Exhibit 4.1
NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE OFFERED, SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED
("TRANSFERRED") IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. IN THE ABSENCE OF SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE
TRANSFERRED (OTHER THAN TO AN AFFILIATE OR MEMBER OF THE HOLDER HEREOF FOR NO
CONSIDERATION) UNLESS THE COMPANY HAS RECEIVED A WRITTEN OPINION FROM COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY STATING THAT SUCH TRANSFER IS
BEING MADE IN COMPLIANCE WITH ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
CONVERTIBLE PROMISSORY NOTE
$2,500,000 April 7, 2009
New York, New York
No. CN-1
FOR VALUE RECEIVED, Ivivi Technologies, Inc., a New Jersey corporation
(the "COMPANY"), hereby promises to pay to the order of Emigrant Capital Corp.
(the "HOLDER"), in lawful money of the United States of America and in
immediately available funds, TWO MILLION FIVE HUNDRED THOUSAND DOLLARS
($2,500,000), or, if less, the unpaid principal amount of all Loans made by the
Holder pursuant to the Loan Agreement (as defined below), together with accrued
and unpaid interest on the unpaid principal balance of this Note from time to
time outstanding, each due and payable on the dates and in the manner set forth
below.
This Convertible Promissory Note (this "NOTE") is the Note referred to
in, and is executed and delivered in connection with, that certain Loan
Agreement, dated as of April 7, 2009 (as the same may from time to time be
amended, modified or supplemented or restated, the "LOAN AGREEMENT"). Additional
rights of the Holder are set forth in the other Loan Documents. Capitalized
terms used herein without definition shall have the meanings given to such terms
in the Loan Agreement.
1. PRINCIPAL REPAYMENT. Unless this Note has been converted in
accordance with the terms of SECTION 4 below, and subject to acceleration as
provided herein and in the other Loan Documents, the outstanding principal
amount of this Note and all unpaid accrued interest shall be fully due and
payable in cash on the Maturity Date.
2. INTEREST RATE. The outstanding principal amount of this Note shall
bear interest accruing daily at a rate equal to twelve (12%) percent per annum
from (and including) the date hereof to (and excluding) the date on which the
entire principal amount of this Note is paid in full, regardless of the
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commencement of any bankruptcy or insolvency proceedings against the Company;
PROVIDED, HOWEVER, that the outstanding principal amount of this Note shall bear
interest during the continuance of any Default accruing daily at a rate equal to
the lesser of (i) eighteen (18%) percent per annum and (ii) the maximum rate
permitted by law. All accrued and unpaid interest hereunder shall be due and
payable on the Maturity Date. Interest shall be calculated on the basis of a
360-day year for the actual number of days elapsed.
3. PLACE OF PAYMENT. All amounts payable hereunder shall be payable at
the office of the Holder, unless another place of payment shall be specified in
writing by the Holder.
4. CONVERSION.
4.1 DEFINITIONS. As used herein, the following terms shall
have the following meanings:
(a) "ADDITIONAL SHARES OF COMMON STOCK" shall mean
all shares of Common Stock issued (or deemed to be issued
pursuant to SECTION 4.4(G)) by the Company after the Closing
Date, other than Permitted Securities.
(b) "COMMON STOCK CONVERSION PRICE" shall mean, as of
any date of determination, the Initial Common Stock Conversion
Price as adjusted pursuant to SECTION 4.4 through such date of
determination.
(c) "COMMON STOCK EQUIVALENTS" shall mean any stock
or security convertible into or exchangeable for Common Stock
and any right, warrant or option to acquire Common Stock or
any such convertible or exchangeable security.
(d) "CONVERSION AMOUNT" shall mean, as of any
Conversion Date, an amount equal to the aggregate outstanding
principal balance of this Note as of such Conversion Date,
together with all accrued and unpaid interest thereon through
the Conversion Date.
(e) "CONVERSION DATE" shall mean the date on which
this Note is converted into shares of Qualified Financing
Conversion Stock or shares of Common Stock which, for
avoidance of doubt, shall be the Qualified Financing
Conversion Date, the Maturity Date Conversion Date, the Event
of Default Conversion Date or the Sale Event Conversion Date,
as applicable.
(f) "CONVERTIBLE SECURITIES" shall mean any evidences
of indebtedness, shares or other securities directly or
indirectly convertible or exercisable into or exchangeable for
Common Stock, but excluding Options.
(g) "EQUITY FINANCING" shall mean any issuance and
sale for cash of Common Stock or Common Stock Equivalents by
the Company occurring after the date hereof.
