UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 


FORM 8-K
 


CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of report (Date of earliest event reported):  June 26, 2013
 


ADAMIS PHARMACEUTICALS CORPORATION
(Exact Name of Registrant as Specified in Charter)

Delaware
 
0-26372
 
82-0429727
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)
         
11455 El Camino Real, Suite 310
Del Mar, CA
 
92130
(Address of Principal Executive Offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (858) 997-2400

(Former name or Former Address, if Changed Since Last Report.)


 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 


 
 
Item 1.01 
Entry Into a Material Definitive Agreement.
 
On June 26, 2013, Adamis Pharmaceuticals Corporation (the “Company”) completed the closing of a private placement financing transaction (the “Transaction”) with a small number of accredited institutional investors.  Pursuant to a Subscription Agreement (the “Purchase Agreement”) and other transaction documents, we issued Secured Convertible Promissory Notes (the “Notes”), and common stock purchase warrants (“Warrants”) to purchase up to 13,004,316 shares of common stock, and received gross cash proceeds of $5,300,000, excluding transactions costs, fees and expenses.  The Notes have an aggregate principal amount of $6,502,158, including a $613,271 principal amount Note issued to Gemini Master Fund Ltd. in exchange for its previously outstanding June 2012 convertible note, which is no longer outstanding.  The maturity date of the Notes is December 26, 2013.  Our obligations under the Notes and the other transaction documents are guaranteed by our principal subsidiaries and, pursuant to a Security Agreement entered into with the investors, are secured by a security interest in substantially all of our assets and those of the subsidiaries.  The Notes are convertible into shares of common stock at any time at the discretion of the investor at an initial conversion price per share of $0.50.  The exercise price of the Warrants is $0.715 per share, subject to adjustment as described below.
 
Under the transaction documents, we have agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) within 60 days following the closing to register the resale of the shares issuable upon conversion of the Notes and exercise of the Warrants, and to have the registration statement declared effective within 120 days of the closing date.  The transaction documents provide for a variety of monetary penalties, which could be material, if the registration statement is not filed or declared effective by the times contemplated in the transaction documents, or does not continue to be effective thereafter.  Each of the Company and the investors has agreed to indemnify the other party and certain affiliates against certain liabilities related to the registration statement.
 
The transaction documents include restrictions on our ability to engage in certain kinds of transactions while the Notes are outstanding without the consent of the investors, including without limitation: (a) incurring, paying or repaying certain kinds of indebtedness; (b) other than certain permitted liens, creating or incurring any liens, security interests or encumbrances on our property or assets; (c) amending our charter documents (with certain exceptions) in any manner that materially and adversely affects the investors’ rights; (d) repurchasing shares of common stock, or repurchasing or reacquiring shares of common stock (with certain exceptions); (e) entering into certain kinds of related party transactions with our officers, directors, employees or affiliates; (f) paying or redeeming any financing related debt or securities, with certain permitted exceptions; (g) entering into any equity line of credit arrangements or issuing any variable priced equity linked instruments; (h) filing any registration statements relating to the offer and sale of shares until the registration statement contemplated by the transaction documents is declared effective; (i) selling, leasing or otherwise disposing of any significant portion of our assets outside the ordinary course of business; or (i) entering into transactions with any of our affiliates (with certain exceptions).
 
In connection with the closing of a registered underwritten public offering or a registered direct public offering resulting in at least $10 million of gross proceeds to us, the investors must elect to either have the Notes redeemed at a price equal to 115% of the outstanding principal amount and interest, if any, or convert the Notes effective at the closing of the offering, at a conversion price of 85% of the lowest sales, conversion, exercise or purchase price of any common stock or common stock equivalent issued in connection with the offering if such price is lower than the then-current conversion price.  Except in connection with a qualified offering, we may not redeem or prepay t he Notes.
 
 
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The occurrence of any of the following events of default will, at the option of the holder, make all principal, interest and other amounts due on the Note immediately due and payable: (a) the Company  (i) fails to pay any installment of principal or interest when due or (ii) fails to pay any interest or other sums due under the Note when due; (b) the Company breaches any material covenant or other term or condition of the transaction documents or the Note, except for a breach of payment, in any material respect and if susceptible to cure, the Company has failed to cure such breach within five days after delivery of a notice of such breach; (c) any material representation or warranty of the Company made in the transaction documents is false or misleading in any material respect; (d) any dissolution, liquidation or winding up by the Company or a material subsidiary of a substantial portion of their business; (e) cessation of operations by the Company or a material subsidiary; (f) the failure by the Company or any material subsidiary to maintain any material intellectual property rights, personal, real property, equipment, leases or other assets which are necessary to conduct its business (whether now or in the future) and which failure could reasonably be expected to result in a material adverse effect on the Company, and such breach is not cured with 20 days after written notice to the Company from the holder; (g) the Company or any material subsidiary makes an assignment for the benefit of creditors, or applies for or consents 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; (h) any money judgment, writ or similar final process is entered or made in a non-appealable adjudication against the Company or any material subsidiary or any of its property or other assets for more than $100,000 in excess of the Company’s or such material subsidiary’s insurance coverage, unless stayed vacated or satisfied within 30 days; (i) 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 is instituted by or against the Company or any subsidiary; (j) an event resulting in the Common Stock no longer being quoted on the OTCQB, failure to comply with the requirements for continued quotation on the OTCQB for a period of 20 consecutive trading days, or notification from the OTCQB that the Company is not in compliance with the conditions for such continued quotation and such non-compliance continues for 20 days following such notification; (k) within 30 days following the consummation of one or more private placement or public offering transactions after the closing date in which the Company has received in the aggregate at least $10 million of net proceeds, a default by the Company or any material subsidiary under any one or more obligations in an aggregate monetary amount in excess of $150,000 for more than 30 days after the due date; (l) an SEC or judicial stop trade order or OTCQB suspension; (m) the Company’s failure to timely deliver Common Stock to the holder pursuant to and in the form required by the Notes, the subscription agreement and the Warrants or, if required, a replacement Note or Warrant following a partial conversion or exercise; (n) failure by the Company to have reserved for issuance upon conversion of the Notes or upon exercise of the Warrants, the number of shares of Common Stock as required in the transaction documents and to have cured such failure with any applicable time periods provided for in the transaction documents; (o) the restatement of any financial statements filed by the Company with the SEC for any date or period from two years prior to the closing date and until the Notes are no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statements, have constituted a material adverse effect on the Company; (p) the Company’s failure to materially comply with the registration obligations set forth in the subscription agreement; (q) failure by the Company to obtain, within three weeks of the Closing Date, all of the fully executed waivers from all prior investors in the Company in connection with any anti-dilution rights that may be triggered as a result of the issuance of the Notes and the Warrants and all of the fully executed consents from all prior secured investors in the Company with regards to the pari passu sharing of the security interests of such secured prior investors with the holders of the Notes; (r) a failure by the Company to notify the holders of any material event of which the Company is obligated to notify the holders pursuant to the terms of the transaction documents; (s) a default by the Company of a material term, covenant, warranty or undertaking of any other agreement to which the Company and the holders are parties, or the occurrence of an event of default under any such other agreement to which the Company and the holders are parties which is not cured after any required notice and/or cure period; and (t) the occurrence of an event of default under any other secured note.
 
Pursuant to the Security Agreement, upon an event of default the investors have the right to foreclose on all of the collateral securing the Company’s obligations under the transaction documents, and have customary rights of a secured party to dispose of the collateral to help satisfy payment of our obligations under the transaction documents.  In addition, following an event of default or after the maturity date, a default interest rate of 12% per annum applies.  Also, during the pendency of an event of default, the conversion price of the Notes will be reduced to be 80% of the lowest volume weighted average price of the common stock for any five consecutive trading days during any 30-day period commencing on the original date of the Notes and before a conversion date upon which some or all of the Note is converted.
 
 
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The conversion prices of the Notes and the Warrants are subject to anti-dilution provisions providing that, with the exception of certain excluded categories of issuances and transactions, if we issue any shares of common stock or securities convertible into or exercisable for common stock, or if common stock equivalents are repriced, at an effective price per share less than the conversion price of the Notes or the exercise price of the Warrants (as applicable), without the consent of a majority in interest of the investors, the conversion price of the Notes and Warrants will be adjusted downward to equal the per share price of the securities issued or deemed issued in such transaction.
 
If, at any time while the Notes are outstanding, (A) the Company effects any merger or consolidation of the Company with or into another entity, (B) the Company 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 Company or another entity) for more than 50% of the outstanding shares of Common Stock is completed, (D) the Company consummates a stock purchase agreement or other business combination 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, (E) any person or group is or becomes the beneficial owner of 50% or more of the aggregate Common Stock or any material subsidiary, (F) the Company effects any reclassification (other than stock splits or reverse stock splits or similar proportionate changes) 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 or (G) a majority of the members of the Company’s board of directors as of the closing date are no longer serving as directors of the Company, except as a result of natural causes or as a result of hiring additional outside directors in order to meet stock exchange requirements, unless prior written consent of the holders had been obtained by the Company (in any such case, a "Fundamental Transaction"), the Notes, as to the unpaid principal portion and accrued interest, will 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 to holders of Common Stock on account of such Fundamental Transaction, upon or with respect to the securities subject to the conversion right immediately before such Fundamental Transaction.  Additionally, in connection with the occurrence of a Fundamental Transaction, the holder may either (i) accelerate the maturity date of the Notes as of the date of the Fundamental Transaction and receive payment for the then outstanding principal amount of the Note, and any other amounts owed to the holder pursuant to the transaction documents, or (ii) redeem the Note together with any other amounts owed to the holder pursuant to the Transaction Documents.

In the case of a delay in the delivery of conversion shares or warrant shares later than the period provided in the Notes or Warrants, the transaction agreements provide for monetary penalties, which could be material, for each trading day after the required delivery date during which the shares are not delivered.  If the Company fails to timely deliver conversion shares or warrant shares and if the holder purchases shares of Common Stock to deliver in satisfaction of a sale by holder of the Common Stock which holder was entitled to receive upon such conversion or exercise, then the Company is obligated to pay to 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 or Warrant (as applicable) for which such conversion or exercise request was not timely honored, together with interest thereon at a rate of 15% per annum.

If (i) the Company is prohibited from issuing conversion shares, or (ii) an event of default occurs and continues beyond any applicable cure period, or (iii) the Company or any material subsidiary liquidates, dissolves or winds up, then at the holder's election, the Company must pay to holder a sum of money determined by multiplying the amount of outstanding principal amount designated by holder by, at the holder’s election, the greater of (i) 115%, or (ii) a fraction the numerator of which is the highest closing price of the Common Stock for the 30 days preceding the date demand is made by holder and the denominator of which is the lowest applicable conversion price during such 30 day period, together with accrued but unpaid interest and any other amounts due under the transaction documents.  Upon receipt of such mandatory redemption payment, the corresponding Note principal, interest and other amounts will be deemed paid and no longer outstanding.
 
 
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The Warrants are exercisable for a period of five years from the date of issuance.  The exercise price of the Warrants is $0.715 per share.  The Warrants provide for proportional adjustment of the number and kind of securities purchasable upon exercise of the Warrants and the per share exercise price upon the occurrence of certain specified events, and include price anti-dilution provisions which provide for an adjustment to the per share exercise price of the Warrants and the number of shares issuable upon exercise of the Warrants, if the Company issues common stock or common stock equivalents at effective per share prices lower than the exercise price of the Warrants, on terms similar in material respects to the anti-dilution provisions relating to the Notes.
 
The Warrants include a variety of penalties, which could be material, for the Company’s failure to timely deliver securities upon exercise.  In addition, if a registration statement covering the resale of Warrant Shares is not available for the resale of such shares, the Purchaser may exercise the Warrant on a “net exercise” or “cashless” basis.  Otherwise, the Warrants are exercisable for cash.
 
In connection with certain kinds of Fundamental Transactions, the Company is obligated to purchase the Warrant from the holder for cash based on the Black Scholes value of the Warrants if that amount is higher than the spread between the per share price payable in the transaction and the exercise price per share of the Warrant, pursuant to procedures described in the Warrants.
 
For a period of one year after the closing date, the investors have a right of first refusal to purchase securities proposed to be offered and sold in the future by us, other than in connection with certain excluded or exempt issuances.
 
Pursuant to the terms of the Purchase Agreement, we expect to use the net proceeds to pay operating, general and administrative expenses, including current and accrued salaries to employees, fees to directors, and other obligations incurred in the ordinary course of our business.  The net proceeds will also be available to make scheduled interest payments on our outstanding December 2012 promissory note, to pay expenses relating to our filing with the FDA for our epinephrine syringe product candidate, and to acquire rights regarding other products, assets or technologies.
 
Before the closing of the Transaction, the holders of our convertible promissory notes dated April 5, 2013 converted a portion of their notes into 208,000 shares of common stock, and we used $644,000 of the proceeds from the transaction to redeem and pay in full the outstanding unconverted amounts owed on those notes.  As a result, the April 5, 2013 notes are no longer outstanding. In addition, the holder of the Company’s previously issued convertible promissory note dated December 31, 2013, with a principal amount of $600,000, agreed to extend the maturity date of that note from September 30, 2013, to March 26, 2014.
 
LifeTech Capital, a division of Aurora Capital LLC, acted as the placement agent for the private placement.  We paid a fee of $190,000 to the placement agent, and issued common stock purchase warrants to the placement agent to purchase 844,444 shares of common stock at an exercise price equal to $0.715 per share. The placement agent warrants have a term of five years and include net exercise provisions.  We also agreed to reimburse the placement agent and certain investors for certain expenses relating to the Transaction, and to indemnify the placement agent and its affiliates and representatives against all expenses, losses, claims, actions, damages or liabilities, and the reasonable fees and expenses of their counsel, arising out of the provision of the services relating to the transaction.
 
The foregoing description of the transaction documents does not purport to be complete and is qualified in its entirety by reference to the full text of each document, which are filed as Exhibits to this Current Report on Form 8-K and are incorporated herein by reference.
 
On July 1, 2013, the Company issued a press release relating to the above transaction.  The press release is filed as Exhibit 99.1 to this Report.
 
Item 2.03
Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant.
 
The information provided in response to Item 1.01 of this report is incorporated by reference into this Item 2.03.
 
Item 3.02 
Unregistered Sales of Equity Securities.
 
The information provided in response to Item 1.01 of this report is incorporated by reference into this Item 3.02.  The securities were issued in a private placement under Section 4(2) of the Securities Act of 1933, as amended, and/or Rule 506 of Regulation D under the Securities Act.  Each investor represented that it was an accredited investor, as defined in Rule 501 of Regulation D, and that it was acquiring the securities for its own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Act.
 
 
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Item 9.01. 
Financial Statements and Exhibits.
   
(d)
Exhibits
 
Exhibit
Number
 
Description
10.1
 
10.2
 
10.3
 
10.4
 
10.5
 
 99.1   Press Release dated July 1, 2013.

 
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
ADAMIS PHARMACEUTICALS CORPORATION
     
Dated:   July 1, 2013
By:
/s/ Robert O. Hopkins
 
Name:
Robert O. Hopkins
 
Title:
Chief Financial Officer




Adamis Pharmaceuticals Corporation 8-K
Exhibit 10.1
 
SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT (this “ Agreement ”), is dated as of June 26, 2013, by and between Adamis Pharmaceuticals Corporation, a Delaware corporation (the “ Company ”), and the subscribers identified on Schedule 1 hereto, which may be amended from time to time prior to Closing (the “ Subscribers ”).

WHEREAS , the Company and the Subscribers are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the provisions of Section 4(2), Section 4(6) and/or Regulation D (“ Regulation D ”) as promulgated by the United States Securities and Exchange Commission (the “ Commission ”) under the Securities Act of 1933, as amended (the “ 1933 Act ”); and

WHEREAS , the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Subscribers, as provided herein, and the Subscribers shall purchase for up to $6,300,000 (“ Purchase Price ”), in the aggregate, (i) convertible secured promissory notes of the Company (“ Note ” or “ Notes ”) having an aggregate principal amount of up to $7,000,000 (“ Principal Amount ”), a form of which is annexed hereto as Exhibit A , convertible into shares of the Company’s common stock, $0.0001 par value (the “ Common Stock ”) at a per share conversion price set forth in the Notes (“ Conversion Price ”); and (ii) warrants   (the “ Warrants ”) in the form attached hereto as Exhibit B, to purchase shares of the Company’s Common Stock (the “ Warrant Shares ”) (the “ Offering ”).  The Notes, shares of Common Stock issuable upon conversion of the Notes (the “ Conversion Shares ”), the Warrants, and the Warrant Shares are collectively referred to herein as the “ Securities ”; and

WHEREAS , Gemini Master Fund, Ltd. (“ Gemini ”), one of the Subscribers, currently holds that certain 10% Senior Convertible Note issued to Gemini by the Company in the original principal amount of $500,000 on or about June 11, 2012 (“ Gemini Note ”), which Gemini Note currently has an outstanding balance consisting of $500,000 in principal and accrued but unpaid interest thereunder; and

WHEREAS , the aggregate proceeds of the sale of the Notes and the Warrants contemplated hereby, including the Gemini Note, shall be held in escrow by Grushko & Mittman, P.C., 515 Rockaway Avenue, Valley Stream, New York 11581 (the “ Escrow Agent ”) pursuant to the terms of an Escrow Agreement to be executed by the parties substantially in the form attached hereto as Exhibit C (the “ Escrow Agreement ”).

NOW, THEREFORE , in consideration of the mutual covenants and other agreements contained in this Agreement the Company and the Subscribers hereby agree as follows:

1.            Closing .

(a)           Subject to the satisfaction or waiver of the terms and conditions of this Agreement, on the “ Closing Date ” Subscribers shall purchase and the Company shall sell to such Subscribers the Notes and Warrants as described in Section 2 below.  The minimum amount of Purchase Price that a Subscriber may invest shall not be less than $500,000.  The date the Escrow Agent releases the funds received from one or more Subscribers to the Company and releases the Escrow Documents (as defined in the Escrow Agreement) to the parties in accordance with the provisions of the Escrow Agreement shall be the Closing Date with respect to such released funds and Escrow Documents, and such release is referred to herein as the “ Closing .”  There shall be only one Closing.

(b)           The Purchase Price payable by each Subscriber hereunder shall equal 90% of the original principal amount of the Note being purchased by such Subscriber hereunder.  Each Subscriber’s payment of its Purchase Price hereunder shall be payable by wire transfer of immediately funds to the Escrow Agent, or, in the case of Gemini, the surrender of the Gemini Note to the Escrow Agent.  Gemini’s surrender of the Gemini Note shall constitute payment in full for its Purchase Price hereunder, and the Notes and Warrants being issued to Gemini hereunder are being issued in substitution and exchange for the Gemini Note.   Pursuant to Rule 144 promulgated under the 1933 Act (“ Rule 144 ”), the holding period for the Note issued to Gemini hereunder (and the Conversion Shares thereunder) shall tack back to June 11, 2012 (the original issue date of the Gemini Note).  Subject to the remainder of this Section, the Company agrees not to take a position contrary to this paragraph, and the Company agrees to take all actions, including without limitation the issuance by its legal counsel of any necessary legal opinions, necessary to issue such Conversion Shares without restriction and not containing any restrictive legend without the need for any action by Gemini.  Notwithstanding anything contained herein or the other Transaction Documents, Gemini agrees that it will not sell, transfer or otherwise dispose of any Conversion Shares until the earliest to occur of (i) the Effective Date of the Registration Statement (as such terms are defined below), (ii) the date which is six months following the Closing Date, or (iii) the date on which all of Conversion Shares issued or issuable to the other Subscribers may otherwise be freely sold by such other Subscribers pursuant to Rule 144 or otherwise.

2.            Notes and Warrants .

(a)            Notes .   Subject to the satisfaction or waiver of the terms and conditions of this Agreement, on the Closing Date, each Subscriber shall purchase from the Company, and the Company shall sell to each such Subscriber, a Note in the Principal Amount designated on Schedule 1 hereto for each such Subscriber’s Purchase Price indicated thereon.
 
 
 

 
 
(b)            Warrants .  On the Closing Date, the Company will issue and deliver the Warrants to the Subscribers.  A Warrant to purchase one Warrant Share for each Conversion Share issuable upon conversion of the Notes at the Conversion Price in effect on the Closing Date.  The initial exercise price to acquire a Warrant Share upon exercise of a Warrant shall be 110% of the closing price of the Common Stock as reported by Bloomberg L.P. for the Principal Market [as defined in Section 9(b)] for the last Trading Day preceding the Closing Date, subject to reduction as described in the Warrants.  The Warrants shall be exercisable until five years after the issue date of the Warrants.

(c)            Allocation of Purchase Price .   The Purchase Price will be allocated by each Subscriber, at each Subscriber’s election, among the components of the Securities so that each component of the Securities will be fully paid and non-assessable, and acquired for value.

3.            Security Interest .   On the Closing Date, the Subscribers will appoint a collateral agent (the “ Collateral Agent ”) to act on behalf of the Subscribers as set forth in a “ Security Agreement ,” a form of which is annexed hereto as Exhibit D.   The Collateral Agent will be granted a senior security interest in the assets of the Company on behalf of the Subscribers, which security interest will be memorialized in the Security Agreement.  The Company will acknowledge the appointment of the Collateral Agent to act on behalf of the Subscribers as set forth in the Security Agreement.   The Company will execute such other agreements, documents and financing statements reasonably requested by the Subscribers and the Collateral Agent to memorialize and further protect the security interest described herein, which will be filed at the Company’s expense with the jurisdictions, states and counties reasonably designated by the Subscribers.  Subsequent to the Closing, the Company will also execute all such documents reasonably necessary in the opinion of the Collateral Agent to memorialize and further protect the security interest described herein which will be prepared and filed at the Company’s expense with the jurisdictions, states and filing offices designated by the Collateral Agent.
 
 
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4.            Subscriber Representations and Warranties .  Each of the Subscribers hereby represents and warrants to and agrees with the Company with respect only to such Subscriber that:

(a)            Organization and Standing of the Subscriber .  Subscriber, to the extent applicable, is an entity duly formed, validly existing and in good standing under the laws of the jurisdiction of its formation.

(b)            Authorization and Power .  Such Subscriber has the requisite power and authority to enter into and perform this Agreement and the other Transaction Documents (as defined herein) and to purchase the Note and Warrants being sold to it hereunder.  The execution, delivery and performance of this Agreement and the other Transaction Documents by such Subscriber and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate or similar action, and no further consent or authorization of Subscriber or its board of directors, members or stockholders, if applicable, is required.  This Agreement and the other Transaction Documents have been duly authorized, executed and delivered by such Subscriber and constitutes, or shall constitute, when executed and delivered, a valid and binding obligation of such Subscriber, enforceable against Subscriber in accordance with the terms thereof.

(c)            No Conflicts .  The execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation by such Subscriber of the transactions contemplated hereby and thereby or relating hereto do not and will not (i) result in a violation of such Subscriber’s charter documents, bylaws or other organizational documents, if applicable; (ii) conflict with nor constitute a default (or an event which with notice or lapse of time or both would become a default) under any agreement to which such Subscriber is a party; or (iii) result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to such Subscriber or its properties (except for such conflicts, defaults and violations as would not, individually or in the aggregate, have a material adverse effect on Subscriber).  Such Subscriber is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement and the other Transaction Documents  nor to purchase the Securities in accordance with the terms hereof, provided that for purposes of the representation made in this sentence, such Subscriber is assuming and relying upon the accuracy of the relevant representations and agreements of the Company herein.

(d)            Information on Company .   Such Subscriber has been furnished with or has had access to the EDGAR Website of the Commission to the Company’s filings made with the Commission during the period from the date that is two years preceding the date hereof through the tenth Business Day (as defined in Section 13(h) herein) preceding the Closing Date (including the documents filed as exhibits to such filings, hereinafter referred to collectively as the “ Reports ”).  Subscribers are not deemed to have any knowledge of any information not included in the Reports unless such information is delivered in the manner described in the next sentence.  In addition, such Subscriber may have received in writing from the Company such other information concerning its operations, financial condition and other matters as such Subscriber has requested in writing, identified thereon as OTHER WRITTEN INFORMATION (such other information is collectively, the “ Other Written Information ”), and considered all factors such Subscriber deems material in deciding on the advisability of investing in the Securities.  Such Subscriber was afforded (i) the opportunity to ask such questions as such Subscriber deemed necessary of, and to receive answers from, representatives of the Company concerning the merits and risks of acquiring the Securities; (ii) the right of access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable such Subscriber to evaluate the Securities; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to acquiring the Securities.
 
 
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(e)            Information on Subscriber .   Such Subscriber is, and will be at the time of the conversion of the Notes, exercise of the Warrants, an “ accredited investor ,” as such term is defined in Regulation D promulgated by the Commission under the 1933 Act, is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of United States publicly-owned companies in private placements in the past and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable such Subscriber to utilize the information made available by the Company to evaluate the merits and risks of and to make an informed investment decision with respect to the proposed purchase, which represents a speculative investment.  Such Subscriber has the authority and is duly and legally qualified to purchase and own the Securities.  Such Subscriber is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof.  The information set forth on Schedule 1   hereto regarding such Subscriber is accurate.

(f)            Purchase of Notes and Warrants .  On the Closing Date, such Subscriber will purchase the Note and Warrants as principal for its own account and not with a view toward, or for resale in connection with, the public sale or any distribution thereof.

(g)            Restricted Securities .   Such Subscriber understands that the Securities have not been registered under the 1933 Act nor under any state securities laws or regulations and such Subscriber shall not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any of the Securities unless pursuant to an effective registration statement under the 1933 Act, or unless an exemption from registration is available.  Notwithstanding anything to the contrary contained in this Agreement, such Subscriber may transfer (without restriction and without the need for an opinion of counsel) the Securities to its Affiliates (as defined below), provided that each such Affiliate is an “accredited investor,” as such term is defined under Regulation D, and such Affiliate agrees in writing to be bound by the terms and conditions of this Agreement.  For the purposes of this Agreement, an “ Affiliate ” of any person or entity means any other person or entity directly or indirectly controlling, controlled by or under direct or indirect common control with such person or entity.   For purposes of this definition, “ control ” means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.   In any event, and subject to compliance with applicable securities laws, commencing 180 days after the Closing Date, Subscriber may enter into lawful hedging transactions in the course of hedging the position they assume and the Subscriber may also enter into lawful Short Sales or other derivative transactions relating to the Securities, or interests in the Securities, and deliver the Securities, or interests in the Securities, to close out their short or other positions or otherwise settle other transactions, or loan or pledge the Securities, or interests in the Securities, to third parties who in turn may dispose of these Securities.  Subscriber agrees not to engage in Short Sales prior to 180 days after the Closing Date.  “ Short Sales ” means all “short sales” as defined in rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).
 
 
4

 
 
(h)            Conversion Shares and Warrant Shares Legend .  The Conversion Shares and Warrant Shares shall bear the following or similar legend:

THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR 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 FORM REASONABLY ACCEPTABLE TO THE COMPANY, 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 .”

(i)            Notes and Warrants Legend .  The Notes and Warrants shall bear the following legend:

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE -OR-  EXERCISABLE] 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 FORM REASONABLY ACCEPTABLE TO THE COMPANY, 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 .”

(j)            Communication of Offer .  The offer to sell the Securities was directly communicated to such Subscriber by the Company.  At no time was such Subscriber presented with or solicited by any leaflet, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such communicated offer.

(k)            No Governmental Review .  Such Subscriber understands that no United States federal or state agency or any other governmental or state agency has passed on or made recommendations or endorsement of the Securities or the suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

(l)             Correctness of Representations .  Subscriber represents that the foregoing representations and warranties are true and correct as of the date hereof and, unless Subscriber otherwise notifies the Company prior to the Closing Date, shall be true and correct as of the Closing Date.

(m)            Independent Decision .  The decision of such Subscriber to purchase Securities has been made by such Subscriber independently of any other Subscriber and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company which may have been made or given by any other Subscriber or by any agent or employee of any other Subscriber, and no Subscriber or any of its agents or employees shall have any liability to any other Subscriber (or any other person) relating to or arising from any such information, materials, statements or opinions.
 
 
5

 

(n)            No General Solicitation .  Such Subscriber is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

(o)            Survival .  The foregoing representations and warranties shall survive the Closing Date.

5.            Company Representations and Warranties .  Except as set forth in the Schedules or in the Reports, the Company represents and warrants to and agrees with each Subscriber that:

(a)            Due Incorporation .   The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite corporate power to own its properties and to carry on its business as presently conducted.  The Company is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect (as defined herein).  For purposes of this Agreement, a “ Material Adverse Effect ” shall mean a material adverse effect on the financial condition, results of operations, properties or business of the Company and its Subsidiaries taken as a whole.  For purposes of this Agreement, “ Subsidiary ” means, with respect to any entity at any date, 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 (in the absence of contingencies) 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 such entity, or (B) is under the actual control of the Company.  The Company represents that as of the date of this Agreement and the Closing Date, the Company owns the Subsidiaries identified on Schedule 5(a) and the amount of equity of each such Subsidiary as set forth on Schedule 5(a) .  The Company further represents that other than the name “Cellegy Pharmaceuticals, Inc.,” it has not been known by any other names for the five (5) years preceding the date of this Agreement.  The value of the assets of the Company’s Biosyn, Inc. Subsidiary is not significant and is insignificant relative to the value of the Company as a whole.  So long as any Notes are outstanding, without the prior written Consent of the Subscribers, the Company shall not transfer, or permit any Affiliate of the Company to transfer, any significant dollar amount or value of assets to Biosyn, and the Company shall ensure that Biosyn  does not engage in any operations other than operations that are immaterial relative to the value of Biosyn.  The Company further represents that the Company and each of its Subsidiaries owns no real property.  Upon occurrence of an Event of Default that is not cured during any applicable cure period, the Company shall cause Biosyn to deliver to the Subscribers an executed Additional Debtor Joinder and Subsidiary Guaranty.

(b)            Outstanding Stock .  All issued and outstanding shares of capital stock and equity interests in the Company have been duly authorized and validly issued and are fully paid and non-assessable.
 
 
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(c)            Authority; Enforceability .  This Agreement, the Notes, Warrants, Security Agreement, Subsidiary Guarantees, Intercreditor Agreement, Waiver and Consent Agreement, the Escrow Agreement, and any other agreements delivered or required to be delivered together with or pursuant to this Agreement or in connection herewith (collectively “ Transaction Documents ”) have been duly authorized, executed and delivered by the Company and are valid and binding agreements of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights generally and to general principles of equity.   The Company has full corporate power and authority necessary to enter into and deliver the Transaction Documents and to perform its obligations thereunder.

(d)            Capitalization and Additional Issuances .   The authorized and outstanding capital stock of the Company on a fully diluted basis and all outstanding rights to acquire or receive, directly or indirectly, any equity of the Company or any Subsidiary as of the date of this Agreement and the Closing Date (not including the Securities) are set forth on Schedule 5(d) .  Except as set forth on Schedule 5(d) , there are no options, warrants, or rights to subscribe to, securities, rights, understandings or obligations convertible into or exchangeable for or granting any right to subscribe for any shares of capital stock or other equity interest of the Company.  The only officer, director, employee and consultant stock option or stock incentive plans or similar plans currently in effect or currently contemplated by the Company (as the same may be amended only to extend the expiration of the term of the plan) are described in the Reports.  Except as set forth on Schedule 5(d) , there are no preemptive rights, rights of first refusal, rights of participation or any similar right to participate in the transactions contemplated by the Transaction Documents.

(e)            Consents .  No consent, approval, authorization or order of any court, governmental agency or body or arbitrator having jurisdiction over the Company, Subsidiaries or any of their Affiliates, any Principal Market [as defined in Section 9(b)], or the Company’s stockholders (except for such stockholder approvals, if any, as may be required in order to increase the number of authorized shares of Common Stock under the Company’s amended and restated certificate of incorporation if required by virtue of anti-dilution or other adjustments to the conversion price or the exercise price of the Notes or Warrants after the Closing Date) is required for the execution by the Company of the Transaction Documents and compliance and performance by the Company of its obligations under the Transaction Documents, including, without limitation, the issuance and sale of the Securities.  The Transaction Documents and the Company’s performance of its obligations thereunder have been approved by the Company’s board of directors in accordance with the Company’s certificate of incorporation and applicable law.  Any such qualifications and filings will, in the case of qualifications, be effective upon Closing and will, in the case of filings, be made within the time prescribed by law.

(f)            No Violation or Conflict .  Except as set forth on Schedule 5(f) , and subject to the execution and receipt of the approvals set forth in Schedule 5(f) and assuming the representations and warranties of the Subscriber in Section 4 are true and correct, neither the issuance nor the sale of the Securities nor the performance of the Company’s obligations under the Transaction Documents by the Company, will:

(i)           violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would be reasonably likely to constitute a default) under (A) the articles or certificate of incorporation, charter or bylaws of the Company, (B) to the Company’s knowledge, any decree, judgment, order, law, treaty, rule, regulation or determination applicable to the Company of any court, governmental agency or body, or arbitrator having jurisdiction over the Company or over the properties or assets of the Company or any of its Affiliates, (C) the terms of any bond, debenture, note or any other evidence of indebtedness, or any agreement, except for third party license agreements, stock option or other similar plan, indenture, lease, mortgage, deed of trust or other instrument to which the Company or any of its Affiliates is a party, by which the Company or any of its Affiliates is bound, or to which any of the properties of the Company or any of its Affiliates is subject, or (D) the terms of any “lock-up” or similar provision of any underwriting or similar agreement to which the Company, or any of its Affiliates is a party, except in each of the above cases the violation, conflict, breach, or default of which would not have a Material Adverse Effect; or

 
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(ii)          result in the creation or imposition of any lien, charge or encumbrance upon the Securities or any of the assets of the Company or any of its Affiliates except in favor of each Subscriber as described herein; or

(iii)         other than those that will have been validly waived as of the Closing, result in the activation of any rights of first refusal, participation rights, pre-emptive rights, anti-dilution rights or a reset or repricing of any debt, equity or security instrument of any creditor or equity holder of the Company, or the holder of the right to receive any debt, equity or security instrument of the Company nor result in the acceleration of the due date of any obligation of the Company; or

(iv)         result in the triggering of any piggy-back or other registration rights that have not been waived as of the Closing of any person or entity holding securities of the Company or having the right to receive securities of the Company.

