Exhibit 10.1
 
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) THE
AVAILABILITY OF AN EXEMPTION FROM REGISTRATION THEREUNDER, CONFIRMED BY AN
OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE
PURCHASE AGREEMENT)), IN A GENERALLY ACCEPTABLE FORM. 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: $363,000.00
Issue Date: November 15, 2017
Actual Amount of Purchase Price: $330,000.00
 

SENIOR CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, CLS HOLDINGS USA, INC., a Nevada corporation (hereinafter
called the “Borrower” or the “Company”), hereby promises to pay to the order of
FIRSTFIRE GLOBAL OPPORTUNITIES FUND LLC, a Delaware limited liability company,
or registered assigns (the “Holder”), in the form of lawful money of the United
States of America, the principal sum of $363,000.00, which amount is the
$330,000.00 actual amount of the purchase price (the “Consideration”) hereof
plus an original issue discount in the amount of $33,000.00 (the “OID”) (subject
to adjustment herein) (the “Principal Amount”) and to pay interest on the unpaid
Principal Amount hereof at the rate of five percent (5%) (the “Interest Rate”)
per annum from the date hereof (the “Issue Date”) until the same becomes due and
payable, whether at maturity or upon acceleration or by prepayment or otherwise,
as further provided herein. The maturity date shall be seven (7) months from the
Issue Date (the “Maturity Date”), and is the date upon which the principal sum,
the OID, as well as any accrued and unpaid interest and other fees, shall be due
and payable.

It is further acknowledged and agreed that if the Holder incurs any expenses
relating to the conversion of this Note into shares of Common Stock, half of
such expenses shall be added to  the Principal Amount owed by Borrower under
this Note (not to exceed $1,000 per calendar month).

This Note may not be prepaid or repaid in whole or in part except as otherwise
explicitly set forth herein.

This Note shall be a senior obligation of the Company, with priority over all
future Indebtedness (as defined below) of the Company as provided for herein.

Interest shall commence accruing on the date that the Note is fully funded and
shall be computed on the basis of a 365-day year and the actual number of days
elapsed.  Any Principal Amount or interest on this Note which is not paid when
due shall bear interest at the rate of the lesser of (i) fifteen percent (15%)
per annum and (ii) the maximum amount permitted by law from the due date thereof
until the same is paid (“Default Interest”).

All payments due hereunder (to the extent not converted into shares of common
stock, $0.0001 par value per share, of the Borrower (the “Common Stock”) in
accordance with the terms hereof) shall be made in lawful money of the United
States of America. All payments shall be made at such address as the Holder
shall hereafter give to the Borrower by written notice made in accordance with
the provisions of this Note. Whenever any amount expressed to be due by the
terms of this Note is due on any day which is not a business day, the same shall
instead be due on the next succeeding day which is a business day and, in the
case of any interest payment date which is not the date on which this Note is
paid in full, the extension of the due date thereof shall not be taken into
account for purposes of determining the amount of interest due on such date.

Each capitalized term used herein, and not otherwise defined, shall have the
meaning ascribed thereto in that certain Securities Purchase Agreement, dated as
of the Issue Date, pursuant to which this Note was originally issued (the
“Purchase Agreement”).  As used in this Note, the term “business day” shall mean
any day other than a
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Saturday, Sunday or a day on which commercial banks in the city of New York, New
York are authorized or required by law or executive order to remain closed.  As
used herein, the term “Trading Day” means any day that shares of Common Stock
are trading or quoted on the OTCBB (as defined in the Purchase Agreement), any
tier of the NASDAQ Stock Market, the New York Stock Exchange or the NYSE MKT.
 
This Note is free from all taxes, liens, claims and encumbrances with respect to
the issue hereof and shall not be subject to preemptive rights or other similar
rights of shareholders of the Borrower and will not impose personal liability
upon the holder hereof.

The following terms shall apply to this Note:
 
ARTICLE I. CONVERSION RIGHTS
 
1.1  Conversion Right.  The Holder shall have the right, at any time on or after
the Issue Date, to convert all or any portion of the then outstanding and unpaid
Principal Amount and interest (including any Default Interest) into fully paid
and non-assessable shares of Common Stock, as such Common Stock exists on the
Issue Date, or any shares of capital stock or other securities of the Borrower
into which such Common Stock shall hereafter be changed or reclassified, at the
Conversion Price (as defined below) determined as provided herein (a
“Conversion”); provided, however, that in no event shall the Holder be entitled
to convert any portion of this Note in excess of that portion of this Note upon
conversion of which the sum of (1) the number of shares of Common Stock
beneficially owned by the Holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of this Note or the unexercised or unconverted portion of
any other security of the Borrower subject to a limitation on conversion or
exercise analogous to the limitations contained herein) and (2) the number of
Conversion Shares issuable upon the conversion of the portion of this Note with
respect to which the determination of this proviso is being made, would result
in beneficial ownership by the Holder and its affiliates of more than 4.99% of
the then outstanding shares of Common Stock. For purposes of the proviso set
forth in the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the “1934 Act”), and Regulations 13D-G thereunder, except as
otherwise provided in clause (1) of such proviso, provided, however, that the
limitations on conversion may be waived by the Holder upon, at the election of
the Holder, not less than 61 days’ prior notice to the Borrower, and the
provisions of the conversion limitation shall continue to apply until such 61st
day (or such later date, as determined by the Holder, as may be specified in
such notice of waiver).  The number of Conversion Shares to be issued upon each
conversion of this Note shall be determined by dividing the Conversion Amount
(as defined below) by the applicable Conversion Price then in effect on the date
specified in the notice of conversion, in the form attached hereto as Exhibit A
(the “Notice of Conversion”), delivered to the Borrower by the Holder in
accordance with Section 1.4 below; provided that the Notice of Conversion is
submitted by facsimile or e-mail (or by other means resulting in, or reasonably
expected to result in, notice) to the Borrower before 4:00 p.m., New York, New
York time on such conversion date (the “Conversion Date”). The term “Conversion
Amount” means, with respect to any conversion of this Note, the sum of (1) the
Principal Amount of this Note to be converted in such conversion plus (2) at the
Holder’s option, accrued and unpaid interest, if any, on such Principal Amount
at the Interest Rate to the Conversion Date, plus (3) at the Holder’s option,
Default Interest, if any, on the amounts referred to in the immediately
preceding clauses (1) and/or (2).
 
1.2 Conversion Price.

(a) Calculation of Conversion Price.  The per share conversion price into which
Principal Amount and interest (including any Default Interest) under this Note
shall be convertible into shares of Common Stock hereunder (the “Conversion
Price”) shall be equal to $0.40 (the “Fixed Conversion Price”), provided,
further, that at any time on or after the 180th calendar day after the Issue
Date, the Conversion Price shall equal the lower of (i) the Fixed Conversion
Price or (ii) 75% multiplied by the lowest traded price of the Common Stock
during the twenty (20) consecutive Trading Day period immediately preceding the
Trading Day that the Company receives a Notice of Conversion (the “Alternate
Conversion Price”).
 