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(h) "INITIAL COMMON STOCK CONVERSION PRICE" shall
mean an amount equal to $0.23 per share of Common Stock.
(i) "MATURITY DATE" shall mean July 31, 2009;
PROVIDED, HOWEVER, that if, at the Maturity Date, the Company
has at least $1,000,000 in unrestricted cash and cash
equivalents on hand (as determined in accordance with GAAP),
then the Company may, in its sole discretion, extend the
Maturity Date until August 30, 2009 upon delivery of written
notice of such extension to the Holder on the initial Maturity
Date.
(j) "OPTIONS" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire Common Stock
or Convertible Securities.
(k) "PERMITTED SECURITIES" shall mean (i) this Note
and the Warrant issued pursuant to the Loan Agreement, (ii)
the Qualified Financing Conversion Stock issued in connection
with the Qualified Financing, (iii) the shares of Qualified
Financing Conversion Stock or Common Stock issuable upon the
conversion of this Note or the exercise of the Warrant, (iv)
shares of Common Stock issued upon exercise of Options or
Convertible Securities outstanding as of the Closing Date, and
(v) shares of Common Stock and Convertible Securities and
Options issued after the Closing Date pursuant to the Ivivi
Technologies, Inc. 2009 Equity Incentive Plan; PROVIDED that
the aggregate number of shares of Common Stock (calculated on
an as converted into Common Stock basis) that qualify as
"Permitted Securities" pursuant to this CLAUSE (V) that are at
any one time outstanding shall not exceed 3,750,000 (as
appropriately adjusted from time to time as a result of a
stock split, stock combination or any other similar event
affecting the outstanding number of shares of Common Stock).
(l) "QUALIFIED FINANCING" shall mean the first Equity
Financing (or substantially concurrent Equity Financings)
occurring after the Closing Date which results in gross
proceeds to the Company in an amount at least equal to $5
million (which, for the avoidance of doubt, shall not include
any proceeds arising from the conversion of this Note);
PROVIDED, THAT, in order for any such issuance and sale to
constitute a "Qualified Financing," the Company must receive
gross proceeds from such issuance and sale of at least $3.5
million from one or more Unaffiliated Persons.
(m) "QUALIFIED FINANCING CONVERSION PRICE" shall
mean, with respect to any series or class of Qualified
Financing Conversion Stock, the lowest purchase price per
share of such Qualified Financing Conversion Stock actually
paid by the purchasers thereof in the applicable Qualified
Financing.
(n) "QUALIFIED FINANCING CONVERSION STOCK" shall
mean, with respect to a Qualified Financing, the identical
class and series of capital stock of the Company issued and
sold in such Qualified Financing.
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(o) "SALE EVENT" shall mean (i) the consolidation or
merger of the Company into or with any other entity or
entities which results in the exchange of outstanding shares
of the Company for securities or other consideration issued or
paid or caused to be issued or paid by any such entity or
affiliate thereof (other than a merger to reincorporate the
Company in a different jurisdiction or one in which the
holders of capital stock of the Company immediately prior to
such merger or consolidation continue to hold at least 51% by
voting power of the capital stock of the surviving
corporation), (ii) any issuance, sale or transfer (or related
issuances, sales or transfers) of shares of capital stock of
the Company by the Company or any holder of such shares which
results in the holders of capital stock of the Company
immediately prior to such issuance, sale or transfer ceasing
to continue to hold at least 51% by voting power of the
capital stock of the Company following such issuance, sale or
transfer), (iii) the sale, lease, abandonment, transfer or
other disposition by the Company of all or substantially all
its assets or (iv) any liquidation, dissolution or winding up
of the Company, whether voluntary or involuntary.
Notwithstanding the provisions of CLAUSE (II) of this
definition, in no event shall a Qualified Financing be deemed
to constitute a Sale Event.
(p) "UNAFFILIATED PERSON" shall mean any Person who
is not any of (i) a holder of capital stock of the Company as
of the Closing Date, (ii) an Affiliate of the Company as of
the Closing Date or (iii) an Affiliate of any of the Persons
identified in CLAUSE (I) or (II) above; PROVIDED, THAT,
notwithstanding the foregoing, the Holder shall be deemed an
Unaffiliated Person.