(g)            The Securities .  The Securities upon issuance:

(i)           are, or will be, free and clear of any security interests, liens, claims or other encumbrances, subject only to restrictions upon transfer under the 1933 Act and any applicable state securities laws;

(ii)          have been, or will be, duly and validly authorized and on the dates of issuance of the Notes, Warrants, the Conversion Shares upon conversion of the Notes, and the Warrant Shares upon exercise of the Warrants, such Notes, Warrants, Conversion Shares and Warrant Shares will be duly and validly issued, fully paid and non-assessable and if registered pursuant to the 1933 Act and resold pursuant to an effective registration statement or an exemption from registration, will be free trading, unrestricted and unlegended;

(iii)         will not have been issued or sold in violation of any preemptive or other similar rights of the holders of any securities of the Company or rights to acquire securities or debt of the Company;

(iv)         will not subject the holders thereof to personal liability by reason of being such holders;
 
(v)         assuming the representations and warranties of the Subscribers as set forth in Section 4 hereof are materially true and correct, will not result in a violation of Section 5 under the 1933 Act.

(h)            Litigation .  Other than as disclosed in the Reports, there is no pending or, to the best knowledge of the Company, threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company or any of its Affiliates that would affect the execution by the Company or the complete and timely performance by the Company of its obligations under the Transaction Documents.  Except as disclosed in the Reports, there is no pending or, to the best knowledge of the Company, basis for or threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its Affiliates which litigation if adversely determined would have a Material Adverse Effect.
 
 
8

 
 
(i)             No Market Manipulation .  The Company and its Affiliates have not taken, and will not take, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Securities or affect the price at which the Securities may be issued or resold in violation of Regulation M promulgated under the 1934 Act.

(j)             Information Concerning Company .  As of the date of this Agreement and the Closing Date, the Reports and Other Written Information contain all material information relating to the Company and its operations and financial condition as of their respective dates required to be disclosed therein. Since March 31, 2012, and except as disclosed in the Reports or modified in the Reports and Other Written Information or in the Schedules hereto, there has been no Material Adverse Effect relating to the Company’s business, financial condition or affairs. The Reports and Other Written Information including the financial statements included therein do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, taken as a whole, not misleading in light of the circumstances and when made.  The financial statements of the Company included in the Reports comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles (“ GAAP ”) applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the financial position of the Company and Subsidiaries as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

(k)            Solvency .  Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the Offering, (i) the Company’s fair saleable value of its assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature; (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business for the current fiscal year as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof; and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debt when such amounts are required to be paid.  The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).

(l)             Defaults .  The Company is not in violation of its certificate of incorporation or bylaws.   To its knowledge, the Company is (i) not in default under or in violation of any other material agreement or instrument to which it is a party or by which it or any of its properties are bound or affected, which default or violation would have a Material Adverse Effect, (ii) not in default with respect to any order of any court, arbitrator or governmental body or subject to or party to any order of any court or governmental authority arising out of any action, suit or proceeding under any statute or other law respecting antitrust, monopoly, restraint of trade, unfair competition or similar matters which default would have a Material Adverse Effect, or (iii) not in violation of any statute, rule or regulation of any governmental authority which violation would have a Material Adverse Effect.
 
 
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(m)           No Integrated Offering .   Except as set forth on Schedule 5(m) , neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security of the Company nor solicited any offers to buy any security of the Company under circumstances that would cause the offer of the Securities pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the 1933 Act in a way that would jeopardize the availability of any applicable federal or state securities law exemption for the offer and sale of the Securities, or any applicable stockholder approval provisions of, including, without limitation, under the rules and regulations of the OTCQB [as defined in Section 5(v)], if any.  No prior offering will impair the exemptions relied upon in this Offering or the Company’s ability to timely comply with its obligations hereunder.  Neither the Company nor any of its Affiliates will take any action or suffer any inaction or conduct any offering other than the transactions contemplated hereby that may be integrated with the offer or issuance of the Securities or that would impair the exemptions relied upon in this Offering or the Company’s ability to timely comply with its obligations hereunder.

(n)            No General Solicitation .  Neither the Company, nor any of its Affiliates, nor to its knowledge, any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the 1933 Act) in connection with the offer or sale of the Securities.

(o)            No Undisclosed Liabilities .  The Company has no liabilities or obligations that should be disclosed in its financial statements in accordance with GAAP which are material, individually or in the aggregate, other than those set forth on its financial statements contained in the Reports or those incurred in the ordinary course of the Company’s business since March 31, 2012, and which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

(p)            No Undisclosed Events or Circumstances .  Since March 31, 2012, except as disclosed in the Reports, no event or circumstance has occurred or exists with respect to the Company or its businesses, properties, operations or financial condition, that, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed in the Reports.

(q)            Dilution .   The Company’s executive officers and directors understand the nature of the Securities being sold hereby and recognize that the issuance of the Securities will have a potential dilutive effect on the equity holdings of other holders of the Company’s equity or rights to receive equity of the Company.  The board of directors of the Company has concluded, in its good faith business judgment, that the issuance of the Securities is in the best interests of the Company.  The Company specifically acknowledges that its obligation to issue the Conversion Shares upon conversion of the Notes and the Warrant Shares upon exercise of the Warrants is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other stockholders of the Company or parties entitled to receive equity of the Company.

(r)             No Disagreements with Accountants and Lawyers .  There are no material disagreements of any kind presently existing, or reasonably anticipated by the Company to arise between the Company and the accountants and lawyers previously and presently employed by the Company, including but not limited to disputes or conflicts over payment owed to such accountants and lawyers, nor have there been any such disagreements during the two years prior to the Closing Date.  The Company’s accounting firm is set forth on Schedule 5(r) .  To the knowledge and belief of the Company, such accounting firm: (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the fiscal year ending March 31, 2013.

 
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(s)            Investment Company .  Neither the Company nor any Affiliate of the Company is an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

(t)             Foreign Corrupt Practices .   Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is  in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

(u)            Reporting Company/Shell Company .  The Company is a publicly-held company subject to reporting obligations pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the “ 1934 Act ”), and has a class of securities registered pursuant to Section 12(g) of the 1934 Act.  Pursuant to the provisions of the 1934 Act, the Company has timely filed all reports and other materials required to be filed thereunder with the Commission during the preceding twelve months.  As of the Closing Date, the Company is not a “shell company” nor a “former shell company” as those terms are employed in Rule 144 under the 1933 Act.

(v)            Listing .  The Company’s Common Stock is quoted on the OTC QB Marketplace of the OTC Market Groups, Inc. (“ OTCQB ”) under the symbol ADMP.  The Company has not received any pending oral or written notice that its Common Stock is not eligible nor will become ineligible for quotation on the OTCQB nor that its Common Stock does not meet all requirements for the continuation of such quotation.

(w)           DTC Status .  The Company’s transfer agent is a participant in and the Common Stock is eligible for transfer pursuant to the Depository Trust Company Automated Securities Transfer Program.   The name, address, telephone number, fax number, contact person and email address of the Company transfer agent is set forth on Schedule 5(w) hereto.

(x)             Title to Assets .  The Company owns no real property.  Except as may be sold in the ordinary course of business, the Company has good title to all of its personal property reflected in the Reports as owned by the Company, free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances, except for those that, individually or in the aggregate, do not cause and are not reasonably likely to cause a Material Adverse Effect.  All leases of the Company are valid and subsisting and in full force and effect.

(y)            Compliance with Law . To its knowledge, the business of the Company has been and is presently being conducted in accordance with all applicable federal, state, local and foreign governmental laws, rules, regulations and ordinances, except for such noncompliance that, individually or in the aggregate, would not cause a Material Adverse Effect. The Company has all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted by it unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
 
 
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(z)             Taxes . The Company has accurately prepared and filed all federal, state, foreign and other tax returns required by law to be filed by it, has paid or made provisions for the payment of all taxes shown to be due and all additional assessments, and adequate provisions have been and are reflected in the financial statements of the Company for all current taxes and other charges to which the Company is subject and that are not currently due and payable. None of the federal income tax returns of the have been audited by the Internal Revenue Service (the “ IRS ”). The Company has no knowledge of any additional assessments, adjustments or contingent tax liability (whether federal or state) of any nature whatsoever, whether pending or threatened against the Company for any completed tax period, nor of any basis for any such assessment, adjustment or contingency.

(aa)          Intellectual Property .

(i)            The term “ Intellectual Property Rights ” includes:

1.    
 the Company’s rights regarding the name of the Company and each Subsidiary and all fictional business names, trading names, registered and unregistered trademarks, service marks, and applications of the Company and each Subsidiary owned by the Company that are (A) identified in the Reports, or (B) material for the operation of the Company’s businesses as it is currently conducted or as represented, in writing, to the Purchaser to be conducted (collectively, “ Marks '');

2.    
all patents, patent applications, and inventions and discoveries that may be patentable and in each case that are owned by the Company or any Subsidiary  that are (A) identified in the Reports, or (B) material for the operation of the Company’s businesses as it is currently conducted or as represented, in writing, to the Purchaser to be conducted (collectively, “ Patents '');
 
3.    
all copyrights in both published works and published works owned by the Company or any Subsidiary that are (A) identified in the Reports, or (B) material for the operation of the Company’s businesses as it is currently conducted or as represented, in writing, to the Purchaser to be conducted (collectively, “ Copyrights ”);
 
4.    
all rights in mask works owned by the Company or any Subsidiary (collectively, “ Rights in Mask Works ''); and
 
5.    
all know-how, trade secrets, confidential information, customer lists, software, technical information, data, process technology, plans, drawings, and blue prints (collectively, “ Trade Secrets ''); owned by the Company or any Subsidiary that are (A) identified in the Reports, or (B) material for the operation of the Company’s businesses as it is currently conducted or as represented, in writing, to the Purchaser to be conducted.
 
(ii)            Agreements . There are no outstanding and, to Company’s knowledge, no threatened disputes or disagreements with respect to any agreements relating to any Intellectual Property Rights to which the Company is a party or by which the Company is bound.
 
 
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(iii)           Know-How Necessary for the Business .  Except for such instances, if any, as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, the Intellectual Property Rights (together with intellectual property rights licensed by the Company) are all those necessary for the operation of the Company’s businesses as it is currently conducted or as represented, in writing, to the Purchaser to be conducted. The Company is the owner of all right, title, and interest in and to each of the Intellectual Property Rights, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims, and has the right to use all of the Intellectual Property Rights.  No employee of the Company has entered into any contract that restricts or limits in any way the scope or type of work in which the employee may be engaged or requires the employee to transfer, assign, or disclose information concerning his work to anyone other than of the Company.
 
(iv)           Patents .  Except for such instances, if any, as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:  (A) the Company is the owner of all right, title and interest in and to each of the Patents, free and clear of all Liens and other adverse claims; (B) all of the issued Patents are currently in compliance with formal legal requirements (including payment of filing, examination, and maintenance fees and proofs of working or use), are valid and enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety days after the Closing Date; (C) no Patent has been or is now involved in any interference, reissue, reexamination, or opposition proceeding; (D) except as set forth in Schedule 3.1(o) , (1) there is no potentially interfering patent or patent application of any third party, and (2) no Patent is infringed or has been challenged or threatened in any way; and (E) none of the products manufactured and sold, nor any process or know-how used, by the Company infringes or is alleged to infringe any patent or other proprietary right of any other Person.
 
(v)            Trademarks .  Except for such instances, if any, as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:  (A) the Company is the owner of all right, title, and interest in and to each of the Marks, free and clear of all Liens and other adverse claims; (B) all Marks that have been registered with the United States Patent and Trademark Office are currently in compliance with all formal legal requirements (including the timely post-registration filing of affidavits of use and incontestability and renewal applications), are valid and enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety days after the Closing Date; (C) except as set forth in Schedule 3.1(o) , no Mark has been or is now involved in any opposition, invalidation, or cancellation proceeding and, no such action is currently threatened with respect to any of the Marks; (D) (1) there is no potentially interfering trademark or trademark application of any third party, and (2) no Mark is infringed or has been challenged or threatened in any way; and (E) none of the Marks used by the Company infringes or is alleged to infringe any trade name, trademark, or service mark of any third party.
 
(vi)           Copyrights .  Except for such instances, if any, as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:  (i) to the Company’s knowledge, the Company is the owner of all right, title, and interest in and to each of the Copyrights, free and clear of all Liens and other adverse claims; (ii) the Company does not have any registered Copyrights; (iii) to the Company’s knowledge, none of the subject matter of any of the Copyrights infringes or is alleged to infringe any copyright of any third party or is a derivative work based on the work of a third party; and (iv) all works encompassed by the Copyrights have been marked with the proper copyright notice, if required to establish copyright protection for such works.
 
 
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(vii)          Trade Secrets .  Except for such instances, if any, as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:  (A) with respect to each Trade Secret, the documentation relating to such Trade Secret is current, accurate, and sufficient in detail and content to identify and explain it and to allow its full and proper use without reliance on the knowledge or memory of any individual; (B) the Company has taken all reasonable precautions to protect the secrecy, confidentiality, and value of its Trade Secrets; (C) the Company has good title and an absolute (but not necessarily exclusive) right to use the Trade Secrets; (D) the Trade Secrets are not part of the public knowledge or literature, and, to the Company’s knowledge, have not been used, divulged, or appropriated either for the benefit of any Person (other the Company) or to the detriment of the Company; and (E) no Trade Secret is subject to any adverse claim or has been challenged or threatened in any way.  The Company’s material Intellectual Property Rights are described in the Reports.

(bb)          Books and Record Internal Accounting Controls . The books and records of the Company accurately reflect in all material respects the information relating to the business of the Company, the location and collection of its assets, and the nature of all transactions giving rise to the obligations or accounts receivable of the Company. Except as disclosed in the Reports under the heading “Controls and Procedures,” the Company maintains a system of internal accounting controls sufficient, in the judgment of the Company, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate actions are taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in 1934 Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company, including its Subsidiaries, is made known to the certifying officers by others within those entities.

(cc)          Material Agreements .  The Company is not a party to any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the Commission as an exhibit to a registration statement on Form S-1 or applicable form (collectively, “ Material Agreements ”) if the Company was registering securities under the Securities Act, that has not been so filed.  To the Company’s knowledge, the Company has in all material respects performed all the obligations required to be performed by them to date under the foregoing agreements, has received no notice of default and are not in default under any Material Agreement now in effect, in each of the above cases where the failure to perform such obligations or the result of which default would reasonably be expected to cause a Material Adverse Effect.  Except as set forth in the Company’s certificate of incorporation or in the Transaction Documents or as disclosed in the Reports, no written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement of the Company limits the payment of dividends on the Common Stock.

 
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(dd)          Transactions with Affiliates . Except as set forth in the Reports, there are no loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions between (i) the Company on the one hand, and (ii) on the other hand, any officer or director of the Company, or any Affiliate.

(ee)          Sarbanes-Oxley Act . Except as disclosed in the Reports under the heading “Controls and Procedures,” the Company is in material compliance with the applicable provisions of the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”), and the rules and regulations promulgated thereunder that are effective, and applicable to the Company as of the date hereof.

(ff)            Insurance .  The Company is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company is engaged in light of the size and activities of the Company and its Subsidiaries.  To the best of Company’s knowledge, such insurance contracts and policies are valid and in full force and effect.  The Company has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business on terms consistent with market for the Company’s business.

(gg)          Application Of Takeover Protections . The Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable, as of the Closing Date, any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation or the laws of its state of incorporation that is or could become applicable to the Subscribers as a result of the Subscribers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation the Company’s issuance of the Securities and the Subscribers’ ownership of the Securities.

(hh)          Off-Balance Sheet Arrangements . There is no transaction, arrangement, or other relationship between the Company and an unconsolidated or other off balance sheet entity that is not disclosed in its financial statements that should be disclosed in accordance with GAAP and that would be reasonably likely to have a Material Adverse Effect.

(ii)            Material Non-Public Information . Except with respect to the transactions contemplated hereby that will be publicly disclosed, and with respect to information given to the Subscriber, if any, which the Company hereby confirms will not constitute material non-public information as of the date that is earlier to occur of (a) three months after the Closing Date, or (b) the filing date of the registration statement contemplated by Section 11 below, the Company has not provided any Subscriber or its agents or counsel with any information that the Company believes constitutes material non-public information.  The Company acknowledges that the Subscriber will rely on the above representation when effecting sales of the Securities.

(jj)            Environmental Compliance . The Company has obtained all approvals, authorization, certificates, consents, licenses, orders and permits or other similar authorizations of all governmental authorities, or from any other person, that are required under any Environmental Laws and used in its business or in the business of any of its Subsidiaries, unless the failure to possess such approvals, authorizations, certificates, consents, licenses, orders or permits, individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. “ Environmental Laws ” shall mean all applicable laws relating to the protection of the environment, including, without limitation, all requirements pertaining to reporting, licensing, permitting, controlling, investigating or remediating emissions, discharges, releases or threatened releases of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, materials or wastes, whether solid, liquid or gaseous in nature, into the air, surface water, groundwater or land, or relating to the manufacture, processing,
 
 
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distribution, use, treatment, storage, disposal, transport or handling of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, material or wastes, whether solid, liquid or gaseous in nature. Except for such instances as would not individually or in the aggregate have a Material Adverse Effect, the Company is also in compliance with all other limitations, restrictions, conditions, standards, requirements, schedules and timetables required or imposed under all Environmental Laws and there are no past or present events, conditions, circumstances, incidents, actions or omissions relating to or in any way affecting the Company that violate or may violate any Environmental Law after the Closing Date or that may give rise to any environmental liability, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, study or investigation (i) under any Environmental Law, or (ii) based on or related to the manufacture, processing, distribution, use, treatment, storage (including without limitation underground storage tanks), disposal, transport or handling, or the emission, discharge, release or threatened release of any hazardous substance.

(kk)          Money Laundering .  The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “ Money Laundering Laws ”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.

(ll)            Stock Option Plans . Each stock option granted by the Company under the Company’s stock option plan was granted (i) in accordance with the terms of the Company’s stock option plan and (ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. No stock option granted under the Company’s stock option plan has been backdated.  The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.

(mm)        Office of Foreign Assets Control .  Neither the Company nor any Subsidiary nor, to the Company's knowledge, any director, officer, agent, employee or affiliate of the Company is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“ OFAC ”).

(nn)          Correctness of Representations .   The Company represents that the foregoing representations and warranties are true and correct as of the date hereof in all material respects, and, unless the Company otherwise notifies the Subscribers prior to the Closing Date, shall be true and correct in all material respects as of the Closing Date; provided, that, if such representation or warranty is made as of a different date, in which case such representation or warranty shall be true as of such date.  The Company makes each of the representations contained in Sections 5(a), (b), (c), (d), (e), (f), (h), (j), (k), (l), (o), (p), (r), (s), (t), (x), (y), (z), (aa), (bb), (cc), (dd), (ff), (gg), (hh), (jj), (kk), (ll), and (mm) of this Agreement, as same relate or could be applicable to each Subsidiary, mutatis   mutandum , provided, that in each case any determination of materiality or “Material Adverse Effect” shall be made with respect to the Company and all Subsidiaries, taken together.  All representations made by or relating to the Company of a historical or prospective nature and all undertakings described in Section 9 shall relate, apply and refer to the Company and Subsidiaries and their predecessors and successors.

(oo)         Survival .  The foregoing representations and warranties shall survive the Closing Date.

 
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6.            Regulation D Offering/Legal Opinion .  The offer and issuance of the Securities to the Subscribers is being made pursuant to the exemption from the registration provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder.  On the Closing Date, the Company will provide opinions reasonably acceptable to the Subscribers in substantially the form annexed hereto as Exhibit E from the Company’s legal counsel opining on the availability of an exemption from registration under the 1933 Act as it relates to the offer and issuance of the Securities and other matters reasonably requested by Subscribers.   The Company will provide, at the Company’s expense, to the Subscribers, such other legal opinions as are reasonably necessary in each Subscriber’s reasonable opinion for the issuance of the Securities and the resale of the Securities pursuant to an effective registration statement, Rule 144 under the 1933 Act or an exemption from registration at the time of disposition of the Securities, provided the sale of such Securities qualifies for such exemption or is covered by a Registration Statement.

7.            Maximum Conversion .  A Subscriber shall not be entitled to convert on a Conversion Date that amount of a Note nor may the Company make any payment including principal, interest, or liquidated or other damages by delivery of Conversion Shares in connection with that number of Conversion Shares which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by such Subscriber and its Affiliates on a Conversion Date or payment date, and (ii) the number of Conversion Shares issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a calculation date, which would result in beneficial ownership by Subscriber and its Affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion Date.  For the purposes of 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 Rule 13d-3 thereunder.  Subject to the foregoing, the Subscriber shall not be limited to aggregate conversions of only 4.99% and aggregate conversions by the Subscriber may exceed 4.99%.  The Subscriber shall have the authority to determine whether the restriction contained in this Section 7.3 will limit any conversion of a Note and the extent such limitation applies and to which convertible or exercisable instrument or part thereof such limitation applies.  The Subscriber may increase the permitted beneficial ownership amount up to 9.99% upon and effective after 61 days prior written notice to the Company.  Subscriber may allocate which of the equity of the Company deemed beneficially owned by Subscriber shall be included in the 4.99% amount described above and which shall be allocated to the excess above 4.99%.

8.            Fees .

(a)            Broker’s Commission .  The Company on the one hand, and each Subscriber (for such Subscriber only) on the other hand, agrees to indemnify the other against and hold the other harmless from any and all liabilities to any persons claiming brokerage commissions or similar fees on account of services purported to have been rendered on behalf of the indemnifying party in connection with this Agreement or the transactions contemplated hereby and arising out of such party’s actions.  The Company represents that to the best of its knowledge, except as set forth on Schedule 8(a) , there are no parties entitled to receive fees, commissions, finder’s fees, due diligence fees or similar payments for the Company in connection with the Offering.  The Company agrees to pay, upon Closing the fees described on Schedule 8(a) hereto (“ Fees ”).  Anything in this Agreement to the contrary notwithstanding, each Subscriber is providing indemnification only for such Subscriber’s own actions and not for any action of any other Subscriber.  The liability of the Company and each Subscriber’s liability hereunder is several and not joint.

 
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(b)            Subscriber’s Legal Fees .   The Company shall pay to Grushko & Mittman, P.C., a cash fee of $30,000 (“ Legal Fees ”) (of which $10,000 has been paid) as reimbursement for services rendered in connection with the transactions described in the Transaction Documents.  The Legal Fees will be payable out of funds held pursuant to the Escrow Agreement.  Grushko & Mittman, P.C. will be reimbursed at Closing by the Company for all lien searches, filing fees, and reasonable printing and shipping costs for the closing statements to be delivered to Subscribers.

9.            Covenants of the Company .  The Company covenants and agrees with the Subscribers as follows:

(a)            Stop Orders .  Subject to the prior notice requirement described in Section 9(n), the Company will advise the Subscribers within twenty-four hours after it receives notice of issuance by the Commission, any state securities commission or any other regulatory authority of any stop order or of any order preventing or suspending any offering of any securities of the Company, or of the suspension of the qualification of the Common Stock of the Company for offering or sale in any jurisdiction, or the initiation of any proceeding for any such purpose.  The Company will not issue any stop transfer order or other order impeding the sale, resale or delivery of any of the Securities, except as may be required by any applicable federal or state securities laws, provided to the extent not in violation of such federal or state securities law at least five (5) days prior notice of such instruction is given to the Subscribers.

(b)            Listing/Quotation .   The Company shall promptly secure the quotation or listing of and include the Conversion Shares and Warrant Shares for listing upon each national securities exchange, electronic bulletin board, or automated quotation system upon which the Company’s Common Stock is quoted or listed and shall maintain same so long as any Securities are outstanding or are issuable.  The Company will maintain the quotation or listing of its Common Stock on the New York Stock Exchange, NYSE MKT, NASDAQ Capital Market, NASDAQ Global Market, NASDAQ Global Select Market, the OTC Bulletin Board, the OTCQB, or the OTC QX Marketplace, or New York Stock Exchange (whichever of the foregoing is at the time the principal trading exchange or market for the Common Stock (the “ Principal Market ”), and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Market, as applicable.  Subject to the limitation set forth in Section 9(n), the Company will provide Subscribers with copies of all notices it receives notifying the Company of the threatened and actual delisting of the Common Stock from any Principal Market.  As of the date of this Agreement and the Closing Date, the OTCQB is the Principal Market.

(c)            Market Regulations .  If required, the Company shall notify the Commission, the Principal Market and applicable state authorities, in accordance with their requirements, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Securities to the Subscribers and promptly provide copies thereof to the Subscribers.

(d)            Filing Requirements .   From the date of this Agreement and until the later to occur of (i) none of the Notes are outstanding (the “ End Date ”), or (ii) all the Conversion Shares and Warrant Shares (assuming cashless exercise) have been resold or transferred or are eligible to be transferred by the Subscribers pursuant to a registration statement or pursuant to Rule 144(b)(1)(i), the Company will (A) comply in all respects with its reporting and filing obligations under the 1934 Act, (B) voluntarily comply with all reporting requirements that are applicable to an issuer with a class of shares registered pursuant to Section 12(g) of the 1934 Act even if the Company is not subject to such reporting requirements sufficient to permit Subscriber to be able to resell the Conversion Shares and Warrant Shares pursuant to Rule 144(b)(i), (C) comply with all requirements related to any registration statement filed pursuant to this Agreement, (D) use its commercially reasonable best efforts not to take any action or file any document (whether or not permitted by the 1933 Act or the 1934 Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said acts until the End Date.  Until the later of the End Date or no Warrants are outstanding, the Company will satisfy its obligations to continue the listing or quotation of the Common Stock on a Principal Market and comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Market.  The Company agrees to timely file a Form D with respect to the Securities if required under Regulation D promulgated under the 1934 Act.

 
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(e)            Use of Proceeds .   The proceeds of the Offering will be substantially employed by the Company for the purposes set forth on Schedule 9(e) hereto.  Except as described on Schedule 9(e) , the proceeds of the Offering may not and will not be used for accrued and unpaid officer and director salaries, nor payment of financing related debt nor redemption of outstanding notes or equity instruments of the Company nor non-trade payables outstanding on the Closing Date.

(f)             Reservation .   Prior to the Closing, the Company undertakes to reserve on behalf of Subscribers from its authorized but unissued Common Stock, a number of shares of Common Stock equal to 150% of the amount of Common Stock necessary to allow Subscribers to be able to convert all of the Notes (including interest that would accrue thereon through the Maturity Date (as defined in the Notes)) and 100% of the amount of Warrant Shares issuable upon exercise of the Warrants (“ Required Reservation ”).   Failure to have sufficient shares reserved pursuant to this Section 9(f) at any time shall be a material default of the Company’s obligations under this Agreement and an Event of Default under the Notes.  Without waiving the foregoing requirement, if at any time Notes and Warrants are outstanding the Company has reserved on behalf of the Subscribers less than 125% of the amount necessary for full conversion of the outstanding Note principal and interest at the conversion price in effect on every such date and 100% of the Warrant Shares issuable upon exercise of outstanding Warrants (“ Minimum Required Reservation ”), the Company will promptly reserve the Minimum Required Reservation, or if there are insufficient authorized and available shares of Common Stock to do so, the Company will take all action necessary to increase its authorized capital to be able to fully satisfy its reservation requirements hereunder, including the filing of a preliminary proxy with the Commission not later than fifteen (15) days after the first day the Company has reserved less than the Minimum Required Reservation.  The Company agrees to provide notice to the Subscribers not later than five days after the date the Company has less than the Minimum Required Reservation reserved on behalf of the Subscribers.

(g)            DTC Program .  At all times that Notes or Warrants are outstanding, the Company will employ as the transfer agent for the Common Stock, Conversion Shares and Warrant Shares a participant in the Depository Trust Company Automated Securities Transfer Program and such Common Stock, Conversion Shares and Warrant Shares will be maintained as eligible for transfer pursuant to the Depository Trust Automated Securities Transfer Program.

(h)            Taxes .  From the date of this Agreement and until the End Date, the Company will promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or business of the Company; provided, however, that any such tax, assessment, charge or levy need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if the Company shall have set aside on its books adequate reserves with respect thereto, and provided, further, that the Company will pay all such taxes, assessments, charges or levies forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefore.
 
 
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(i)            Insurance .  As reasonably necessary as determined by the Company, from the date of this Agreement and until the End Date, the Company will keep its assets which are of an insurable character insured by financially sound and reputable insurers against loss or damage by fire, explosion and other risks customarily insured against by companies in the Company’s line of business and location, in amounts and to the extent and in the manner customary for companies in similar businesses similarly situated and located and to the extent available on commercially reasonable terms.

(j)            Books and Records .  From the date of this Agreement and until the End Date, the Company will keep true records and books of account in which full, true and correct entries will be made of all dealings or transactions in relation to its business and affairs in accordance with GAAP applied on a consistent basis.

(k)            Governmental Authorities .   From the date of this Agreement and until the End Date, the Company shall use all commercially reasonable efforts to duly observe and conform in all material respects to all requirements of governmental authorities relating to the conduct of its business and to its properties or assets, where failure to observe and conform to such requirements would reasonably be expected to have a Material Adverse Effect.

(l)            Intellectual Property .  From the date of this Agreement and until the End Date, the Company shall use commercially reasonable efforts to maintain in full force and effect its corporate existence, rights and franchises and all licenses and other rights to Intellectual Property Rights.   Schedule 9(l) hereto identifies its Intellectual Property Rights.

(m)           Properties .  From the date of this Agreement and until the End Date, the Company will keep its properties in good repair, working order and condition, reasonable wear and tear excepted, and from time to time make all necessary and proper repairs, renewals, replacements, additions and improvements thereto; and the Company will at all times comply with each provision of all leases and claims to which it is a party or under which it occupies or has rights to property if the breach of such provision could reasonably be expected to have a Material Adverse Effect.  The Company will not abandon any of its assets except for those assets which have negligible or marginal value or for which it is prudent, in the Company’s reasonable judgment, to do so under the circumstances.

(n)            Confidentiality .   From the date of this Agreement and until the End Date, the Company agrees that except in connection with a Form 8-K, Form 10-Q, Form 10-K and any registration statement which registers the Securities or statements regarding the Subscribers’ ownership of the Securities or in correspondence with the Commission regarding same, it will not disclose publicly or privately the identity of the Subscribers unless (i) expressly agreed to in writing by Subscribers, (ii) as needed in any dispute or proceeding with a Subscriber, (iii) in response to an inquiry by a governmental agency or a self-regulatory organization or (iv) to the extent required by law and then only upon not less than four (4) days prior notice to Subscribers.   Upon  delivery by the Company to the Subscribers after the Closing Date of any notice or information, in writing, electronically or otherwise, and while a Note and Warrants, Conversion Shares or Warrant Shares are held by such Subscribers, unless the  Company has in good faith determined that the matters relating to such notice or information do not constitute material, nonpublic information relating to the Company or Subsidiaries or unless such information is delivered to such Subscriber pursuant to a nondisclosure agreement between the Company and such Subscriber whereby such Subscriber has agreed to maintain material nonpublic information in confidence, the Company shall within four (4) days after any such delivery publicly disclose such  material,  nonpublic information on a Report on Form 8-K.  In the event that the Company believes that a notice or communication to Subscribers contains material, nonpublic information relating to the Company or Subsidiaries, except as required to be delivered in connection with this Agreement, the Company shall so indicate to Subscribers prior to delivery of such notice or information.  Subscribers will be granted five (5) days to notify the Company that Subscriber elects not to receive such information.  In the case that Subscriber elects not to receive such information, the Company will not deliver such information to Subscribers; provided that such failure to provide such information will not be deemed to be a default by the Company under the Transaction Documents.  In the absence of any such Company indication, Subscribers shall be allowed to presume that all matters relating to such notice and information do not constitute material, nonpublic information relating to the Company or Subsidiaries, taken together.  Notwithstanding anything to the contrary herein, the Company shall have no obligation to file a Report on Form 8-K and/or provide prior notification to a Subscriber in advance of delivering any notice or information that contains material nonpublic information to any Subscriber who is serving as a director or officer of the Company at the time of disclosure.  The Company agrees that any information known to Subscriber as of the Closing Date not already made public by the Company on or after the filing of the Form 8-K required to be filed pursuant to Section 9(o) below may be made public and disclosed by the Subscriber unless and to the extent that such information was disclosed to such Subscriber pursuant to a nondisclosure agreement between the Company and such Subscriber whereby such Subscriber has agreed to maintain material nonpublic information in confidence.
 
 
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(o)          Disclosure of Offering .  The Company covenants and agrees that it will, within four (4) business days after the Closing Date, file a Report on Form 8-K with respect to the Transaction Documents and the material terms of the Offering.