1.3 Authorized and Reserved Shares. The Borrower covenants that at all times
until the Note is satisfied in full, the Borrower will reserve from its
authorized and unissued Common Stock a sufficient number of
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shares, free from preemptive rights, to provide for the issuance of a number of
Conversion Shares equal to the greater of: (a) 2,411,961 shares of Common Stock
or (b) the sum of (i) the number of Conversion Shares issuable upon the full
conversion of this Note (assuming no payment of Principal Amount or interest) as
of any issue date (taking into consideration any adjustments to the Conversion
Price pursuant to Section 2 hereof or otherwise) multiplied by (ii) one and a
half (1.5) (the “Reserved Amount”).  In the event that the Borrower shall be
unable to reserve the entirety of the Reserved Amount (the “Reserve Amount
Failure”), the Borrower shall promptly take all actions necessary to increase
its authorized share capital to accommodate the Reserved Amount (the “Authorized
Share Increase”), including without limitation, all board of directors actions
and approvals and promptly (but no less than 60 days following the calling and
holding a special meeting of its shareholders no more than 60 days following the
Reserve Amount Failure to seek approval of the Authorized Share Increase via the
solicitation of proxies.  Notwithstanding the foregoing, in no event shall the
Reserved Amount be lower than the initial Reserved Amount, regardless of any
prior conversions.  The Borrower represents that upon issuance, the Conversion
Shares will be duly and validly issued, fully paid and non-assessable. In
addition, if the Borrower shall issue any securities or make any change to its
capital structure which would change the number of Conversion Shares into which
this Note shall be convertible at the then current Conversion Price, the
Borrower shall at the same time make proper provision so that thereafter there
shall be a sufficient number of shares of Common Stock authorized and reserved,
free from preemptive rights, for conversion of this Note. The Borrower (i)
acknowledges that it has irrevocably instructed its transfer agent to issue
certificates for the Conversion Shares or instructions to have the Conversion
Shares issued as contemplated by Section 1.4(f) hereof, and (ii) agrees that its
issuance of this Note shall constitute full authority to its officers and agents
who are charged with the duty of executing stock certificates or causing the
Company’s transfer agent to electronically issue shares of Common Stock to
execute and issue the necessary certificates for the Conversion Shares or cause
the Conversion Shares to be issued as contemplated by Section 1.4(f) hereof in
accordance with the terms and conditions of this Note.
 
If, at any time the Borrower does not maintain the Reserved Amount it may be
considered an Event of Default under this Note.
 
1.4 Method of Conversion.
 
(a) Mechanics of Conversion.  This Note may be converted by the Holder in whole
or in part, on any Trading Day, at any time on or after the Issue Date, by
submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other
reasonable means of communication dispatched on the Conversion Date prior to
4:00 p.m., New York, New York time). Any Notice of Conversion submitted after
4:00 p.m., New York, New York time, shall be deemed to have been delivered and
received on the next Trading Day.
 
(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary
set forth herein, upon conversion of this Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender this Note to
the Borrower unless the entire unpaid Principal Amount is so converted. The
Holder and the Borrower shall maintain records showing the Principal Amount so
converted and the dates of such conversions or shall use such other method,
reasonably satisfactory to the Holder and the Borrower, so as not to require
physical surrender of this Note upon each such conversion. In the event of any
dispute or discrepancy, such records of the Borrower shall, prima facie, be
controlling and determinative in the absence of manifest error. Notwithstanding
the foregoing, if any portion of this Note is converted as aforesaid, the Holder
may not transfer this Note unless the Holder first physically surrenders this
Note to the Borrower, whereupon the Borrower will forthwith issue and deliver
upon the order of the Holder a new Note of like tenor, registered as the Holder
(upon payment by the Holder of any applicable transfer taxes) may request,
representing in the aggregate the remaining unpaid Principal Amount of this
Note. The Holder and any assignee, by acceptance of this Note, acknowledge and
agree that, by reason of the provisions of this paragraph, following conversion
of a portion of this Note, the unpaid and unconverted Principal Amount of this
Note represented by this Note may be less than the amount stated on the face
hereof.
 
(c) Payment of Taxes. The Borrower shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery of
shares of Common Stock or other securities or property on conversion of this
Note in a name other than that of the Holder (or in street name), and the
Borrower shall not be required to issue or deliver any such shares or other
securities or property unless and until the person or persons (other than the
Holder or the custodian in whose street name such shares are to be held for the
Holder’s
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account) requesting the issuance thereof shall have paid to the Borrower the
amount of any such tax or shall have established to the satisfaction of the
Borrower that such tax has been paid.

(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from
the Holder of a facsimile transmission or e-mail (or other reasonable means of
communication) of a Notice of Conversion meeting the requirements for conversion
as provided in this Section 1.4, the Borrower shall, within one Business Day
thereafter, either send an Optional Prepayment Notice (as hereafter defined) to
the Holder pursuant to the terms of this Note and the Irrevocable Transfer Agent
Instructions or cause its transfer agent to issue and deliver or cause to be
issued and delivered to or upon the order of the Holder certificates for the
Conversion Shares (or cause the electronic delivery of the Conversion Shares as
contemplated by Section 1.4(f) hereof), such delivery of Conversion Shares, if
applicable, to occur within three (3) Trading Days after such receipt (the
“Deadline”) (and, solely in the case of conversion of the entire unpaid
Principal Amount and interest (including any Default Interest) under this Note,
surrender of this Note).  If absent circumstances outside its control (such as
acts of God, cyberattacks, terrorist attacks or substantially similar events),
and unless the Company’s transfer agent has received an Optional Prepayment
Notice pursuant to the terms of this Note and the Irrevocable Transfer Agent
Instructions, the Company’s transfer agent shall fail for any reason or for no
reason to issue to the Holder on or prior to the Deadline a certificate for the
number of Conversion Shares or to which the Holder is entitled hereunder and
register such Conversion Shares on the Company’s share register or to credit the
Holder’s balance account with DTC (as defined below) for such number of
Conversion Shares to which the Holder is entitled upon the Holder’s conversion
of this Note (a “Conversion Failure”), then, in addition to all other remedies
available to the Holder, (i) the Company shall pay in cash to the Holder on each
day after the Deadline and during such Conversion Failure an amount equal to
2.0% of the product of (A) the sum of the number of Conversion Shares not issued
to the Holder on or prior to the Deadline and to which the Holder is entitled
and (B) the closing sale price of the Common Stock on the Trading Day
immediately preceding the last possible date which the Company could have issued
such Conversion Shares to the Holder without violating this Section 1.4(d); and
(ii) the Holder, upon written notice to the Company, may void its Notice of
Conversion with respect to, and retain or have returned, as the case may be, any
portion of this Note that has not been converted pursuant to such Notice of
Conversion; provided that the voiding of an Notice of Conversion shall not
affect the Company’s obligations to make any payments which have accrued prior
to the date of such notice. In addition to the foregoing, if on or prior to the
Deadline, absent delivery of an Optional Prepayment Notice pursuant to the terms
of this Note and the Irrevocable Transfer Agent Instructions, the Company shall
fail to issue and deliver a certificate to the Holder and register such
Conversion Shares on the Company’s share register or credit the Holder’s balance
account with DTC for the number of Conversion Shares to which the Holder is
entitled upon the Holder’s exercise hereunder or pursuant to the Company’s
obligation pursuant to clause (ii) below, and if on or after such Trading Day
the Holder purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of shares of
Common Stock issuable upon such exercise that the Holder anticipated receiving
from the Company, then the Company shall, within two (2) Trading Days after the
Holder’s request and in the Holder’s discretion, either (i) pay cash to the
Holder in an amount equal to the Holder’s total purchase price (including
brokerage commissions and other reasonable and customary out-of-pocket expenses,
if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at
which point the Company’s obligation to deliver such certificate (and to issue
such Conversion Shares) or credit such Holder’s balance account with DTC for
such Conversion Shares shall terminate, or (ii) promptly honor its obligation to
deliver to the Holder a certificate or certificates representing such Conversion
Shares or credit such Holder’s balance account with DTC and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock, times (B) the closing
sales price of the Common Stock on the date of exercise.  Nothing shall limit
the Holder’s right to pursue any other remedies available to it hereunder, at
law or in equity, including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s improper
failure to timely deliver certificates representing the Conversion Shares (or to
electronically deliver such Conversion Shares) upon the conversion of this Note
as required pursuant to the terms hereof.