4.2 QUALIFIED FINANCING CONVERSION. If the Company consummates
a Qualified Financing at any time either (i) prior to the occurrence of
the Maturity Date or (ii) on or following the occurrence of the
Maturity Date to the extent that, in the case of this CLAUSE (II), the
Company shall have not yet repaid the full outstanding principal amount
of this Note and all unpaid accrued interest thereon prior to the
occurrence of such Qualified Financing, the Holder shall have the right
to elect (but shall have no obligation to elect), upon delivery of
written notice of such election by the Holder to the Company not later
than ten Business Days after the closing of such Qualified Financing,
to convert all (but not less than all) of the outstanding principal
balance of this Note and all accrued and unpaid interest thereon,
without the payment of additional consideration by the Holder, into (x)
that number of shares of Qualified Financing Conversion Stock issued
and sold in such Qualified Financing equal to a quotient (a) the
numerator of which is equal to the Conversion Amount as of the
Qualified Financing Conversion Date, and (b) the denominator of which
is equal to the Qualified Financing Conversion Price, and (y) in the
event any warrants or other property or rights are issued or granted to
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investors in the Qualified Financing, a proportionate (based upon the
Conversion Amount actually converted, which shall be deemed to be the
amount invested by the Holder in the Qualified Financing) number and
amount of such warrants and other property or rights. Any such
conversion pursuant to this SECTION 4.2 shall be deemed effective on
the closing date of such Qualified Financing (the "QUALIFIED FINANCING
CONVERSION DATE"). In the event of such conversion, the Holder shall
become a party to the securities purchase agreement (or similar
agreement) pursuant to which the investors in the Qualified Financing
purchase or are issued the securities issued in such Qualified
Financing, and to any related or ancillary agreements, and the Holder
shall be entitled to all of the benefits of each such agreement with
respect to all of the shares of Qualified Financing Conversion Stock
issuable to the Holder upon such conversion and the related property
and rights, on the same basis as the other investors that purchase the
securities in such Qualified Financing. In the event that any approvals
of the stockholders of the Company are required by the Nasdaq
Marketplace Rules in connection with the consummation by the Company of
any Qualified Financing (including with respect to the issuance of any
shares of Qualified Financing Conversion Stock that may become issuable
upon conversion of this Note), the Company shall obtain all such
required stockholder approvals in order to permit the issuance in full
of all shares of Qualified Financing Conversion Stock that may become
issuable upon conversion of this Note.
4.3 COMMON STOCK CONVERSION.
(a) MATURITY DATE CONVERSION. If the Company does not
consummate a Qualified Financing on or prior to the Maturity
Date, then, at any time on or following the occurrence of the
Maturity Date (including at any time on or after the
occurrence of a Qualified Financing following the Maturity
Date), unless the Company shall have repaid the full
outstanding principal amount of this Note and all unpaid
accrued interest thereon, the Holder shall have the right to
elect (but shall have no obligation to elect), upon delivery
of written notice of such election by the Holder to the
Company (which, in the case of a conversion of the Note on the
Maturity Date, shall be delivered by the Holder at least one
day prior to the Maturity Date), to convert all (but not less
than all) of the outstanding principal balance of the Note,
and all accrued and unpaid interest thereon, without the
payment of additional consideration by the Holder, into that
number of shares of Common Stock, equal to a quotient (i) the
numerator of which is equal to the Conversion Amount as of the
Conversion Date, and (ii) the denominator of which is equal to
the Common Stock Conversion Price as in effect as of the
Conversion Date. Any such conversion pursuant to this CLAUSE
(A) shall be deemed effective (x) with respect to any
conversion on the Maturity Date, on the Maturity Date to the
extent that the Holder shall have delivered written notice of
such conversion to the Company pursuant to this CLAUSE (A) at
least one day prior to the Maturity Date, and (y) with respect
to any conversion following the Maturity Date, on the date
that the Holder shall deliver written notice of such
conversion to the Company pursuant to this CLAUSE (A) (the
"MATURITY DATE CONVERSION DATE").
(b) EVENT OF DEFAULT CONVERSION. At any time
following the occurrence and during the continuation of an
Event of Default (other than an Event of Default arising from
a Sale Event which would permit the conversion of this Note
under CLAUSE (C) below), unless the Holder shall have
delivered an Acceleration Notice to the Company pursuant to
Section 9.2(b) of the Loan Agreement, the Holder shall have
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the right to elect (but shall have no obligation to elect),
upon delivery of written notice of such election by the Holder
to the Company at any time while such an Event of Default
exists, to convert all (but not less than all) of the
outstanding principal balance of the Note, and all accrued and
unpaid interest thereon, without the payment of additional
consideration by the Holder, into that number of shares of
Common Stock, equal to a quotient (i) the numerator of which
is equal to the Conversion Amount as of the Conversion Date,
and (ii) the denominator of which is equal to the Common Stock
Conversion Price as in effect as of the Conversion Date. Any
such conversion pursuant to this CLAUSE (B) shall be deemed
effective on the date that the Holder shall deliver written
notice of such conversion to the Company pursuant to this
CLAUSE (B) (the "EVENT OF DEFAULT CONVERSION DATE").