(p)          Negative Covenants .   So long as Notes are outstanding, without the consent of a Majority in Interest (defined in Section 13(j) below), the Company will not and will not permit any of its Subsidiaries to directly or indirectly:

(i)           other than Liens identified on Schedule 9(p)(i) , create, incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, security title, mortgage, security deed or deed of trust, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction) (each, a “ Lien ”) upon any of its property, whether now owned or hereafter acquired except for (a) Liens upon the Company’s intellectual property in connection with a license, development, manufacturing, or distribution transaction or other partnering arrangement; (b) Liens imposed by law for taxes that are not yet due or are being contested in good faith and for which adequate reserves have been established in accordance with GAAP; (c) carriers’, warehousemen’s, mechanic’s, materialmen’s, repairmen’s and other like Liens imposed by law and arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or that are being contested in good faith and by appropriate proceedings; (d) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations; (e) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (f) Liens created with respect to the financing of the purchase of new property in the ordinary course of the Company’s business up to the amount of the purchase, lease or licensing price of such property; and (g) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property (each of (a) through (g), a “ Permitted Lien ”);

(ii)          amend its certificate of incorporation or bylaws so as to materially and adversely affect any rights of the Subscribers with respect to the Securities except to increase the number of shares of Common Stock authorized or to designate a new series of Preferred Stock, or to effect a stock split or reverse stock split;
 
 
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(iii)         repay, repurchase or offer to repay, repurchase or otherwise acquire or make any dividend or distribution in respect of any of its Common Stock, preferred stock, or other equity securities other than to the extent permitted or required under the Transaction Documents and except pursuant to written agreements with employees, directors, officers or consultants providing for a right of repurchase at the original purchase price of such securities upon cessation of service, cessation of vesting, employment termination or similar events;

(iv)        except pursuant to agreements, plans, arrangements or instruments described in the Reports or as set forth on Schedule 9(p)(iv) , or for awards pursuant to equity incentive plans described in the Reports as set forth on Schedule 5(d) , engage in any transactions with any officer, director, employee or any Affiliate of the Company, including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $100,000 in any rolling 12 month period [in one or more transactions, all of which will be aggregated for purposes of this Section 9(p)(iv)] other than (i) for payment of salary, or fees for services rendered, pursuant to and on the terms of a written contract in effect at least five (5) days prior to the Closing Date, a copy of which has been provided to the Subscriber at least four (4) days prior to the Closing Date or disclosed in the Reports at least ten (10) days prior to the Closing Date, which contracts may be extended on terms customary and reasonable within the marketplace, (ii) reimbursement for authorized expenses incurred on behalf of the Company, (iii) for other employee benefits, including stock option or other equity agreements under any equity incentive plan of the Company disclosed in the Reports or on Schedule 5(d) , (iv) or with respect to newly hired employees and officers on terms, conditions and arrangements, in the ordinary course of business, that is consistent with the foregoing, or (v) other transactions disclosed in the Reports; or

(v)         pay or redeem any financing related debt or securities, except as permitted pursuant to the Intercreditor Agreement.
 
(q)           Offering Restrictions .   Subject to the consent of a Majority in Interest, for so long as the Notes are outstanding, the Company will not enter into nor exercise any Equity Line of Credit or similar agreement, nor issue nor agree to issue any floating or Variable Priced Equity Linked Instruments nor any of the foregoing or equity with price reset rights (collectively, the “ Variable Rate Restrictions ”).   For purposes hereof, “ Equity Line of Credit ” shall include any transaction involving a written agreement between the Company and an investor or underwriter whereby the Company has the right to “put” its securities to the investor or underwriter over an agreed period of time and at an agreed price or price formula, and “ Variable Priced Equity Linked Instruments ” shall include: (A) any debt or equity securities which are convertible into, exercisable or exchangeable for, or carry the right to receive additional shares of Common Stock either (1) at any conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for Common Stock at any time after the initial issuance of such debt or equity security, or (2) with a fixed conversion, exercise or exchange price that is subject to being reset at some future date at any time after the initial issuance of such debt or equity security due to a change in the market price of the Company’s Common Stock since date of initial issuance, and (B) any amortizing convertible security which amortizes prior to its maturity date, where the Company is required or has the option to (or any investor in such transaction has the option to require the Company to) make such amortization payments in shares of Common Stock which are valued at a price that is based upon and/or varies with the trading prices of or quotations for Common Stock at any time after the initial issuance of such debt or equity security (whether or not such payments in stock are subject to certain equity conditions).  Variable Priced Equity Linked Instruments excludes any of same identified on Schedule 9(q) .
 
 
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(r)            Seniority .   Except for Permitted Liens, until the Notes are fully satisfied or converted, without written consent of a Majority in Interest, the Company and Subsidiaries shall not grant nor allow any security interest to be taken in any assets of the Company or any Subsidiary or any Subsidiary’s assets; nor issue or amend any debt, equity or other instrument which would give the holder thereof directly or indirectly, a right in any assets of the Company or any Subsidiary or any right to payment equal to or superior to any right of the Subscribers as holders of the Notes in or to such assets or payment.

(s)           Notices .   For so long as the Subscribers hold any Notes or Warrants is outstanding, the Company will maintain a United States address and United States fax number for notice and delivery purposes under the Transaction Documents.

(t)            Transactions with Insiders .  Except as permitted pursuant to Section 9(p)(iv), so long as the Notes are outstanding, without a consent of a Majority in Interest, the Company shall not, and shall cause each of its Subsidiaries not to, enter into, materially amend, materially modify or materially supplement, or permit any Subsidiary to enter into, materially amend, materially modify or materially supplement, any agreement, transaction, commitment, or arrangement, in each case relating to the sale, transfer or assignment of any of the Company’s tangible or intangible assets with any of its Insiders (as defined below)(or any persons who were Insiders at any time during the previous two (2) years), or any Affiliates (as defined below) thereof, or with any individual related by blood, marriage, or adoption to any such individual, singularly or in the aggregate in a manner that materially adversely affects the rights of the Subscriber under the Transaction Documents and other than the payment of salary and other compensation made in the ordinary course of the Company’s business consistent with past practices and industry standards for entities similarly situated as the Company.  “ Affiliate ” for purposes of this Section 9(t) means, with respect to any person or entity, another person or entity that, directly or indirectly, (i) has a ten percent (10%) or more equity interest in that person or entity, (ii) has ten percent (10%) or more common ownership with that person or entity, (iii) controls that person or entity, or (iv) shares common control with that person or entity.  For purposes hereof, “ Insiders ” shall mean any officer, or director of the Company, including but not limited to the Company’s president, chief executive officer, chief financial officer and chief operations officer, and any of their Affiliates or family members.

(u)          Reserved.

(v)          Notice of Event of Default .  The Company agrees to notify Subscriber of the occurrence of an Event of Default (as defined and employed in the Transaction Documents) not later than five (5) days after any of the Company’s officers or directors becomes aware of such Event of Default.

(w)          Further Registration Statements . The Company will not file any registration statements until there is an effective Registration Statement for the unrestricted resale of Subscriber’s Securities a further described in Section 11.1(a) below.
 
 
(x)           Intercreditor Agreement.    The Company will deliver to the Subscribers on or before the Closing Date and enforce the provisions of an Intercreditor Agreement, the form of which is annexed hereto as Exhibit F .

(y)          Waiver and Consent Agreement.    The Company will deliver to the Subscribers on or before the Closing Date and enforce the provisions of a Waiver and Consent Agreement, the form of which is annexed hereto as Exhibit G .
 
 
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(z)          The Company acknowledges and agrees that a Subscriber may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the 1933 Act and who agrees in writing with the Company to be bound by the provisions of this Agreement and, if required under the terms of such arrangement and subject to compliance with applicable federal and state securities laws, such Subscriber may transfer pledged or secured Securities to the pledgees or secured parties in the event of a default relating to such pledge.  Absent special circumstances and subject to compliance with applicable federal and state securities laws, such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith.   Further, no notice shall be required of such pledge.  At the appropriate Subscriber’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities.

(aa)        Additional Debtor Joinder and Subsidiary Guaranty.  Each Subsidiary other than those expressly excluded on Schedule 5(a) will deliver to Subscribers upon Closing an executed Additional Debtor Joinder and Subsidiary Guaranty, forms of which are annexed to the Security Agreement annexed hereto as Exhibit D.

10.          Covenants of the Company Regarding Indemnification .

(a)          The Company agrees to indemnify, hold harmless, reimburse and defend the Subscribers, the Subscribers’ officers, directors, agents, counsel, Affiliates, members, managers, control persons, and principal shareholders, against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the Subscribers or any such person which results, arises out of or is based upon (i) any breach of any representation or warranty, or material misrepresentation, by Company in this Agreement or in any Exhibits or Schedules attached hereto in any Transaction Document; or (ii) after any applicable notice and/or cure periods, any breach or default in performance by the Company of any covenant or undertaking to be performed by the Company hereunder, or any other Transaction Document entered into by the Company and Subscribers relating hereto.

(b )         In no event shall the liability of the Subscribers or permitted successor hereunder or under any Transaction Document or other agreement delivered in connection herewith be greater in amount than the dollar amount of the net proceeds actually received by such Subscriber or successor upon the sale of Registrable Securities (as defined herein).

11.1.       Registration Rights .  The Company hereby grants the following registration rights to holders of the Securities.

(a)          The Company shall file with the Commission a registration statement on Form S-1 (the “ Registration Statement ”) (or such other form that it is eligible to use) in order to register the Registrable Securities for resale and distribution under the 1933 Act on or before sixty (60) days after the Closing Date (the “ Filing Date ”). The Company shall use commercially reasonable efforts to cause the Registration Statement to be declared effective by the Commission as soon as practicable following the Filing Date (including filing with the Commission a request for acceleration of its effectiveness in accordance with Rule 461 within three (3) Business Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the staff of the Commission that such Registration Statement will not be reviewed, or not be subject to further review), but in any event not later than one hundred and twenty (120) days after the Closing Date (the “ Effective Date ”).  
 
 
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To the extent permitted by the Commission, the Company will register not less than a number of shares of common stock in the aforedescribed Registration Statement that is equal to 125% of the Conversion Shares issued and issuable upon conversion of all the Notes issued on the Closing Date including interest for the entire term of the Notes and 100% of the Warrant Shares issuable upon exercise of the Warrants (collectively the “ Registrable Securities ”).   Any security which is Registrable Security (including Warrant Shares after giving effect to cashless exercise of the Warrants) shall cease being a Registrable Security once such Registrable Security has been issued without further transfer restrictions after a sale or transfer pursuant to Rule 144 under the 1933 Act or may be resold under Rule 144 without volume limitations or manner of sale requirements pursuant to Rule 144b(i)(i) (including, with respect to Warrant Shares, giving effect to the ability to net exercise the Warrants), and at such time as there are no longer any “Registrable Securities” as defined above (and in all events one year after the Closing Date), the Company may terminate the Registration Statement.  The Registrable Securities shall be reserved and set aside exclusively for the benefit of each Subscriber and Warrant holder, pro rata , and not issued, employed or reserved for anyone other than each Subscriber and Warrant holder.  The Company represents that there are no securities of the Company which would or could be aggregated with the Registrable Securities for purposes of Rule 415 and the Company will not take any action that could cause such aggregation.  Not later than twenty (20) days after first being permitted by applicable Commission rules and regulations, the registration statement will be amended by the Company or additional registration statements will be filed by the Company as necessary to register additional shares of Common Stock to allow the public resale of all Common Stock included in and issuable by virtue of the Registrable Securities.  Without the written consent of a Majority in Interest, no securities of the Company other than the Registrable Securities will be included in the Registration Statement.  It shall be deemed a default of the Company’s obligations if at any time after the date the Registration Statement is declared effective by the Commission (“ Actual Effective Date ”) the Company has registered for unrestricted resale on behalf of the Holders fewer than 90% of the amount of shares of Common Stock required to be registered therein (the difference between the amount required to be registered therein and the actual amount of shares registered being the “ Shortfall ”).  In such event the Company shall take all actions necessary to cause at least the amount of shares of Common Stock required to be registered therein to be registered within forty-five (45) days after the first day such Shortfall exists.  Failure to file the registration statement in accordance with the preceding sentence within thirty (30) days after the first day such Shortfall first exists or failure to cause such registration to become effective within forty-five (45) days after such Shortfall first exists shall be included in the definition of a Non-Registration Event set forth in Section 11.4.

If at any time after the date the Registration Statement is declared effective by the Commission (“ Actual Effective Date ”) the Company has registered for unrestricted resale on behalf of the Holders fewer than 90% of the amount of shares of Common Stock required to be registered therein (with any Cut Back Shares being deemed as not required to be registered) (the difference between the amount required to be registered therein and the actual amount of shares registered being the “ Shortfall ”), the Company will use its commercially reasonable best efforts to file a registration statement as soon as reasonably practicable but in all events within forty-five (45) days after the first day such Shortfall exists, and to cause such registration statement to become effective as soon as reasonably practicable thereafter.  If at any time the Commission takes the position that the offering of some or all of the Registrable Securities in a registration statement is not eligible to be made on a delayed or continuous basis under the provisions of Rule 415 under the 1933 Act or requires any holder of Registrable Securities (a “ Holder ”) to be named as an “underwriter,” the Company shall use all reasonable efforts to persuade the Commission that the offering contemplated by the registration statement is a valid secondary offering and not an offering “by or on behalf of the issuer” as defined in Rule 415 and that none of the Holders is an “underwriter.”  The Holders (through a single counsel for all Holders) shall have the right to participate in and comment on any written submission made to the Commission with respect thereto.  No such written submission shall be made to the Commission regarding such issues to which such counsel reasonably objects.  In the event that, despite the Company’s efforts and compliance with the terms of this Section, the Commission refuses to alter its position, the Company shall (i) remove from the registration statement such portion of the Registrable Securities (the “ Cut Back Shares ”) and/or
 
 
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(ii) agree to such restrictions and limitations on the registration and resale of the Registrable Securities as the Commission may require to assure the Company’s compliance with the requirements of Rule 415 and that no Holder is named as an “underwriter” in the registration statement without that Holder’s prior written consent (collectively, the “ SEC Restrictions ”).  Any cut-back imposed on the Holders pursuant to this Section shall be allocated first, to any shares included in the Registration Statement on behalf of any one who is not a Holder and then, among the Holders on a pro rata basis and shall be applied first to any Warrant Shares covered by such registration statement and then to any other shares of Common Stock covered by such registration statement, unless the SEC Restrictions otherwise require or provide or the Holders otherwise agree.  Provided that the number of Registrable Securities included in the Registration Statement after the application of any cutback is not less than 17.6 million shares [subject to adjustment as set forth in Section 13(p)], no limitation on the number of Registrable Securities included in the registration statement as a result of the application of Rule 415 shall be deemed to be a breach of any provision of the Transaction Documents, and no penalties, liquidated damages or other damages or other consequences under the Transaction Documents shall result from or accrue due to such initial cutback but shall accrue in connection with the obligation described in the next sentence.  In the event the Company amends the initial Registration Statement in accordance with the foregoing, the Company will use its best efforts to file with the Commission, as promptly as allowed by Commission or SEC Guidance provided to the Company or to registrants of securities in general, one or more registration statements on Form S-1 or such other form available to register for resale those Registrable Securities that were not registered for resale on the initial Registration Statement, as amended.  In the event of a cutback hereunder, the Company shall give the Holder at least five (5) Trading Days prior written notice along with the calculations as to such Holder’s allotment.

(b)         If the Company at any time proposes to register any of its securities under the 1933 Act for sale to the public, whether for its own account or for the account of other security holders or both, except with respect to registration statements on Forms S-4, S-8 or another form not available for registering the Registrable Securities for sale to the public, provided the Registrable Securities are not otherwise registered for resale by the Subscribers or Holder pursuant to an effective registration statement, each such time it will give at least ten (10) days’ prior written notice to the record holder of the Registrable Securities of its intention so to do. Upon the written request of the holder, received by the Company within ten (10) days after the giving of any such notice by the Company, to register any of the Registrable Securities not previously registered pursuant to the Registration Statement which has not ceased to be a Registrable Security, the Company will cause such Registrable Securities as to which registration shall have been so requested to be included with the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent required to permit the sale or other disposition of the Registrable Securities so registered by the holder of such Registrable Securities (the “ Seller ” or “ Sellers ”). In the event that any registration pursuant to this Section 11.1(ii) shall be, in whole or in part, an underwritten or a registered direct public offering of common stock of the Company, the number of shares of Registrable Securities to be included in such an underwriting or registered direct offering may be reduced by the managing underwriter or managing placement agent if and to the extent that the Company and the underwriter or managing placement agent shall reasonably be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold by the Company therein; provided, however, that the Company shall notify the Seller in writing of any such reduction.
 
 
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(c)          The Subscribers hereby acknowledge that there may be times when the Company must suspend the use of a prospectus until such time as an amendment to the related registration statement has been filed by the Company and declared effective by the Commission or until the Company has amended or supplemented such prospectus.  Each Subscriber hereby covenants that it will not sell any securities pursuant to any prospectus during the period commencing at the time at which the Company gives the Sellers notice of the suspension of the use of such prospectus and ending at the time the Company gives the Sellers notice that the Sellers may thereafter effect sales pursuant to such prospectus.  Notwithstanding anything herein to the contrary, the Company shall not suspend use of any registration statement by the Sellers unless in the good faith determination of the Company such suspension is necessary (A) to delay the disclosure of material non-public information concerning the Company, the disclosure of which at the time is not, in the good faith opinion of the Company, in the best interests of the Company or (B) to amend or supplement the affected registration statement or the related prospectus as required by the federal securities laws or so that such registration statement or prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the case of the prospectus in light of the circumstances under which they were made, not misleading, or (C) because it would be detrimental to the Company or its shareholders for sales to be made from such Registration Statement at such time, or that there exists a material development or potential material development involving the Company which the Company would be obligated to disclose in the prospectus contained in such registration statement, which disclosure would, in the good faith judgment of the Company, be materially detrimental to the Company at such time, or that it is advisable to suspend use of the prospectus not to exceed the period of time described below due to material undisclosed pending corporate developments or pending public filings with the Commission (which need not be described in detail) (an “ Allowed Delay ”); provided , however , that (X) except as otherwise provided by clause (Y) below, in the event that such suspension is required by the need for an amendment or supplement to a registration statement or a related prospectus, the Company shall promptly (taking into account the above factors) file such required amendments or supplements as shall be necessary for the disposition of the Registrable Securities to recommence, (Y) if the Company has determined in good faith that offers and sales pursuant to a prospectus should not be made by reason of the presence of potential material undisclosed circumstances or developments with respect to which the disclosure that would be required in the related registration statement would have a material adverse effect on the Company and its business, the Company may suspend the use of such prospectus and defer the filing of any required amendment or supplement for the minimum period of time reasonably necessary (taking into account the above factors) to avoid such adverse effect, and (Z) Allowed Delays may be imposed for not more than forty-five (45) days (which need not be consecutive days) in any twelve (12) month period (defined as every rolling period of three hundred and sixty-five (365) consecutive days commencing on the effective date).  Notwithstanding anything else herein, a Subscriber’s inability to sell Registrable Securities during an Allowed Delay shall not be deemed to be a breach or default, but will result in the accrual of liquidated damages hereunder.

11.2.       Registration Procedures . If and whenever the Company is required by the provisions of Section 11.1 to effect the registration of any Registrable Securities under the 1933 Act, the Company will, as expeditiously as possible:

(a)          subject to the timelines provided in this Agreement, prepare and file with the Commission a registration statement required by Section 11.1 with respect to such securities and use its commercially reasonable best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby (determined as herein provided), promptly provide to the holders of the Registrable Securities copies of all filings and Commission letters of comment and notify the Sellers  (by facsimile and by e-mail to an address, if any, provided by the Subscribers) and Grushko & Mittman, P.C. (by email to counslers@aol.com ) on or before the second  Business Day thereafter that the Company receives notice that (i) the Commission has no comments or no further comments on the registration statement, and (ii) the registration statement has been declared effective (failure to timely provide notice as required by this Section 11.2(a) shall be a material breach of the Company’s obligation and an Event of Default as defined in the Notes and a Non-Registration Event as defined in Section 11.4 of this Agreement);

 
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(b)         prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until such registration statement has been effective for a period of one (1) year, and comply with the provisions of the 1933 Act with respect to the disposition of all of the Registrable Securities covered by such registration statement in accordance with the Sellers’ intended method of disposition set forth in such registration statement for such period;
 
 
(c)          furnish to the Sellers, at the Company’s expense, such number of copies of the registration statement and the prospectus included therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or their disposition of the securities covered by such registration statement or make them electronically available;

(d)         [reserved];

(e)          list the Registrable Securities covered by such registration statement with any securities exchange on which the Common Stock of the Company is then listed;

(f)           notify the Sellers within twenty-four (24) hours of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing or which becomes subject to a Commission, state or other governmental order suspending the effectiveness of the registration statement covering any of the Registrable Securities;

(g)         provided same would not be in violation of the provision of Regulation FD under the 1934 Act, make available for inspection by the Sellers during reasonable business hours,  and any attorney, accountant or other agent retained by the Sellers, all publicly available, non-confidential financial and other records, pertinent corporate documents and properties of the Company, and cause the Company’s officers, directors and employees to supply all publicly available, non-confidential information reasonably requested by the Sellers, attorney, accountant or agent in connection with such registration statement at such requesting Seller’s expense; and

(h)         provide to the Sellers copies of the registration statement and amendments thereto five (5) Business Days prior to the filing thereof with the Commission.  Any Seller’s failure to comment on any registration statement or other document provided to a Subscriber or its counsel shall not be construed to constitute approval thereof nor the accuracy thereof.

11.3.       Provision of Documents .  In connection with each registration described in this Section 11, each Seller will furnish to the Company in writing such information and representation letters with respect to itself and the proposed distribution by it as reasonably shall be necessary in order to assure compliance with federal and applicable state securities laws.
 
 
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11.4.       Non-Registration Events .  The Company agrees that the Sellers will suffer damages if the registration statement is not filed or is not declared effective by the Commission by the dates described herein and accordingly, if (A) due to the action or inaction of the Company a registration statement is not declared effective within five days after receipt by the Company or its attorneys of a written or oral communication from the Commission that the registration statement will not be reviewed or that the Commission has no further comments, (B) any registration statement described in Section 11.1(a) is not filed by the Filing Date, or is not declared effective by the Effective Date or any other date set forth in Section 11.1(a), or (C) any registration statement described in Sections 11.1(a), 11.1(b) or 11.1(c) is filed and declared effective but shall thereafter cease to be effective without being succeeded within twenty-two (22) Business Days by an effective replacement or amended registration statement or for a period of time which shall exceed thirty (30) days in the aggregate per year (defined as every rolling period of three hundred and sixty-five (365) consecutive days commencing on the effective date) (each such event shall be a “ Non-Registration Event ”), then the Company shall pay to the holder of Registrable Securities, as Liquidated Damages , an amount equal to one and one-half percent (1.5%) for each thirty (30) days (or such lesser pro-rata amount for any period of less than thirty (30) days) of the principal amount of the outstanding Notes and purchase price of Conversion Shares and Warrant Shares issued upon conversion of Notes and exercise of Warrants held by Subscribers which are subject to such Non-Registration Event.  The Company must pay the Liquidated Damages in cash.  The Liquidated Damages must be paid within ten (10) days after the end of each thirty (30) day period or shorter part thereof for which Liquidated Damages are payable.  In the event a registration statement is filed but is withdrawn prior to being declared effective by the Commission, then such registration statement will be deemed to have not been filed and Liquidated Damages will be calculated accordingly.  All oral or written communications received from the Commission relating to a registration statement must be responded to within ten (10) Business Days after receipt of such communication from the Commission.  Failure to timely respond to Commission communications is a Non-Registration Event for which Liquidated Damages shall accrue and be payable by the Company to the holders of Registrable Securities at the same rate and amounts set forth above calculated from the date the response was required to have been made.  Liquidated Damages shall not be payable pursuant to this Section 11.4 in connection with Registrable Securities for such times as such Registrable Securities may be freely sold by the holder thereof pursuant to Rule 144(b)(1)(i) without volume limitations.

11.5.       Expenses .  All expenses incurred by the Company in complying with Section 11, including, without limitation, all registration and filing fees, printing expenses (if required), fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of FINRA, transfer taxes, and fees of transfer agents and registrars (but excluding such fees relating to any transfer of Common Stock by a Subscriber that is unrelated to a resale under a Registration Statement), are called “ Registration Expenses .” All underwriting discounts and selling commissions applicable to the sale of Registrable Securities are called “ Selling Expenses .”  The Company will pay all Registration Expenses in connection with any registration statement described in Section 11.  Selling Expenses in connection with each such registration statement shall be borne by the Seller and may be apportioned among the Sellers in proportion to the number of shares included on behalf of the Seller relative to the aggregate number of shares included under such registration statement for all Sellers, or as all Sellers thereunder may agree.

11.6.       Indemnification and Contribution .

(a)          In the event of a registration of any Registrable Securities under the 1933 Act pursuant to Section 11, the Company will, to the extent permitted by law, indemnify and hold harmless the Seller, each of the officers, directors, agents, Affiliates, members, managers, control persons, and principal shareholders of the Seller, each underwriter of such Registrable Securities thereunder and each other person, if any, who controls such Seller or underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which the Seller, or such underwriter or controlling person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Registrable Securities was registered under the 1933 Act pursuant to Section 11, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances when made,
 
 
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and will subject to the provisions of Section 11.6(c) reimburse the Seller, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company shall not be liable to the Seller to the extent that any such damages arise out of or are based upon an untrue statement or omission made in any preliminary prospectus if (i) the Seller failed to send or deliver a copy of the final prospectus delivered by the Company to the Seller with or prior to the delivery of written confirmation of the sale by the Seller to the person asserting the claim from which such damages arise, (ii) the final prospectus would have corrected such untrue statement or alleged untrue statement or such omission or alleged omission, or (iii) to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by any such Seller in writing specifically for use in such registration statement or prospectus.

(b)          In the event of a registration of any of the Registrable Securities under the 1933 Act pursuant to Section 11, each Seller severally but not jointly will, to the extent permitted by law, indemnify and hold harmless the Company, and each person, if any, who controls the Company within the meaning of the 1933 Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the 1933 Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Registrable Securities were registered under the 1933 Act pursuant to Section 11, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such Seller, as such, furnished in writing to the Company by such Seller specifically for use in such registration statement or prospectus, and provided, further, however, that the liability of the Seller hereunder shall be limited to the net proceeds actually received by the Seller from the sale of Registrable Securities pursuant to such registration statement.

(c)          Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 11.6(c) and shall only relieve it from any liability which it may have to such indemnified party under this Section 11.6(c), except and only if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 11.6(c) for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected, provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnifying party shall have reasonably concluded that there may be reasonable defenses available to indemnified party which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified parties, as a group, shall have the right to select one separate counsel, reasonably satisfactory to the indemnified and indemnifying party, and to assume such legal defenses and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred.
 
 
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(d)         In order to provide for just and equitable contribution in the event of joint liability under the 1933 Act in any case in which either (i) a Seller, or any controlling person of a Seller, makes a claim for indemnification pursuant to this Section 11.6 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 11.6 provides for indemnification in such case, or (ii) contribution under the 1933 Act may be required on the part of the Seller or controlling person of the Seller in circumstances for which indemnification is not provided under this Section 11.6; then, and in each such case, the Company and the Seller will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that the Seller is responsible only for the portion represented by the percentage that the public offering price of its securities offered by the registration statement bears to the public offering price of all securities offered by such registration statement, provided, however, that, in any such case, (y) the Seller will not be required to contribute any amount in excess of the public offering price of all such securities sold by it pursuant to such registration statement; and (z) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation and provided, further, however, that the liability of the Seller hereunder shall be limited to the net proceeds actually received by the Seller from the sale of Registrable Securities pursuant to such registration statement.

11.7.       Unlegended Shares and 144 Sales .

(a)           Delivery of Unlegended Shares .  Within three (3) Business Days (such fifth day being the “ Unlegended Shares Delivery Date ”) after the day on which the Company has received (i) a notice that Conversion Shares, Warrant Shares or any other Common Stock (acquired pursuant to or in connection with this Agreement or the Transaction Documents) held by the Subscriber has been sold pursuant to a registration statement or Rule 144 under the 1933 Act, or are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information requirements under rule 144 as to such shares are without volume and manner of sale restrictions or if such legend is not otherwise required under the 1933 Act, (ii) a representation that the prospectus delivery requirements, or the requirements of Rule 144, as applicable and if required, have been satisfied, (iii) the original share certificates representing the shares of Common Stock that have been sold, and (iv) in the case of sales under Rule 144, customary representation letters of the Subscriber and, if required, Subscriber’s broker regarding compliance with the requirements of Rule 144 and any other documents reasonably required by the Company’s transfer agent, the Company at its expense, (y) shall deliver, and shall cause legal counsel selected by the Company to deliver to its transfer agent (with copies to Subscriber) an appropriate instruction and opinion of such counsel, directing the delivery of shares of Common Stock without any legends including the legend set forth in Section 4(h) above (the “ Unlegended Shares ”); and (z) cause the transmission of the certificates representing the Unlegended Shares together with a legended certificate representing the balance of the submitted Common Stock certificate, if any, to the Subscriber at the address specified in the notice of sale, via express courier, by electronic transfer or otherwise on or before the Unlegended Shares Delivery Date.  Provided Unlegended Shares may be resold pursuant to the effective registration statement or Rule 144(b)(1) without volume or manner of sale limitations, the Company may deliver uncertificated shares in lieu of share certificates.

 
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(b)          DWAC .   In lieu of delivering physical certificates representing the Unlegended Shares, upon request of Subscribers, so long as the certificates therefor do not bear a legend and the Subscriber is not obligated to return such certificate for the placement of a legend thereon, the Company shall cause its transfer agent to electronically transmit the Unlegended Shares by crediting the account of Subscriber’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission system, provided that the Company’s Common Stock is DTC eligible and the Company’s transfer agent participates in the Deposit Withdrawal Agent Commission system.  Such delivery must be made on or before the Unlegended Shares Delivery Date.

(c)           Late Delivery of Unlegended Shares .   The Company understands that a delay in the delivery of the Unlegended Shares pursuant to Section 11.7 hereof later than the Unlegended Shares Delivery Date could result in economic loss to a Subscriber.  As compensation to a Subscriber for such loss, the Company agrees to pay late payment fees (as liquidated damages and not as a penalty) to the Subscriber for late delivery of Unlegended Shares in the amount of $100 per Business Day (increasing to $200 per Business Day after the tenth Business Day) after the Unlegended Shares Delivery Date for each $10,000 of purchase price of the Unlegended Shares subject to the delivery default.  If during any three hundred and sixty (360) day period, the Company fails to deliver Unlegended Shares as required by this Section 11.7 for an aggregate of thirty (30) days, then each Subscriber or assignee holding Securities subject to such default may, at its option, require the Company to redeem all or any portion of the Unlegended Shares subject to such default at a price per share equal to the greater of (i) 120% of the purchase price paid or deemed paid by the Subscriber for the Unlegended Shares that were not timely delivered, or (ii) a fraction in which the numerator is the highest closing price of the Common Stock during the aforedescribed thirty (30) day period and the denominator of which is the lowest conversion price or exercise price, as the case may be, during such thirty (30) day period, multiplied by the price paid by Subscriber for such Common Stock (“ Unlegended Redemption Amount ”).  The Company shall pay any payments incurred under this Section in immediately available funds upon demand.    To the extent that liquidated damages accrues under this Section, Section 2.5A of the Note and Section 2(d)(i) of the Warrant, then the Holder may elect which one of the Sections referring to such liquidated damages shall apply.

(d)          Injunction .  In the event a Subscriber shall request delivery of Unlegended Shares as described in Section 11 and the Company is required to deliver such Unlegended Shares pursuant to Section 11.7, the Company may not refuse to deliver Unlegended Shares based on any claim that such Subscriber or anyone associated or affiliated with such Subscriber has not complied with Subscriber’s obligations under the Transaction Documents, or for any other reason, unless, an injunction or temporary restraining order from a court, on notice, restraining and or enjoining delivery of such Unlegended Shares shall have been sought and obtained by the Company and the Company has posted a surety bond for the benefit of such Subscriber in the amount of the greater of (i) 120% of the amount of the aggregate purchase price of the Common Stock which is subject to the injunction or temporary restraining order, or (ii) the closing price of the Common Stock on the Trading Day (as defined in Section 13(h) herein) before the issue date of the injunction multiplied by the number of Unlegended Shares to be subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Subscriber to the extent Subscriber obtains judgment in Subscriber’s favor.

 
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(e)           Buy-In .   In addition to any other rights available to Subscriber, if the Company fails to deliver to a Subscriber Unlegended Shares as required pursuant to this Agreement and after the Unlegended Shares Delivery Date the Subscriber, or a broker on the Subscriber’s behalf, purchases (in an open market transaction or otherwise) shares of common stock to deliver in satisfaction of a sale by such Subscriber of the shares of Common Stock which the Subscriber was entitled to receive from the Company (a “ Buy-In ”), then the Company shall promptly pay in cash to the Subscriber (in addition to any remedies available to or elected by the Subscriber) the amount by which (A) the Subscriber’s total purchase price (including brokerage commissions, if any) for the shares of common stock so purchased exceeds (B) the aggregate purchase price of the shares of Common Stock delivered to the Company for reissuance as Unlegended Shares, 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 Subscriber purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase price of shares of Common Stock delivered to the Company for reissuance as Unlegended Shares, the Company shall be required to pay the Subscriber $1,000, plus interest. The Subscriber shall provide the Company written notice indicating the amounts payable to the Subscriber in respect of the Buy-In.