(e) Obligation of Borrower to Deliver Common Stock. Three (3) Business Days
after receipt by the Borrower of a Notice of Conversion, absent Borrower’s
timely delivery of an Optional Prepayment Notice pursuant to the terms of this
Note and the Irrevocable Transfer Agent Instructions, the Holder shall be deemed
to be the holder of record of the Conversion Shares issuable upon such
conversion, the outstanding Principal Amount and the amount of accrued and
unpaid interest (including any Default Interest) under this Note shall be
reduced to reflect such conversion, and, unless the Borrower defaults on its
obligations under this Article I, all rights
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with respect to the portion of this Note being so converted shall forthwith
terminate except the right to receive the Common Stock or other securities, cash
or other assets, as herein provided, on such conversion. If the Holder shall
have given a Notice of Conversion as provided herein, and the Borrower shall not
have delivered an Optional Prepayment Notice pursuant to the terms of this Note
and the Irrevocable Transfer Agent Instructions, the Borrower’s obligation to
issue and deliver the certificates for the Conversion Shares (or cause the
electronic delivery of the Conversion Shares as contemplated by Section 1.4(f)
hereof) shall be absolute and unconditional, irrespective of the absence of any
action by the Holder to enforce the same, any waiver or consent with respect to
any provision thereof, the recovery of any judgment against any person or any
action to enforce the same, any failure or delay in the enforcement of any other
obligation of the Borrower to the holder of record, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder of any obligation to the Borrower, and irrespective of any other
circumstance which might otherwise limit such obligation of the Borrower to the
Holder in connection with such conversion. The Conversion Date specified in the
Notice of Conversion shall be the Conversion Date so long as the Notice of
Conversion is received by the Borrower before 6:00 p.m., New York, New York
time, on such date.
 
(f) Delivery of Conversion Shares by Electronic Transfer. In lieu of delivering
physical certificates representing the Conversion Shares issuable upon
conversion hereof, provided the Borrower is participating in the Depository
Trust Company (“DTC”) Fast Automated Securities Transfer or Deposit/Withdrawal
at Custodian programs and the sale of the Conversion Shares is registered under
the 1933 Act or the Conversion Shares are proposed to be sold pursuant to an
exemption from such registration requirements and the Company’s transfer agent
has received an opinion of counsel satisfactory to it confirming that the
requirements of such exemption have been met, upon request of the Holder and its
compliance with the provisions contained in Section 1.1 and in this Section 1.4,
the Borrower shall use its best efforts to cause its transfer agent to
electronically transmit the Conversion Shares issuable upon conversion hereof to
the Holder by crediting the account of Holder’s Prime Broker with DTC through
its Deposit Withdrawal Agent Commission system.
 
1.5 Concerning the Shares. The Conversion Shares issuable upon conversion of
this Note may not be sold or transferred unless (i) such shares are sold
pursuant to an effective registration statement under the 1933 Act or (ii) the
Borrower or its transfer agent shall have been furnished with an opinion of
counsel reasonably acceptable to the Borrower’s transfer agent (which opinion
may be issued by Company counsel or the Legal Counsel Opinion (as defined in the
Purchase Agreement)) to the effect that the shares to be sold or transferred may
be sold or transferred pursuant to an exemption from such registration,
including Rule 144 or (iii) such shares are transferred to an “affiliate” (as
defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer
the shares only in accordance with this Section 1.5 and who is an Accredited
Investor (as defined in the Purchase Agreement). Except as otherwise provided in
the Purchase Agreement (and subject to the removal provisions set forth below),
until such time as the Conversion Shares have been registered under the 1933 Act
or are proposed to be sold pursuant to an exemption from such registration
requirements and the Company’s transfer agent has received an opinion of counsel
satisfactory to it confirming that the requirements of such exemption have been
met, each certificate for the Conversion Shares that has not been so included in
an effective registration statement or that has not been sold pursuant to an
effective registration statementor or an exemption that permits the removal of
the legend (and the Company’s transfer agent has received an opinion of counsel
satisfactory to it confirming that the requirements of such exemption have been
met), shall bear a legend substantially in the following form, as appropriate:
 
“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE 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) THE
AVAILABILITY OF AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS, CONFIRMED BY
AN OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE
PURCHASE AGREEMENT)), IN A GENERALLY ACCEPTABLE FORM. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN
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CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.”
 
The legend set forth above shall be removed and the Company shall issue to the
Holder a certificate for the applicable Conversion Shares without such legend
upon which it is stamped or (as requested by the Holder) issue the applicable
Conversion Shares by electronic delivery by crediting the account of such
holder’s broker with DTC, if, unless otherwise required by applicable state
securities laws such Conversion Shares are registered for sale under an
effective registration statement filed under the 1933 Act or otherwise are
proposed to be sold pursuant to an exemption from such registration requirements
and the Company’s transfer agent has received an opinion of counsel satisfactory
to it confirming that the requirements of such exemption have been met.  The
Company shall be responsible for the fees of its transfer agent and all DTC fees
associated with any such issuance.  The Holder agrees to sell all Conversion
Shares, including those represented by a certificate(s) from which the legend
has been removed, in compliance with applicable prospectus delivery
requirements, if any.  In the event that the Company does not accept the opinion
of counsel provided by the Holder with respect to the transfer of Conversion
Shares pursuant to an exemption from registration, but the Company’s transfer
agent is willing to accept such opinion, at the Deadline, notwithstanding that
the conditions of Rule 144, Rule 144A or Regulation S, as applicable, have been
met, it may be considered an Event of Default under this Note.
 
1.6 Effect of Certain Events.
 
(a) Effect of Merger, Consolidation, Etc. As long as the Note remains
outstanding, at the option of the Holder, the sale, conveyance or disposition of
all or substantially all of the assets of the Borrower, or the consolidation,
merger or other business combination of the Borrower with or into any other
Person (as defined below) or Persons when the Borrower is not the survivor may
either: (i) be deemed to be an Event of Default pursuant to which the Borrower
shall be required to pay to the Holder upon the consummation of and as a
condition to such transaction an amount equal to the Default Amount (defined in
Section 3.21) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person”
shall mean any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.
 
