any action brought by either party against the other concerning
the transactions contemplated by this Note shall be brought only in the state
or
federal courts of located in the state of California. The prevailing party
shall
be entitled to recover from the other party its reasonable attorney’s fees and
costs.
4.8 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 all the rights
of a shareholder of the Borrower with respect to the New Securities and/or
Conversion Shares to be received by Holder after delivery by the Holder of
a
Conversion Notice and
effectiveness of conversion in accordance with this Note.
4.9 Waiver
of Presentment.
The
Borrower expressly waives presentment, protest, demand, notice of dishonor,
presentment for the purpose of accelerating maturity, and diligence in
collection.
[Signature
page follows.]
7
IN
WITNESS WHEREOF,
Xxxxxxxx has caused this Note to be signed in its name by an authorized officer
as of the 20th day of July, 2007.
|
DRTATTOFF,
LLC
|
|
|
By:
|
/s/
Xxxxx Xxxxx
|
|
Name:
|
Xxxxx
Xxxxx
|
|
Title:
|
CEO
|
8
EXHIBIT
A
FORM
OF
CONVERSION NOTICE
(To
be
executed by the Holder in order to convert the Note.)
The
undersigned hereby irrevocably elects to convert the Convertible Promissory
Note
(the “Note”) of DrTattoff, LLC, a California limited liability company (the
“Company”),
held
by the undersigned into shares of [New Securities in connection with the Next
Financing][Conversion Shares], according to the terms and conditions of the
Note
and the conditions hereof. The undersigned hereby requests that certificates
for
the shares of New Securities or Conversion Shares to be issued to the
undersigned pursuant to this Conversion Notice be issued in the name of, and
delivered to, the undersigned as indicated below. A copy of the Note being
converted is attached hereto (and the original Note shall be transmitted to
the
Corporation pursuant to the terms thereof). All capitalized terms used in this
Conversion Notice, but not otherwise defined herein shall have the meanings
assigned in the Note. Execution and delivery of this Conversion Notice by
facsimile shall be valid an binding for all purposes and shall be effective
upon
such facsimile transmission.
| Date of Notice | ||
| Conversion Information:[NAME OF XXXXXX] | ||
| Address of Holder: | ||
| Name of Holder | ||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
Note:
Subject to the terms and conditions of the Note, conversion shall be effected
upon consummation of the applicable financing and the New Securities or
Conversion Shares shall be delivered to Holder only after receipt by the Company
of the original Note or an affidavit of loss in customary
form.
9