(f)           144 Default .   At any time commencing six months after the Closing Date and ending on the End Date, in the event the Subscriber is not permitted to sell any of the Conversion Shares or Warrant Shares without such shares thereafter being subject to any resale restrictions or without any restrictive legend being put on the shares following their sale or if such sales are permitted but subject to volume limitations or further restrictions on resale as a result of the unavailability to Subscriber of Rule 144 (a “ 144 Default ”), for any reason including but not limited to failure by the Company to file quarterly, annual or any other filings required to be made by the Company by the required filing dates (provided that any filing made within the time for a valid extension shall be deemed to have been timely filed), or the Company’s failure to make information publicly available which would allow Subscriber’s reliance on Rule 144 in connection with sales of Conversion Shares or Warrant Shares, except due to a change in current applicable securities laws or because the Subscriber is an Affiliate (as defined under Rule 144) of the Company, then the Company shall pay such Subscriber as liquidated damages and not as a penalty for each thirty (30) days (or such lesser pro-rata amount for any period less than thirty (30) days) an amount equal to one and one-half percent (1.5%) of the purchase price of the Conversion Shares and Warrant Shares subject to such 144 Default.  Liquidated Damages shall not be payable pursuant to this Section 11.7(f) in connection with Shares for such times as such Shares may be sold by the holder thereof without any legend or volume or other restrictions (other than the availability of current public information) pursuant to Section 144(b)(1)(i) of the 1933 Act or pursuant to an effective registration statement.
 
12.         (a)             Favored Nations Provision .  Other than in connection with (i) full or partial consideration in connection with a bona fide strategic merger, acquisition, consolidation or purchase of substantially all of the securities or assets of a corporation or other entity, or pursuant to acquisitions of assets or intellectual property (or licensing of or rights to use assets or intellectual property) or similar strategic transactions approved by a majority of the non-employee directors of the Company, in each case so long as such issuances are not for the purpose of raising capital and which holders of such securities or debt are not at any time granted registration rights, (ii) the Company’s issuance of securities in connection with bona fide strategic license agreements and other bona fide partnering arrangements so long as such issuances are not for the purpose of raising capital and which holders of such securities or debt are not at any time granted registration rights, (iii) the Company’s issuance of Common Stock or the issuances or grants of options, restricted stock, restricted stock units or other equity awards to purchase Common Stock to officers, employees, and directors, and up to 200,000 shares or awards to consultants who perform consulting services to the Company,  pursuant to any option or equity incentive plan or agreement duly adopted for such purpose approved by a majority of the non-employee directors of the Company,
 
 
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(iv) the exercise or exchange of or conversion of any securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement on the unamended terms disclosed in the Reports and which securities are also described on Schedule 12(a) , (v) as a result of the exercise of Warrants or conversion of Notes which are granted or issued pursuant to this Agreement, (vi) securities issued pursuant to stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock resulting in a proportionate and an equitable adjustment to the conversion price of the Notes or the exercise price of the Warrants, and (vii) placement agent warrants issuable to licensed broker dealers in connection with the transactions contemplated by this Agreement as described on Schedule 12(a) or underwriter warrants issued as compensation to licensed broker dealers in connection with underwritten public offerings (collectively, the foregoing (i) through (vii) are “ Excepted Issuances ”), if at any time the Notes or Warrants are outstanding, the Company shall agree to or issue (the “ Lower Price Issuance ”) any Common Stock or securities convertible into or exercisable for shares of Common Stock (or modify any of the foregoing which may be outstanding) to any person or entity at a price per share or conversion or exercise price per share which shall be less than the Conversion Price in effect at such time, or if less than the Warrant exercise price in effect at such time, without the consent of the a Majority in Interest, then the Conversion Price and Warrant exercise price shall automatically be reduced to such other lower price.  The Conversion Price of the Conversion Shares and exercise price in relation to the Warrant Shares shall be calculated separately for the Conversion Shares and Warrant Shares.  Common Stock issued or issuable by the Company for no consideration or for consideration that cannot be determined at the time of issue will be deemed issuable or to have been issued for $0.001 per share of Common Stock.  For purposes of the adjustments described in this paragraph, the issuance of any security of the Company carrying the right to convert such security into shares of Common Stock or any warrant, right or option to purchase Common Stock shall result in the adjustment described above upon the sooner of (A) public announcement of, (B) the agreement to, or (C) actual issuance of such convertible security, warrant, right or options and again at any time upon any subsequent issuances of shares of Common Stock upon exercise of such conversion or purchase rights if such issuance is at a price lower than the Conversion Price or Warrant exercise price in effect upon such issuance.  A convertible instrument (including a right to purchase equity of the Company) issued, subject to an original issue or similar discount or which principal amount is directly or indirectly increased after issuance will be deemed to have been issued for the actual cash amount received by the Company in consideration of such convertible instrument.  The rights of Subscribers set forth in this Section 12(a) are in addition to any other rights the Subscribers have pursuant to this Agreement, the Notes, Warrants, any other Transaction Document, and any other agreement referred to or entered into in connection herewith or to which Subscribers and Company are parties.

(b)          Right of Participation .  Until twelve (12) months following the Closing Date, the Subscribers hereunder shall be given not less than ten (10)  days prior written notice of any proposed sale by the Company of its Common stock or other securities or equity linked debt obligations including but not limited to a registered direct offering; in connection with the Excepted Issuances (“ Other Offering ”).  If Subscribers elect to exercise their rights pursuant to this Section 12(b), the Subscribers shall have the right during the ten (10) days following receipt of the notice, to purchase in the aggregate up to all of such offered common stock, debt or other securities in accordance with the terms and conditions set forth in the notice of sale, relative to each other in proportion to the amount of Note Principal issued to them on Closing Date.  Subscribers who participate in such Other Offering shall be entitled at their option to purchase, in proportion to each other, the amount of such Other Offering that could have been purchased by Subscribers who do not exercise their rights hereunder until up to the entire Other Offering is purchased by Subscribers.  In the event such terms and conditions are modified during the notice period, Subscribers shall be given prompt notice of such modification and shall have the right during the ten (10) days following the notice of modification to exercise such right.
 
 
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(c)          Until the later of (a) eighteen (18) months after the Closing Date, or (b) the Notes are no longer outstanding, the Subscriber is granted the right to elect to substitute any term or terms of any other offering in connection with which the Subscriber has rights as described in Section 12(a) or Section 12(b), for any term or terms of the Offering in connection with Securities owned by Subscriber as of the date the Subscriber’s rights pursuant to Section 12(a) are triggered or the date notice described in Section 12(b) is required to be given to Subscriber, at Subscriber’s election.

(d)          Maximum Exercise of Rights .  In the event the exercise of the rights described in Section 12(a), Section 12(b) and Section 12(c) would or could result in the issuance of an amount of Common Stock of the Company that would exceed the maximum amount that may be issued to a Subscriber calculated in the manner described in Section 7.3 of this Agreement, then the issuance of such additional shares of Common Stock of the Company to such Subscriber (but not the payment to the Company of the purchase price for the common stock or other securities or equity linked debt obligations sold in the Other Offering) will be deferred in whole or in part until such time as such Subscriber is able to beneficially own such Common Stock without exceeding the applicable maximum amount set forth calculated in the manner described in Section 7.3 of this Agreement and such Subscriber notifies the Company accordingly.

13.          Special Conditions .   The Company issued promissory notes (“ Prior Notes ”) to the persons and entities identified on Schedule 13 hereto (“ Prior Lenders ”), in the principal amounts and on the dates indicated thereon.  The amount outstanding to the Prior Lenders in connection with the Prior Notes as of the Closing Date is set forth on Schedule 13 (“ Outstanding Prior Debt ”).  Each Prior Lender may participate in the Offering and tender as payment of such Prior Lender’s Purchase Price, dollar-for-dollar the amount outstanding and owed to such Prior Lender in connection with such Prior Notes.  The Prior Lenders will deliver the Prior Notes to the Escrow Agent on or prior to the Closing Date to be exchanged for Notes.

14.          Miscellaneous .

(a)           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 or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice in accordance with this Section 13(a).  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:  if to the Company, to: Adamis Pharmaceuticals Corporation, 11455 El Camino Real, Suite 310, San Diego, CA 92130, Attn: Dennis J. Carlo, Ph.D., CEO, facsimile: 866.893.3622 , with a copy by fax only to (which shall not constitute notice): Weintraub Tobin Chediak Coleman Grodin, 400 Capitol Mall, 11 th Floor, Sacramento, CA 95814, Attn: C. Kevin Kelso, Esq., facsimile: (916) 446-1611, and (ii) if to the Holder, to the address and facsimile number listed on Schedule 1 hereto, with a copy by fax only to (which shall not constitute notice): Grushko & Mittman, P.C., 515 Rockaway Avenue, Valley Stream, New York 11581, facsimile: (212) 697-3575.
 
 
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(b)          Entire Agreement; Assignment .  This Agreement and other documents delivered in connection herewith represent the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by both parties.  Neither the Company nor the Subscribers has relied on any representations not contained or referred to in this Agreement and the documents delivered herewith.   No right or obligation of the Company shall be assigned without prior notice to and the written consent of the Subscribers.

(c)           Counterparts/Execution .  This Agreement may be executed in any number of counterparts and by the different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.  This Agreement may be executed by facsimile transmission, PDF, electronic signature or other similar electronic means with the same force and effect as if such signature page were an original thereof.

(d)          Law Governing this Agreement .  This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws thereof or any other State.  Any action brought by any party against any other party hereto concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county of New York.  The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens .   The parties executing this Agreement and other agreements referred to herein or delivered in connection herewith on behalf of the Company agree to submit to the in personam jurisdiction of such courts and hereby irrevocably waive trial by jury.   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 Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.  Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

(e)           Specific Enforcement, Consent to Jurisdiction .  The Company and Subscribers acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.  Subject to Section 13(d) hereof, the Company and each Subscriber hereby irrevocably waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction in New York of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.  Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law.
 
 
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(f)           Damages .   In the event the Subscriber is entitled to receive any liquidated or other damages pursuant to the Transactions Documents, the Subscriber may elect to receive the greater of actual damages or such liquidated damages.  In the event the Subscriber is granted rights under different sections of the Transaction Documents relating to the same subject matter or which may be exercised contemporaneously, or pursuant to which damages or remedies are different, Subscriber is granted the right in Subscriber’s absolute discretion to proceed under such section as Subscriber elects.

(g)          Maximum Payments .   Nothing contained herein or in any document referred to herein or delivered in connection herewith shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law.  In the event that the rate of interest or dividends required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Company to the Subscribers and thus refunded to the Company.  The Company agrees that it may not and actually waives any right to challenge the effectiveness or applicability of this Section 13(g).

(h)          Calendar Days .   All references to “days” in the Transaction Documents shall mean calendar days unless otherwise stated.  The terms “ Business Days ” and “ Trading Days ” shall mean days that the New York Stock Exchange is open for trading for three or more hours.  Time periods shall be determined as if the relevant action, calculation or time period were occurring in New York City.  Any deadline that falls on a non-Business Day in any of the Transaction Documents shall be automatically extended to the next Business Day and interest, if any, shall be calculated and payable through such extended period.

(i)            Captions: Certain Definitions .  The captions of the various sections and paragraphs of this Agreement have been inserted only for the purposes of convenience; such captions are not a part of this Agreement and shall not be deemed in any manner to modify, explain, enlarge or restrict any of the provisions of this Agreement.  As used in this Agreement the term “ person ” shall mean and include an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization and a government or any department or agency thereof.

(j)            Consent .   As used in this Agreement and the other Transaction Documents and any other agreement delivered in connection herewith, “Consent of the Subscribers” or similar language means the consent of holders of more than fifty percent (50%) of each affected component of the Securities on the date consent is requested (such holders being a “ Majority in Interest ”).  A Majority in Interest may consent to take or forebear from any action permitted under or in connection with the Securities and Transaction Documents, modify any of the Securities and Transaction Documents or waive any default or requirement applicable to the Company, Subsidiaries or Subscribers under the Securities and Transaction Documents provided the effect of such action is equally applied or applicable to all the Subscribers.

(k)           Severability .  In the event that any term or provision of this Agreement shall be finally determined to be superseded, invalid, illegal or otherwise unenforceable pursuant to applicable law by an authority having jurisdiction and venue, that determination shall not impair or otherwise affect the validity, legality or enforceability: (i) by or before that authority of the remaining terms and provisions of this Agreement, which shall be enforced as if the unenforceable term or provision were deleted, or (ii) by or before any other authority of any of the terms and provisions of this Agreement.

(l)            Successor Laws .  References in the Transaction Documents to laws, rules, regulations and forms shall also include successors to and functionally equivalent replacements of such laws, rules, regulations and forms.  A successor rule to Rule 144(b)(1)(i) shall include any rule that would be available to a non-Affiliate of the Company for the sale of Common Stock not subject to volume restrictions and after a six month holding period.
 
 
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(m)          Maximum Liability .   In no event shall the liability of the Subscribers or permitted assign hereunder or under any Transaction Document or other agreement delivered in connection herewith be greater in amount than the dollar amount of the net proceeds actually received by such Subscriber or successor upon the sale of Conversion Shares or Warrant Shares.

(n)          Independent Nature of Subscribers .     The Company acknowledges that the obligations of each Subscriber under the Transaction Documents are several and not joint with the obligations of any other Subscriber, and no Subscriber shall be responsible in any way for the performance of the obligations of any other Subscriber under the Transaction Documents. The Company acknowledges that each Subscriber has represented that the decision of each Subscriber to purchase Securities has been made by such Subscriber independently of any other Subscriber and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company which may have been made or given by any other Subscriber or by any agent or employee of any other Subscriber, and no Subscriber or any of its agents or employees shall have any liability to any other Subscriber (or any other person) relating to or arising from any such information, materials, statements or opinions.  The Company acknowledges that nothing contained in any Transaction Document, and no action taken by any Subscriber pursuant hereto or thereto shall be deemed to constitute the Subscribers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Subscribers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  The Company acknowledges that it has elected to provide all Subscribers with the same terms and Transaction Documents for the convenience of the Company and not because Company was required or requested to do so by the Subscribers.  The Company acknowledges that such procedure with respect to the Transaction Documents in no way creates a presumption that the Subscribers are in any way acting in concert or as a group with respect to the Transaction Documents or the transactions contemplated thereby.

(o)          Equal Treatment .   No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of the Transaction Documents unless the same consideration is also offered and paid to all the Subscribers and their permitted successors and assigns.

(p)          Adjustments .   The conversion price, Warrant exercise price, amount of Conversion Shares and Warrant Shares, trading volume amounts, price/volume amounts and similar figures in the Transaction Documents shall be equitably adjusted and as otherwise described in this Agreement, the Notes and Warrants.
 
[-SIGNATURE PAGES FOLLOW-]
 
 
38

 
 
IN WITNESS WHEREOF, the parties hereto have caused this Subscription Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

ADAMIS PHARMACEUTICALS CORPORATION
 
 
Address for Notice:
 
11455 El Camino Real, Suite 310,
San Diego, CA 92130
 
By:
/s/ DENNIS J. CARLO
 
Fax: (866) 893-3622
  Name: Dennis J. Carlo        
  Title: Chief Executive Officer    
 
With a copy to (which shall not constitute notice):
 
Weintraub Tobin Chediak Coleman Grodin
400 Capitol Mall, 11 th Floor
Sacramento, CA 95814
Attn: C. Kevin Kelso, Esq.
Fax: (916) 446-1611
 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR SUBSCRIBER FOLLOWS]
 
 
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[SUBSCRIBER SIGNATURE PAGES TO
ADAMIS PHARMACEUTICALS CORPORATION SUBSCRIPTION AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Subscription Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
 
Name of Subscriber: ________________________________________________________
 
Signature of Authorized Signatory of Subscriber : __________________________________
 
Name of Authorized Signatory: ____________________________________________________
 
Title of Authorized Signatory: _____________________________________________________
 
Email Address of Authorized Signatory: _____________________________________________
 
Facsimile Number of Authorized Signatory: __________________________________________
 
Address for Notice to Purchaser:
 
 
Address for Delivery of Securities to Purchaser (if not same as address for notice):
 
 
Purchase Price: $______________

Principal Amount of Note: $_________________

Warrant Shares: _________________

EIN Number: _______________________
 

[SIGNATURE PAGES CONTINUE]
 
 
40

 
 
LIST OF EXHIBITS AND SCHEDULES
 
Exhibit A
 
Form of Note
Exhibit B
 
Form of Warrant
Exhibit C
 
Escrow Agreement
Exhibit D
 
Form of Security Agreement
Exhibit E
 
Form of Legal Opinion
Exhibit F
 
Form of Intercreditor Agreement
Exhibit G
 
Form of Waiver and Consent Agreement
Schedule 1
 
List of Subscribers
Schedule 5(a)
 
Subsidiaries
Schedule 5(d)
 
Capitalization
Schedule 5(f)
 
Exceptions
Schedule 5(r)
 
Accountants
Schedule 5(w)
 
Transfer Agent
Schedule 5(ff)
 
Insurance Policy
Schedule 8(a)
 
Fees
Schedule 9(e)
 
Use of Proceeds
Schedule 9(l)
 
Intellectual Property
Schedule 9(p)(i)
 
Liens
Schedule 9(p)(iv)
 
Transactions with Affiliates
Schedule 9(q)
 
Variable Priced Equity Linked Instruments
Schedule 12(a)
 
Excepted Issuances
 
 
41

 
 
SCHEDULE 1
 
SUBSCRIBERS
 
PURCHASE
PRICE
   
NOTE PRINCIPAL
   
WARRANTS
 
                         
                         
                         
                         
                         
                         
                         
                         
 
 
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TOTALS
                       

*  Surrender of Note with Interest in lieu of cash
 
 
43

 
 
SCHEDULES TO SUBSCRIPTION AGREEMENT

In connection with that certain Subscription Agreement dated on or about June 26, 2013 (the “ Agreement ” or the “ Subscription Agreement ”) and entered into by and among Adamis Pharmaceuticals Corporation (the “ Company ”) and each person or entity executing the Agreement as a “Subscriber,” the Company hereby delivers these schedules as contemplated by the Agreement.  The schedules and the information and disclosures contained herein are intended only to qualify and limit the representations, warranties and covenants of the Company contained in the Agreement, and shall not be deemed to expand in any way the scope or effect of any of such representations, warranties or covenants.  No reference or disclosure of any information or document in these Schedules shall be construed as a statement or admission that it is material unless otherwise indicated or that such item or other matter is required to be referred to or disclosed in these Schedules.   Matters reflected in the schedules are not necessarily limited to matters required by the Subscription Agreement to be reflected in these schedules.   Such additional matters are set forth for informational purposes and do not necessarily include other matters of a similar nature.  Capitalized terms used but not defined herein shall have the same meanings given them in the Subscription Agreement.
 
Schedule 5(a)
Subsidiaries

The Company owns 100% of the outstanding common stock and all other equity of each of the following Subsidiaries.  All of the following Subsidiaries are incorporated in Delaware except Biosyn, Inc., which is a Pennsylvania corporation.

Adamis Laboratories, Inc. (“ Adamis Labs ”)
 
Adamis Viral Therapies, Inc. (“ Adamis Viral ”)
 
Adamis Corporation (“ Adamis Corp .”)
 
Biosyn, Inc.
 
Biosyn, Inc. will not initially execute or deliver to Subscribers an Additional Debtor Joinder and Subsidiary Guaranty or any other Transaction Document in connection with the transactions contemplated by the Transaction Documents.
 
Schedule 5(d)
Capitalization
 
Authorized capital stock:
 
·
200,000,000 shares of common stock, $0.0001 par value
 
·
10,000,000 shares of preferred stock, $0.0001 par value, none of which are issued or outstanding.
 
Outstanding Equity:
 
(a)
There are 104,496,046 outstanding shares of Common Stock.
 
(b)
There are outstanding options to purchase 6,824,296 shares of Common Stock.
 
 
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(c)
There are outstanding restricted stock units granted under the 2009 Plan to acquire 716,691 shares of Common Stock.
 
(d)
There are outstanding warrants to acquire 1,800,505 shares of Common Stock.
 
(e)
The Company has entered into agreements with licensed broker dealers providing for placement agent warrants in connection with the transactions contemplated by the Transaction Documents, as described in Schedule 8(a), or underwriter warrants customarily issued in connection with underwritten public offerings.
 
(f)
12% Convertible Debentures dated April 5, 2013 and securities issuable pursuant to such transaction agreements (the “ April 2013 Debentures ”), in the aggregate principal amount of $570,000, which are convertible into shares of Common Stock.  The April 2013 Debentures include anti-dilution and other provisions pursuant to which the conversion price of the April 2013 Debentures will be reduced, and the number of shares issuable upon conversion of the April 2013 Debentures increased, upon the issuance (with certain exceptions) of securities below the then-conversion price of the April 2013 Debentures or the occurrence of certain events of default.  The securities purchase agreement relating to these debentures provides that as long as an investor holds any of the debentures, the investor has a right of first refusal, which has been waived with respect to the transactions contemplated by the Transaction Documents, to purchase new securities (with certain exceptions) that the Company may propose to offer and sell while any debentures are outstanding.  The investors have agreed that following the closing of the transactions contemplated by the Subscription Agreement, their right of first refusal will apply to new securities that the Subscribers have elected not to purchase under the rights granted to the Subscribers under the Transaction Documents.
 
(g)
Convertible Promissory Note dated December 31, 2012 and securities issuable pursuant to such transaction agreements (the “ December 2012 Note ”), in the aggregate principal amount of $600,000, convertible into shares of Common Stock.
 
(h)
Under the Company’s 2009 Equity Incentive Plan (the “ 2009 Plan ”), non-employee directors are entitled to receive annual automatic awards of options.
 
(i)
On the Closing Date, the Company will issue to the holder of the December 2012 Note a warrant to purchase 375,000 shares of Common Stock, at an exercise price per share equal to 110% of the closing price of the Common Stock on the trading day preceding the Closing Date.
 
Schedule 5(f)
No Violation of Conflict

In connection with the transactions contemplated by the Transaction Documents, the Company will obtain the waivers, consents and approvals of the holders of the April 2013 Debentures, December 2012 Note and June 2012 Note.  In connection with the grant of the security interest contemplated by the Security Agreement, the Company will obtain the consents and approvals of the Regents of the University of California (as represented by the University of California, San Diego), Dana Farber Institute, Inc., and Wisconsin Alumni Research Foundation, as licensors under the License Agreements (as defined below) pursuant to which the Company has licensed certain intellectual property rights, to the grant of the security interests contemplated by the Security Agreement, subject to the terms and conditions set forth in such consents and approvals.
 
 
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The Company’s obligations under the April 2013 Debentures and the June 2012 Note and related transaction agreements are guaranteed by the Company’s Adamis Labs, Adamis Viral and Adamis Corp. subsidiaries pursuant to Guarantees executed by such subsidiaries.
 
Schedule 5(r)
Accountants

Mayer Hoffman McCann P.C., was the independent accountant with respect to the Company’s financial statements for the years ended March 31, 2012 and 2011 and is expected to express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the fiscal year ending March 31, 2013.
 
Schedule 5(w)
Transfer Agent
 
First American Stock Transfer
4747 N. 7th Street, Suite 170
Phoenix, AZ 85014
602-759-5512 Phone
602-759-5522 Fax
Contact: Robyn Brand
Email: robyn@firstamericanstock.com
 
Schedule 8(a)
Fees

LifeTech Capital (“ LTC ”) is entitled to receive a cash fee equal to 5.0% of the gross proceeds of Securities issued by the Company to the investors that LTC introduced by LTC to the Company (“ LTC Investors ”).  In addition, LTC is entitled to receive placement agent warrants to purchase common stock equal to 5.0% of the number of shares initially issuable by the Company upon conversion or exercise of the notes and warrants issued in the offering contemplated by the Transaction Documents.  The warrants will have a term of five years, include a cashless exercise feature, and will have an exercise price per share equal to the exercise price of the Warrants issued to the Subscribers.

Alpha Capital Anstalt will receive a due diligence fee of $70,000.

No fees will be paid in connection with the rolling in of the Prior Notes described in Section 13 of the subscription Agreement.
 
 
46

 
 
Schedule 9(e)
Use of Proceeds

The Company will use a portion of the proceeds to make scheduled interest payments under the December 2012 Note of $5,167 per month.  The Company will use approximately 67% of the cash proceeds substantially for acquisition of rights regarding products, assets or technologies, and to enable the FDA filing for the Company’s epinephrine syringe product candidate.  The balance will be used for payment of operating, general and administrative expenses including current and accrued salaries to employees, fees to directors, and other obligations incurred in the ordinary course of the Company’s business.

Schedule 9(l)
Intellectual Property

The Company’s Biosyn, Inc. subsidiary holds the following issued patents.  The Company makes no representations or warranties concerning whether such patents have been or will be maintained:

Program
Country
Status
Filing Date (Issue Date)
Patent # (where applicable)
C31G/Savvy
African Union (OAPI)
Issued
7/17/1991 (9/15/1994)
9911
C31G/Savvy
Namibia
Issued
3/19/1992 (11/25/1992)
92/0017
C31G/Savvy
U.S.
Issued
3/22/1991 (5/24/1994)
5,314,917
C31G/Savvy
U.S.
Issued
4/4/1994 (10/2/2001)
6,297,278
 
Registered copyrights:  None.

Registered trademarks:  None, other than the following:

MARK
Registration Number or Application Serial #
International Class
AEROKID
2,946,639
5
AEROKID LOGO
3,025,733
5
LOGO
2,969,548
5
AEROHIST
3,000,259
5
ANA-TOTE
2,805,731
5

These trademarks relate to certain allergy and respiratory products that the Company has not sold for more than two years.  The Company makes no representations or warranties concerning the status of such marks or whether they have been or will be maintained.

Pursuant to its license agreements (the “ License Agreements ”) with (i) The Regents of the University of California (as represented by University of California San Diego) and Dana Farber Cancer Institute, Inc., (ii) Wisconsin Alumni Research Foundation, and (iii) Nevagen, LLC, the Company has licensed rights to use certain patents and intellectual property rights held by such licensors, pursuant to the terms of the applicable license agreements, as described in the Reports.  The Company has separately provided to the investors a schedule containing information concerning the licensed patents and patent applications, and the Company hereby represents that the information provided on such schedule that is not included in information filed on the exhibits to the License Agreement filed with the SEC does not constitute material non-public information.
 
 
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The Company own rights to the following Domain Names:

Adamislaboratories.com
Adamislabs.com
Adamispharmaceutical.com
Adamispharmaceuticals.com
Adamispharma.com
 
Schedule 9(p)(i)
Negative Covenants

The Company’s rights to use the intellectual property covered by the License Agreements are subject to the terms of such License Agreements and to the licensors’ ability to terminate the applicable License Agreement pursuant to the provisions of the License Agreements.

The Company’s obligations under the April 2013 Debentures and the June 2012 Note and related transaction agreements are guaranteed by the Company’s Adamis Labs, Adamis Viral and Adamis Corp. subsidiaries (the “Guarantors”) pursuant to Guarantees executed by such subsidiaries.  Such guarantees will be subordinated to the guarantees provided to the Subscribers by the Guarantors in the Transaction Documents.

The Company has outstanding promissory notes to Dennis Carlo, Ph.D., the president and chief executive officer of the Company, evidencing loans made by Dr. Carlo to the Company in 2009.  As of  May 31, 2013, the outstanding principal balance under the Carlo Notes was $81,232.  The Company's obligations under the Carlo Notes are secured by a security interest in the Company’s assets, although no financing statement has been filed with respect to such notes.  Dr. Carlo will be a party to the Intercreditor Agreement and will subordinate such security interest to the rights of the Subscribers under the Transaction Documents, pursuant to the terms of the Intercreditor Agreement.
 
Schedule 9(q)
Variable Priced Equity Linked Instruments

The June 2012 Note and the April 2013 Notes contain provisions relating to possible future adjustments to the conversion price of such notes upon price anti-dilution events or events of default that may be regarded as including Variable Rate Restrictions and as making such notes Variable Priced Equity Linked Instruments, as modified pursuant to the Waiver and Consent executed by the holders of such notes.

Schedule 12(a)
Excepted Issuances

·
Outstanding options to purchase 6,824,296 shares of Common Stock.
 
·
Outstanding restricted stock units granted under the 2009 Plan to acquire 716,691 shares of Common Stock.
 
 
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·
Outstanding warrants to acquire 1,800,505 shares of Common Stock.
 
·
Securities issuable upon conversion of the April 2013 Debentures.  Subject to the modified terms of the Consent and Waiver, the principal amount and all accrued interest are convertible into shares of Common Stock at any time at the discretion of the holder at an initial conversion price per share of $0.50, subject to adjustment for stock splits, reverse stock splits, stock dividends and other similar transactions and subject to the terms of the Debentures.  The conversion price is also subject to full-ratchet anti-dilution protection as provided in the Debentures.
 
·
Securities issuable upon conversion of the December 2012 Note.   Subject to the modified terms of the Consent and Waiver, the investor has the right to convert part or all of the principal and interest owed under the December 2012 Note into Common Stock at a conversion price equal to $0.55 per share (subject to adjustment for stock dividends, stock splits, reverse stock splits, reclassifications or other similar events affecting the number of outstanding shares of Common Stock).
 
·
Securities issuable upon exchange of Old Adamis stock certificates for common stock of the Company pursuant to the 2009 merger of Old Adamis and Old Cellegy. Warrants issued to LTC to purchase common stock equal to 5.0% of the number of shares initially issuable by the Company upon conversion or exercise of the notes and warrants issued in the offering contemplated by the Transaction Documents.  The warrants will have a term of five years, include a cashless exercise feature, and will have an exercise price per share equal to the exercise price of the Warrants issued to the Subscribers.
 
Schedule 13
Special Conditions

Gemini Master Fund, Ltd. is the holder of the June 2012 Note.  The amount of principal and accrued interest under the June 2012 Note is $551,944.44 as of June 21, 2013.
49



 


Adamis Pharmaceuticals Corporation 8-K
Exhibit 10.2
 
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: $________________________
Purchase Price: $_________________________
Issue Date: June 26, 2013
 
SECURED CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, ADAMIS PHARMACEUTICALS CORPORATION, a Delaware corporation (hereinafter called “ Borrower ”), hereby promises to pay to the order of __________________ (the “ Holder ”), address at ________________________ , without demand, the sum of up to _____________________ Dollars ($ ________________ ) (“ Principal Amount ”), with interest accruing thereon, on December 26, 2013 (the “ Maturity Date ”), if not sooner paid or modified as permitted herein.

This Note has been entered into pursuant to the terms of a subscription agreement by and among the Borrower, the Holder and certain other holders (the “ Other Holders ”) of convertible promissory notes (the “ Other Notes ”), dated of even date herewith (the “ Subscription Agreement ”) for an aggregate Principal Amount of up to $7 ,000,000 .  Unless otherwise separately defined herein, each capitalized term used in this Note shall have the same meaning as set forth in the Subscription Agreement.  The following terms shall apply to this Note:

ARTICLE I

GENERAL PROVISIONS

1.1          Interest Rate .   Interest, if any, shall be payable on the Maturity Date, accelerated or otherwise, when the principal and accrued but unpaid interest shall be due and payable, or sooner as described below.  Interest will be payable in cash or at the election of the Holder, may be converted to Common Stock pursuant to Article II.

1.2           Payment Grace Period .  Except as may be expressly provided for herein, 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 defined in Article IV) a default interest rate of twelve percent (12%) 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.
 
 
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1.4          Pari Passu .   All payments made on this Note and the Other Notes and except as otherwise set forth herein all actions taken by the Borrower with respect to this Note and the Other Notes shall be made and taken pari passu with respect to this Note and the Other Notes.

1.5          Application of Payments .  Payments made in connection with this Note shall be applied first to amounts due hereunder other than principal and interest, thereafter to interest and finally to Principal Amount.

1.6          Miscellaneous .   Interest on this Note, if any, shall be calculated on the basis of a 360-day year and the actual number of days elapsed.  Principal and interest on this Note and other payments in connection with this Note shall be payable at the Holder’s offices as designated above in lawful money of the United States of America in immediately available funds without set-off, deduction or counterclaim.  Upon assignment of the interest of Holder in this Note, Borrower shall instead make its payment pursuant to the assignee’s instructions upon receipt of written notice thereof.

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, $0.0001 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 date of the issuance of this Note and then at any time until this Note is fully paid, to convert any outstanding and unpaid principal portion of this Note, and accrued but unpaid 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 date of issuance of this Note, or any shares of capital stock of Borrower into which such Common Stock shall hereafter be changed or reclassified, at the conversion price as defined in Section 2.1(b) hereof, determined as provided herein.  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) Trading 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 Holder will not be required to surrender the Note to the Borrower until the Note has been fully converted or satisfied.  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.

(b)          Subject to adjustment as provided in Section 2.1(c) hereof, the conversion price (“ Conversion Price ”) per share shall be the lowest of:

(i)            $0.50 or 5 day VWAP for the 5 Trading Days preceding the Closing Date, whichever is lower,

(ii)          during the pendency of an Event of Default, 80% of the lowest VWAP for any five (5) consecutive Trading Days during any thirty (30) day period commencing on the Issue Date and prior to a Conversion Date, or
 
 
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(iii)         if the Holder converts this Note into shares of Common Stock in connection with a Qualified Offering, then 85% of the lowest sales, conversion, exercise or purchase price of any Common Stock or Common Stock Equivalent (as defined in Section 2.1(c)D) issued in connection with a Qualified Offering.

VWAP ” shall mean for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the Common Stock is not then listed or quoted for trading on a Trading Market and if prices for the Common Stock are then reported on the OTCQB (or a similar organization or agency succeeding to its functions of reporting prices), the most recent closing price per share of the Common Stock so reported, or (c) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders.