(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note
is issued and outstanding and prior to conversion of all of this Note, there
shall be any merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which shares of Common
Stock of the Borrower shall be changed into the same or a different number of
shares of another class or classes of stock or securities of the Borrower or
another entity, or in case of any sale or conveyance of all or substantially all
of the assets of the Borrower other than in connection with a plan of complete
liquidation of the Borrower, then the Holder of this Note shall thereafter have
the right to receive upon conversion of this Note, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such stock, securities or
assets which the Holder would have been entitled to receive in such transaction
had this Note been converted in full immediately prior to such transaction
(without regard to any limitations on conversion set forth herein), and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the Holder of this Note to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares issuable upon conversion of the Note) shall
thereafter be applicable, as nearly as may be practicable in relation to any
securities or assets thereafter deliverable upon the conversion hereof. The
Borrower shall not effectuate any transaction described in this Section 1.6(b)
unless (a) it first gives, to the extent practicable, at least thirty (30) days
prior written notice (but in any event at least fifteen (15) days prior written
notice) of the record date of the special meeting of shareholders to approve, or
if there is no such record date, the consummation of, such merger,
consolidation, exchange of shares, recapitalization, reorganization or other
similar event or sale of assets (during which time the Holder shall be entitled
to convert this Note) and (b) the resulting successor or acquiring entity (if
not the Borrower) assumes by written instrument the obligations of this Section
1.6(b). The above provisions shall similarly apply to successive consolidations,
mergers, sales, transfers or share exchanges.
 
(c) Adjustment Due to Distribution. If the Borrower shall declare or make any
distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a dividend, stock repurchase, by way of return of capital or
otherwise (including any dividend or distribution to the Borrower’s shareholders
in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a “Distribution”), then
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the Holder of this Note shall be entitled, upon any conversion of this Note
after the date of record for determining shareholders entitled to such
Distribution, to receive the amount of such assets which would have been payable
to the Holder with respect to the shares of Common Stock issuable upon such
conversion had such Holder been the holder of such shares of Common Stock on the
record date for the determination of shareholders entitled to such Distribution.
 
(d) Purchase Rights. If, at any time when all or any portion of this Note is
issued and outstanding, the Borrower issues any convertible securities or rights
to purchase stock, warrants, securities or other property (the “Purchase
Rights”) pro rata to the record holders of any class of Common Stock, then the
Holder of this Note will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such Holder could have
acquired if such Holder had held the number of shares of Common Stock acquirable
upon complete conversion of this Note (without regard to any limitations on
conversion contained herein) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.
 
(e)  Dilutive Issuance.  If the Borrower, at any time while this Note or any
amounts due hereunder are outstanding, issues, sells or grants (or has issued,
sold or granted as of the Issue Date, as the case may be) any option to
purchase, or sells or grants any right to reprice, or otherwise disposes of, or
issues (or has sold or issued, as the case may be, or announces any sale, grant
or any option to purchase or other disposition), any Common Stock or other
securities convertible into, exercisable for, or otherwise entitle any person or
entity the right to acquire, shares of Common Stock (including, without
limitation, upon conversion of this Note, and any convertible notes or warrants
outstanding as of or following the Issue Date), in each or any case at an
effective price per share that is lower than the then Conversion Price (such
lower price, the “Base Conversion Price” and such issuances, collectively, a
“Dilutive Issuance”) (it being agreed that if the holder of the Common Stock or
other securities so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion, exercise or exchange
prices or otherwise, or due to warrants, options or rights per share which are
issued in connection with such issuance, be entitled to receive shares of Common
Stock at an effective price per share that is lower than the Conversion Price,
such issuance shall be deemed to have occurred for less than the Conversion
Price on such date of the Dilutive Issuance), then the Conversion Price shall be
reduced, at the option of the Holder, to a price equal the Base Conversion
Price.  If the Company enters into a Variable Rate Transaction, despite the
prohibition set forth in the Purchase Agreement, the Company shall be deemed to
have issued Common Stock or Common Stock Equivalents at the lowest possible
price per share at which such securities could be issued in connection with such
Variable Rate Transaction. Such adjustment shall be made whenever such Common
Stock or other securities are issued.  Notwithstanding the foregoing, no
adjustment will be made under this Section 1.6(e) in respect of an Exempt
Issuance.  In the event of an issuance of securities involving multiple tranches
or closings, any adjustment pursuant to this Section 1.6(e) shall be calculated
as if all such securities were issued at the initial closing.

An “Exempt Issuance” shall mean the issuance of (a) shares of Common Stock or
other securities to officers or directors of the Company pursuant to any stock
or option or similar equity incentive plan or pursuant to their employment
agreements, which is consistent with the Company’s prior business practices; (b)
shares of Common Stock upon conversion or exercise of securities outstanding on
the date hereof; (c) securities issued pursuant to a merger, consolidation,
acquisition or similar business combination, provided that any such issuance
shall only be to a Person (or to the equity holders of a Person) which is,
itself or through its subsidiaries, an operating company or an owner of an asset
in a business synergistic with the business of the Company and shall provide to
the Company additional benefits in addition to the investment of funds, but
shall not include a transaction in which the Company is issuing securities
primarily for the purpose of raising capital or to an entity whose primary
business is investing in securities; (d) securities issued pursuant to any
equipment loan or leasing arrangement, real property leasing arrangement or debt
financing from a bank or similar financial institution; or (d) securities issued
with respect to which the Holder waives its rights in writing under this Section
1.6(e).

(f)  Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price as a result of the events described in this
Section 1.6, the Borrower, at its expense, shall promptly compute such
adjustment or readjustment and prepare and furnish to the Holder a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is
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based. The Borrower shall, upon the written request at any time of the Holder,
furnish to such Holder a like certificate setting forth (i) such adjustment or
readjustment, (ii) the Conversion Price at the time in effect and (iii) the
number of shares of Common Stock and the amount, if any, of other securities or
property which at the time would be received upon conversion of the Note.
 
1.7 [Intentionally Omitted].
 
1.8 Status as Shareholder. Three (3) Business Days after submission of a Notice
of Conversion by a Holder (assuming the Borrower has not delivered an Optional
Prepayment Notice pursuant to the terms of this Note and the Irrevocable
Transfer Agent Instructions) (i) the Conversion Shares covered thereby (other
than the Conversion Shares, if any, which cannot be issued because their
issuance would exceed such Holder’s allocated portion of the Reserved Amount or
Maximum Share Amount) shall be deemed converted into shares of Common Stock and
(ii) the Holder’s rights as a Holder of such converted portion of this Note
shall cease and terminate, excepting only the right to receive certificates for
such shares of Common Stock and to any remedies provided herein or otherwise
available at law or in equity to such Holder because of a failure by the
Borrower to comply with the terms of this Note. Notwithstanding the foregoing,
if a Holder has not received certificates for all shares of Common Stock prior
to the tenth (10th) business day after the expiration of the Deadline with
respect to a conversion of any portion of this Note for any reason, then (unless
the Holder otherwise elects to retain its status as a holder of Common Stock by
so notifying the Borrower) the Holder shall regain the rights of a Holder of
this Note with respect to such unconverted portions of this Note and the
Borrower shall, as soon as practicable, return such unconverted Note to the
Holder or, if the Note has not been surrendered, adjust its records to reflect
that such portion of this Note has not been converted. In all cases, the Holder
shall retain all of its rights and remedies for the Borrower’s failure to
convert this Note.
 