(c) SALE EVENT CONVERSION. At least 20 days prior to
the consummation of a Sale Event, the Company shall deliver
written notice thereof to the Holder and the Company shall not
effect such Sale Event prior to the proposed closing date
specified in such notice. In connection with the consummation
of such Sale Event, unless the Holder shall have delivered an
Acceleration Notice to the Company pursuant to Section 9.2(b)
of the Loan Agreement, the Holder shall have the right to
elect (but shall have no obligation to elect), upon delivery
of written notice of such election by the Holder to the
Company not later than two days prior to the closing date of
the applicable Sale Event, to convert all (but not less than
all) of the outstanding principal balance of this Note and all
accrued and unpaid interest thereon, without the payment of
additional consideration by the Holder, into that number of
shares of Common Stock, equal to a quotient (i) the numerator
of which is equal to the Conversion Amount as of the
Conversion Date, and (ii) the denominator of which is equal to
the Common Stock Conversion Price as in effect as of the
Conversion Date. Any such conversion pursuant to this CLAUSE
(C) shall be deemed effective immediately prior to the
consummation of the applicable Sale Event (the "SALE EVENT
CONVERSION DATE").
4.4 ADUSTMENT OF COMMON STOCK CONVERSION PRICE.
(a) STOCK SPLITS AND COMBINATIONS. If the Company
shall at any time or from time to time on or after the Closing
Date effect a subdivision (by any stock split, stock dividend
or otherwise) of the outstanding shares of Common Stock, the
Common Stock Conversion Price then in effect immediately
before that subdivision shall be proportionately decreased. If
the Company shall at any time or from time to time on or after
the Closing Date combine the outstanding shares of the Common
Stock, the Common Stock Conversion Price then in effect
immediately before the combination shall be proportionately
increased. Any adjustment under this paragraph shall become
effective at the close of business on the date the subdivision
or combination becomes effective.
(b) COMMN STOCK DIVIDENDS. In the event the Company
at any time or from time to time on or after the Closing Date
shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive,
a dividend or other distribution payable in additional shares
of Common Stock, then and in each such event the Common Stock
Conversion Price then in effect shall be decreased as of the
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time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such
record date, by multiplying the Common Stock Conversion Price
then in effect by a fraction:
(i) the numerator of which shall be the
total number of shares of Common Stock issued and
outstanding immediately prior to the time of such
issuance or the close of business on such record
date, and
(ii) the denominator of which shall be the
total number of shares of Common Stock issued and
outstanding immediately prior to the time of such
issuance or the close of business on such record date
plus the number of shares of Common Stock issuable in
payment of such dividend or distribution.
(c) OTHER STOCK DIVIDENDS. In the event the Company
at any time or from time to time on or after the Closing Date
shall make or issue, or fix a record date for the
determination of holders of any Common Stock entitled to
receive, a dividend or other distribution payable in
securities of the Company other than shares of such Common
Stock, then and in each such event provision shall be made so
that the Holder shall receive upon any conversion of this Note
into shares of such Common Stock, in addition to the number of
shares of such Common Stock receivable thereupon, the amount
of securities of the Company that they would have received had
this Note been converted for such shares of Common Stock on
the date of such event (regardless of whether or not this Note
is then convertible into shares of Common Stock) and had they
thereafter, during the period from the date of such event to
and including the conversion date, retained such securities
receivable by them as aforesaid during such period, giving
application to all adjustments called for during such period
under this SECTION 4.4.
(d) REORGANIZATION, RECLASSIFICATION, ETC. If, at any
time or from time to time on or after the Closing Date, any
Common Stock issuable upon conversion of this Note (regardless
of whether or not this Note is then convertible into shares of
Common Stock) shall be changed into the same or a different
number of shares of any class or classes of stock, whether by
capital reorganization, reclassification, or otherwise (other
than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger,
consolidation, or sale of assets provided for below), then and
in each such event the Holder shall, in addition to the other
conversion rights set forth herein, have the right thereafter
to convert this Note into the kind and amount of shares of
stock and other securities and property receivable upon such
reorganization, reclassification, or other change, by holders
of the number of shares of such Common Stock into which this
Note might have been converted immediately prior to such
reorganization, reclassification, or change (regardless of
whether or not this Note is then convertible into shares of
Common Stock), all subject to further adjustment as provided
herein.