(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:

A.            Fundamental Transaction .   If, at any time while this Note is outstanding, (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) for more than 50% of the outstanding shares of Common Stock 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, or spin-off) 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 material Subsidiary of the Borrower, (F) the Borrower effects any reclassification (other than stock splits or reverse stock splits or similar proportionate changes) 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 or (G) a majority of the members of the Borrower’s board of directors as of the Closing Date no longer serving as directors of the Borrower, except as a result of natural causes or as a result of hiring additional outside directors in order to meet stock exchange requirements, unless prior written consent of the Holders had been obtained by the Borrower (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 to holders of Common Stock of the Company 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.  Additionally, in connection with the occurrence of a Fundamental Transaction, the Borrower shall permit the Holder to either (i) accelerate the Maturity Date as of the date of the Fundamental Transaction and receive payment for the then outstanding Principal Amount, and any other amounts owed to the Holder pursuant to the Transaction Documents, or (ii) redeem the Note together with any other amounts owed to the Holder pursuant to the Transaction Documents.  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.
 
 
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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.

D.            Share Issuance .  So long as this Note is outstanding, if the Borrower shall issue any Common Stock except for the Excepted Issuances (as defined in Section 12(a) of the Subscription Agreement), 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 or other Common Stock Equivalent carrying the right to convert such security, debt instrument or 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, Common Stock Equivalent and again upon the issuance of shares of Common Stock upon exercise of such conversion or purchase rights if at the time of either of such issuances the purchase or issue price of the Common Stock is at a price lower than the then applicable Conversion Price. Common Stock issued or issuable by the Borrower for no consideration or for consideration which cannot be determined at the time of issue or which is subject to reset will be deemed issuable or to have been issued for $0.0001 per share of Common Stock.  The reduction of the Conversion Price described in this paragraph is in addition to the other rights of the Holder described in the Subscription Agreement.  A convertible instrument (including a right to purchase equity of the Company) issued, subject to an original issue or similar discount or which principal amount is directly or indirectly increased after issuance will be deemed to have been issued for the actual cash amount received by the Company in consideration of such convertible instrument.  “ Common Stock Equivalent ” shall mean any securities of the Borrower or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

(d)         Whenever the Conversion Price is adjusted pursuant to Section 2.1(c) above, the Borrower shall promptly, but not later than the third (3 rd ) Trading Day after the effectiveness of the adjustment, provide notice to the Holder setting forth the Conversion Price after such adjustment and setting forth a statement of the facts requiring such adjustment.  A reduction in the Conversion Price will be effective upon the occurrence of the event giving rise to such reduction of the Conversion Price.  An increase in the Conversion Price will be effective after notice is given to Holder of such increase in the Conversion Price.
 
 
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(e)         During the period the conversion right exists, 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 and interest, if any.  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.

2.2          Partial Conversion .  This Note may be converted by the Holder in whole or in part as described in Section 2.1(a) hereof and the Subscription Agreement.  Upon partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Note and interest which shall not have been converted or paid, upon surrender of the existing Note.

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 to determine whether the restriction contained in this Section 2.3 will limit any conversion hereunder and the extent such limitation applies and to which convertible or exercisable instrument or part thereof such limitation applies.  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.

2.4          Borrower’s Obligations .  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 (subject to compliance with applicable federal and state securities laws) 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 Borrower’s transfer agent and that the certificates representing such shares shall contain no legend other than the legend set forth in Section 4(h) of the Subscription Agreement.  If and when a 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.  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, provided that Holder delivers reasonably requested representations in support of such opinion.  In addition, without limiting the foregoing, the Borrower will deliver shares without legends as required by Section 11.7(a) of the Subscription Agreement.  The Borrower will pay any transfer agent fees or DWAC fees in connection with issuance of shares pursuant to this Section.
 
 
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2.5          Late Delivery.   The Borrower understands that a delay in the delivery of the Conversion Shares in the form required pursuant to Section 2.4 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 this Note upon Conversion of the Note, the amount of $100 per Trading Day (increasing to $200 per Trading Day after ten (10) Trading Days) 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 upon demand.  Furthermore, in addition to any other remedies which may be available to the Holder, in the event that the Borrower fails for any reason to effect delivery of the Conversion Shares on or before the Delivery Date, the Holder will be entitled to revoke all or part of the relevant Notice of Holder 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.  Liquidated damages accruing for the same Trading Day with respect to the same Shares will only be paid once, at the Holder’s election, pursuant to either this Section or Section 11.7(c) of the Subscription Agreement.

2.6          Buy-In .   In addition to any other rights available to Holders, if the Borrower fails to deliver to a Holder 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 sale by 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 acceptable to the Borrower indicating the amounts payable to Holder in respect of the Buy-In.

ARTICLE III

ACCELERATION AND REDEMPTION

3.1.         Redemption .  This Note may not be prepaid, converted, redeemed or called by the Borrower without the consent of the Holder except as described in this Note.
 
 
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3.2.         Mandatory Redemption at Holder’s Election .   In the event (i) the Borrower is prohibited from issuing Conversion Shares, (ii) or the occurrence of any other Event of Default that continues beyond any applicable cure period, or (iii) upon the liquidation, dissolution or winding up of the Borrower or any material Subsidiary, then at the Holder's election made the later of (i) within thirty (30)  days after the date of delivery of notice from the Company to Borrower of the occurrence of such event, or (ii) the actual occurrence of such event, the Borrower must pay to Holder not later than ten (10) days after request by Holder, a sum of money determined by multiplying the amount of outstanding Principal Amount designated by Holder by, at the Holder’s election, the greater of (i) 115%, or (ii) a fraction the numerator of which is the highest closing price of the Common Stock for the thirty (30) days preceding the date demand is made by Holder pursuant to this Section 3 and the denominator of which is the lowest applicable Conversion Price during such thirty (30) day period, together with accrued but unpaid interest and any other amounts due under the Transaction Documents (" 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) 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.  The foregoing notwithstanding, Holder may demand and receive from the Borrower the amount stated above or any other greater amount which Holder is entitled to receive or demand pursuant to the Transaction Documents.  If the Borrower receives a notice of election by Holder to receive a Mandatory Redemption Payment, the Company will, reasonably promptly thereafter, notify the Other Holders that it has received such a notice of election.

3.3          Qualified Offering .  Not later than two (2) Trading Days before the closing of a Qualified Offering, the Holder must elect in writing to the Borrower to either (i) accelerate the Maturity Date to not later than twenty (20) Trading Days after such final closing and receive payment equal to 115% of the outstanding Principal Amount and interest, if any, or (ii) exercise the Holder’s conversion rights, with such conversion to be effective at the closing of the Qualified Offering.  The Holder may make the foregoing election conditional upon the timely closing of the Qualified Offering.  The Holder may elect either or both of the foregoing alternatives provided the entire outstanding Principal Amount and interest is subject to such election(s).  “ Qualified Offering ” shall mean an underwritten public offering, or a registered direct public offering pursuant to an effective registration statement which has generated not less than $10,000,000 of gross proceeds for the Borrower in one or more related closings.

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 (i) fails to pay any installment of principal or interest under this Note when due or (ii) fails to pay any interest or other sums due under this Note when due.

4.2          Breach of Covenant .  The Borrower or any material Subsidiary breaches any material covenant or other term or condition of the Subscription Agreement, Transaction Documents or this Note, except for a breach of payment, in any material respect and if susceptible to cure, the Borrower has failed to cure such breach within five (5) days after delivery of a notice of such breach.

4.3          Breach of Representations and Warranties .  Any material representation or warranty of the Borrower made herein, in the Subscription Agreement, or the Transaction Documents shall be false or misleading in any material respect as of the date made and the Closing Date.
 
 
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4.4          Liquidation .   Any dissolution, liquidation or winding up by Borrower or a material Subsidiary of a substantial portion of their business.
 
4.5          Cessation of Operations .   Cessation of operations by Borrower or a material Subsidiary.
 
4.6          Maintenance of Assets .   The failure by Borrower or any material Subsidiary to maintain any material intellectual property rights, personal, real property, equipment, leases or other assets which are necessary to conduct its business (whether now or in the future) and which failure could reasonably be expected to result in a Material Adverse Effect (as defined in the Subscription Agreement) on Borrower, and such breach is not cured with twenty (20) days after written notice to the Borrower from the Holder.  Notwithstanding the foregoing, the sale by the Company of any such asset described above in the ordinary course of business for reasonable value shall not be deemed to be an Event of Default.

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 made in a non-appealable adjudication against Borrower or any material Subsidiary or any of its property or other assets for more than $100,000 in excess of the Borrower’s or such material Subsidiary’s insurance coverage, 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 .   An event resulting in the Common Stock no longer being quoted on the OTCQB (the “ OTCQB ”); failure to comply with the requirements for continued quotation on the OTCQB for a period of twenty (20) consecutive trading days; or notification from the OTCQB that the Borrower is not in compliance with the conditions for such continued quotation and such non-compliance continues for twenty (20) days following such notification.

4.11        Non-Payment .  Within thirty (30) days following the consummation of one or more private placement or public offering transactions after the Closing Date in which the Company has received in the aggregate at least $10 million of net proceeds, a default by the Borrower or any material Subsidiary under any one or more obligations in an aggregate monetary amount in excess of $150,000 for more than thirty (30) days after the due date.

4.12        Stop Trade .  An SEC or judicial stop trade order or OTCQB suspension.

4.13        Failure to Deliver Common Stock or Replacement Note and Warrant .   Borrower’s failure to timely deliver Common Stock to the Holder pursuant to and in the form required by this Note, the Subscription Agreement, and the Warrant or, if required, a replacement Note or Warrant following a partial conversion or exercise.

4.14        Reservation Default .   Failure by the Borrower to have reserved for issuance upon conversion of the Note or upon exercise of the Warrants, the number of shares of Common Stock as required in the Subscription Agreement, this Note and the Warrants and to have cured such failure with any applicable time periods provided for in the Transaction Documents.
 
 
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4.15        Financial Statement Restatement .  The restatement after the date hereof of any financial statements filed by the Borrower with the Securities and Exchange Commission 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.  For the avoidance of doubt, any restatement related to new accounting pronouncements shall not constitute a default under this Section 4.15 .

4.16        Non-Registration Event .  The Borrower’s failure to materially comply with the registration obligations set forth in Section 11 of the Subscription Agreement.

4.17        Waivers/Consents .  Failure by the Borrower to obtain, within three weeks of the Closing Date, all of the fully executed waivers from all prior investors in the Company in connection with any anti-dilution rights that may be triggered as a result of the issuance of the Notes and the Warrants at the Closing Date (as defined in the Subscription Agreement) and all of the fully executed consents from all prior secured investors in the Company with regards to the pari passu sharing of the security interests of such secured prior investors with the Subscribers herein.

4.18        Notification Failure .   A failure by Borrower to notify Holder of any material event of which Borrower is obligated to notify Holder pursuant to the terms of this Note or any other Transaction Document.

4.19        Cross Default .  A default 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 an 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.
 
4.20        Other Note Default .   The occurrence of an Event of Default under any Other Note.

ARTICLE V

SECURITY INTEREST

5.            Security Interest/Waiver of Automatic Stay .   This Note is secured by a security interest granted to the Holder pursuant to a Security Agreement, as delivered by Borrower to Holder.  The Borrower acknowledges and agrees that should a proceeding under any bankruptcy or insolvency law be commenced by or against the Borrower or a Subsidiary, or if any of the Collateral (as defined in the Security Agreement) should become the subject of any bankruptcy or insolvency proceeding, then the Holder should be entitled to, among other relief to which the Holder may be entitled under the Transaction Documents and any other agreement to which the Borrower or a Subsidiary and Holder are parties (collectively, “ Loan Documents ”) and/or applicable law, an order from the court granting immediate relief from the automatic stay pursuant to 11 U.S.C. Section 362 to permit the Holder to exercise all of its rights and remedies pursuant to the Loan Documents and/or applicable law, to the maximum extent permitted by applicable law. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION 362.  FURTHERMORE, THE BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE HOLDER TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW.  To the maximum extent permitted by applicable law, the Borrower hereby consents to any motion for relief from stay that may be filed by the Holder in any bankruptcy or insolvency proceeding initiated by or against the Borrower and, further, agrees not to file any opposition to any motion for relief from stay filed by the Holder.  The Borrower represents, acknowledges and agrees that this provision is a specific and material aspect of the Loan Documents, and that the Holder would not agree to the terms of the Loan Documents if this waiver were not a part of this Note. The Borrower further represents, acknowledges and agrees that this waiver is knowingly, intelligently and voluntarily made, that neither the Holder nor any person acting on behalf of the Holder has made any representations to induce this waiver, that the Borrower has been represented (or has had the opportunity to he represented) in the signing of this Note and the Loan Documents and in the making of this waiver by independent legal counsel selected by the Borrower and that the Borrower has discussed this waiver with counsel.

 
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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 Trading Day during normal business hours where such notice is to be received), or the first Trading Day following such delivery (if delivered other than on a Trading Day during normal business hours where such notice is to be received) or (b) on the first Trading 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: Adamis Pharmaceuticals Corporation, 11455 El Camino Real, Suite 310, San Diego, CA 92130, Attn: Dennis J. Carlo, Ph.D., CEO, facsimile: 866.893.3622 , with a copy by fax only to (which shall not constitute notice): Weintraub Tobin Chediak Coleman Grodin, 400 Capitol Mall, 11 th Floor, Sacramento, CA 95814, Attn: C. Kevin Kelso, Esq., facsimile: (916) 446-1611, 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 (which shall not constitute notice) by fax only to Grushko & Mittman, P.C., 515 Rockaway Avenue, Valley Stream, New York 11581, facsimile: (212) 697-3575.
 
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 .  Except as other may be permitted in connection with Fundamental Transaction, 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).

 
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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          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.
 
6.7          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.
 
6.8          Non-Trading Days .   Whenever any payment or any action to be made shall be due on a day that is not a Trading Day, such payment may be due or action shall be required on the next succeeding Trading 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.
 
6.9          Facsimile Signature .  In the event that the Borrower’s signature is delivered by facsimile transmission, PDF, electronic signature or other similar electronic means, such signature shall create a valid and binding obligation of the Borrower with the same force and effect as if such signature page were an original thereof.
 
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.

 
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IN WITNESS WHEREOF , Borrower has caused this Note to be signed in its name by an authorized officer as of the _____ day of June, 2013.
 
  ADAMIS PHARMACEUTICALS CORPORATION
     
  By:
/s/ DENNIS J. CARLO 
    Name: Dennis Carlo    
    Title: Chief Executive Officer
 
WITNESS:     
     
 
 
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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 ADAMIS PHARMACEUTICALS CORPORATION on June 26, 2013 into Shares of Common Stock of ADAMIS PHARMACEUTICALS CORPORATION (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 ADAMIS PHARMACEUTICALS CORPORATION
 
Shares To Be Delivered:_________________________________________________________________
 
Signature:____________________________________________________________________________
 
Print Name:__________________________________________________________________________
 
Address:_____________________________________________________________________________

   ____________________________________________________________________________
 
 
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 Adamis Pharmaceuticals Corporation 8-K
Exhibit 10.3
 
ESCROW AGREEMENT
 
This Agreement is dated as of the 26 th day of June, 2013 among Adamis Pharmaceuticals Corporation, a Delaware corporation (the “ Company ”), the subscribers listed on Schedule 1 hereto (“ Subscribers ”), and Grushko & Mittman, P.C. (the “ Escrow Agent ”):
 
W I T N E S S E T H :
 
WHEREAS, the Company and Subscribers have entered into a Subscription Agreement calling for the sale by the Company to the Subscribers of secured convertible promissory Notes and Warrants for an aggregate purchase price of up to $6,3 00,000 ; and
 
WHEREAS, the parties hereto require the Company to deliver the Notes and Warrants against payment therefor, with such Notes and the Escrowed Funds to be delivered to the Escrow Agent, along with the other documents, instruments and payments hereinafter described, to be held in escrow and released by the Escrow Agent in accordance with the terms and conditions of this Agreement; and
 
WHEREAS, the Escrow Agent is willing to serve as escrow agent pursuant to the terms and conditions of this Agreement;
 
NOW THEREFORE, the parties agree as follows:
 
ARTICLE I
 
INTERPRETATION
 
1.1.         Definitions .  Capitalized terms used and not otherwise defined herein that are defined in the Subscription Agreement shall have the meanings given to such terms in the Subscription Agreement.  Whenever used in this Agreement, the following terms shall have the following respective meanings:
 
§             Agreement ” means this Agreement and all amendments made hereto and thereto by written agreement between the parties;
 
§             Collateral Agent ” shall mean Collateral Agents LLC;
 
§             Closing Date ” shall have the meaning set forth in Section 1 of the Subscription Agreement;
 
§             Escrow Documents ” shall mean the Company Documents and Subscriber Documents;
 
§             Escrowed Payment ” shall mean an aggregate of up to $6,300,000;
 
§             Fees ” shall have the meaning set forth in Section 8(a) and on Schedule 8(a) to the Subscription Agreement;
 
§             Intercreditor Agreement ” shall have the meaning set forth in Section 9(x) of the Subscription Agreement;
 
§             Legal Opinion ” means the original signed legal opinion referred to in Section 6 of the Subscription Agreement;
 
 
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§             Note ” shall have the meaning set forth in the second recital to the Subscription Agreement;
 
§             Principal Amount ” shall mean an aggregate of up to $7 ,000,000 ;
 
§             Security Agreement ” shall have the meaning set forth in Section 3 of the Subscription Agreement and shall include the deliveries required to be made therewith at the time of execution;
 
§             Subscriber Legal Fees ” shall have the meaning set forth in Section 8(b) of the Subscription Agreement;
 
§             Subscription Agreement ” means the Subscription Agreement (and the exhibits and schedules thereto) entered into or to be entered into by the Company and Subscribers in reference to the sale and purchase of the Notes and Warrants;
 
§             Warrants ” shall have the meaning set forth in Section 2(b) of the Subscription Agreement;
 
§             “Waiver and Consent Agreement” shall have the meaning set forth in Section 9(y) of the Subscription Agreement;
 
§             Collectively, the Intercreditor Agreement, Legal Opinion, Notes, Security Agreement, Warrants, Waiver and Consent Agreement and Subscription Agreement signed and executed by all signators thereto other than the Subscribers, Fees and Subscriber Legal Fees are referred to as “ Company Documents ”; and
 
§             Collectively, the Escrowed Payment, the Collateral Agent executed Security Agreement, and the Subscribers executed Subscription Agreement and Security Agreement are referred to as “ Subscriber Documents .”
 
1.2.         Entire Agreement .  This Agreement along with the Company Documents and the Subscriber Documents to which the Subscriber and the Company or Subsidiary are a party constitute the entire agreement between the parties hereto pertaining to the Company Documents and Subscriber Documents and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties.  There are no warranties, representations and other agreements made by the parties in connection with the subject matter hereof, except as specifically set forth in this Agreement, the Company Documents and the Subscriber Documents.
 
1.3.         Extended Meanings .  In this Agreement words importing the singular number include the plural and vice versa; words importing the masculine gender include the feminine and neuter genders.  The word “person” includes an individual, body corporate, partnership, trustee or trust or unincorporated association, executor, administrator or legal representative.
 
1.4.         Waivers and Amendments .  This Agreement may be amended, modified, superseded, cancelled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by all parties, or, in the case of a waiver, by the party waiving compliance.  Except as expressly stated herein, no delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder preclude any other or future exercise of any other right, power or privilege hereunder.
 
 
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1.5.         Headings .  The division of this Agreement into articles, sections, subsections and paragraphs and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.
 
1.6.         Law Governing this Agreement .  This Agreement 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 shall be brought only in the state courts of New York or in the federal courts located in the state of New York.  Both parties and the individuals executing this Agreement and other agreements on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury.  The prevailing party (which shall be the party which receives an award most closely resembling the remedy or action sought) shall be entitled to recover from the other party its reasonable attorney’s fees and costs.  In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.
 
1.7.         Specific Enforcement, Consent to Jurisdiction .  The Company and Subscribers acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to an injuction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.  Subject to Section 1.6 hereof, each of the Company and Subscribers hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.  Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law.
 
ARTICLE II
 
DELIVERIES TO THE ESCROW AGENT
 
2.1.         Company Deliveries .  On or before the Closing Date, the Company shall execute and deliver the Company Documents to the Escrow Agent.
 
2.2.         Subscriber Deliveries.   On or before the Closing Date, Subscribers shall execute and deliver the Subscription Agreements and Security Agreement, shall cause the Collateral Agent to execute and deliver the Security Agreement, to the Escrow Agent.  The Escrowed Payment will be delivered pursuant to the following wire transfer instructions, unless Escrow Agent approves a different method of delivery:

Citibank, N.A.
1155 6 th Avenue
New York, NY 10036
ABA Number: 0210-00089
For Credit to: Grushko & Mittman, IOLA Trust Account
Account Number: 9997242837
 
 
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2.3.         Intention to Create Escrow Over Company Documents and Subscriber Documents .  The Subscribers and Company intend that the Company Documents and Subscriber Documents shall be held in escrow by the Escrow Agent pursuant to this Agreement for their benefit as set forth herein.
 
2.4.         Escrow Agent to Deliver Company Documents and Subscriber Documents .  The Escrow Agent shall hold and release the Company Documents and Subscriber Documents only in accordance with the terms and conditions of this Agreement.
 
ARTICLE III
 
RELEASE OF COMPANY DOCUMENTS AND SUBSCRIBER DOCUMENTS
 
3.1.         Release of Escrow .  Subject to the provisions of Section 4.2, the Escrow Agent shall release the Company Documents and Subscriber Documents as follows:
 
(a)           On the Closing Date, the Escrow Agent will simultaneously release the Company Documents to the Subscribers and release the Subscriber Documents to the Company, except that:
 
(i)           the Fees will be released directly to the recipients identified on Schedule 8(a) to the Subscription Agreement;
 
(ii)          Subscriber Legal Fees will be released directly to the Subscriber’s attorneys; and
 
(iii)         the Security Agreement will be released to the Collateral Agent.
 
The Escrow Agent may request any written representations, certifications and documents in Escrow Agent’s absolute discretion before releasing any funds from escrow.
 
(b)         All funds to be delivered to the Company shall be delivered pursuant to the wire instructions to be provided in writing by the Company to the Escrow Agent.
 
(c)         Notwithstanding the above, upon receipt by the Escrow Agent of joint written instructions (“ Joint Instructions ”) signed by the Company and the Subscribers, it shall deliver the Company Documents and Subscriber Documents in accordance with the terms of the Joint Instructions.
 
(d)         Anything herein to the contrary notwithstanding, upon receipt by the Escrow Agent of a final and non-appealable judgment, order, decree or award of a court of competent jurisdiction (a “ Court Order ”), the Escrow Agent shall deliver the Company Documents and Subscriber Documents in accordance with the Court Order.  Any Court Order shall be accompanied by an opinion of counsel for the party presenting the Court Order to the Escrow Agent (which opinion shall be satisfactory to the Escrow Agent) to the effect that the court issuing the Court Order has competent jurisdiction and that the Court Order is final and non-appealable.
 
3.2.        A Closing may take place on or before July 23, 2012.  After July 23, 2012, the Escrow Agent will promptly return the applicable Company Documents to the Company and return the Subscriber Documents to the Subscriber.

3.3.         Acknowledgement of Company and Subscriber; Disputes .  The Company and the Subscribers acknowledge that the only terms and conditions upon which the Company Documents and Subscriber Documents are to be released are set forth in Sections 3 and 4 of this Agreement.  The Company and the Subscribers reaffirm their agreement to abide by the terms and conditions of this Agreement with respect to the release of the Company Documents and Subscriber Documents.  Any dispute with respect to the release of the Company Documents and Subscriber Documents shall be resolved pursuant to Section 4.2 or by agreement between the Company and Subscribers.

 
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ARTICLE IV

CONCERNING THE ESCROW AGENT

4.1.         Duties and Responsibilities of the Escrow Agent .  The Escrow Agent’s duties and responsibilities shall be subject to the following terms and conditions:
 
(a)           The Subscribers and Company acknowledge and agree that the Escrow Agent (i) shall not be responsible for or bound by, and shall not be required to inquire into whether either the Subscribers or Company is entitled to receipt of the Company Documents and Subscriber Documents pursuant to any other agreement or otherwise; (ii) shall be obligated only for the performance of such duties as are specifically assumed by the Escrow Agent pursuant to this Agreement; (iii) may rely on and shall be protected in acting or refraining from acting upon any written notice, instruction, instrument, statement, request or document furnished to it hereunder and believed by the Escrow Agent in good faith to be genuine and to have been signed or presented by the proper person or party, without being required to determine the authenticity or correctness of any fact stated therein or the propriety or validity or the service thereof; (iv) may assume that any person believed by the Escrow Agent in good faith to be authorized to give notice or make any statement or execute any document in connection with the provisions hereof is so authorized; (v) shall not be under any duty to give the property held by Escrow Agent hereunder any greater degree of care than Escrow Agent gives its own similar property; and (vi) may consult counsel satisfactory to Escrow Agent, the opinion of such counsel to be full and complete authorization and protection in respect of any action taken, suffered or omitted by Escrow Agent hereunder in good faith and in accordance with the opinion of such counsel.
 
(b)           The Subscribers and Company acknowledge that the Escrow Agent is acting solely as a stakeholder at their request and that the Escrow Agent shall not be liable for any action taken by Escrow Agent in good faith and believed by Escrow Agent to be authorized or within the rights or powers conferred upon Escrow Agent by this Agreement.  The Subscribers and Company, jointly and severally, agree to indemnify and hold harmless the Escrow Agent and any of Escrow Agent’s partners, employees, agents and representatives for any action taken or omitted to be taken by Escrow Agent or any of them hereunder, including the fees of outside counsel and other costs and expenses of defending itself against any claim or liability under this Agreement, except in the case of gross negligence or willful misconduct on Escrow Agent’s part committed in its capacity as Escrow Agent under this Agreement.  The Escrow Agent shall owe a duty only to the Subscribers and Company under this Agreement and to no other person.
 
(c)           The Subscribers and Company jointly and severally agree to reimburse the Escrow Agent for outside counsel fees, to the extent authorized hereunder and incurred in connection with the performance of its duties and responsibilities hereunder.
 
(d)           The Escrow Agent may at any time resign as Escrow Agent hereunder by giving five (5) days prior written notice of resignation to the Subscribers and the Company.  Prior to the effective date of the resignation as specified in such notice, the Subscribers and Company will issue to the Escrow Agent a Joint Instruction authorizing delivery of the Company Documents and Subscriber Documents to a substitute Escrow Agent selected by the Subscribers and Company.  If no successor Escrow Agent is named by the Subscribers and Company, the Escrow Agent may apply to a court of competent jurisdiction in the State of New York for appointment of a successor Escrow Agent, and to deposit the Company Documents and Subscriber Documents with the clerk of any such court.
 
 
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(e)           Other than in connection with the Subscriber Legal Fees, the Escrow Agent does not have and will not have any interest in the Company Documents and Subscriber Documents, but is serving only as escrow agent, having only possession thereof.  The Escrow Agent shall not be liable for any loss resulting from the making or retention of any investment in accordance with this Escrow Agreement.
 
(f)           This Agreement sets forth exclusively the duties of the Escrow Agent with respect to any and all matters pertinent thereto and no implied duties or obligations shall be read into this Agreement.
 
(g)           The Escrow Agent shall be permitted to act as counsel for the Subscribers in any dispute as to the disposition of the Company Documents and Subscriber Documents, in any other dispute between the Subscribers and Company, whether or not the Escrow Agent is then holding the Company Documents and Subscriber Documents and continues to act as the Escrow Agent hereunder.
 
(h)           The provisions of this Section 4.1 shall survive the resignation of the Escrow Agent or the termination of this Agreement.
 
4.2.         Dispute Resolution: Judgments .  Resolution of disputes arising under this Agreement shall be subject to the following terms and conditions:
 
(a)           If any dispute shall arise with respect to the delivery, ownership, right of possession or disposition of the Company Documents and Subscriber Documents, or if the Escrow Agent shall in good faith be uncertain as to its duties or rights hereunder, the Escrow Agent shall be authorized, without liability to anyone, to (i) refrain from taking any action other than to continue to hold the Company Documents and Subscriber Documents pending receipt of a Joint Instruction from the Subscribers and Company, or (ii) deposit the Company Documents and Subscriber Documents with any court of competent jurisdiction in the State of New York, in which event the Escrow Agent shall give written notice thereof to the Subscribers and the Company and shall thereupon be relieved and discharged from all further obligations pursuant to this Agreement.  The Escrow Agent may, but shall be under no duty to, institute or defend any legal proceedings which relate to the Company Documents and Subscriber Documents.  The Escrow Agent shall have the right to retain counsel if it becomes involved in any disagreement, dispute or litigation on account of this Agreement or otherwise determines that it is necessary to consult counsel.
 
(b)           The Escrow Agent is hereby expressly authorized to comply with and obey any Court Order.  In case the Escrow Agent obeys or complies with a Court Order, the Escrow Agent shall not be liable to the Subscribers and Company or to any other person, firm, corporation or entity by reason of such compliance.
 
ARTICLE V
 
GENERAL MATTERS
 
5.1.         Termination .  This escrow shall terminate upon the release of all of the Company Documents and Subscriber Documents or at any time upon the agreement in writing of the Subscribers and Company.
 
 
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5.2.         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:
 
(a)         If to the Company, to:

Adamis Pharmaceuticals Corporation
11455 El Camino Real, Suite 310
San Diego, CA 92130
Attn: Dennis J. Carlo, Ph.D., CEO
Fax: 866.893.3622

With a copy by fax only to (which shall not constitute notice):

Weintraub Tobin Chediak Coleman Grodin
400 Capitol Mall, 11 th Floor
Sacramento, CA 95814
Attn: C. Kevin Kelso, Esq.
Fax: (916) 446-1611
 
(b)         If to the Subscribers: to the addresses set forth on Schedule 1

With a copy by facsimile only to (which shall not constitute notice):
 
Grushko & Mittman, P.C.
515 Rockaway Avenue
Valley Stream, New York 11581
Fax: (212) 697-3575
 
(c)         If to the Escrow Agent, to:
 
Grushko & Mittman, P.C.
515 Rockaway Avenue
Valley Stream, New York 11581
Fax: (212) 697-3575
 
or to such other address as any of them shall give to the others by notice made pursuant to this Section 5.2.
 
5.3.         Interest .  The Escrowed Payment shall not be held in an interest bearing account nor will interest be payable in connection therewith.  In the event the Escrowed Payment is deposited in an interest bearing account, any interest earned on the Escrowed Payment will be paid in the New York State Client Protection Fund or for a similar purpose.
 
 
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5.4.         Assignment; Binding Agreement .  Neither this Agreement nor any right or obligation hereunder shall be assignable by any party without the prior written consent of the other parties hereto.  This Agreement shall ensure to the benefit of and be binding upon the parties hereto and their respective legal representatives, successors and assigns.
 
5.5.         Invalidity .  In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal, or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law.
 
5.6.         Counterparts/Execution .  This Agreement may be executed in any number of counterparts and by different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.  This Agreement may be executed by facsimile transmission and delivered by facsimile transmission.
 
5.7.         Agreement .  Each of the undersigned states that he has read the foregoing Escrow Agreement and understands and agrees to it.
 
[THIS SPACE INTENTIONALLY LEFT BLANK]
 
 
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IN WITNESS WHEREOF , the undersigned have executed and delivered this Escrow  Agreement, as of the date first written above.
 
 
COMPANY:
 
ADAMIS PHARMACEUTICALS CORPORATION
 
a Delaware corporation
     
 
By:
/s/ DENNIS CARLO       
   
Name: Dennis Carlo
   
Title: Chief Executive Officer
     
 
ESCROW AGENT:
     
 
GRUSHKO & MITTMAN, P.C.
     
 
By:
 
   
Name:
     
 
SUBSCRIBERS:
     
 
Name of Subscriber:
     
 
By:
 
   
Name:
   
Title:
 
 
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SCHEDULE 1
(SUBSCRIBERS)

SUBSCRIBERS
 
PURCHASE
PRICE
   
NOTE PRINCIPAL
   
WARRANTS
 
                         
                         
                         
                         
                         
                         
                         
                         
 
 
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TOTALS
                       

*  Surrender of Note with Interest in lieu of cash
 
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Adamis Pharmaceuticals Corporation 8-K
Exhibit 10.4
 
SECURITY AGREEMENT

This SECURITY AGREEMENT, dated as of June 26, 2013 (this “ Agreement ”), is among Adamis Pharmaceuticals Corporation, a Delaware corporation (the “ Company ”), each Subsidiary of the Company that becomes a party to this Agreement by execution and delivery of the form annexed hereto as Annex A and the Subsidiary Guaranty annexed thereto (each such Subsidiary, the “ Guarantor ” and together with the Company, the “ Debtors ”),  Collateral Agents, LLC, as collateral agent (the “ Collateral Agent ”) for and the holders of the Company’s Secured Convertible Notes due December 26, 2013 which were issued on June 26, 2013, in the original aggregate principal amount of up to $7,000,000 (collectively, the “ Notes ”) (collectively, the “ Secured Parties ”).

W I T N E S S E T H:

WHEREAS, pursuant to the Subscription Agreement (as defined in the Notes), the Secured Parties have severally agreed to extend the loans to the Company evidenced by the Notes;

WHEREAS, pursuant to a certain Subsidiary Guaranty (“ Guaranty ”) to be dated as of the date of the Additional Debtor Joinder, forms of which are annexed hereto as Annex A, the Guarantor agrees to guarantee and act as surety for payment of such Notes, and other obligations of the Company;

WHEREAS, in order to induce the Secured Parties to extend the loans evidenced by the Notes, each Debtor has agreed to execute and deliver to the Collateral Agent this Agreement and to grant Collateral Agent, for the ratable benefit of the Secured Parties, a security interest in certain property of such Debtor to secure the prompt payment, performance and discharge in full of all of the Debtors’ obligations under the Notes and Transaction Documents.