1.9 Prepayment. Notwithstanding anything to the contrary contained in this Note,
at any time prior to the 180th day following the Issue Date, the Borrower shall
have the right, exercisable on two (2) Trading Days prior written notice to the
Holder of the Note, to prepay the outstanding Principal Amount and interest
(including any Default Interest) then due under this Note, in whole or in part,
in accordance with this Section 1.9.  Any notice of prepayment hereunder (an
“Optional Prepayment Notice”) shall be delivered to the Holder of the Note at
its registered addresses and shall state: (1) that the Borrower is exercising
its right to prepay the Note, and (2) the date of prepayment which shall be not
more than two (2) Trading Days from the date of the Optional Prepayment Notice.
If the Holder has delivered a pending Notice of Conversion, Borrower must
deliver its Optional Prepayment Notice, pursuant to the terms of this Note and
the Irrevocable Transfer Agent Instructions (including but not limited to the
limitation that this Note may only be prepaid within the 180 day period
following the Issue Date), within one (1) Business Day after receipt of the
Notice of Conversion to prevent conversion of the amount of the Note requested
by the Holder (provided, however, that if the Borrower fails to actually pay the
Holder on the Optional Prepayment Date pursuant to the terms of this Note and
the Optional Prepayment Notice, then the Borrower must honor the conversion of
the amount of the Note requested by the Holder).  On the date fixed for
prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of
the amounts designated below to or upon the order of the Holder as specified by
the Holder in writing to the Borrower. If the Borrower exercises its right to
prepay the Note at any time within the initial 90 days following the Issue Date,
the Borrower shall make payment to the Holder of an amount in cash equal to the
sum of: (w) 115% multiplied by the Principal Amount then outstanding plus (x)
accrued and unpaid interest on the Principal Amount to the Optional Prepayment
Date plus (y) Default Interest, if any, on the amounts referred to in clauses
(w) and (x).  If the Borrower exercises its right to prepay the Note at any time
from the 91st day through the 180th day following the Issue Date, the Borrower
shall make payment to the Holder of an amount in cash equal to the sum of: (w)
125% multiplied by the Principal Amount then outstanding plus (x) accrued and
unpaid interest on the Principal Amount to the Optional Prepayment Date plus (y)
Default Interest, if any, on the amounts referred to in clauses (w) and (x). 
If, on two separate occasions, the Borrower delivers an Optional Prepayment
Notice and fails to pay the applicable prepayment amount due to the Holder on
the Optional Prepayment Date, then the Borrower shall forever forfeit its right
to prepay the Note pursuant to this Section 1.9.

1.10 Repayment from Proceeds.  While any portion of the outstanding Principal
Amount and interest (including Default Interest) under this Note are due and
owing, if the Company consummates a financing in a net amount that exceeds
$3,000,000.00 from the issuance of equity or debt (the “Subsequent Financing”),
or receives net cash proceeds from the issuance of securities pursuant to its
outstanding equity line of credit (the “Equity Line Financing”), the Borrower
shall, within one (1) business day of Borrower’s receipt of such net
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proceeds, inform the Holder of such receipt, following which the Holder shall
have the right in its sole discretion to require the Borrower to immediately
apply all or any portion of the net proceeds from the Subsequent Financing that
exceeds $3,000,000 and/or 50% of the net proceeds from the Equity Line Financing
to repay all or any portion of the outstanding Principal Amount and interest
(including any Default Interest) then due under this Note.  Failure of the
Borrower to comply with this provision may constitute an Event of Default.  In
the event that Holder requires the Borrower to apply such proceeds during the
prepayment period set forth in Section 1.9, the payment of such proceeds shall
not be subject to the terms of Section 1.9 herein (with the understanding that
if the Holder does not require the Borrower to apply such proceeds, but the
Borrower applies such proceeds in its discretion, and the proceeds are applied
during the prepayment period set forth in Section 1.9, then the payment of such
proceeds shall be subject to the terms of Section 1.9 herein).
 
ARTICLE II. RANKING AND CERTAIN COVENANTS
2.1 Ranking.  The obligations of the Borrower under this Note shall rank senior
with respect to any and all Indebtedness incurred as of or following the Issue
Date.
2.2 Other Indebtedness.  So long as the Borrower shall have any obligation under
this Note, the Borrower shall not (directly or indirectly through any Subsidiary
or affiliate) incur or suffer to exist or guarantee any Indebtedness that is
senior to or pari passu with (in priority of payment and performance) the
Borrower’s obligations hereunder.  As used in this Section 2.2, the term
“Borrower” means the Borrower and any Subsidiary of the Borrower.  As used
herein, the term “Indebtedness” means (a) all indebtedness of the Borrower for
borrowed money or for the deferred purchase price of property or services,
including any type of letters of credit, but not including deferred purchase
price obligations in place as of the Issue Date and as disclosed in the SEC
Documents or obligations to trade creditors incurred in the ordinary course of
business, (b) all obligations of the Borrower evidenced by notes, bonds,
debentures or other similar instruments, (c) all guarantee obligations of the
Borrower in respect of obligations of the kind referred to in clauses (a)
through (b) above that the Borrower would not be permitted to incur or enter
into, and (d) all obligations of the kind referred to in clauses (a) through (c)
above that the Borrower is not permitted to incur or enter into that are secured
and/or unsecured by (or for which the holder of such obligation has an existing
right, contingent or otherwise, to be secured and/or unsecured by) any lien or
encumbrance on property (including accounts and contract rights) owned by the
Borrower, whether or not the Borrower has assumed or become liable for the
payment of such obligation.  Indebtedness shall exclude purchase money
indebtedness hereafter incurred by the Borrower to finance the purchase of fixed
or capital assets, including all capital lease obligations of the Borrower which
do not exceed the purchase price of the assets funded.
2.3 Distributions on Capital Stock. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not without the Holder’s written
consent (a) pay, declare or set apart for such payment, any dividend or other
distribution (whether in cash, property or other securities) on shares of
capital stock other than dividends on shares of Common Stock solely in the form
of additional shares of Common Stock or (b) directly or indirectly or through
any subsidiary make any other payment or distribution in respect of its capital
stock except for distributions pursuant to any shareholders’ rights plan.
 
2.4 Restriction on Stock Repurchases and Debt Repayments. So long as the
Borrower shall have any obligation under this Note, the Borrower shall not
without the Holder’s written consent redeem, repurchase or otherwise acquire
(whether for cash or in exchange for property or other securities or otherwise)
in any one transaction or series of related transactions any shares of capital
stock of the Borrower or any warrants, rights or options to purchase or acquire
any such shares, or repay any pari passu or subordinated Indebtedness of
Borrower.
 
2.5 Sale of Assets. So long as the Borrower shall have any obligation under this
Note, the Borrower shall not, without the Holder’s written consent, sell, lease
or otherwise dispose of any significant portion of its assets outside the
ordinary course of business. Any consent to the disposition of any assets may be
conditioned on a specified use of the proceeds of disposition.
 