(e) MERGER OR CONSOLIDATION. In case of any
consolidation or merger of the Company with or into another
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corporation or the sale of all or substantially all of the
assets of the Company to another corporation, at any time or
from time to time on or after the Closing Date, this Note
shall thereafter be convertible (or shall be converted into a
security which shall be so convertible) into the kind and
amount of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock into
which this Note is convertible (regardless of whether or not
this Note is then convertible into shares of Common Stock)
would have been entitled upon such consolidation, merger or
sale; and, in such case, appropriate adjustment (as determined
in good faith by the Board of Directors of the Company) shall
be made in the application of the provisions in this SECTION
4.4 set forth with respect to the rights and interest
thereafter of the Holder, to the extent that the provisions
set forth in this SECTION 4.4 (including provisions with
respect to changes in and other adjustments of the Common
Stock) shall thereafter be applicable, as nearly as reasonably
may be, in relation to any shares of stock or other property
thereafter deliverable upon the conversion of this Note.
(f) NOTICE. In case at any time or from time to time
on or after the first date on which the Holder shall be
entitled to convert this Note into Common Stock under SECTION
4.3, (i) the Company shall declare any dividend upon any
Common Stock payable in cash or stock or make any other
distribution to the holders of any Common Stock, (ii) the
Company shall offer for subscription pro rata to the holders
of any Common Stock any additional shares of stock of any
class or other rights, (iii) there shall be any capital
reorganization or reclassification of the capital stock of the
Company, or (iv) or a Sale Event shall occur; then, in any one
or more of said cases, the Company shall give, by first class
mail, postage prepaid, or by facsimile, addressed to the
Holder, (A) at least 20 days' prior written notice of the date
on which the books of the Company shall close or a record
shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any
such reorganization, reclassification, or Sale Event and (B)
in the case of any such reorganization, reclassification or
Sale Event, at least 20 days' prior written notice of the date
when the same shall take place. Such notice in accordance with
the foregoing CLAUSE (A) shall also specify, in the case of
any such dividend, distribution or subscription rights, the
date on which the holders of such Common Stock shall be
entitled thereto and such notice in accordance with the
foregoing CLAUSE (B) shall also specify the date or projected
date on which the holders of such Common Stock shall be
entitled to exchange their shares of such Common Stock for
securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be.
(g) ADJUSTMENTS TO COMMON STOCK CONVERSION PRICE FOR
CERTAIN DILUTIVE ISSUANCES.
(i) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON
STOCK.
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(1) Except for the issuance of Permitted
Securities, if the Company at any time or from time
to time after the Closing Date shall issue any
Options or Convertible Securities or shall fix a
record date for the determination of holders of any
class of securities entitled to receive any such
Options or Convertible Securities, then the maximum
number of shares of Common Stock (as set forth in the
instrument relating thereto, assuming the
satisfaction of any conditions to exercisability,
convertibility or exchangeability but without regard
to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise
of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or
exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued
as of the time of such issue or, in case such a
record date shall have been fixed, as of the close of
business on such record date. Notwithstanding the
foregoing, except as otherwise provided in CLAUSE (2)
below, in the event that an adjustment to the Common
Stock Conversion Price is made upon the issuance of
any such Options or Convertible Securities, then no
further adjustment of the Common Stock Conversion
Price shall be made upon the actual issuance of
Common Stock upon exercise of such Options or upon
the actual issuance of Common Stock upon conversion
or exchange of such Convertible Securities.
(2) If the terms of any Option or
Convertible Security, the issuance of which resulted
in an adjustment to the Common Stock Conversion Price
pursuant to the terms of CLAUSE (II) below, are
revised (either automatically pursuant to the
provisions contained therein or as a result of an
amendment to such terms) to provide for either (A)
any increase or decrease in the number of shares of
Common Stock issuable upon the exercise, conversion
or exchange of any such Option or Convertible
Security or (B) any increase or decrease in the
consideration payable to the Company upon such
exercise, conversion or exchange, then, effective
upon such increase or decrease becoming effective,
the Common Stock Conversion Price computed upon the
original issue of such Option or Convertible Security
(or upon the occurrence of a record date with respect
thereto) shall be readjusted to such Common Stock
Conversion Price as would have obtained had such
revised terms been in effect upon the original date
of issuance of such Option or Convertible Security.
Notwithstanding the foregoing, no adjustment pursuant
to this CLAUSE (2) shall have the effect of
increasing the Common Stock Conversion Price to an
amount which exceeds the lower of (x) the Common
Stock Conversion Price on the original adjustment
date, or (y) the Common Stock Conversion Price that
would have resulted from any issuances of Additional
Shares of Common Stock between the original
adjustment date and such readjustment date.