NOW, THEREFORE, in consideration of the agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1.            Certain Definitions . As used in this Agreement, the following terms shall have the meanings set forth in this Section 1. Terms used but not otherwise defined in this Agreement that are defined in Article 8 or 9 of the UCC (such as “account,” “chattel paper,” “commercial tort claim,” “deposit account,” “document,” “equipment,” “fixtures,” “general intangibles,” “goods,” “instruments,” “inventory,” “investment property,” “letter-of-credit rights,” “proceeds” and “supporting obligations”) shall have the respective meanings given such terms in Article 8 or 9 of the UCC, as applicable.  Upper case terms shall have the meanings attributed to them in the Subscription Agreement.

(a)             Collateral ” means the collateral in which the Collateral Agent is granted a security interest by this Agreement and which shall include the following personal property owned by the Debtors, whether presently owned or existing or hereafter acquired or coming into existence, wherever situated, and all additions and accessions thereto and all substitutions and replacements thereof, and all proceeds, products and accounts thereof, including, without limitation, all proceeds from the disposition, sale or transfer of the Collateral and of insurance covering the same and of any tort claims in connection therewith, and all dividends, interest, cash, notes, securities, equity interest or other property at any time and from time to time acquired, receivable or otherwise distributed in respect of, or in exchange for, any or all of the Pledged Securities (as defined below):

(i)             All goods, including, without limitation, (A) all machinery, equipment, computers, motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special and general tools, fixtures, test and quality control devices and other equipment of every kind and nature and wherever situated, together with all documents of title and documents representing the same, all additions and accessions thereto, replacements therefor, all parts therefor, and all substitutes for any of the foregoing and all other items used and useful in connection with any Debtor’s businesses and all improvements thereto; and (B) all inventory;

 
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(ii)            Except as set forth on Schedule B , all contract rights and other general intangibles, including, without limitation, all partnership interests, membership interests, stock or other securities, rights under any of the Organizational Documents (as defined herein), agreements related to the Pledged Securities (as defined herein), licenses, distribution and other agreements, computer software (whether “off-the-shelf,” licensed from any third party or developed by any Debtor), computer software development rights, leases, franchises, customer lists, quality control procedures, grants and rights, goodwill, trademarks, service marks, trade styles, trade names, patents, patent applications, copyrights, and income tax refunds;

(iii)           All accounts, together with all instruments, all documents of title representing any of the foregoing, all rights in any merchandising, goods, raw materials, timber cut or to be cut, oil, gas, hydrocarbons, and minerals extracted or to be extracted, equipment, motor vehicles and trucks which any of the same may represent, and all right, title, security and guaranties with respect to each account, including any right of stoppage in transit;

(iv)          All documents, letter-of-credit rights, instruments and chattel paper;

(v)           All commercial tort claims;

(vi)          All deposit accounts and all cash (whether or not deposited in such deposit accounts);

(vii)         All investment property;

(viii)        All supporting obligations;

(ix)           All files, records, books of account, business papers, and computer programs; and

(x)            the products and proceeds of all of the foregoing Collateral set forth in clauses (i)-(ix) above.

Without limiting the generality of the foregoing, the “ Collateral ” shall include all investment property and general intangibles respecting ownership and/or other equity interests in Guarantor, including, without limitation, the shares of capital stock and the other equity interests listed on Schedule H   hereto (as the same may be modified from time to time pursuant to the terms hereof), and any other shares of capital stock and/or other equity interests of any other direct or indirect Subsidiary of any Debtor obtained in the future, and, in each case, all certificates representing such shares and/or equity interests and, in each case, all rights, options, warrants, stock, other securities and/or equity interests that may hereafter be received, receivable or distributed in respect of, or exchanged for, any of the foregoing and all rights arising under or in connection with the Pledged Securities, including, but not limited to, all dividends, interest and cash.
 
Notwithstanding the foregoing, nothing herein shall be deemed to constitute an assignment of any asset which, in the event of an assignment, becomes void by operation of applicable law or the assignment of which is otherwise prohibited by applicable law (in each case to the extent that such applicable law is not overridden by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law); provided , however , that to the extent permitted by applicable law, this Agreement shall create a valid security interest in such asset and, to the extent permitted by applicable law, this Agreement shall create a valid security interest in the proceeds of such asset.
 
 
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(b)             Intellectual Property ” means the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, (i) all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, all registrations, recordings and applications in the United States Copyright Office, (ii) all patents of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof, and all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, (iii) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade dress, service marks, logos, domain names and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common law rights related thereto, (iv) all trade secrets arising under the laws of the United States, any other country or any political subdivision thereof, (v) all rights to obtain any reissues, renewals or extensions of the foregoing, (vi) all licenses for any of the foregoing, (vii) any items included in the definition of Intellectual Property Rights as defined in the Subscription Agreement and not set forth above, and (viii) all causes of action for infringement of the foregoing.

(c)             Majority in Interest ” means, at any time of determination, the holders of more than fifty percent (50%) (based on then-outstanding principal amounts and accrued interest of Notes at the time of such determination) of the Notes.

(d)             Necessary Endorsement ” means undated stock powers endorsed in blank and other proper instruments of assignment duly executed and such other instruments or documents as the Collateral Agent (as that term is defined below) may reasonably request.

(e)             Obligations ” means all of the liabilities and obligations (primary, secondary, direct, contingent, sole, joint or several) due or to become due, or that are now or may be hereafter contracted or acquired, or owing to, of any Debtor to the Secured Parties, including, without limitation, all obligations under this Agreement, the Notes, the Guaranty and obligations under any other Transaction Document, instrument, agreement or other document executed and/or delivered in connection herewith or therewith in each case, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from any of the Secured Parties as a preference, fraudulent transfer or otherwise as such obligations may be amended, supplemented, converted, extended or modified from time to time. Without limiting the generality of the foregoing, the term “Obligations” shall include, without limitation: (i) principal of, and interest on the Notes and the loans extended pursuant thereto; (ii) any and all other fees, indemnities, costs, obligations and liabilities of the Debtors from time to time under or in connection with this Agreement, the Notes and any other Transaction Documents, instruments, agreements or other documents executed and/or delivered in connection herewith or therewith; and (iii) all amounts (including but not limited to post-petition interest) in respect of the foregoing that would be payable but for the fact that the obligations to pay such amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving any Debtor.  With respect to Obligations arising from any source other than principal and interest in the Note, only those Obligations which have been or are reducable to a quantified monetary amount or which have accrued or begun to accrue while any other Obligations are outstanding as of the date all amounts due in connection with the Notes have been indefeasibly paid shall thereafter be included in the definition of Obligations.

 
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(f)             Organizational Documents ” means with respect to any Debtor, the documents by which such Debtor was organized (such as a certificate of incorporation, certificate of limited partnership or articles of organization, and including, without limitation, any certificates of designation for preferred stock or other forms of preferred equity) and which relate to the internal governance of such Debtor (such as bylaws, a partnership agreement or an operating, limited liability or members agreement).

(g)             Pledged Securities ” shall have the meaning ascribed to such term in Section 4(i).

(h)             UCC ” means the Uniform Commercial Code of the State of New York and or any other applicable law of any state or states which has jurisdiction with respect to all, or any portion of, the Collateral or this Agreement, from time to time. It is the intent of the parties that defined terms in the UCC should be construed in their broadest sense so that the term “Collateral” will be construed in its broadest sense. Accordingly if there are, from time to time, changes to defined terms in the UCC that broaden the definitions, they are incorporated herein and if existing definitions in the UCC are broader than the amended definitions, the existing ones shall be controlling.

2.             Grant of Security Interest in Collateral . As an inducement for the Secured Parties to extend the loans as evidenced by the Notes and to secure the complete and timely payment, performance and discharge in full, as the case may be, of all of the Obligations, each Debtor hereby unconditionally and irrevocably pledges, grants and hypothecates to the Secured Parties a security interest in and to, a lien upon and a right of set-off against all of their respective right, title and interest of whatsoever kind and nature in and to, the Collateral (a “ Security Interest ” and, collectively, the “ Security Interests ”).

3.             Delivery of Certain Collateral . Contemporaneously or prior to the execution of this Agreement, each Debtor shall deliver or cause to be delivered to the Collateral Agent, any and all certificates and other instruments or documents representing any of the Collateral, in each case, together with all Necessary Endorsements.

4.             Representations, Warranties, Covenants and Agreements of the Debtors . Except as set forth under the corresponding section of the disclosure schedules delivered to the Secured Parties and Collateral Agent concurrently herewith (the “ Disclosure Schedules ”), which Disclosure Schedules shall be deemed a part hereof.  As of the date hereof, each Debtor represents and warrants to the Secured Parties as follows and, until the repayment in full of the Obligations, covenants and agrees with, the Secured Parties as follows:

(a)             Each Debtor has the requisite corporate, partnership, limited liability company or other power and authority to enter into this Agreement and otherwise to carry out its obligations hereunder. The execution, delivery and performance by each Debtor of this Agreement and the filings contemplated herein have been duly authorized by all necessary action on the part of such Debtor and no further action is required by such Debtor. This Agreement, when executed and delivered, will constitute the legal, valid and binding obligation of each Debtor, enforceable against each Debtor in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization and similar laws of general application relating to or affecting the rights and remedies of creditors and by general principles of equity.
 
 
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(b)             The Debtors have no place of business or offices where their respective books of account and records are kept (other than temporarily at the offices of its attorneys or accountants) or places where Collateral is stored or located, except as set forth on Schedule A   attached hereto. Except as specifically set forth on Schedule A , there exist no liens on the Collateral except for Permitted Liens (as defined in the Subscription Agreement) or those identified on Schedule B hereto. Except as disclosed on Schedule A and except for Collateral to be held by the Collateral Agent, none of such Collateral is in the possession of any consignee, bailee, warehouseman, agent or processor.

(c)             Except for Permitted Liens or except as set forth on Schedule B attached hereto, the Debtors are the sole owner of the Collateral (except for non-exclusive licenses granted by any Debtor in the ordinary course of business), free and clear of any liens, security interests, encumbrances, rights or claims, and are fully authorized to grant the Security Interests. Except as set forth on Schedule B attached hereto, there is not on file in any governmental or regulatory authority, agency or recording office an effective financing statement, security agreement, license or transfer or any notice of any of the foregoing (other than those that will be filed in favor of the Secured Parties pursuant to this Agreement) covering or affecting any of the Collateral.

(d)             No written claim has been received that any Collateral or any Debtor’s use of any Collateral violates the rights of any third party. There has been no adverse decision to any Debtor’s claim of ownership rights in or exclusive rights to use the Collateral in any jurisdiction or to any Debtor’s right to keep and maintain such Collateral in full force and effect, and there is no proceeding involving said rights pending or, to the best knowledge of any Debtor, threatened before any court, judicial body, administrative or regulatory agency, arbitrator or other governmental authority.

(e)             Each Debtor shall at all times maintain its books of account and records relating to the Collateral at its principal place of business and its Collateral at the locations set forth on Schedule A   attached hereto and may not relocate such books of account and records or tangible Collateral except in the ordinary course of sales unless it delivers to the Secured Parties at least 15 days prior to such relocation (i) written notice of such relocation and the new location thereof (which must be within the United States) and (ii) evidence that appropriate financing statements under the UCC and other necessary documents have been filed and recorded and other steps have been taken to perfect the Security Interests to create in favor of the Secured Parties a valid, perfected and continuing perfected first priority lien in the Collateral, except as otherwise permitted hereby.

(f)             This Agreement creates in favor of the Secured Parties a valid senior security interest in the Collateral, subject only to Permitted Liens securing the payment and performance of the Obligations. Upon making the filings described in the immediately following paragraph, all security interests created hereunder in any Collateral that may be perfected by filing Uniform Commercial Code financing statements shall have been duly perfected. Except for the filing of the Uniform Commercial Code financing statements referred to in the immediately following paragraph, the recordation of the Intellectual Property Security Agreement (as defined below) with respect to copyrights and copyright applications, if applicable, in the United States Copyright Office referred to in paragraph and the delivery of the certificates and other instruments provided in Section 3, no action is necessary to create, perfect or protect the security interests created  hereunder.  Without limiting the generality of the foregoing, except for the filing of said financing statements and the recordation of said Intellectual Property Security Agreement, if applicable, no consent of any third parties and no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for (i) the execution, delivery and performance of this Agreement, (ii) the creation or perfection of the Security Interests created hereunder in the Collateral or (iii) the enforcement of the rights of the Collateral Agent and the Secured Parties hereunder.

(g)             Each Debtor hereby authorizes the Collateral Agent to file one or more financing statements under the UCC, with respect to the Security Interests, with the proper filing and recording agencies in any jurisdiction deemed proper by it and authorizes Collateral Agent to take any other action in Collateral Agent’s absolute discretion to effectuate, memorialize and protect Secured Parties’ interest and rights under this Agreement.

 
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(h)             The execution, delivery and performance of this Agreement by the Debtors does not (i) violate any of the provisions of any Organizational Documents of any Debtor or, to the knowledge of any Debtor, any judgment, decree, order or award of any court, governmental body or arbitrator or any applicable law, rule or regulation applicable to any Debtor or (ii) to the knowledge of each Debtor, conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing any Debtor’s debt or otherwise) or other understanding to which such Debtor is a party or by which any property or asset of any Debtor is bound or affected. If any, all required consents (including, without limitation, from stockholders or creditors of any Debtor) necessary for any Debtor to enter into and perform its obligations hereunder have been obtained.

(i)              The capital stock and other equity interests listed on Schedule H hereto (the “ Pledged Securities ”) represent all of the capital stock and other equity interests of each Guarantor, and represent all capital stock and other equity interests owned, directly or indirectly, by the Company in each Guarantor. All of the Pledged Securities, if applicable, are validly issued, fully paid and nonassessable, and the Company is the legal and beneficial owner of the Pledged Securities, free and clear of any lien, security interest or other encumbrance except for the security interests created by this Agreement and other Permitted Liens.

(j)              The ownership and other equity interests in partnerships and limited liability companies (if any) included in the Collateral (the “ Pledged Interests ”) by their express terms do not provide that they are securities governed by Article 8 of the UCC and are not held in a securities account or by any financial intermediary.

(k)             Except for Permitted Liens, each Debtor shall at all times maintain the liens and Security Interests provided for hereunder as valid and perfected first priority liens and security interests in the Collateral in favor of the Secured Parties until this Agreement and the Security Interest hereunder shall be terminated pursuant to Section 14 hereof. Each Debtor hereby agrees to defend the same against the claims of any and all persons and entities. Each Debtor shall safeguard and protect all Collateral for the account of the Secured Parties.  Upon request of the Collateral Agent, each Debtor will sign and deliver to the Collateral Agent on behalf of the Secured Parties at any time or from time to time one or more financing statements pursuant to the UCC in form reasonably satisfactory to the Collateral Agent and will pay the cost of filing the same in all public offices wherever filing is, or is deemed by the Collateral Agent to be, necessary or desirable to effect the rights and obligations provided for herein. Without limiting the generality of the foregoing, each Debtor shall pay all fees, taxes and other amounts necessary to maintain the Collateral and the Security Interest hereunder, and each Debtor shall obtain and furnish to the Collateral Agent from time to time, upon demand, such releases and/or subordinations of claims and liens (other than Permitted Liens) that may be required to maintain the priority of the Security Interest hereunder.

(l)              Other than with respect to Permitted Liens, no Debtor will transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose of any of the Collateral (except for non-exclusive licenses granted by a Debtor in its ordinary course of business, sales of inventory by a Debtor in its ordinary course of business and disposition of obsolete equipment) without the prior written consent of the Collateral Agent.

(m)            Each Debtor shall keep and preserve its equipment, inventory and other tangible Collateral in good condition, repair and order and shall not operate or locate any such Collateral (or cause to be operated or located) in any area excluded from insurance coverage.

 
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(n)             Each Debtor shall maintain with financially sound and reputable insurers, insurance with respect to the Collateral, including Collateral hereafter acquired, against loss or damage of the kinds and in the amounts customarily insured against by entities of established reputation having similar properties similarly situated and in such amounts as are customarily carried under similar circumstances by other such entities and otherwise as is prudent for entities engaged in similar businesses but in any event sufficient to cover the full replacement cost thereof. Each Debtor shall cause each insurance policy issued in connection herewith to provide, and the insurer issuing such policy to certify to the Collateral Agent, that (a) the Collateral Agent will be named as lender loss payee and additional insured under each such insurance policy; and (b) if such insurance is proposed to be cancelled or materially changed for any reason whatsoever, such insurer or the Company will promptly notify the Collateral Agent. In addition, the Collateral Agent will have the right (but no obligation) at its election to remedy any default in the payment of premiums within thirty (30) days of notice from the Company or the insurer of any such default. If no Event of Default (as defined in the Notes) exists and if the proceeds arising out of any claim or series of related claims do not exceed $100,000, loss payments in each instance will be applied by the applicable Debtor to the repair and/or replacement of property with respect to which the loss was incurred to the extent reasonably feasible, and any loss payments or the balance thereof remaining, to the extent not so applied, shall be payable to the applicable Debtor; provided , however , that payments received by any Debtor after an Event of Default occurs and is continuing or in excess of $100,000 for any occurrence or series of related occurrences shall be paid to the Collateral Agent on behalf of the Secured Parties and, if received by such Debtor, shall be held in trust for the Secured Parties and immediately paid over to the Collateral Agent unless otherwise directed in writing by the Collateral Agent. Copies of such policies or the related certificates, in each case, naming the Collateral Agent as lender loss payee and additional insured shall be delivered to the Collateral Agent at least annually and at the time any new policy of insurance is issued.

(o)             Each Debtor shall, within ten (10) days of obtaining knowledge thereof, advise Collateral Agent promptly, in sufficient detail, of any material adverse change in the Collateral, and of the occurrence of any event which would have a material adverse effect on the value of the Collateral or on the Secured Parties’ security interest.

(p)             Each Debtor shall promptly execute and deliver to the Collateral Agent such further deeds, mortgages, assignments, security agreements, financing statements or other instruments, documents, certificates and assurances and take such further action as the Collateral Agent may from time to time request and may in its sole discretion deem necessary to perfect, protect or enforce the Secured Parties’ security interest in the Collateral including, without limitation, if applicable, the execution and delivery of a separate security agreement with respect to each Debtor’s Intellectual Property, if any (“ Intellectual Property Security Agreement ”) in which the Secured Parties have been granted a security interest hereunder, all substantially in forms reasonably acceptable to the Collateral Agent, which Intellectual Property Security Agreement, and other such documents and agreements other than as stated therein, shall be subject to all of the terms and conditions hereof.

(q)             Each Debtor shall permit the Collateral Agent and its representatives and agents to inspect the Collateral during normal business hours and upon reasonable prior notice, and to make copies of records pertaining to the Collateral as may be reasonably requested by the Collateral Agent from time to time.

(r)              Each Debtor shall take commercially reasonable steps necessary to diligently pursue and seek to preserve, enforce and collect any rights, claims, causes of action and accounts receivable in respect of the Collateral.

(s)             Each Debtor shall promptly notify the Secured Parties in sufficient detail upon becoming aware of any attachment, garnishment, execution or other legal process levied against any Collateral and of any other information received by such Debtor that may materially affect the value of the Collateral, the Security Interest or the rights and remedies of the Secured Parties hereunder.

 
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(t)             All information heretofore, herein or hereafter supplied to the Secured Parties by or on behalf of any Debtor with respect to the Collateral is accurate and complete in all material respects as of the date furnished and in light of the circumstances under which such statements were made.

(u)             Each Debtor shall at all times preserve and keep in full force and effect its existence and good standing and any rights and franchises material to its business.

(v)             No Debtor will change its name, type of organization, jurisdiction of organization, organizational identification number (if it has one), legal or corporate structure, or add any new fictitious name unless it provides at least 15 days prior written notice to the Collateral Agent of such change and, at the time of such written notification, such Debtor provides any financing statements or fixture filings necessary to perfect and continue the perfection of the Security Interests granted and evidenced by this Agreement.

(w)            Except in the ordinary course of business, no Debtor may consign any of its inventory or sell any of its inventory on bill and hold, sale or return, sale on approval, or other conditional terms of sale without the consent of the Collateral Agent which shall not be unreasonably withheld.

(x)             No Debtor may relocate its chief executive office to a new location without providing 15 days prior written notification thereof to the Secured Parties and provided that at the time of such written notification, such Debtor provides any financing statements necessary to perfect and continue the perfection of the Security Interests granted and evidenced by this Agreement.

(y)             Each Debtor was organized and remains organized solely under the laws of the state set forth next to such Debtor’s name in Schedule D   attached hereto, which Schedule D   sets forth each Debtor’s organizational identification number or, if any Debtor does not have one, states that one does not exist.

(z)            

(i)             The actual name of each Debtor is the name set forth in Schedule D attached hereto;

(ii)            no Debtor has any trade names except as set forth on Schedule E   attached hereto;

(iii)           no Debtor has used any name other than that stated in the preamble hereto or as set forth on Schedule E   for the preceding five years; and

(iv)          no entity has merged into any Debtor or been acquired by any Debtor within the past five years except as set forth on Schedule E .

(aa)           At any time that any Collateral consists of instruments, certificated securities or other items that require or permit possession by a secured party to perfect the security interest created hereby, the applicable Debtor shall deliver such Collateral to the Collateral Agent.

(bb)          During the continuance of an Event of Default, each Debtor, in its capacity as issuer, hereby agrees to comply with any and all orders and instructions of Collateral Agent regarding the Pledged Securities consistent with the terms of this Agreement without the further consent of any Debtor as contemplated by Section 8-106 (or any successor section) of the UCC. Further, each Debtor agrees, solely with respect to the Pledged Securities, that it shall not enter into a similar agreement (or one that would confer “control” within the meaning of Article 8 of the UCC) with any other person or entity.
 
 
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(cc)           each Debtor shall cause all tangible chattel paper, if any, constituting Collateral to be delivered to the Collateral Agent or, if such delivery is not possible, then to cause such tangible chattel paper to contain a legend noting that it is subject to the security interest created by this Agreement. To the extent that any Collateral consists of electronic chattel paper, the applicable Debtor shall cause the underlying chattel paper to be “marked” within the meaning of Section 9-105 of the UCC (or successor section thereto).

(dd)          [reserved].

(ee)           To the extent that any Collateral consists of letter-of-credit rights, the applicable Debtor shall cause the issuer of each underlying letter of credit to consent to an assignment of the proceeds thereof to the Secured Parties.

(ff)             To the extent that any Collateral is in the possession of any third party, the applicable Debtor shall join with the Collateral Agent in notifying such third party of the Secured Parties’ security interest in such Collateral and shall use commercially reasonable efforts to obtain an acknowledgement and agreement from such third party with respect to the Collateral, in form and substance reasonably satisfactory to the Collateral Agent.

(gg)          If any Debtor shall at any time hold or acquire a commercial tort claim, such Debtor shall promptly notify the Secured Parties in a writing signed by such Debtor of the particulars thereof and grant to the Secured Parties in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Collateral Agent.

(hh)          Each Debtor shall promptly provide written notice to the Collateral Agent of any and all accounts which arise out of contracts with any governmental authority and, to the extent necessary to perfect or continue the perfected status of the Security Interests in such accounts and proceeds thereof, shall execute and deliver to the Collateral Agent an assignment of claims for such accounts and cooperate with the Collateral Agent in taking any other steps required, in its judgment, under the Federal Assignment of Claims Act or any similar federal, state or local statute or rule to perfect or continue the perfected status of the Security Interests in such accounts and proceeds thereof.

(ii)             The Company shall cause each subsidiary of the Company to promptly become a party hereto (an “ Additional Debtor ”), by executing and delivering an Additional Debtor Joinder substantially in the form of Annex A   attached hereto and comply with the provisions hereof applicable to the Debtors. Concurrent therewith, the Additional Debtor shall execute and deliver the form of Subsidiary Guaranty included in Annex A and shall also deliver replacement schedules for, or supplements to all other Disclosure Schedules to (or referred to in) this Agreement, as applicable, which replacement schedules shall supersede, or supplements shall modify, the Schedules then in effect. The Additional Debtor shall also deliver such opinions of counsel, authorizing resolutions, good standing certificates, incumbency certificates, organizational documents, financing statements and other information and documentation as the Collateral Agent may reasonably request. Upon delivery of the foregoing to the Collateral Agent, the Additional Debtor shall be and become a party to this Agreement with the same rights and obligations as the Debtors, for all purposes hereof as fully and to the same extent as if it were an original signatory hereto and shall be deemed to have made the representations, warranties and covenants set forth herein as of the date of execution and delivery of such Additional Debtor Joinder (other than representations and warranties that specifically refer to an earlier date), and all references herein to the “Debtors” shall be deemed to include each Additional Debtor.

(jj)             Each Debtor shall vote the Pledged Securities to comply with the covenants and agreements set forth herein and in the Notes.

 
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(kk)           Each Debtor shall register the pledge of the applicable Pledged Securities on the books of such Debtor. Each Debtor shall notify each issuer of Pledged Securities to register the pledge of the applicable Pledged Securities in the name of the Collateral Agent on the books of such issuer. Further, except with respect to certificated securities delivered to the Collateral Agent, the applicable Debtor shall deliver to Collateral Agent an acknowledgement of pledge (which, where appropriate, shall comply with the requirements of the relevant UCC with respect to perfection by registration) signed by the issuer of the applicable Pledged Securities, which acknowledgement shall confirm that: (a) it has registered the pledge on its books and records; and (b) at any time directed by Collateral Agent during the continuation of an Event of Default, such issuer will transfer the record ownership of such Pledged Securities into the name of any designee of the Collateral Agent, will take such steps as may be necessary to effect the transfer, and will comply with all other instructions of the Collateral Agent regarding such Pledged Securities without the further consent of the applicable Debtor.

(ll)             In the event that, upon an occurrence of an Event of Default, Collateral Agent shall sell all or any of the Pledged Securities to another party or parties (herein called the “ Transferee ”) or shall purchase or retain all or any of the Pledged Securities, each Debtor shall, to the extent applicable: (i) deliver to Collateral Agent or the Transferee, as the case may be, the articles of incorporation, bylaws, minute books, stock certificate books, corporate seals, deeds, leases, indentures, agreements, evidences of indebtedness, books of account, financial records and all other Organizational Documents and records of the Debtors and their direct and indirect subsidiaries; (ii) use its commercially reasonable efforts to obtain resignations of the persons then serving as officers and directors of the Debtors and their direct and indirect subsidiaries, if so requested; and (iii) use its commercially reasonable efforts to obtain any approvals that are required by any governmental or regulatory body in order to permit the sale of the Pledged Securities to the Transferee or the purchase or retention of the Pledged Securities by Collateral Agent and allow the Transferee or Collateral Agent to continue the business of the Debtors and their direct and indirect subsidiaries.

(mm)         Without limiting the generality of the other obligations of the Debtors hereunder, each Debtor shall, at the request of the Collateral Agent (i) cause to be registered at the United States Copyright Office all of its material copyrights, (ii) cause the security interest contemplated hereby with respect to all Intellectual Property registered at the United States Copyright Office or United States Patent and Trademark Office to be duly recorded at the applicable office, and (iii) give the Collateral Agent notice whenever it acquires (whether absolutely or by license) or creates any additional material Intellectual Property.

(nn)          Each Debtor will from time to time, at the joint and several expense of the Debtors, promptly execute and deliver all such further instruments and documents, and take all such further action as may be reasonably necessary or desirable, or as the Collateral Agent may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce Collateral Agent’s rights and remedies hereunder and with respect to any Collateral or to otherwise carry out the purposes of this Agreement.

(oo)          Schedule F attached hereto lists all of the patents, patent applications, trademarks, trademark applications, registered copyrights, and domain names owned by any of the Debtors as of the date hereof.   Schedule F lists all material licenses in favor of any Debtor for the use of any patents, trademarks, copyrights and domain names as of the date hereof. All material patents and trademarks, if any, of the Debtors have been duly recorded at the United States Patent and Trademark Office, and all material copyrights, if any, of the Debtors have been duly recorded at the United States Copyright Office.

(pp)          Except as set forth on Schedule G attached hereto, none of the account debtors or other persons or entities obligated on any of the Collateral is a governmental authority covered by the Federal Assignment of Claims Act or any similar federal, state or local statute or rule in respect of such Collateral.
 
 
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5.             Effect of Pledge on Certain Rights .   If any of the Collateral subject to this Agreement consists of nonvoting equity or ownership interests (regardless of class, designation, preference or rights) that may be converted into voting equity or ownership interests upon the occurrence of certain events (including, without limitation, upon the transfer of all or any of the other stock or assets of the issuer), it is agreed that the pledge of such equity or ownership interests pursuant to this Agreement or the enforcement of any of Collateral Agent’s rights hereunder shall not be deemed to be the type of event which would trigger such conversion rights notwithstanding any provisions in the Organizational Documents or agreements to which any Debtor is subject or to which any Debtor is party.

6.             Defaults . The following events shall be “ Events of Default ”:

(a)             The occurrence of an Event of Default (as defined in the Notes) under the Notes;

(b)             Any representation or warranty of any Debtor in this Agreement shall prove to have been incorrect in any material respect when made;

(c)             The failure by any Debtor to observe or perform any of its obligations hereunder for five (5) days after delivery to such Debtor of notice of such failure by or on behalf of a Secured Party unless such default is capable of cure but cannot be cured within such time frame and such Debtor is using best efforts to cure same in a timely fashion; or

(d)             If any material provision of this Agreement shall at any time for any reason be declared to be null and void, or the validity or enforceability thereof shall be contested by any Debtor, or a proceeding shall be commenced by any Debtor, or by any governmental authority having jurisdiction over any Debtor, seeking to establish the invalidity or unenforceability thereof, or any Debtor shall deny that any Debtor has any liability or obligation purported to be created under this Agreement.

7.             Duty to Hold In Trust .

(a)             During the continuance of an Event of Default, each Debtor shall, upon receipt of any revenue, income, dividend, interest or other sums subject to the Security Interests, whether payable pursuant to the Notes or otherwise, or of any check, draft, note, trade acceptance or other instrument evidencing an obligation to pay any such sum, hold the same in trust for the Secured Parties and shall forthwith endorse and transfer any such sums or instruments, or both, to the Collateral Agent for distribution to the Secured Parties, pro-rata in proportion to their respective then-currently outstanding principal amount of Notes for application to the satisfaction of the Obligations (and if any Note is not outstanding, pro-rata in proportion to the initial purchases of the remaining Notes).

(b)             If any Debtor shall become entitled to receive or shall receive any securities or other property (including, without limitation, shares of Pledged Securities or instruments representing Pledged Securities acquired after the date hereof, or any options, warrants, rights or other similar property or certificates representing a dividend, or any distribution in connection with any recapitalization, reclassification or increase or reduction of capital, or issued in connection with any reorganization of such Debtor or any of its direct or indirect subsidiaries) in respect of the Pledged Securities (whether as an addition to, in substitution of, or in exchange for, such Pledged Securities or otherwise), such Debtor agrees to (i) hold the same in trust on behalf of and for the benefit of the Secured Parties; and (ii) to deliver any and all certificates or instruments evidencing the same to Collateral Agent on or before the close of business on the fifth Business Day following the receipt thereof by such Debtor, in the exact form received together with the Necessary Endorsements, to be held by Collateral Agent subject to the terms of this Agreement as Collateral.
 
 
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8.             Rights and Remedies Upon Default .

(a)             After the occurrence and during the continuance of any Event of Default, the Collateral Agent shall have the right to exercise all of the remedies conferred hereunder and under the Notes, and the Collateral Agent shall have all the rights and remedies of a secured party under the UCC. Without limitation, the Collateral Agent, for the benefit of the Secured Parties, shall have the following rights and powers:

(i)             The Collateral Agent shall have the right to take possession of the Collateral and, for that purpose, enter, with the aid and assistance of any person, any premises where the Collateral, or any part thereof, is or may be placed and remove the same, so long as the same can be accomplished without breach of the peace and otherwise in compliance with applicable law, and each Debtor shall assemble the Collateral and make it available to the Collateral Agent at places which the Collateral Agent shall reasonably select, whether at such Debtor’s premises or elsewhere, and make available to the Collateral Agent, without rent, all of such Debtor’s respective premises and facilities for the purpose of the Collateral Agent taking possession of, removing or putting the Collateral in saleable or disposable form.

(ii)           Upon notice to the Debtors by Collateral Agent, all rights of each Debtor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise and all rights of each Debtor to receive the dividends and interest which it would otherwise be authorized to receive and retain, shall cease. Upon such notice, Collateral Agent shall have the right to receive, for the benefit of the Secured Parties, any interest, cash dividends or other payments on the Collateral and, at the option of Collateral Agent, to exercise in such Collateral Agent’s discretion all voting rights pertaining thereto. Without limiting the generality of the foregoing, Collateral Agent shall have the right (but not the obligation) to exercise all rights with respect to the Collateral as if it were the sole and absolute owner thereof, including, without limitation, to vote and/or to exchange, at its sole discretion, any or all of the Collateral in connection with a merger, reorganization, consolidation, recapitalization or other readjustment concerning or involving the Collateral or any Debtor or any of its direct or indirect subsidiaries.

(iii)          The Collateral Agent shall have the right to seek an Order from a court appointing a Trustee  to operate the business of each Debtor using the Collateral and shall have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the Collateral, at public or private sale or otherwise, either with or without special conditions or stipulations, for cash or on credit or for future delivery, in such parcel or parcels and at such time or times and at such place or places, and upon such terms and conditions as are commercially reasonable.  Upon each such sale, lease, assignment or other transfer or disposition of Collateral, the Collateral Agent, for the benefit of the Secured Parties, may, unless prohibited by applicable law which cannot be waived, purchase all or any part of the Collateral being sold, free from and discharged of all trusts, claims, right of redemption and equities of any Debtor, which are hereby waived and released.