2.6 Advances and Loans; Affiliate Transactions. So long as the Borrower shall
have any obligation under this Note, the Borrower shall not, without the
Holder’s written consent, lend money, give credit, make advances to or enter
into any transaction with any person, firm, joint venture or corporation,
including, without
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limitation, officers, directors, employees, subsidiaries and affiliates of the
Borrower, except loans, credits or advances (a) in existence or committed on the
Issue Date and which the Borrower has informed Holder in writing prior to the
Issue Date or which is disclosed in the SEC Documents, (b) transactions with
affiliates consistent with the Borrower’s past practices; (c) in regard to
transactions with unaffiliated third parties, made in the ordinary course of
business or (d) in regard to transactions with unaffiliated third parties, not
in excess of $50,000. So long as the Borrower shall have any obligation under
this Note, the Borrower shall not, without the Holder’s written consent, repay
any affiliate (as defined in Rule 144) of the Borrower in connection with any
indebtedness or accrued amounts owed to any such party.

2.7 Section 3(a)(9) or 3(a)(10) Transaction. So long as this Note is
outstanding, the Borrower shall not enter into any transaction or arrangement
structured in accordance with, based upon, or related or pursuant to, in whole
or in part, either Section 3(a)(9) of the Securities Act (a “3(a)(9)
Transaction”) or Section 3(a)(l0) of the Securities Act (a “3(a)(l0)
Transaction”). In the event that the Borrower does enter into, or makes any
issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(l0)
Transaction while this note is outstanding, a liquidated damages charge of 25%
of the outstanding principal balance of this Note, but not less than Twenty Five
Thousand Dollars ($25,000), will be assessed and will become immediately due and
payable to the Holder at its election in the form of a cash payment or added to
the balance of this Note (under Holder's and Borrower's expectation that this
amount will tack back to the Issue Date).

2.8 Preservation of Business and Existence, etc. So long as the Borrower shall
have any obligation under this Note, the Borrower shall not, without the
Holder’s written consent, change the nature of its proposed business or sell,
divest, or change the structure of any material assets other than in the
ordinary course of business or as disclosed in the SEC Documents. In addition,
so long as the Borrower shall have any obligation under this Note, the Borrower
shall maintain and preserve, and cause each of its Subsidiaries to maintain and
preserve, its existence, rights and privileges, and become or remain, and cause
each of its Subsidiaries (other than dormant Subsidiaries that have no or
minimum assets) to become or remain, duly qualified and in good standing in each
jurisdiction in which the character of the properties owned or leased by it or
in which the transaction of its business makes such qualification necessary.
Furthermore, so long as the Borrower shall have any obligation under this Note,
the Borrower shall not, without the Holder’s written consent, enter into
Variable Rate Transaction or investment.

2.9 Noncircumvention.  The Company hereby covenants and agrees that the Company
will not, by amendment of its Certificate or Articles of Incorporation or
Bylaws, or through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, dissolution, issue or sale of securities, or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Note, and will at all times in good faith carry out all
the provisions of this Note and take all action as may be required to protect
the rights of the Holder.
2.10 Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note.
ARTICLE III. EVENTS OF DEFAULT
 
It shall be considered an event of default if any of the following events listed
in this Article III (each, an “Event of Default”) shall occur, and be continuing
after Holder has given notice to Borrower thereof and Borrower has failed to
cure such event within five (5) Business Days thereafter (except with respect to
Section 3.2, in which case no cure period shall apply except as provided
specifically in Section 3.2:
 
3.1 Failure to Pay Principal or Interest. The Borrower fails to pay the
Principal Amount hereof or interest thereon when due on this Note, whether at
maturity, upon acceleration or otherwise, or fails to fully comply with Section
1.10 of this Note..
 
3.2 Conversion and the Shares. The Borrower (i) fails to issue Conversion Shares
to the Holder (or announces or threatens in writing that it will not honor its
obligation to do so) upon exercise by the Holder of the
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conversion rights of the Holder in accordance with the terms of this Note, (ii)
fails to transfer or cause its transfer agent to transfer (issue)
(electronically or in certificated form) any certificate for the Conversion
Shares issuable to the Holder upon conversion of or otherwise pursuant to this
Note as and when required by this Note, (iii) reserve the Reserved Amount at all
times, or (iv) the Borrower directs its transfer agent not to transfer or
delays, impairs, and/or hinders its transfer agent in transferring (or issuing)
(electronically or in certificated form) any certificate for the Conversion
Shares issuable to the Holder upon conversion of or otherwise pursuant to this
Note as and when required by this Note, or fails to remove (or directs its
transfer agent not to remove or impairs, delays, and/or hinders its transfer
agent from removing) any restrictive legend (or to withdraw any stop transfer
instructions in respect thereof) on any certificate for any Conversion Shares
issued to the Holder upon conversion of or otherwise pursuant to this Note as
and when required by this Note if the sale of the Conversion Shares are then
registered under the 1933 Act or are otherwise proposed to be sold pursuant to
an exemption from such registration requirements and the Company’s transfer
agent has received an opinion of counsel satisfactory to it confirming that the
requirements of such exemption have been met (or makes any written announcement,
statement or threat that it does not intend to honor the obligations described
in this paragraph) and, in all cases of (i) – (iv), any such failure shall
continue uncured (or any written announcement, statement or threat not to honor
its obligations shall not be rescinded in writing) for three (3) Trading Days
after the Holder shall have delivered a Notice of Conversion and assuming that
the Company has not delivered an Optional Prepayment Notice (pursuant to the
terms of this Note and the Irrevocable Transfer Agent Instructions (including
but not limited to the limitation that this Note may only be prepaid within the
180 day period following the Issue Date)). It is an obligation of the Borrower
to remain current in its obligations to its transfer agent. It shall be an Event
of Default of this Note, if a conversion of this Note is delayed, hindered or
frustrated due to a balance owed by the Borrower to its transfer agent. If at
the option of the Holder, the Holder advances any funds to the Borrower’s
transfer agent in order to process a conversion, such advanced funds shall be
paid by the Borrower to the Holder within forty eight (48) hours of a demand
from the Holder.  Notwithstanding the foregoing, it shall not be an Event of
Default if the failure hereunder is due to the transfer agent’s failure to issue
the Conversion Shares due to circumstances outside its control such as acts of
God, cyberattacks, terrorist attacks or substantially similar events.
 
3.3 Breach of Agreements and Covenants. The Borrower breaches any material
agreement, covenant or other material term or condition contained in the
Purchase Agreement, this Note, the Warrant described in the Purchase Agreement,
the Irrevocable Transfer Agent Instructions.
 
3.4 Breach of Representations and Warranties. Any representation or warranty of
the Borrower made in the Purchase Agreement, this Note, the Warrant described in
the Purchase Agreement, the Irrevocable Transfer Agent Instructions shall be
false or misleading in any material respect when made and the breach of which
has (or with the passage of time will have) a material adverse effect on the
rights of the Holder with respect to this Note or the Purchase Agreement.
 
3.5 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall
make an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business, or such a receiver or trustee shall otherwise be
appointed.
 
3.6 Judgments. Any money judgment, writ or similar process shall be entered or
filed against the Borrower or any subsidiary of the Borrower or any of its
property or other assets for more than $100,000, and shall remain unvacated,
unbonded or unstayed for a period of twenty (20) days unless otherwise consented
to by the Holder, which consent will not be unreasonably withheld.
 
3.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings, voluntary or involuntary, for relief under any
bankruptcy law or any law for the relief of debtors shall be instituted by or
against the Borrower or any material subsidiary of the Borrower.
 