(3) If the terms of any Option or
Convertible Security, the issuance of which did not
result in an adjustment to the Common Stock
Conversion Price pursuant to the terms of CLAUSE (II)
below (either because the consideration per share of
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the Additional Shares of Common Stock subject thereto
was equal to or greater than the Common Stock
Conversion Price then in effect, or because such
Option or Convertible Security was issued before the
Closing Date), are revised after the Closing Date
(either automatically pursuant to the provisions
contained therein or as a result of an amendment to
such terms) to provide for either (A) any increase or
decrease in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange of
any such Option or Convertible Security or (B) any
increase or decrease in the consideration payable to
the Company upon such exercise, conversion or
exchange, then such Option or Convertible Security,
as so amended, and the Additional Shares of Common
Stock subject thereto shall be deemed to have been
issued effective upon such increase or decrease
becoming effective.
(4) Upon the expiration or termination of
any unexercised Option or unconverted or unexchanged
Convertible Security which resulted (either upon its
original issuance or upon a revision of its terms) in
an adjustment to the Common Stock Conversion Price
pursuant to the terms of CLAUSE (II) below, the
Common Stock Conversion Price shall be readjusted to
such Common Stock Conversion Price as would have
obtained had such Option or Convertible Security
never been issued.
(ii) ADJUSTMENT OF COMMON STOCK CONVERSION PRICE UPON
ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In the event
the Company shall at any time after the Closing Date issue
Additional Shares of Common Stock (including Additional Shares
of Common Stock deemed to be issued pursuant to CLAUSE (I)
above), without consideration or for a consideration per share
less than the applicable Common Stock Conversion Price in
effect immediately prior to such issue, then the Common Stock
Conversion Price shall be reduced, concurrently with such
issue, to a price (calculated to the nearest one-hundredth of
a cent) determined in accordance with the following formula:
CP2 = CP1 * (A + B) / (A + C)
For purposes of the foregoing formula, the following
definitions shall apply:
"CP2" shall mean the Common Stock Conversion Price
in effect immediately after such issue of
Additional Shares of Common Stock;
"CP1" shall mean the Common Stock Conversion Price
in effect immediately prior to such issue of
Additional Shares of Common Stock;
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"A" shall mean the number of shares of Common
Stock outstanding and deemed outstanding
immediately prior to such issue of
Additional Shares of Common Stock (treating
for this purpose as outstanding all shares
of Common Stock issuable upon exercise of
Options outstanding immediately prior to
such issue or upon conversion of Convertible
Securities outstanding immediately prior to
such issue);
"B" shall mean the number of shares of Common
Stock that would have been issued if such
Additional Shares of Common Stock had been
issued at a price per share equal to CP1
(determined by dividing the aggregate
consideration received or receivable by the
Company in respect of such issue by CP1);
and
"C" shall mean the number of such Additional
Shares of Common Stock issued in such
transaction.
(iii) DETERMINATION OF CONSIDERATION. For purposes of
this SECTION 4.4(G), the consideration received or receivable
by the Company for the issue or deemed issue any Additional
Shares of Common Stock shall be computed as follows:
(1) CASH AND PROPERTY: The consideration per
share received or receivable by the Company for the
issue of Additional Shares of Common Stock shall:
(A) insofar as it consists of cash,
be computed at the aggregate amount of cash
received by the Company, excluding amounts
paid or payable for accrued interest;
(B) insofar as it consists of
securities and the value of such securities
is not determinable by reference to a
separate agreement, (A) if the securities
are then traded on a securities exchange or
the Nasdaq Stock Market, then the value
shall be computed based on the average of
the closing prices of the securities on such
securities exchange or Nasdaq Stock Market
over the thirty (30) day period ending on
the date of receipt by the Company, (B) if
the securities are actively traded
over-the-counter, then the value shall be
computed based on the average of the closing
prices over the thirty (30) day ending on
the date of receipt by the Company, and (C)
if there is no active public market, then
the value shall be computed based on the
fair market value thereof on the date of
receipt by the Company, as determined in
good faith by the Board of Directors of the
Company;
(C) insofar as it consists of
property other than cash or securities, be
computed at the fair market value thereof at
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the time of such issue, as determined in
good faith by the Board of Directors of the
Company; and
(D) in the event Additional Shares
of Common Stock are issued together with
other shares or securities or other assets
of the Company for consideration which
covers both, be the proportion of such
consideration so received, computed as
provided in CLAUSES (A), (B) and (C) above,
as determined in good faith by the Board of
Directors of the Company.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received or receivable by the
Company for Additional Shares of Common Stock deemed
to have been issued pursuant to this SECTION 4.4(G),
relating to Options and Convertible Securities, shall
be determined by dividing:
(A) the total amount, if any,
received or receivable by the Company as
consideration for the issue of such Options
or Convertible Securities, plus the minimum
aggregate amount of additional consideration
(as set forth in the instruments relating
thereto, without regard to any provision
contained therein for a subsequent
adjustment of such consideration) payable to
the Company upon the exercise of such
Options or the conversion or exchange of
such Convertible Securities, or in the case
of Options for Convertible Securities, the
exercise of such Options for Convertible
Securities and the conversion or exchange of
such Convertible Securities, by
(B) the maximum number of shares of
Common Stock (as set forth in the
instruments relating thereto, without regard
to any provision contained therein for a
subsequent adjustment of such number)
issuable upon the exercise of such Options
or the conversion or exchange of such
Convertible Securities.