(iv)          The Collateral Agent shall have the right (but not the obligation) to notify any account debtors and any obligors under instruments or accounts to make payments directly to the Collateral Agent, on behalf of the Secured Parties, and to enforce the Debtors’ rights against such account debtors and obligors.

(v)           The Collateral Agent, for the benefit of the Secured Parties, may (but is not obligated to) direct any financial intermediary or any other person or entity holding any investment property to transfer the same to the Collateral Agent, on behalf of the Secured Parties, or its designee.

 
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(vi)          The Collateral Agent may (but is not obligated to) transfer any or all Intellectual Property registered in the name of any Debtor at the United States Patent and Trademark Office and/or Copyright Office into the name of the Collateral Agent or any purchaser of any Collateral.

(b)             The Collateral Agent shall comply with any applicable law in connection with a disposition of Collateral and such compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. The Collateral Agent may sell the Collateral without giving any warranties and may specifically disclaim such warranties. If the Collateral Agent sells any of the Collateral on credit, the Debtors will only be credited with payments actually made by the purchaser. In addition, each Debtor waives any and all rights that it may have to a judicial hearing in advance of the enforcement of any of the Collateral Agent’s rights and remedies hereunder, including, without limitation, its right following an Event of Default to take immediate possession of the Collateral and to exercise its rights and remedies with respect thereto.

(c)             If any notice to Debtor of the sale or other disposition of Collateral is required by then applicable law, five business (5) days prior written notice (which Debtor agree is reasonable notice within the meaning of Section 9.612(a) of the Uniform Commercial Code) shall be given to Debtor of the time and place of any sale of Collateral.  The rights granted in this Section are in addition to any and all rights available to Collateral Agent under the Uniform Commercial Code.

(d)             For the purpose of enabling the Collateral Agent to further exercise rights and remedies under this Section 8 or elsewhere provided by agreement or applicable law, each Debtor hereby grants to the Collateral Agent, for the benefit of the Collateral Agent and the Secured Parties, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to such Debtor) to use, license or sublicense during the continuance of an Event of Default, any Intellectual Property now owned or hereafter acquired by such Debtor, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof.

9.             Applications of Proceeds . The proceeds of any such sale, lease or other disposition of the Collateral hereunder or from payments made on account of any insurance policy insuring any portion of the Collateral shall be applied first, to the expenses of retaking, holding, storing, processing and preparing for sale, selling, and the like (including, without limitation, any taxes, fees and other costs incurred in connection therewith) of the Collateral, if any, to the reasonable attorneys’ fees and expenses incurred by the Collateral Agent in enforcing the Secured Parties’ rights hereunder and in connection with collecting, storing and disposing of the Collateral, and then to satisfaction of the Obligations pro rata among the Secured Parties (based on then-outstanding principal amounts of Notes at the time of any such determination), and then to the payment of any other amounts required by applicable law, after which the Secured Parties shall pay to the applicable Debtor any surplus proceeds. If, upon the sale, license or other disposition of the Collateral, the proceeds thereof are insufficient to pay all amounts to which the Secured Parties are legally entitled, the Debtors will be liable for the deficiency, together with interest thereon, at the rate of 18% per annum or the lesser amount permitted by applicable law (the “Default Rate”), and the reasonable fees of any attorneys employed by the Secured Parties to collect such deficiency. To the extent permitted by applicable law, each Debtor waives all claims, damages and demands against the Secured Parties arising out of the repossession, removal, retention or sale of the Collateral, unless due solely to the gross negligence or willful misconduct of the Secured Parties as determined by a final judgment (not subject to further appeal) of a court of competent jurisdiction.

 
13

 
 
10.             Securities Law Provision . Each Debtor recognizes that Collateral Agent may be limited in its ability to effect a sale to the public of all or part of the Pledged Securities by reason of certain prohibitions in the Securities Act of 1933, as amended, or other federal or state securities laws (collectively, the “ Securities Laws ”), and may reasonably be obliged to resort to one or more sales to a restricted group of purchasers who may be required to agree to acquire the Pledged Securities for their own account, for investment and not with a view to the distribution or resale thereof. Each Debtor agrees that sales so made may be at prices and on terms less favorable than if the Pledged Securities were sold to the public, and that Collateral Agent has no obligation to delay the sale of any Pledged Securities for the period of time necessary to register the Pledged Securities for sale to the public under the Securities Laws. Each Debtor shall cooperate with Collateral Agent in its attempt to satisfy any requirements under the Securities Laws (including, without limitation, registration thereunder if requested by Collateral Agent) applicable to the sale of the Pledged Securities by Collateral Agent.

11.             Costs and Expenses . Each Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses incurred in connection with any filing required hereunder, including without limitation, any financing statements pursuant to the UCC, continuation statements, partial releases and/or termination statements related thereto or any expenses of any searches reasonably required by the Collateral Agent. The Debtors shall also pay all other claims and charges which in the reasonable opinion of the Collateral Agent is reasonably likely to prejudice, imperil or otherwise affect the Collateral or the Security Interests therein. The Debtors will also, upon demand, pay to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which the Collateral Agent, for the benefit of the Secured Parties, may incur in connection with (i) the enforcement of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, or (iii) the exercise or enforcement of any of the rights of the Secured Parties under the Notes.  Until so paid, any fees payable hereunder shall be added to the principal amount of the Notes and shall bear interest at the Default Rate.

12.             Responsibility for Collateral . The Debtors assume all liabilities and responsibility in connection with all Collateral, and the Obligations shall in no way be affected or diminished by reason of the loss, destruction, damage or theft of any of the Collateral or its unavailability for any reason. Without limiting the generality of the foregoing, (a) neither the Collateral Agent nor any Secured Party (i) has any duty (either before or after an Event of Default) to collect any amounts in respect of the Collateral or to preserve any rights relating to the Collateral, or (ii) has any obligation to clean-up or otherwise prepare the Collateral for sale, and (b) each Debtor shall remain obligated and liable under each contract or agreement included in the Collateral to be observed or performed by such Debtor thereunder. Neither the Collateral Agent nor any Secured Party shall have any obligation or liability under any such contract or agreement by reason of or arising out of this Agreement or the receipt by the Collateral Agent or any Secured Party of any payment relating to any of the Collateral, nor shall the Collateral Agent or any Secured Party be obligated in any manner to perform any of the obligations of any Debtor under or pursuant to any such contract or agreement, to make inquiry as to the nature or sufficiency of any payment received by the Collateral Agent or any Secured Party in respect of the Collateral or as to the sufficiency of any performance by any party under any such contract or agreement, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to the Collateral Agent or to which the Collateral Agent or any Secured Party may be entitled at any time or times.

 
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13.             Security Interests Absolute . All rights of the Secured Parties and all obligations of the Debtors hereunder, shall be absolute and unconditional, irrespective of: (a) any lack of validity or enforceability of this Agreement, the Notes or any agreement entered into in connection with the foregoing, or any portion hereof or thereof; (b) any change in the time, manner or place of payment or performance of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Notes or any other agreement entered into in connection with the foregoing; (c) any exchange, release or non-perfection of any of the Collateral, or any release or amendment or waiver of or consent to departure from any other collateral for, or any guarantee, or any other security, for all or any of the Obligations; (d) any action by the Secured Parties to obtain, adjust, settle and cancel in its sole discretion any insurance claims or matters made or arising in connection with the Collateral; or (e) any other circumstance which might otherwise constitute any legal or equitable defense available to a Debtor, or a discharge of all or any part of the Security Interests granted hereby. Until the Obligations shall have been paid and performed in full, the rights of the Secured Parties shall continue even if the Obligations are barred for any reason, including, without limitation, the running of the statute of limitations or bankruptcy. Each Debtor expressly waives presentment, protest, notice of protest, demand, notice of nonpayment and demand for performance. In the event that at any time any transfer of any Collateral or any payment received by the Secured Parties hereunder shall be deemed by final order of a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under the bankruptcy or insolvency laws of the United States, or shall be deemed to be otherwise due to any party other than the Secured Parties, then, in any such event, each Debtor’s obligations hereunder shall survive cancellation of this Agreement, and shall not be discharged or satisfied by any prior payment thereof and/or cancellation of this Agreement, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof. Each Debtor waives all right to require the Secured Parties to proceed against any other person or entity or to apply any Collateral which the Secured Parties may hold at any time, or to marshal assets, or to pursue any other remedy. Each Debtor waives any defense arising by reason of the application of the statute of limitations to any Obligations secured hereby.

14.            Term of Agreement . This Agreement and the Security Interest shall terminate on the date on which all payments under the Notes have been indefeasibly paid in full and all other Obligations have been paid or discharged; provided, however, that all indemnities of the Debtors contained in this Agreement (including, without limitation, Annex B hereto) shall survive and remain operative and in full force and effect regardless of the termination of this Agreement.

15.            Power of Attorney; Further Assurances .

(a)             Each Debtor authorizes the Collateral Agent, and does hereby make, constitute and appoint the Collateral Agent and its officers, agents, successors or assigns with full power of substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in the name of the Collateral Agent or such Debtor, after the occurrence and during the continuance of an Event of Default, (i) to endorse any note, checks, drafts, money orders or other instruments of payment (including, without limitation, payments payable under or in respect of any policy of insurance) in respect of the Collateral that may come into possession of the Collateral Agent; (ii) to sign and endorse any financing statement pursuant to the UCC or any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with accounts, and other documents relating to the Collateral; (iii) to pay or discharge taxes, liens, security interests or other encumbrances at any time levied or placed on or threatened against the Collateral; (iv) to demand, collect, receipt for, compromise, settle and sue for monies due in respect of the Collateral; (v) to transfer any Intellectual Property or provide licenses respecting any Intellectual Property; and (vi) generally, at the option of the Collateral Agent, and at the expense of the Debtors, at any time, or from time to time, to execute and deliver any and all documents and instruments and to do all acts and things which the Collateral Agent deems necessary to protect, preserve and realize upon the Collateral and the Security Interests granted therein in order to effect the intent of this Agreement and the Notes all as fully and effectually as the Debtors might or could do; and each Debtor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. This power of attorney is coupled with an interest and shall be irrevocable for the term of this Agreement and thereafter as long as any of the Obligations shall be outstanding. The designation set forth herein shall be deemed to amend and supersede any inconsistent provision in the Organizational Documents or other documents or agreements to which any Debtor is subject or to which any Debtor is a party. Without limiting the generality of the foregoing, after the occurrence and during the continuance of an Event of Default, each Secured Party is specifically authorized to execute and file any applications for or instruments of transfer and assignment of any patents, trademarks, copyrights or other Intellectual Property with the United States Patent and Trademark Office and the United States Copyright Office.

 
15

 
 
(b)             On a continuing basis, each Debtor will make, execute, acknowledge, deliver, file and record, as the case may be, with the proper filing and recording agencies in any jurisdiction, including, without limitation, the jurisdictions indicated on Schedule C attached hereto, all such instruments, and take all such action as may reasonably be deemed necessary or advisable, or as reasonably requested by the Collateral Agent, to perfect the Security Interest granted hereunder and otherwise to carry out the intent and purposes of this Agreement, or for assuring and confirming to the Collateral Agent the grant or perfection of a perfected security interest in all the Collateral under the UCC.

(c)             Each Debtor hereby irrevocably appoints the Collateral Agent as such Debtor’s attorney-in-fact, with full authority in the place and instead of such Debtor and in the name of such Debtor, from time to time in the Collateral Agent’s discretion, to take any action permitted under this Agreement and to execute any instrument which the Collateral Agent may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including the filing, in its sole discretion, of one or more financing or continuation statements and amendments thereto, relative to any of the Collateral without the signature of such Debtor where permitted by law, which financing statements may (but need not) describe the Collateral as “all assets” or “all personal property” or words of like import, and ratifies all such actions taken by the Collateral Agent. This power of attorney is coupled with an interest and shall be irrevocable for the term of this Agreement and thereafter as long as any of the Obligations shall be outstanding.

16.            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 (a) personally served, (b) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (c) delivered by a reputable overnight courier service with charges prepaid, or (d) 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 (i) 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), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours), (ii) on the first Business Day following the date deposited with an overnight courier service with charges prepaid, or (iii) on the fifth Business Day following the date of mailing pursuant to subpart (b) above, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:
 
To Debtor, to:
 
Adamis Pharmaceuticals Corporation
   
11455 El Camino Real, Suite 310
   
San Diego, CA 92130
   
Attn: Dennis J. Carlo, Ph.D., CEO
   
Fax: (866) 893-3622
     
With a copy by fax only to
   
(which shall not constitute notice):
 
Weintraub Tobin Chediak Coleman Grodin
   
400 Capitol Mall, 11 th Floor
   
Sacramento, CA 95814
   
Attn: C. Kevin Kelso, Esq.
   
Fax: (916) 446-1611
     
To the Collateral Agent:
 
Collateral Agents, LLC
   
333 Seventh Avenue, 3 rd Floor
   
New York, NY 10001
   
Attn: General Counsel
   
Fax: (212) 245-9101
 
 
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If to Debtor or Collateral Agent,
   
with a copy by telecopier only to:
 
Grushko & Mittman, P.C.
   
515 Rockaway Avenue
   
Valley Stream, New York 11581
   
Fax: (212) 697-3575
 
17.            Other Security . To the extent that the Obligations are now or hereafter secured by property other than the Collateral or by the guarantee, endorsement or property of any other person, firm, corporation or other entity, then the Collateral Agent shall have the right, in its sole discretion, to pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of the Secured Parties’ rights and remedies hereunder.

18.            Appointment of Collateral Agent . The Secured Parties hereby appoint Collateral Agents, LLC to act as their agent (“ Collateral Agent ”) for purposes of exercising any and all rights and remedies of the Secured Parties hereunder. Such appointment shall continue until revoked in writing by a Majority in Interest, at which time a Majority in Interest shall appoint a new Collateral Agent. The Collateral Agent shall have the rights, responsibilities and immunities set forth in Annex B hereto.

19.            Miscellaneous .

(a)             No course of dealing between the Debtors and the Collateral Agent, nor any failure to exercise, nor any delay in exercising, on the part of the Collateral Agent, any right, power or privilege hereunder or under the Notes shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

(b)             All of the rights and remedies of the Collateral Agent with respect to the Collateral, whether established hereby or by the Notes or by any other agreements, instruments or documents or by law shall be cumulative and may be exercised singly or concurrently.

(c)             This Agreement, together with the exhibits and schedules hereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into this Agreement and the exhibits and schedules hereto. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Debtors and Collateral Agent or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.

(d)             If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 
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(e)             No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

(f)             This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Debtors may not assign this Agreement or any rights or obligations hereunder without the prior written consent of a Majority in Interest (other than by merger). Any Secured Party may assign any or all of its rights under this Agreement to any Person to whom such Secured Party assigns or transfers any Obligations, provided such transferee agrees in writing to be bound, with respect to the transferred Obligations, by the provisions of this Agreement that apply to the “Secured Parties.”

(g)             Each party shall take such further action and execute and deliver such further documents as may be necessary or appropriate in order to carry out the provisions and purposes of this Agreement.

(h)             All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each Debtor agrees that all proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and the Notes (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan. Each Debtor hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If any party shall commence a proceeding to enforce any provisions of this Agreement, then the prevailing party in such proceeding shall be reimbursed by the other party for its reasonable attorney’s fees and other costs and expenses incurred with the investigation, preparation and prosecution of such proceeding.

(i)              This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile or other electronic transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such signature were the original thereof.

(j)              All Debtors shall jointly and severally be liable for the obligations of each Debtor to the Secured Parties hereunder.
 
 
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(k)             Each Debtor shall indemnify, reimburse and hold harmless the Collateral Agent and the Secured Parties and their respective partners, members, shareholders, officers, directors, employees and agents (and any other persons with other titles that have similar functions) (collectively, “ Indemnitees ”) from and against any and all losses, claims, liabilities, damages, penalties, suits, costs and expenses, of any kind or nature, (including fees relating to the cost of investigating and defending any of the foregoing) imposed on, incurred by or asserted against such Indemnitee in any way related to or arising from or alleged to arise from this Agreement or the Collateral, except any such losses, claims, liabilities, damages, penalties, suits, costs and expenses which result from the gross negligence or willful misconduct of the Indemnitee as determined by a final, nonappealable decision of a court of competent jurisdiction. This indemnification provision is in addition to, and not in limitation of, any other indemnification provision in the Notes, the Subscription Agreement (as such term is defined in the Notes) or any other agreement, instrument or other document executed or delivered in connection herewith or therewith.

(l)              Nothing in this Agreement shall be construed to subject Collateral Agent or any Secured Party to liability as a partner in any Debtor or any if its direct or indirect subsidiaries that is a partnership or as a member in any Debtor or any of its direct or indirect subsidiaries that is a limited liability company, nor shall Collateral Agent or any Secured Party be deemed to have assumed any obligations under any partnership agreement or limited liability company agreement, as applicable, of any such Debtor or any if its direct or indirect subsidiaries or otherwise, unless and until any such Secured Party exercises its right to be substituted for such Debtor as a partner or member, as applicable, pursuant hereto.

(m)            To the extent that the grant of the security interest in the Collateral and the enforcement of the terms hereof require the consent, approval or action of any partner or member, as applicable, of any Debtor or any direct or indirect subsidiary of any Debtor or compliance with any provisions of any of the Organizational Documents, the Debtors hereby grant such consent and approval and waive any such noncompliance with the terms of said documents.

(n)            Termination; Release .  When the Obligations have been indefeasibly paid and no Obligations are outstanding, this Agreement shall be terminated, and the Collateral Agent, at the request and sole expense of the Debtor, will execute and deliver to the Debtor the proper instruments (including UCC termination statements) acknowledging the termination of the Security Agreement, and duly assign, transfer and deliver to the Debtor, without recourse, representation or warranty of any kind whatsoever, such of the Collateral, including, without limitation, as may be in the possession of the Collateral Agent.
 
[SIGNATURE PAGES FOLLOW]
 
 
19

 
 
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed on the day and year first above written.
 
ADAMIS PHARMACEUTICALS CORPORATION
 
     
By:
  /s/ Dennis J. Carlo  
 
Name:
 
 
Title:
 
 
COLLATERAL AGENT

COLLATERAL AGENTS, LLC
 
By:
   
 
Name:
 
 
Title:
 
 
 
20

 
 
OMNIBUS SECURED PARTY SIGNATURE PAGE TO
ADAMIS PHARMACEUTICALS CORPORATION
SECURITY AGREEMENT

The undersigned, in its capacity as a Secured Party, hereby executes and delivers the Security Agreement to which this signature page is attached and agrees to be bound by the Security Agreement on the date set forth on the first page of the Security Agreement.  This counterpart signature page, together with all counterparts of the Security Agreement and signature pages of the other parties named therein, shall constitute one and the same instrument in accordance with the terms of the Security Agreement.
   
[Print Name of Investor]  
 
 
   
[Signature]  
   
Name:
 
 
     
Title: 
 
 
 
Address:   
 
 
 
Telephone No.:     
 
Fax No.:    
 
Email:    
 
Taxpayer ID# (if applicable):     
 
 
21

 
 
SCHEDULES TO SECURITY AGREEMENT

Schedule A
 
Principal Place of Business of Debtor:

Adamis Pharmaceuticals Corporation
11455 El Camino Real, Suite 310
San Diego, CA 92130
 
Locations Where Collateral is Located or Stored:

Same as above
 
Schedule B
Exceptions to Ownership
 
The Borrower is licensee of certain patents and other intellectual property rights under the following license agreements, which have previously been filed as exhibits to the Borrower’s reports filed with the Securities and Exchange Commission (the “ License Agreements ”):  (i) Agreement effective as of April 18, 2011, with The Regents of the University of California (as represented by University of California San Diego) and Dana Farber Cancer Institute, Inc., as licensors; and (ii) Two License Agreements dated as of January 26, 2007, and a License Agreement dated January 2, 2008, between Wisconsin Alumni Research Foundation, as licensor, and the Borrower, as licensee (as assignee from Colby Pharmaceutical Company, the original licensee).  The Borrower’s rights as licensee under the License Agreements are subject to the terms and conditions of the applicable license agreements, including a prohibition on transfer or assignment of the License Agreement by the Borrower without the consent of the licensor.  Pursuant to letters that have been provided to counsel for the Secured Parties, the above licensors have consented, on the terms set forth in such letters, to the grant by Borrower of the security interest reflected in the Security Agreement.

The Borrower is not granting any ownership interest in the license agreement between Adamis Corp. and Nevagen, LLC dated July 28, 2006, and as amended on December 29, 2008 (the “Nevagen License Agreement”).  The Borrower hereby represents that granting a security interest in the common stock of Adamis Corp. does not violate the terms of the Nevagen License Agreement.

The Borrower’s rights as lessee under the lease agreement relating to its offices in San Diego, California are subject to the terms and conditions of the applicable lease agreement.

Schedule C
Jurisdictions
 
 
22

 

Delaware

Schedule D
Legal Names and Organizational Identification Numbers

Debtor
Filing Jurisdiction
ID Number
Adamis Pharmaceuticals Corporation
Delaware
3774992
Adamis Corporation
Delaware
4322799
Adamis Laboratories, Inc.
Delaware
4014783
Adamis Viral Therapies, Inc.
Delaware
4169204

Schedule E
Names; Mergers and Acquisitions

Cellegy Pharmceuticals, Inc.  As disclosed in Borrower’s filings with the Securities and Exchange Commission, effective April 2009, the corporation formerly named Adamis Pharmaceuticals Corporation merged with and into Cellegy Pharmaceuticals, Inc., and Cellegy changed its corporate name to Adamis Pharmaceuticals Corporation.

Schedule F
Intellectual Property

The Company’s Biosyn, Inc. subsidiary holds the following issued patents.  The Company makes no representations or warranties concerning whether such patents have any value or have been or will be maintained:

Program
Country
Status
Filing Date (Issue Date)
Patent # (where applicable)
C31G/Savvy
African Union (OAPI)
Issued
7/17/1991 (9/15/1994)
9911
C31G/Savvy
Namibia
Issued
3/19/1992 (11/25/1992)
92/0017
C31G/Savvy
U.S.
Issued
3/22/1991 (5/24/1994)
5,314,917
C31G/Savvy
U.S.
Issued
4/4/1994 (10/2/2001)
6,297,278

Registered copyrights:  None.

Registered trademarks:  None, other than the following:

MARK
Registration Number or Application Serial #
International Class
AEROKID
2,946,639
5
AEROKID LOGO
3,025,733
5
LOGO
2,969,548
5
AEROHIST
3,000,259
5
ANA-TOTE
2,805,731
5
 
 
23

 
 
These trademarks relate to certain allergy and respiratory products that the Company has not marketed or sold for more than two years and does not currently market or sell.  The Company makes no representations or warranties concerning the status of such marks or whether they have been or will be maintained:

Pursuant to the License Agreements, the Company has licensed rights to use certain patents and intellectual property rights held by such licensors, pursuant to the terms of the applicable License Agreements.

The Company own rights to the following Domain Names:

Adamislaboratories.com
Adamislabs.com
Adamispharmaceutical.com
Adamispharmaceuticals.com
Adamispharma.com

Schedule G
Account Debtors

The Regents of the University of California, and Wisconsin Alumni Research Foundation, which are licensors under the License Agreements, are or may be public entities/governmental authorities for purposes of the statutes and rules referenced in Section 4(pp) of the Security Agreement.

Schedule H
Pledged Securities

All of the outstanding shares of common stock of the following subsidiaries of Borrower:

·    
Adamis Corporation
·    
Adamis Viral Therapies, Inc.
·    
Adamis Laboratories, Inc.

The Company owns 1,000 shares of capital stock of Adamis Corporation.  Adamis Corporation owns 1,000 shares of capital stock of Adamis Viral Therapies, Inc. and 1,000 shares of capital stock of Adamis Laboratories, Inc.

 
24

 

ANNEX A
to
SECURITY
AGREEMENT

  FORM OF ADDITIONAL DEBTOR JOINDER

Security Agreement dated as of June 26, 2013 made by
Adamis Pharmaceuticals Corporation
and its Subsidiaries party thereto from time to time, as Debtors
to and in favor of
the Secured Parties identified therein (the “ Security Agreement ”)

Reference is made to the Security Agreement as defined above; capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in, or by reference in, the Security Agreement.

The undersigned hereby agrees that upon delivery of this Additional Debtor Joiner to the Secured Parties referred to above, the undersigned shall (a) be an Additional Debtor under the Security Agreement, (b) have all the rights and obligations of the Debtors under the Security Agreement as fully and to the same extent as if the undersigned was an original signatory thereto and (c) be deemed to have made the representations and warranties set forth therein as of the date of execution and delivery of this Additional Debtor Joinder (except to the extent such representation or warranty specifically refers to an earlier date). WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.

Attached hereto are supplemental and/or replacement Schedules to the Security Agreement, as applicable.

Attached hereto is an original Subsidiary Guaranty executed by the undersigned and delivered herewith.

An executed copy of this Additional Debtor Joinder shall be delivered to the Secured Parties, and the Secured Parties may rely on the matters set forth herein on or after the date hereof. This Additional Debtor Joinder shall not be modified, amended or terminated without the prior written consent of the Secured Parties.
 
 
25

 
 
IN WITNESS WHEREOF, the undersigned has caused this Joiner to be executed in the name and on behalf of the undersigned.

[Name of Additional Debtor]
 
By:
 
Name:
Title:
 
Address:

Dated: 
 

 
26

 
 
FORM OF SUBSIDIARY GUARANTY

1.            Identification .

This Guaranty (the “ Guaranty ”), dated as of ___________________ , is entered into by ______________ , a __________________ corporation (“ Guarantor ”), for the benefit of the Collateral Agent identified below and the parties identified on Schedule A hereto (each a “ Lender ” and collectively, the “ Lenders ”).

2.            Recitals .

2.1           Guarantor is a direct or indirect subsidiary of Adamis Pharmaceuticals Corporation, a Delaware corporation (“ Parent ”).  The Lenders have made and/or are making loans to Parent (the “ Loans ”).  Guarantor will obtain substantial benefit from the proceeds of the Loans.

2.2           The Loans are and will be evidenced by certain Secured Convertible Promissory Notes (collectively, “ Note ” or the “ Notes ”) issued by Parent on, about or after the date of this Guaranty pursuant to those certain Subscription Agreements dated at or about the date hereof (“ Subscription Agreements ”).  The Notes issued on the Closing Date are further described on Schedule A hereto and were and or will be executed by Parent as “Borrower” for the benefit of each Lender as the “Holder” thereof.

2.3           In consideration of the Loans made and to be made by Lenders to Parent and for other good and valuable consideration, and as security for the performance by Parent of its obligations under the Notes and as security for the repayment of the Loans and all other sums due from Debtor to Lenders arising under the Notes (collectively, the “ Obligations ”), Guarantor, for good and valuable consideration, receipt of which is acknowledged, has agreed to enter into this Guaranty.

2.4           The Lenders have appointed Collateral Agents LLC as Collateral Agent pursuant to that certain Security Agreement dated at or about the date of this Agreement (“ Security Agreement ”), among the Lenders and Collateral Agent.

2.5           Upper case terms employed but not defined herein shall have the meanings ascribed to them in the Transaction Documents (as defined in the Subscription Agreement).

3.            Guaranty .

3.1            Guaranty .  Guarantor hereby unconditionally and irrevocably guarantees, jointly and severally with any other guarantor of the Obligations, the punctual payment, performance and observance when due, whether at stated maturity, by acceleration or otherwise, of all of the Obligations now or hereafter existing, whether for principal, interest (including, without limitation, all interest that accrues after the commencement of any insolvency, bankruptcy or reorganization of Parent, whether or not constituting an allowed claim in such proceeding), fees, commissions, expense reimbursements, liquidated damages, indemnifications or otherwise arising under the Notes, Security Agreement, or any other Transaction Document (as defined in the Subscription Agreement) (such obligations, to the extent not paid by Parent being the “ Guaranteed Obligations ” and included in the definition of Obligations), and agrees to pay any and all reasonable costs, fees and expenses (including reasonable counsel fees and expenses) incurred by Collateral Agent and the Lenders in enforcing any rights under the Guaranty set forth herein.  Without limiting the generality of the foregoing, Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by Parent to Collateral Agent and the Lenders, but for the fact that they are unenforceable or not allowable due to the existence of an insolvency, bankruptcy or reorganization involving Parent.

 
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3.2            Guaranty Absolute .  Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Notes, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of Collateral Agent or the Lenders with respect thereto.  The obligations of Guarantor under this Guaranty are independent of the Guaranteed Obligations, and a separate action or actions may be brought and prosecuted against Guarantor to enforce such obligations, irrespective of whether any action is brought against Parent or any other guarantor or whether Parent or any other guarantor is joined in any such action or actions.  The liability of Guarantor under this Guaranty constitutes a primary obligation, and not a contract of surety, and to the extent permitted by law, shall be irrevocable, absolute and unconditional irrespective of, and Guarantor hereby irrevocably waives any defenses it may now or hereafter have in any way relating to, any or all of the following:

(a)           any lack of validity of the Notes or any agreement or instrument relating thereto;
 
(b)           any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure from the Notes, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to Parent or otherwise;
 
(c)           any taking, exchange, release, subordination or non-perfection of any Collateral, or any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations;
 
(d)           any change, restructuring or termination of the corporate, limited liability company or partnership structure or existence of Parent; or
 
(e)           any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by Collateral Agent or  the Lenders that might otherwise constitute a defense available to, or a discharge of, Parent or any other guarantor or surety.

This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by Collateral Agent, the Lenders or any other entity upon the insolvency, bankruptcy or reorganization of the Parent or otherwise (and whether as a result of any demand, settlement, litigation or otherwise), all as though such payment had not been made.

3.3            Waiver .  Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that Collateral Agent or the Lenders exhaust any right or take any action against any Borrower or any other person or entity or any Collateral.  Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated herein and that the waiver set forth in this Section 3.3 is knowingly made in contemplation of such benefits.  Guarantor hereby waives any right to revoke this Guaranty, and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.
 
3.4        Continuing Guaranty; Assignments .  This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the later of the indefeasible cash or other payment in full of the Guaranteed Obligations , (b) be binding upon Guarantor, its successors and assigns, and (c) inure to the benefit of and be enforceable by the Lenders and their successors, pledgees, transferees and assigns.  Without limiting the generality of the foregoing clause (c), any Lender may pledge, assign or otherwise transfer all or any portion of its rights and obligations under this Guaranty (including, without limitation, all or any portion of its Notes owing to it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted such Collateral Agent or Lender herein or otherwise.
 
 
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3.5           Subrogation .  Guarantor will not exercise any rights that it may now or hereafter acquire against the Collateral Agent or any Lender or other guarantor (if any) that arise from the existence, payment, performance or enforcement of such Guarantor’s obligations under this Guaranty, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Collateral Agent or any Lender or other guarantor (if any), directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security solely on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been indefeasibly paid in full.
 
 
3.6      Maximum Obligations . Notwithstanding any provision herein contained to the contrary, Guarantor’s liability with respect to the Obligations shall be limited to an amount not to exceed, as of any date of determination, the amount that could be claimed by Lenders from Guarantor without rendering such claim voidable or avoidable under Section 548 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law.
 
4.            Miscellaneous .
 
4.1            Expenses .  Guarantor shall pay to the Lenders, on demand, the amount of any and all reasonable expenses, including, without limitation, reasonable attorneys’ fees, reasonable legal expenses and reasonable brokers’ fees, which the Lenders may incur in connection with exercise or enforcement of any the rights, remedies or powers of the Lenders hereunder or with respect to any or all of the Obligations.

4.2            Waivers, Amendment and Remedies .  No course of dealing by the Lenders and no failure by the Lenders to exercise, or delay by the Lender in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, and no single or partial exercise thereof shall preclude any other or further exercise thereof or the exercise of any other right, remedy or power of the Lenders.  No amendment, modification or waiver of any provision of this Guaranty and no consent to any departure by Guarantor therefrom, shall, in any event, be effective unless contained in a writing signed by the Guarantor and the Majority in Interest (as such term is defined in the Security Agreement) or Lenders against whom such amendment, modification or waiver is sought, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.  The rights, remedies and powers of the Lenders, not only hereunder, but also under any other Transaction Documents and under applicable law are cumulative, and may be exercised by the Lenders from time to time in such order as the Lenders may elect.

4.3            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 (a) personally served, (b) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (c) delivered by a reputable overnight courier service with charges prepaid, or (d) 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 (i) 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, or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours), (ii) on the first Business Day following the date deposited with an overnight courier service with charges prepaid, or (iii) on the fifth Business Day following the date of mailing pursuant to subpart (b) above, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:
 
 
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To Guarantor, to:
 
Adamis Pharmaceuticals Corporation
   
11455 El Camino Real, Suite 310
   
San Diego, CA 92130
   
Attn: Dennis J. Carlo, Ph.D., CEO
   
Fax: (866) 893-3622
     
With a copy by fax only to
 
 
(which shall not constitute notice):
 
Weintraub Tobin Chediak Coleman Grodin
   
400 Capitol Mall, 11 th Floor
   
Sacramento, CA 95814
   
Attn: C. Kevin Kelso, Esq.
   
Fax: (916) 446-1611
     
To the Collateral Agent:
 
Collateral Agents, LLC
   
333 Seventh Avenue, 3 rd Floor
   
New York, NY 10001
   
Attn: General Counsel
   
Fax: (212) 245-9101
     
To Lenders:
 
To the addresses and telecopier numbers set forth on Schedule A
     
If to Guarantor, Lender or    
Collateral Agent, with a copy by telecopier only to:     
     
    Grushko & Mittman, P.C.
515 Rockaway Avenue
Valley Stream, New York 11581
Fax: (212) 697-3575
 
Any party may change its address by written notice in accordance with this paragraph.