3.8 Delisting of Common Stock. The Borrower shall fail to maintain the listing
of the Common Stock on at least one of the Over the Counter Bulletin Board, the
OTCQB Market, any level of the OTC Markets, or any level of the Nasdaq Stock
Market or the New York Stock Exchange (including the NYSE MKT).
 
3.9 Failure to Comply with the 1934 Act. At any time after the Issue Date, the
Borrower shall fail to comply with the periodic reporting requirements of the
1934 Act and/or the Borrower shall cease to be subject to
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the reporting requirements of the 1934 Act.  It shall not be an Event of Default
under this Section 3.9 if the Borrower shall file any Notification of Late
Filing on Form 12b-25 with the SEC.
 
3.10 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any
substantial portion of its business.
 
3.11 Cessation of Operations. Any cessation of operations by Borrower or
Borrower admits it is otherwise generally unable to pay its debts as such debts
become due, provided, however, that any disclosure of the Borrower’s ability to
continue as a “going concern” shall not be an admission that the Borrower cannot
pay its debts as they become due.
 
3.12 Maintenance of Assets. The failure by Borrower to maintain any material
intellectual property rights, personal, real property or other assets which are
necessary to conduct its business (whether now or in the future).
 
3.13 Financial Statement Restatement. The restatement of any financial
statements filed by the Borrower with the SEC for any date or period from two
years prior to the Issue Date of this Note and until this Note is no longer
outstanding, if the result of such restatement would, by comparison to the
unrestated financial statement, have constituted a material adverse effect on
the rights of the Holder with respect to this Note or the Purchase Agreement.
 
3.14 Reverse Splits. The Borrower effectuates a reverse split of its Common
Stock without twenty (20) days prior written notice to the Holder.
 
3.15 Replacement of Transfer Agent.  In the event that the Borrower proposes to
replace its transfer agent, the Borrower fails to provide, prior to the
effective date of such replacement, a fully executed Irrevocable Transfer Agent
Instructions in a form as initially delivered pursuant to the Purchase Agreement
(including but not limited to the provision to irrevocably reserve shares of
Common Stock in the Reserved Amount) signed by the successor transfer agent to
Borrower and the Borrower.

3.16 DTC “Chill”. The DTC places a “chill” (i.e. a restriction placed by DTC on
one or more of DTC’s services, such as limiting a DTC participant’s ability to
make a deposit or withdrawal of the security at DTC) on any of the Borrower’s
securities.

3.17 Illegality. Any court of competent jurisdiction issues an order declaring
this Note, the Purchase Agreement or any provision hereunder or thereunder to be
illegal.

3.18. DWAC Eligibility.  In addition to the Event of Default in Section 3.16,
the Common Stock is otherwise not eligible for trading through the DTC’s Fast
Automated Securities Transfer or Deposit/Withdrawal at Custodian programs.

3.19 Cross-Default.  The declaration of an event of default by any lender or
other extender of credit to the Company under any notes, loans, agreements or
other instruments of the Company evidencing any Indebtedness of the Company
(including those filed as exhibits to or described in the Company’s filings with
the SEC), after the passage of all applicable notice and cure or grace periods.

3.20 Variable Rate Transactions. The Borrower (i) issues shares of Common Stock
(or convertible securities or Purchase Rights) in connection with a Variable
Rate Transaction (entered into in the future), or (ii) adjusts downward the
“floor price” at which shares of Common Stock (or convertible securities or
Purchase Rights) may be issued in connection with a Variable Rate Transaction
(entered into in the future).

3.21 Rights and Remedies Upon an Event of Default.  Upon the occurrence and
during the continuation of any Event of Default specified in this Article III,
this Note shall become immediately due and payable and the Borrower shall pay to
the Holder, in full satisfaction of its obligations hereunder, an amount (the
“Default Amount”) equal to the Principal Amount then outstanding plus accrued
interest (including any Default Interest) through the date of full repayment
multiplied by 150%.  Holder may, in its sole discretion, determine to
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accept payment part in Common Stock and part in cash. For purposes of payments
in Common Stock, the conversion formula set forth in Section 1.2 shall apply. 
Upon an uncured Event of Default, all amounts payable hereunder shall
immediately become due and payable, all without demand, presentment or notice,
all of which hereby are expressly waived by the Borrower, together with all
costs, including, without limitation, legal fees and expenses, of collection,
and the Holder shall be entitled to exercise all other rights and remedies
available at law or in equity, including, without limitation, those set forth in
Section 3.22 below.

ARTICLE IV. MISCELLANEOUS
 
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the
Holder 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 privileges. All rights and remedies of the Holder existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
 
4.2 Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, e-mail 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 e-mail or facsimile, with accurate confirmation generated by the
transmitting facsimile machine or confirmation of receipt if transmitted by
e-mail, 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 Borrower, to:

CLS HOLDINGS USA, INC.
11767 South Dixie Highway, Suite 115
Miami, FL 33156
Attention: Jeffrey Binder
e-mail: jeff@clslabs.com

With a copy by e-mail only to (which copy shall not constitute notice):

BROAD AND CASSEL
1 North Clematis Street, Suite 500
West Palm Beach, Florida 33401
Attention:  Kathleen L. Deutsch, P.A.
e-mail: kdeutsch@broadandcassel.com
 
If to the Holder:
FIRSTFIRE GLOBAL OPPORTUNITIES FUND LLC
1040 First Avenue, Suite 190
New York, NY 10022
Attention: Eli Fireman
e-mail: eli@firstfirecapital.com
 
With a copy by e-mail only to (which copy shall not constitute notice):

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LEGAL & COMPLIANCE, LLC
330 Clematis Street, Suite 217
West Palm Beach, FL 33401
Attn: Chad Friend, Esq., LL.M.
e-mail: CFriend@LegalandCompliance.com
 
4.3 Amendments. This Note and any provision hereof may only be amended by an
instrument in writing signed by the Borrower and the Holder. 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.
 
4.4 Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to be the benefit of the Holder and its
successors and assigns. Each transferee of this Note must be an “Accredited
Investor” (as defined in the Purchase Agreement). Notwithstanding anything in
this Note to the contrary, this Note may be pledged as collateral by Holder in
connection with a bona fide margin account or other lending arrangement.
 
4.5 Cost of Collection. If default is made in the payment of this Note, the
Borrower shall pay the Holder hereof costs of collection, including reasonable
attorneys’ fees.
 
4.6 Governing Law; Venue; Attorney’s Fees. This Note shall be governed by
and construed in accordance with the laws of the State of Nevada without regard
to principles of conflicts of laws. Any action brought by either party against
the other concerning the transactions contemplated by this Note or any other
agreement, certificate, instrument or document contemplated hereby 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 Borrower hereby irrevocably waives 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 BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY
TRANSACTIONS CONTEMPLATED HEREBY.  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 Note or any other agreement, certificate,
instrument or document contemplated hereby or thereby 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
Note 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.  The
prevailing party in any action or dispute brought in connection with this the
Note or any other agreement, certificate, instrument or document contemplated
hereby or thereby shall be entitled to recover from the other party its
reasonable attorney’s fees and costs.
 