(iv) MULTIPLE CLOSING DATES. In the event
the Company shall issue on more than one date
Additional Shares of Common Stock that are a part of
one transaction or a series of related transactions
and that would result in an adjustment to the Common
Stock Conversion Price pursuant to the terms of this
SECTION 4.4(G) then, upon the final such issuance,
the Common Stock Conversion Price shall be readjusted
to give effect to all such issuances as if they
occurred on the date of the first such issuance (and
without additional giving effect to any adjustments
as a result of any subsequent issuances within such
period).
(h) ACKNOWLEDGEMENT AS TO ADJUSTMENTS. The Company
hereby acknowledges that an event requiring an adjustment to
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the Common Stock Conversion Price pursuant to this SECTION 4.4
may occur at any time following the Closing Date, regardless
of whether or not this Note is then convertible into shares of
Common Stock and prior to the Conversion Date. Accordingly,
with respect to any conversion of this Note into Common Stock,
the calculation of the applicable Common Stock Conversion
Price in respect of such conversion shall be calculated after
giving effect to any event requiring an adjustment to the
Common Stock Conversion Price pursuant to this SECTION 4.4
that shall have occurred at any time from and after the
Closing Date and prior to the Conversion Date.
(i) CALCULATIONS. No adjustment in the Common Stock
Conversion Price shall be required unless such adjustment
would require upon increase or decrease of a least one-tenth
of a cent ($0.001) in such Common Stock Conversion Price;
PROVIDED, however, that any adjustments which by reason of
this CLAUSE (I) are not required to be made shall be carried
forward and taken into account in any subsequent cent or the
nearest 1/100th of a share, as applicable. The number of
shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the
Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(j) CERTIFICATE AS TO ADJUSTMENTS. Upon the
occurrence of each adjustment or readjustment of the Common
Stock Conversion Price pursuant to this SECTION 4.4, the
Company at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and
furnish to the Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The
Company shall, upon the written request at any time of the
Holder, furnish or cause to be furnished to such holder a
similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Common Stock Conversion Price then in
effect, and (iii) the number of shares of Common Stock into
which this Note is convertible and the amount, if any, of
other property which then would be received upon the
conversion of this Note.
4.5 GENERAL.
(a) Upon the occurrence of any conversion of this Note
pursuant to this SECTION 4, the Holder shall deliver to the Company
during regular business hours at the principal office of the Company,
or at such other office or agency of the Company as may be designated
by the Company, this Note, duly endorsed or assigned in blank or to the
Company, upon which this Note shall be deemed cancelled. Additionally,
together with the delivery of this Note, the Holder shall deliver to
Company a written notice stating the name in which the Holder wishes
the certificate or certificates for shares of capital stock to be
issued upon such conversion to be so issued.
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(b) All shares of Qualified Financing Conversion Stock or
Common Stock, as applicable, issued upon the conversion of this Note in
accordance with its terms shall be validly issued, fully paid and
nonassessable.
(c) No fractional shares of Qualified Financing Conversion
Stock or Common Stock, as applicable, shall be issued upon conversion
of this Note. In lieu of any fractional shares to which the Holder
would otherwise be entitled, the Company shall pay cash equal to such
fraction multiplied by the Qualified Financing Conversion Price or the
Common Stock Conversion Price, as applicable or shall round such
fractional share up to the next whole number, as elected by the
Company.
(d) The Company shall, as soon as practicable after the
Conversion Date, issue and deliver at the office to the Holder, or to
his or its nominees, a certificate or certificates for the number of
shares of Qualified Financing Conversion Stock or Common Stock, as
applicable, to which the Holder shall be entitled under this SECTION 4,
together with cash in lieu of any fraction of a share. All such
certificates shall bear the following restrictive legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, ENCUMBERED
OR OTHERWISE TRANSFERRED ("TRANSFERRED") IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. IN THE ABSENCE OF
SUCH REGISTRATION, THIS SECURITY MAY NOT BE TRANSFERRED (OTHER THAN TO
AN AFFILIATE OR MEMBER OF THE HOLDER HEREOF FOR NO CONSIDERATION)
UNLESS THE COMPANY HAS RECEIVED A WRITTEN OPINION FROM COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE COMPANY STATING THAT SUCH TRANSFER IS
BEING MADE IN COMPLIANCE WITH ALL APPLICABLE FEDERAL AND STATE
SECURITIES LAWS."
(e) For so long as this Note remains outstanding, the Company
will cause to be reserved and kept available out of its authorized and
unissued shares of Common Stock, the number of whole shares of such
Common Stock sufficient to permit the conversion in full of this Note
under SECTION 4.3 based on the then current Common Stock Conversion
Price.
(f) The Company will not, by amendment of its charter or
through reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the
terms of this Note. Without limiting the generality of the foregoing,
the Company will (i) not increase the par value of any shares of
Qualified Financing Conversion Stock or Common Stock, as applicable,
obtainable upon the conversion of this Note and (ii) take all such
actions as may be necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable shares of
14
Qualified Financing Conversion Stock or Common Stock, as applicable,
upon the conversion of this Note.
(g) The Company shall pay any and all issue and other similar
taxes that may be payable in respect of any issuance or delivery of
shares of Qualified Financing Conversion Stock or Common Stock, as
applicable, upon conversion of this Note pursuant to this SECTION 4.
(h) For the avoidance of doubt, the Holder's conversion rights
described in SECTION 4.2 and 4.3 shall be deemed cumulative and not
exclusive.
5. NO VOLUNTARY PREPAYMENT. The Company may not optionally prepay all
or any portion of the outstanding principal amount of this Note or any accrued
and unpaid interest thereon.
6. MANDATORY PREPAYMENT. The Company shall be required to prepay the
entire outstanding principal amount of this Note, together with all accrued and
unpaid interest thereon, in accordance with Section 2.5 of the Loan Agreement.
7. APPLICATION OF PAYMENTS. Payment on this Note shall be applied first
to accrued interest, and thereafter to the outstanding principal balance hereof.
8. SECURED NOTE. The full amount of this Note is secured by the
Collateral identified and described as secIurity therefor in the Security
Agreement. The Company shall not, directly or indirectly, create, permit or
suffer to exist, and shall defend the Collateral against and take such other
action as is necessary to remove, any Lien on or in the Collateral, or in any
portion thereof, except as permitted pursuant to the Loan Documents.
9. WAIVER. The Company waives presentment and demand for payment,
notice of dishonor, protest and notice of protest of this Note, and shall pay
all costs of enforcement and collection when incurred, including, without
limitation, reasonable attorneys' fees, costs and other expenses.
10. GOVERNING LAW. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
11. SUCCESSORS AND ASSIGNS. The provisions of this Note shall inure to
the benefit of and be binding on any successor to the Company and shall extend
to any holder hereof.
12. OBLIGATIONS ABSOLUTE. The Company acknowledges that this Note and
the Company's obligations under this Note are and shall at all times continue to
be absolute and unconditional in all respects, and shall at all times be valid
and enforceable irrespective of any other agreement or circumstances of any
nature whatsoever that might otherwise constitute a defense to this Note or the
obligation of the Company under this Note. The Company absolutely,
unconditionally and irrevocably waives any and all right to assert any defense,
setoff, counterclaim or crossclaim of any nature whatsoever with respect to this
15
Note or the obligations of the Company under this Note in any action or
proceeding brought by the Holder to collect the indebtedness evidenced hereby,
or any portion thereof.
13. AMENDMENT. No provision of this Note may be changed, modified,
waived or released, unless it is in writing and signed by the Company and the
Holder. No waiver of any term, condition or provision of this Note, in any one
or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such term, condition or provision.
14. NOTICES. All notices or other communications to be given hereunder
shall be in writing and sent in accordance with the Loan Agreement.
15. REMEDIES. The Holder shall have the rights and remedies in respect
of this Note as set forth in Section 9 of the Loan Agreement.
[SIGNATURES FOLLOW]
IN WITNESS WHEREOF, Company has executed this Convertible Promissory
Note on the date first above written.
WITNESS: IVIVI TECHNOLOGIES, INC.
/s/ X. X. Xxxxxxx
---------------------------------- /s/ Xxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxx, Controller ---------------------------
Ivivi Technologies, Inc. Name: Xxxx X. Xxxxxxxxx
Title:CFO
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