4.4            Term; Binding Effect .  This Guaranty shall (a) remain in full force and effect until payment and satisfaction in full of all of the Guaranteed Obligations; (b) be binding upon Guarantor and its successors and permitted assigns; and (c) inure to the benefit of the Lenders and their respective successors and assigns.  All the rights and benefits granted by Guarantor to the Collateral Agent and Lenders hereunder and other agreements and documents delivered in connection therewith are deemed granted to both the Collateral Agent and Lenders.  Upon the payment in full of the Guaranteed Obligations, (i) this Guaranty shall terminate and (ii) the Lenders will, upon Guarantor’s request and at Guarantor’s expense, execute and deliver to Guarantor such documents as Guarantor shall reasonably request to evidence such termination, all without any representation, warranty or recourse whatsoever.

4.5            Captions .  The captions of Paragraphs, Articles and Sections in this Guaranty have been included for convenience of reference only, and shall not define or limit the provisions hereof and have no legal or other significance whatsoever.
 
 
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4.6            Governing Law; Venue; Severability .  This Guaranty shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts or choice of law.  Any legal action or proceeding against Guarantor with respect to this Guaranty may be brought in the courts of the State of New York or of the United States for the Southern District of New York, and, by execution and delivery of this Guaranty, Guarantor hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts.  Guarantor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Guaranty brought in the aforesaid courts and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum.  If any provision of this Guaranty, or the application thereof to any person or circumstance, is held invalid, such invalidity shall not affect any other provisions which can be given effect without the invalid provision or application, and to this end the provisions hereof shall be severable and the remaining, valid provisions shall remain of full force and effect.   This Guaranty shall be deemed an unconditional obligation of Guarantor for the payment of money and, without limitation to any other remedies of Lenders, may be enforced against Guarantor 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 Lenders and Guarantor are parties or which Guarantor delivered to Lenders, which may be convenient or necessary to determine Lenders’ rights hereunder or Guarantor’s obligations to Lenders are deemed a part of this Guaranty, whether or not such other document or agreement was delivered together herewith or was executed apart from this Guaranty.   Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.  Guarantor irrevocably appoints Parent its true and lawful agent for service of process upon whom all processes of law and notices may be served and given in the manner described above; and such service and notice shall be deemed valid personal service and notice upon Guarantor with the same force and validity as if served upon Guarantor.

4.7            Satisfaction of Obligations .  For all purposes of this Guaranty, the payment in full of the Obligations shall be conclusively deemed to have occurred when the Obligations have been paid pursuant to the terms of the Notes and the Subscription Agreements.

4.8            Counterparts/Execution .  This Agreement may be executed in any number of counterparts and by the different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.  This Agreement may be executed by facsimile signature and delivered by electronic transmission.

[THE BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
 
 
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IN WITNESS WHEREOF, the undersigned have executed and delivered this Guaranty, as of the date first written above.

“GUARANTOR”
 
By:
/s/ DENNIS J. CARLO   
 
Its: President
 
 
This Guaranty Agreement may be signed by facsimile signature and
delivered by confirmed facsimile transmission.
 
 
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SCHEDULE A TO GUARANTY

         
         
         
         
 
 
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ANNEX B
to
SECURITY
AGREEMENT

THE COLLATERAL AGENT

1. Appointment .   The Secured Parties (all capitalized terms used herein and not otherwise defined shall have the respective meanings provided in the Security Agreement to which this Annex B is attached (the “ Agreement ”), by their acceptance of the benefits of the Agreement, hereby designate Collateral Agents, LLC (“ Collateral Agent ”) as the Collateral Agent to act as specified herein and in the Agreement. Each Secured Party shall be deemed irrevocably to authorize the Collateral Agent to take such action on its behalf under the provisions of the Agreement and any other Transaction Document (as such term is defined in the Notes) and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Collateral Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Collateral Agent may perform any of its duties hereunder by or through its agents or employees.

2. Nature of Duties . The Collateral Agent shall have no duties or responsibilities except those expressly set forth in the Agreement. Neither the Collateral Agent nor any of its partners, members, shareholders, officers, directors, employees or agents shall be liable for any action taken or omitted by it as such under the Agreement or hereunder or in connection herewith or therewith, be responsible for the consequence of any oversight or error of judgment or answerable for any loss, unless caused solely by its or their gross negligence or willful misconduct as determined by a final judgment (not subject to further appeal) of a court of competent jurisdiction. The duties of the Collateral Agent shall be mechanical and administrative in nature; the Collateral Agent shall not have by reason of the Agreement or any other Transaction Document a fiduciary relationship in respect of any Debtor or any Secured Party; and nothing in the Agreement or any other Transaction Document, expressed or implied, is intended to or shall be so construed as to impose upon the Collateral Agent any obligations in respect of the Agreement or any other Transaction Document except as expressly set forth herein and therein.

3. Lack of Reliance on the Collateral Agent . Independently and without reliance upon the Collateral Agent, each Secured Party, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Company and its subsidiaries in connection with such Secured Party’s investment in the Debtors, the creation and continuance of the Obligations, the transactions contemplated by the Transaction Documents, and the taking or not taking of any action in connection therewith, and (ii) its own appraisal of the creditworthiness of the Company and its subsidiaries, and of the value of the Collateral from time to time, and the Collateral Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Secured Party with any credit, market or other information with respect thereto, whether coming into its possession before any Obligations are incurred or at any time or times thereafter. The Collateral Agent shall not be responsible to the Debtors or any Secured Party for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith, or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of the Agreement or any other Transaction Document, or for the financial condition of the Debtors or the value of any of the Collateral, or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of the Agreement or any other Transaction Document, or the financial condition of the Debtors, or the value of any of the Collateral, or the existence or possible existence of any default or Event of Default under the Agreement, the Notes or any of the other Transaction Documents.
 
 
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4. Certain Rights of the Collateral Agent . The Collateral Agent shall have the right to take any action with respect to the Collateral, on behalf of all of the Secured Parties. To the extent practical, the Collateral Agent shall request instructions from the Secured Parties with respect to any material act or action (including failure to act) in connection with the Agreement or any other Transaction Document, and shall be entitled to act or refrain from acting in accordance with the instructions of a Majority in Interest  (based on then-outstanding principal amounts of Notes at the time of any such determination); if such instructions are not provided despite the Collateral Agent’s request therefor, the Collateral Agent shall be entitled to refrain from such act or taking such action, and if such action is taken, shall be entitled to appropriate indemnification from the Secured Parties in respect of actions to be taken by the Collateral Agent; and the Collateral Agent shall not incur liability to any person or entity by reason of so refraining. Without limiting the foregoing, (a) no Secured Party shall have any right of action whatsoever against the Collateral Agent as a result of the Collateral Agent acting or refraining from acting hereunder in accordance with the terms of the Agreement or any other Transaction Document, and the Debtors shall have no right to question or challenge the authority of, or the instructions given to, the Collateral Agent pursuant to the foregoing and (b) the Collateral Agent shall not be required to take any action which the Collateral Agent believes (i) could reasonably be expected to expose it to personal liability or (ii) is contrary to this Agreement, the Transaction Documents or applicable law.

5. Reliance . The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by the proper person or entity, and, with respect to all legal matters pertaining to the Agreement and the other Transaction Documents and its duties thereunder, upon advice of counsel selected by it and upon all other matters pertaining to this Agreement and the other Transaction Documents and its duties thereunder, upon advice of other experts selected by it. Anything to the contrary notwithstanding, the Collateral Agent shall have no obligation whatsoever to any Secured Party to assure that the Collateral exists or is owned by the Debtors or is cared for, protected or insured or that the liens granted pursuant to the Agreement have been properly or sufficiently or lawfully created, perfected, or enforced or are entitled to any particular priority.

6. Indemnification . To the extent that the Collateral Agent is not reimbursed and indemnified by the Debtors, the Secured Parties will jointly and severally reimburse and indemnify the Collateral Agent, in proportion to their initially purchased respective principal amounts of Notes, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Collateral Agent in performing its duties hereunder or under the Agreement or any other Transaction Document, or in any way relating to or arising out of the Agreement or any other Transaction Document except for those determined by a final judgment (not subject to further appeal) of a court of competent jurisdiction to have resulted solely from the Collateral Agent’s own gross negligence or willful misconduct. Prior to taking any action hereunder as Collateral Agent, the Collateral Agent may require each Secured Party to deposit with it sufficient sums as it determines in good faith is necessary to protect the Collateral Agent for costs and expenses associated with taking such action.

7. Resignation by the Collateral Agent .  
 
(a) The Collateral Agent may resign from the performance of all its functions and duties under the Agreement and the other Transaction Documents at any time by giving 5 days’ prior written notice (as provided in the Agreement) to the Debtors and the Secured Parties. Such resignation shall take effect upon the appointment of a successor Collateral Agent pursuant to clauses (b) and (c) below.

(b) Upon any such notice of resignation, the Secured Parties, acting by a Majority in Interest, shall appoint a successor Collateral Agent hereunder.

 
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(c) If a successor Collateral Agent shall not have been so appointed within said 5-day period, the Collateral Agent shall then appoint a successor Collateral Agent who shall serve as Collateral Agent until such time, if any, as the Secured Parties appoint a successor Collateral Agent as provided above. If a successor Collateral Agent has not been appointed within such 5-day period, the Collateral Agent may petition any court of competent jurisdiction or may interplead the Debtors and the Secured Parties in a proceeding for the appointment of a successor Collateral Agent, and all fees, including, but not limited to, extraordinary fees associated with the filing of interpleader and expenses associated therewith, shall be payable by the Debtors on demand.

8. Rights with respect to Collateral . Each Secured Party agrees with all other Secured Parties and the Collateral Agent (i) that it shall not, and shall not attempt to, exercise any rights with respect to its security interest in the Collateral, whether pursuant to any other agreement or otherwise (other than pursuant to this Agreement), or take or institute any action against the Collateral Agent or any of the other Secured Parties in respect of the Collateral or its rights hereunder (other than any such action arising from the breach of this Agreement) and (ii) that such Secured Party has no other rights with respect to the Collateral other than as set forth in this Agreement and the other Transaction Documents. Upon the acceptance of any appointment as Collateral Agent hereunder by a successor Collateral Agent, such successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent and the retiring Collateral Agent shall be discharged from its duties and obligations under the Agreement.  After any retiring Collateral Agent’s resignation or removal hereunder as Collateral Agent, the provisions of the Agreement including this Annex B shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral Agent.

9.    Other Activities .    Collateral Agent may generally engage in any kind of business with a Secured Party or Debtor any subsidiary or affiliate thereof as if it had not entered into this Agreement. Collateral Agent and its affiliates and their officers, directors, employees, and agents (including legal counsel) may now or hereafter be engaged in one or more transactions with either a Secured Party or Debtor or may act as trustee, agent or representative of either a Secured Party or Debtor, or otherwise be engaged in other transactions with such parties (collectively, the “Other Activities”).  Without limiting the forgoing, Collateral Agent and its affiliates and their officers, directors, employees, and agents (including legal counsel) shall not be responsible to account to a Secured Party or Debtor for such other activities.  

10.  Collateral Agent Fees .  In addition to any other fees and expenses required to be paid to the Collateral Agent in this Agreement, the Collateral Agent will be paid a fee of $5,000 at the closing of the Transaction and $1,000 on each one year anniversary thereof.  Further, in addition to the foregoing, upon the occurrence of an Event of Default, the Secured Parties collectively shall pay the Collateral Agent the sum of $10,000 on account, to apply against an hourly fee of $350 to be paid to the Collateral Agent by the Secured Parties for services rendered pursuant to this Agreement.  All payments due to the Collateral Agent under this Agreement including reimbursements must be paid when billed.  The Collateral Agent may refuse to act on behalf of or make a distribution to any Secured Party who is not current in payments to the Collateral Agent.  Payments required pursuant to this Agreement shall be pari passu to the Secured Parties' interests in the Debentures.  The Collateral Agent is hereby authorized to deduct any sums due the Collateral Agent from Collateral in the Collateral Agent's possession.
 
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Adamis Pharmaceuticals Corporation 8-K
Exhibit 10.5
 
INTERCREDITOR AGREEMENT

THIS INTERCREDITOR AGREEMENT (this " Agreement" ) dated as of June 26, 2013, among the parties whose names are subscribed on the signature page hereto as Junior Lenders (collectively, the “ Junior Lenders ”), the parties identified on Schedule A-1 hereto (collectively the “ Senior Lenders ”), and Adamis Pharmaceuticals Corporation, a Delaware corporation (the “ Borrower ”).

WHEREAS, it is a condition to the Senior Lenders making an investment pursuant to and in accordance with (i) that certain “ Subscription Agreement ” to be dated on or about June 26, 2013 by and between the Borrower and Senior Lenders (as amended, modified or supplemented from time to time), and (ii) the “ Transaction Documents ” referred to in the Subscription Agreement collectively described below in definition of “Senior Agreements” , that the Junior Lenders and Senior Lenders enter into this Agreement;

WHEREAS, the Junior Lender A has made a loan to the Borrower evidenced by a convertible promissory note as described below in the definition of “ Junior Obligations A ”;

WHEREAS, the Junior Lender B has made loans to the Borrower evidenced by promissory notes as described below in the definition of “ Junior Obligations B ” (collectively, the Junior Lender A and Junior Lender B are referred to as “ Junior Lenders ” and Junior Obligations A and Junior Obligations B are referred to as “ Junior Obligations ”);

WHEREAS, the Senior Lenders will make various loans to the Borrower evidenced by Notes as described below in the definition of “ Senior Obligations ”;

WHEREAS, the Senior Lenders have entered into a Security Agreement with the Borrower and Collateral Agent identified below pursuant to which the Senior Lenders appointed the Collateral Agent to administer certain “ Collateral ” as defined below;

WHEREAS, the Junior Lender and the Senior Lenders desire to enter into this Agreement to provide for the relative priorities of their obligations.

NOW, THEREFORE, in consideration of the premises set forth herein and for other good and valuable consideration, the parties hereto agree as follows:

1.            Definitions

·             Collateral Agent ” shall mean Collateral Agents LLC or any successor serving as the Collateral Agent under the Security Agreement.

·               Collateral ” shall mean the Collateral as defined in Section 1 of the Senior Security Agreement.

·             “Junior Agreements” means the promissory notes and amendments thereto described on Schedule 1 hereto described in the definition of Junior Obligations.

·             Junior Obligations A ” shall mean the Convertible Promissory Note issued by the Borrower to Robert Noel Robinson (“ Junior Lender A ”) on or about December 31, 2012, in the principal amount of $600,000, and all other sums and obligations owed by Borrower to Junior Lender A pursuant to such Note, as amended, and any other agreement whether oral or written pursuant to which Borrower owes or may owe any amount contingent, liquidated, determined, quantifiable, or otherwise.

 
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·             Junior Obligations B ” shall mean all outstanding promissory notes issued by the Borrower to Dennis J. Carlo, Ph.D. (the “ Junior Lender B ”) evidencing loans made by Dr. Carlo to the Borrower in 2009, in the principal amount as of May 31, 2013 or $81,232, and all other sums and obligations owed by Borrower to Junior Lender B pursuant to such Note, as amended, and any other agreement whether oral or written pursuant to which Borrower owes or may owe any amount contingent, liquidated, determined, quantifiable, or otherwise.

·             Lenders ” shall mean collectively the Senior Lenders and the Junior Lenders A and Junior Lenders B.

·             Majority in Interest ” shall have the meaning set forth in the Senior Security Agreement as amended and shall not include the Junior Lenders.

·             Notes ” means the Notes as defined in the Subscription Agreement.

·             Payment in Full” or “Paid in Full ” shall mean the indefeasible payment in full in cash and/or equity of the Senior Obligations.
 
·             Proceeding ” shall mean any voluntary or involuntary insolvency, bankruptcy, receivership, custodianship, liquidation, dissolution, reorganization, assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or any other proceeding for the liquidation, dissolution or other winding up of the Borrower.

·             Senior Agreements ” means the Transaction Documents dated on or about the date of this Agreement among Borrower and Senior Lenders, pursuant to which the Borrower issued Notes to the Senior Lenders for an aggregate Principal Amount of up to $7,000,000 as further described on Schedule A-1 .

·             Senior Obligations ” shall mean the Notes issued to the Senior Lenders pursuant to the Senior Agreements in the Principal Amounts set forth on Schedule A-1 hereto and Obligations (as defined in the Security Agreement) owed by the Borrower to Senior Lenders pursuant to the Security Agreement dated June 26, 2013.

·             “Senior Security Agreement” shall mean the Security Agreement entered into at or about the date of this Agreement among the Borrower, Senior Lenders and Collateral Agent.

Upper case terms employed but not otherwise defined herein shall have the meanings attributed to them in the relevant Transaction Document as from the context employed would be reasonable.

2.            Subordination of Junior Obligations to the Senior Obligations .  Borrower hereby covenants and agrees, and the Junior Lenders likewise hereby covenant and agree, that the payment of any and all of the Junior Obligations shall be subordinate and subject in right of payment, to the extent and in the manner hereinafter set forth, to the prior Payment in Full of the Senior Obligations.  Each holder of the Senior Obligations shall be deemed to have acquired the Senior Obligations in reliance upon the provisions contained in this Agreement.

 
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3.            Distributions from Collateral Agent . Until the Payment in Full of the Senior Obligations, the Junior Lenders hereby instruct the Collateral Agent to deliver to the Senior Lenders all Collateral or proceeds thereof (net of any expenses which the Collateral Agent is entitled to retain from collections under the Security Agreement) obtained or received from the exercise of any remedies against, or otherwise in connection with, the Collateral.  Any payments made by the Collateral Agent to the Junior Lenders in violation of the preceding sentence shall be subject to the terms of Section 6 below.

4.            Restricted Actions .

(a)           Proceedings .  In the event of any Proceeding, the following shall apply:

(i)           all Senior Obligations shall be Paid in Full before any payment of or with respect to the Junior Obligations shall be made;

(ii)          any payment or distribution, whether in cash, property or securities, which but for the terms hereof would otherwise be payable or deliverable in respect of the Junior Obligations, shall be paid or delivered directly to the Collateral Agent until all Senior Obligations are Paid in Full, and the Junior Lenders irrevocably authorize, empower and direct all receivers, trustees, liquidators, custodians, conservators and others having authority in the premises to effect all such payments and distributions, and the Junior Lenders also irrevocably authorize, empower and direct the Senior Lenders to demand, sue for, collect and receive every such payment or distribution;

(iii)         the Junior Lenders agree to execute and deliver to the Collateral Agent all such further instruments confirming the authorization referred to in clause (ii) above; and

(iv)         the Junior Lenders agree not to initiate or prosecute or encourage any other person to initiate any Proceeding or initial or prosecute any claim, action or other proceeding challenging the enforceability of the Senior Obligations or their rights under the Security Agreement and any documents executed in connection therewith.

(b)           Reinstatement of Senior Obligations .   The Senior Obligations shall continue to be treated as Senior Obligations and the provisions of this Agreement shall continue to govern the relative rights and priorities of Senior Lenders and the Junior Lenders even if all or part of the Senior Obligations or the Senior Lenders rights under the Security Agreement or any security interests or liens securing the Senior Obligations are subordinated, set aside, avoided or disallowed in connection with any such Proceeding and this Agreement shall be reinstated if at any time any payment of any of the Senior Obligations is rescinded or must otherwise be returned by any holder of the Senior Obligations or any representative of such holder.

(c)           Prohibited Actions .  Until Payment in Full of the Senior Obligations, Junior Lenders will not without the prior written consent of a Majority in Interest: (i) accelerate, give notice of default, demand payment, attempt to enforce or collect any Junior Obligation or any rights in respect of any Junior Obligation; or (ii) commence, or join with any other creditor in commencing, any bankruptcy, reorganization or insolvency proceedings with respect to the Borrower and/or any of its Subsidiaries.

(d)           Action by Majority In Interest .  The Senior Lenders may take any action under the Transaction Documents and Security Agreement which may be taken by them individually or as a Majority in Interest and exercise all rights available or granted to Senior Lenders under the Security Agreement and Transaction Documents.  The Senior Lenders hereby authorize the Collateral Agent to act on their behalf in connection with this Agreement in the same manner and on the same terms and conditions as apply to the Senior Security Agreement.  The Junior Lenders acknowledge such appointment.
 
 
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5 .             Permitted Payments on Junior Obligations .  Until the Payment in Full of the Senior Obligations, other than scheduled [interest] payments under the terms of the Junior Obligations, the Borrower shall not pay and, the Junior Lenders shall not receive or retain any amount paid on or in connection with the Junior Obligations excluding but not limited to principal, interest, and liquidated or other damages, except by delivery of Common Stock of the Borrower only on the precise terms and conditions set forth in Junior Obligations in effect as of immediately following the Closing under the Subscription Agreement.

6.            Turn Over Obligation .  Any payment or distribution on account of the Junior Obligations made in violation of the restrictions set forth in this Agreement that is received by the Junior Lenders before all Senior Obligations are Paid in Full shall: (i) not be commingled with any asset of the Junior Lenders, (ii) be held in trust by the Junior Lenders for the benefit of the Senior Lenders, and (iii) be promptly paid over to the Collateral Agent, for application to the payment of the Senior Obligations then remaining unpaid, until all of the Senior Obligations are Paid in Full.

7.            Modifications to Senior Obligations .  The Senior Lenders may at any time and from time to time without the consent of or notice to the Junior Lenders, without incurring liability to the Junior Lenders for and without impairing or releasing the obligations of the Junior Lenders under this Agreement, change the manner or place of payment or extend the time of payment of or renew or alter any of the terms of the Senior Obligations, or amend in any manner any agreement, note, guaranty or other instrument evidencing or securing or otherwise relating to the Senior Obligations.

8.            Restrictions on Junior Obligations and Junior Lenders .  The Junior Lenders may not without the consent of a Majority in Interest, change the manner or place of payment or extend the time of payment of or renew or alter any of the terms of the Junior Obligations  or amend in any manner any agreement, note, guaranty or other instrument evidencing or securing or otherwise relating to the Junior Obligations.

9.            Continued Effectiveness of this Agreement .  The terms of this Agreement, the subordination effected hereby, and the rights and the obligations of the Junior Lenders, Borrower and the Senior Lenders arising hereunder shall not be affected, modified or impaired in any manner or to any extent by: (a) any amendment or modification of or supplement to the loan documents evidencing the Junior Obligations or the Senior Obligations, the Senior Agreements, or the Junior Agreements, except as may be permitted pursuant to Section 7 hereof; (b) the validity or enforceability of any of such documents; or (c) any exercise or non-exercise of any right, power or remedy under or in respect of the Senior Obligations or the Junior Obligations or any of the instruments or documents referred to in clause (a) above.  The Junior Lenders hereby acknowledge that the provisions of this Agreement are intended to be enforceable at all times, whether before the commencement of, after the commencement of, in connection with or premised on the occurrence of a Proceeding.

10.          Termination .  This Agreement shall terminate upon the indefeasible Payment in Full of the Senior Obligations.

11.          Miscellaneous .

(a)           Rights and Remedies Not Waived .  No act, omission or delay by the Senior Lenders or Junior Lenders shall constitute a waiver of their rights and remedies hereunder or otherwise.  No single or partial waiver by the Senior Lenders or Junior Lenders of any default hereunder or right or remedy that it may have shall operate as a waiver of any other default, right or remedy or of the same default, right or remedy on a future occasion.
 
 
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(b)           Governing Law .  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to conflicts of laws that would result in the application of the substantive laws of another jurisdiction.

(c)           Waiver of Jury Trial and Setoff; Consent to Jurisdiction; Etc.

(i)           In any litigation in any court with respect to, in connection with, or arising out of this Agreement or any instrument or document delivered pursuant to this Agreement, or the validity, protection, interpretation, collection or enforcement hereof or thereof, or any other claim or dispute howsoever arising, among the Collateral Agent, Senior Lenders and Junior Lenders or any Lender, then each Senior Lender or Junior Lenders, to the fullest extent it may legally do so, (A) waives the right to interpose any setoff, recoupment, counterclaim or cross-claim in connection with any such litigation, irrespective of the nature of such setoff, recoupment, counterclaim or cross-claim, unless such setoff, recoupment, counterclaim or cross-claim could not, by reason of any applicable federal or state procedural laws, be interposed, pleaded or alleged in any other action; and (B) WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION AND ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.  EACH SENIOR LENDER AND JUNIOR LENDERS AGREE THAT THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGE THAT THE COLLATERAL AGENT WOULD NOT ENTER THIS AGREEMENT IF THIS SECTION WERE NOT PART OF THIS AGREEMENT.

(ii)          Each party hereto irrevocably consents to the exclusive jurisdiction of any State or Federal Court located within the County of New York, State of New York, in connection with any action or proceeding arising out of or relating to this Agreement or any document or instrument delivered pursuant to this Agreement or otherwise.  In any such litigation, each party hereto waives, to the fullest extent it may effectively do so, personal service of any summons, complaint or other process and agrees that the service thereof may be made by certified or registered mail directed to such Lender at its address for notice determined in accordance with Section 12(c)(ii) hereof.  Each party hereto hereby waives, to the fullest extent it may effectively do so, the defenses of forum non conveniens and improper venue.

(d)           Admissibility of this Agreement .  Each of the Senior Lenders and the Junior Lenders agree that any copy of this Agreement signed by it and transmitted by telecopier for delivery to the other parties shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence.

(e)           Notices .  Any notice or other communication under the provisions of this Agreement shall be given in the manner set forth in the Senior Security Agreement, except that any notice given or required to be given under this Agreement to the Senior Lenders shall also be given to Grushko & Mittman, P.C., 515 Rockaway Avenue, Valley Stream, New York 11581, fax: (212) 697-3575, and to the Collateral Agent, at 333 Seventh Avenue, 3 rd Floor, New York, New York 10001, fax: (212) (212) 245-9101.

(f)            Amendments and Modification .  No provision hereof shall be modified, altered, waived or limited except by written instrument expressly referring to this Agreement and to such provision, and executed by the parties hereto.
 
 
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(g)           Counterparts/Execution .  This Agreement may be executed in any number of counterparts and by the different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.  This Agreement may be executed by facsimile signature and delivered electronically.

(h)           Successors and Assigns .  Whenever in this Agreement reference is made to any party, such reference shall be deemed to include the successors, assigns, heirs and legal representatives of such party.  No party hereto may transfer any rights under this Agreement, unless the transferee agrees to be bound by, and comply with all of the terms and provisions of this Agreement, as if an original signatory hereto on the date hereof.

(i)            Legends .  Until the Senior Obligations are Paid in Full, Junior Lenders will immediately imprint a legend on the instruments evidencing the Junior Obligations that such instruments are subject to this Agreement.

(j)            Captions: Certain Definitions .  The captions of the various sections and paragraphs of this Agreement have been inserted only for the purposes of convenience; such captions are not a part of this Agreement and shall not be deemed in any manner to modify, explain, enlarge or restrict any of the provisions of this Agreement.  As used in this Agreement the term " person " shall mean and include an individual, a partnership, a joint venture, a corporation, a limited liability Borrower, a trust, an unincorporated organization and a government or any department or agency thereof.

(k)           Severability .  In the event that any term or provision of this Agreement shall be finally determined to be superseded, invalid, illegal or otherwise unenforceable pursuant to applicable law by an authority having jurisdiction and venue, that determination shall not impair or otherwise affect the validity, legality or enforceability (i) by or before that authority of the remaining terms and provisions of this Agreement, which shall be enforced as if the unenforceable term or provision were deleted, or (ii) by or before any other authority of any of the terms and provisions of this Agreement.

(l)            Entire Agreement .  This Agreement together with the Transaction Documents contains the entire agreement of the parties and supersedes all other agreements and understandings, oral or written, with respect to the matters contained herein.
 
[Sigantures on Next Page]
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Intercreditor Agreement to be signed, by their respective duly authorized officers or directly, as of the date first written above.

BORROWER”
 
  ADAMIS PHARMACEUTICALS CORPORATION
a Delaware  corporation
     
  By:  /s/ DENNIS CARLO       
    Name: Dennis Carlo
    Title: Chief Executive Officer 
 
ACKNOWLEDGED AND AGREED:

COLLATERAL AGENTS, LL C
“Collateral Agent”
 
By:       
  Print Name of Signator:     
 
 
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JUNIOR LENDER SIGNATURE PAGE TO
ADAMIS PHARMACEUTICALS CORPORATION
INTERCREDITOR AGREEMENT

The undersigned, in its capacity as a Junior Lender, hereby executes and delivers the Intercreditor Agreement to which this signature page is attached and agrees to be bound by the Intercreditor Agreement on the date set forth on the first page of the Intercreditor Agreement.  This counterpart signature page, together with all counterparts of the Intercreditor Agreement and signature pages of the other parties named therein, shall constitute one and the same instrument in accordance with the terms of the Intercreditor Agreement.
 
 
 
[Print Name of Junior Lender]
 
 
 
[Signature]
 
 
Name:
   
     
Title:
   
 
Address:   
 
 
 
Fax No.:
   
 
Email:
   
 
Taxpayer ID# (if applicable): 
   
 
 
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SENIOR LENDER SIGNATURE PAGE TO
ADAMIS PHARMACEUTICALS CORPORATION
INTERCREDITOR AGREEMENT

The undersigned, in its capacity as a Senior Lender, hereby executes and delivers the Intercreditor Agreement to which this signature page is attached and agrees to be bound by the Intercreditor Agreement on the date set forth on the first page of the Intercreditor Agreement.  This counterpart signature page, together with all counterparts of the Intercreditor Agreement and signature pages of the other parties named therein, shall constitute one and the same instrument in accordance with the terms of the Intercreditor Agreement.
 
 
 
[Print Name of  Senior Lender]
 
 
 
[Signature]
 
 
Name:
   
     
Title:
   
 
Address:   
 
 
 
Fax No.:
   
 
Email:
   
 
Taxpayer ID# (if applicable): 
   
 
 
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SCHEDULE A-1 TO INTERCREDITOR AGREEMENT

SENIOR LENDERS
 
PURCHASE
PRICE
   
NOTE PRINCIPAL
   
WARRANTS
 
                         
                         
                         
                         
                         
                         
                         
                         
 
 
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TOTALS
                       

*  Surrender of Note with Interest in lieu of cash
 
11



Adamis Pharmaceuticals Corporation 8-K
 
Exhibit 99.1
 

Adamis Pharmaceuticals Announces Private Placement

San Diego, California – July 1, 2013 Adamis Pharmaceuticals Corporation (OTCQB: ADMP) announced today that it has completed a private placement financing transaction pursuant to which it issued senior secured convertible promissory notes and warrants to purchase up to 13,004,316 shares of common stock, to a small number of institutional investors and received gross cash proceeds of $5,300,000.  The notes have an aggregate principal amount of $6,502,158, which includes $613,271 from the exchange of a previously outstanding convertible note.

Net proceeds from this financing will be used to help fund the continued operations of the company, advance some of the company’s product candidates, and enable any potential future acquisition of products, assets or technologies to bolster the company’s pipeline.

“We believe this offering will be beneficial to our shareholders as we strengthen our balance sheet and continue to move closer to achieving the goals described in my May 3, 2013 letter to shareholders,” said Dr. Dennis J. Carlo, CEO and President of Adamis.

Additional information about the transaction is contained in the company’s Form 8K filing with the Securities and Exchange Commission.

About Adamis Pharmaceuticals Corporation

Adamis Pharmaceuticals Corporation is a biopharmaceutical company engaged in the development and commercialization of specialty pharmaceutical and biotechnology products in the therapeutic areas of respiratory disease, allergy, oncology and immunology.  Adamis currently has three products in its specialty pharmaceutical product pipeline, including the Epinephrine Injection PFS syringe product for use in the emergency treatment of anaphylaxis, APC-1000 for the treatment of asthma and chronic obstructive pulmonary disease, and APC-3000, an HFA inhaled nasal steroid product for the treatment of allergic rhinitis.  The Company’s biotechnology efforts are focused on the development of therapeutic vaccine product candidates and cancer drugs for patients with unmet medical needs in the multi-billion dollar global cancer markets.  Its products under research and development include TeloB-VAX, a novel cell-based therapeutic cancer vaccine and three drugs: and APC-100, APC-200, and APC-300, for the treatment of prostate cancer.

Contact Adamis

David J. Marguglio
SVP – Corporate Development
(858) 412-7950
dmarguglio@adamispharma.com

Forward Looking Statements

This press release contains forward-looking statements.  These statements relate to future events or our future results of operations or future financial performance, including, but not limited to the following statements: the company’s beliefs concerning the ability of its product candidates to compete successfully in the market; the company’s beliefs concerning the safety and effectiveness of its product candidates; the results of any future clinical trials that the company may conduct relating to its product candidates; the ability to fund future product development; future revenues expected from any of its product candidates, assuming that they are developed and approved for marketing by the FDA and other regulatory authorities; and the intellectual property protection that may be afforded by any patents or patent applications relating to its products and product candidates.  Statements in this press release concerning future events depend on several factors beyond the company’s control, including receipt of adequate funding to support these activities, market conditions, and the regulatory approval process.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors, which may cause Adamis’ actual results to be materially different from these forward-looking statements.  Certain of these risks, uncertainties, and other factors are described in greater detail in Adamis’ filings from time to time with the SEC, which Adamis strongly urges you to read and consider, all of which are available free of charge on the SEC’s web site at http://www.sec.gov.  Except to the extent required by law, Adamis expressly disclaims any obligation to update any forward-looking statements.