4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to
pay an amount in excess of the outstanding Principal Amount (or the portion
thereof required to be paid at that time) plus accrued and unpaid interest plus
Default Interest on such interest, the Borrower and the Holder agree that the
actual damages to the Holder from the receipt of cash payment on this Note may
be difficult to determine and the amount to be so paid by the Borrower
represents stipulated damages and not a penalty and is intended to compensate
the Holder in part for loss of the opportunity to convert this Note and to earn
a return from the sale of shares of Common Stock acquired upon conversion of
this Note at a price in excess of the price paid for such shares pursuant to
this Note. The Borrower and the Holder hereby agree that such amount of
stipulated damages is not plainly disproportionate to the possible loss to the
Holder from the receipt of a cash payment without the opportunity to convert
this Note into shares of Common Stock.
 
4.8 Purchase Agreement. The Company and the Holder shall be bound by the
applicable terms of the Purchase Agreement and the documents entered into in
connection herewith and therewith.
 
4.9 Notice of Corporate Events. Except as otherwise provided below, the Holder
of this Note shall have no rights as a Holder of Common Stock unless and only to
the extent that it converts this Note into Common Stock. The Borrower shall
provide the Holder with prior notification of any meeting of the Borrower’s
shareholders
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(and copies of proxy materials and other information sent to shareholders). In
the event of any taking by the Borrower of a record of its shareholders for the
purpose of determining shareholders who are entitled to receive payment of any
dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation, reclassification
or recapitalization) any share of any class or any other securities or property,
or to receive any other right, or for the purpose of determining shareholders
who are entitled to vote in connection with any Change in Control or any
proposed liquidation, dissolution or winding up of the Borrower, the Borrower
shall mail a notice to the Holder, at least twenty (20) days prior to the record
date specified therein (or twenty (20) days prior to the consummation of the
transaction or event, whichever is earlier), of the date on which any such
record is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
The Borrower shall make a public announcement of any event requiring
notification to the Holder hereunder substantially simultaneously with the
notification to the Holder in accordance with the terms of this Section 4.9.
 
4.10 Remedies. The Borrower acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder, by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the Borrower
acknowledges that the remedy at law for a breach of its obligations under this
Note will be inadequate and agrees, in the event of a breach or threatened
breach by the Borrower of the provisions of this Note, that the Holder shall be
entitled, in addition to all other available remedies at law or in equity, and
in addition to the penalties assessable herein, to an injunction or injunctions
restraining, preventing or curing any breach of this Note and to enforce
specifically the terms and provisions thereof, without the necessity of showing
economic loss and without any bond or other security being required.

4.11 Construction; Headings. This Note shall be deemed to be jointly drafted by
the Company and all the Holder and shall not be construed against any person as
the drafter hereof. The headings of this Note are for convenience of reference
and shall not form part of, or affect the interpretation of, this Note.

4.12 Usury.  To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will resist any
and all efforts to be compelled to take the benefit or advantage of, usury laws
wherever enacted, now or at any time hereafter in force, in connection with any
action or proceeding that may be brought by the Holder in order to enforce any
right or remedy under this Note.  Notwithstanding any provision to the contrary
contained in this Note, it is expressly agreed and provided that the total
liability of the Company under this Note for payments which under the applicable
law are in the nature of interest shall not exceed the maximum lawful rate
authorized under applicable law (the “Maximum Rate”), and, without limiting the
foregoing, in no event shall any rate of interest or default interest, or both
of them, when aggregated with any other sums which under the applicable law in
the nature of interest that the Company may be obligated to pay under this Note
exceed such Maximum Rate.  It is agreed that if the maximum contract rate of
interest allowed by applicable law and applicable to this Note is increased or
decreased by statute or any official governmental action subsequent to the Issue
Date, the new maximum contract rate of interest allowed by law will be the
Maximum Rate applicable to this Note from the effective date thereof forward,
unless such application is precluded by applicable law.  If under any
circumstances whatsoever, interest in excess of the Maximum Rate is paid by the
Company to the Holder with respect to indebtedness evidenced by this the Note,
such excess shall be applied by the Holder to the unpaid principal balance of
any such indebtedness or be refunded to the Company, the manner of handling such
excess to be at the Holder’s election.

4.13 Severability.  In the event that any provision of this Note is invalid or
unenforceable under any applicable statute or rule of law (including any
judicial ruling), 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 this Note.

4.14  Terms of Future Financings.  So long as this Note is outstanding, upon any
issuance by the Borrower or any of its subsidiaries of any security with any
term more favorable to the holder of such security or with a term in favor of
the holder of such security that was not similarly provided to the Holder in
this Note, the Warrant and Commitment Shares, taken as a whole, then (i) the
Borrower shall notify the Holder of such additional or more favorable term
within one (1) business day of the issuance of the respective security, and (ii)
such term, at
15

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Holder’s option, shall become a part of the transaction documents with the
Holder (regardless of whether the Borrower complied with the notification
provision of this Section 4.14).  The types of terms contained in another
security that may be more favorable to the holder of such security include, but
are not limited to, terms addressing conversion discounts, prepayment rate,
conversion lookback periods, interest rates, exercise prices, and original issue
discounts.

[signature page follows]
 
 
 
 
 
 
 
 

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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by
its duly authorized officer on November 15, 2017.
 
CLS HOLDINGS USA, INC.

By:

/s/ Jeffrey Binder
 
 
Name: Jeffrey Binder
 
 
Title:   Chief Executive Officer
 

 
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EXHIBIT A -- NOTICE OF CONVERSION
 
The undersigned hereby elects to convert $______________ principal amount of the
Note (defined below) into that number of shares of Common Stock to be issued
pursuant to the conversion of the Note (“Common Stock”) as set forth below, of
CLS HOLDINGS USA, INC., a Nevada corporation (the “Borrower”), according to the
conditions of the Senior Convertible Promissory Note of the Borrower dated as of
November 15, 2017 (the “Note”), as of the date written below. No fee will be
charged to the Holder for any conversion, except for transfer taxes, if any.
 
Box Checked as to applicable instructions:
 
☐
 
The Borrower shall electronically transmit the Common Stock issuable pursuant to
this Notice of Conversion to the account of the undersigned or its nominee with
DTC through its Deposit Withdrawal Agent Commission system (“DWAC
Transfer”)(available only when the shares of Common Stock to be issued have been
registered under the 1933 Act or the shares are otherwise proposed to be sold
pursuant to an exemption from such registration requirements and the Company’s
transfer agent has received an opinion of counsel satisfactory to it confirming
that the requirements of such exemption have been met).
 
 
 
 
 
Name of DTC Prime Broker:
 
 
Account Number:

 
☐
 
The undersigned hereby requests that the Borrower issue a certificate or
certificates for the number of shares of Common Stock set forth below (which
numbers are based on the Holder’s calculation attached hereto) in the name(s)
specified immediately below or, if additional space is necessary, on an
attachment hereto:
 
 
 
 
 
FIRSTFIRE GLOBAL OPPORTUNITIES FUND LLC
1040 First Avenue, Suite 190
New York, NY 10022
Attn: Eli Fireman
e-mail: eli@firstfirecapital.com
 

 

 
Date of Conversion:
 

   
Applicable Conversion Price:
 
$
     
Costs Incurred by the Undersigned to Convert the Note into Shares of Common
Stock:
 

$
   
Number of Shares of Common Stock to be Issued Pursuant to Conversion of the
Note:
         
Amount of Principal Balance Due remaining Under the Note after this conversion:
       

 

 
By:
         
Name:
         
Title:
         
Date: