Exhibit 10.2
 
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
 
Original Issue Date: November 27, 2019

Original Principal Amount: $833,333.33
Purchase Price: $750,000.00

 
FORM OF
 
8% SENIOR SECURED
 
CONVERTIBLE PROMISSORY NOTE
 
DUE NOVEMBER 26, 2020
 
THIS 8% SENIOR SECURED CONVERTIBLE PROMISSORY NOTE is one of a series of duly
authorized and validly issued 8% Senior Secured Convertible Promissory Notes of
EXACTUS, INC., a Nevada corporation (the “Company”), having its principal place
of business at 80 NE 4th Avenue, Suite 28, Delray Beach, Florida 33483,
designated as its 8% Senior Secured Convertible Promissory Note due November 26,
2020 (this “Note”, and collectively with the other Notes of such series, the
“Notes”).
 
This Note is being issued at a ten percent (10%) original issue discount.
 
FOR VALUE RECEIVED, the Company promises to pay to 3i, LP, a Delaware limited
partnership, or its registered assigns (each, a “Holder”), or shall have paid
pursuant to the terms hereunder, the principal sum of Eight Hundred Three
Hundred Thirty Three Thousand Three Hundred Thirty Three Dollars and Thirty
Three Cents ($833,333.33) on November 26, 2020 or such earlier date as this Note
is required or permitted to be repaid and/or redeemed as provided hereunder, and
to pay interest to the Holder on the aggregate unconverted and outstanding
principal amount of this Note in accordance with the provisions hereof. This
Note is subject to the following additional provisions:
 
Section 1. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Note (a) capitalized terms not otherwise defined
herein shall have the meanings set forth in the Purchase Agreement (as defined
below), and (b) the following terms shall have the following meanings:
 
“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act.
 
“Alternate Consideration” shall have the meaning set forth in Section 5(d).
 
“Amortization Conversion Rate” means 80% of the lowest VWAP during the ten (10)
consecutive Trading Days ending on the Trading Day that is immediately prior to
the applicable Amortization Redemption Payment Date, provided; however, that in
the event that a Holder elects to defer an Amortization Payment as provided for
in Section 2(d), the Amortization Conversion Rate to be calculated as of the
delivery of the Deferral Notice.
 
“Amortization Redemption” shall have the meaning set forth in Section 2(d).
 
 
 
-1-

 
 
 
“Amortization Redemption Payment Amount” means the product of: (a) (i) 110%, and
(b) the sum of (i) one-ninth (1/9th) of the Original Principal Amount of this
Note, (ii) 100% of all accrued and unpaid interest on the principal amount of
this Note that is subject to such Amortization Redemption, (iii) 100% of the
Make-Whole Amount payable in respect of the principal amount of this Note that
is subject to such Amortization Redemption (as applicable), and (iv) all
liquidated damages, costs of collection and other amounts payable in respect of
this Note as of the applicable Amortization Redemption Payment Date for such
Amortization Redemption.
 
“Amortization Redemption Payment Date” shall have the meaning set forth in
Section 2(d).
 
“Bankruptcy Event” means any of the following events: (a) the Company or any
Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation
S-X for purposes of this definition) thereof commences a case or other
proceeding under any bankruptcy, reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction relating to the Company or any Significant Subsidiary
thereof, (b) there is commenced against the Company or any Significant
Subsidiary thereof any such case or proceeding that is not dismissed within
sixty (60) days after commencement, (c) the Company or any Significant
Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief
or other order approving any such case or proceeding is entered, (d) the Company
or any Significant Subsidiary thereof suffers any appointment of any custodian
or the like for it or any substantial part of its property that is not
discharged or stayed within sixty (60) calendar days after such appointment, (e)
the Company or any Significant Subsidiary thereof makes a general assignment for
the benefit of creditors, (f) the Company or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts or (g) the Company or any Significant
Subsidiary thereof, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing in writing or
takes any corporate action for the purpose of effecting any of the foregoing.
 
“Base Conversion Price” shall have the meaning set forth in Section 5(f).
 
“Beneficial Ownership Limitation” shall have the meaning set forth in Section
4(d).
 
“Buy-In” shall have the meaning set forth in Section 4(c)(v).
 
“Change of Control” means any Fundamental Transaction other than (i) any merger
of the Company or any of its, direct or indirect, wholly-owned Subsidiaries with
or into any of the foregoing Persons, (ii) any reorganization, recapitalization
or reclassification of the shares of Common Stock in which holders of the
Company’s voting power immediately prior to such reorganization,
recapitalization or reclassification continue after such reorganization,
recapitalization or reclassification to hold publicly traded securities and,
directly or indirectly, are, in all material respects, the holders of at least
50.1% of the voting power of the surviving entity (or entities with the
authority or voting power to elect the members of the board of directors (or
their equivalent if other than a corporation) of such entity or entities) after
such reorganization, recapitalization or reclassification, or (iii) pursuant to
a migratory merger effected solely for the purpose of changing the jurisdiction
of incorporation of the Company or any of its Subsidiaries.
 
 “Closing Bid Price” and “Closing Sale Price” means, for any security as of any
date, the last closing bid price and last closing trade price, respectively, for
such security on the then principal Trading Market, as reported by Bloomberg,
or, if the then principal Trading Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price
(as the case may be) then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg,
or, if the then principal Trading Market is not the principal securities
exchange or trading market for such security, the last closing bid price or last
trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the “pink
sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price (as the case may be) of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved in good faith by an
independent, regionally recognized accounting mutually agreeable to the Company
and the Holder. All such determinations shall be appropriately adjusted for any
stock splits, stock dividends, stock combinations, recapitalizations or other
similar transactions during such period.
 
 
 
-2-

 

“Common Stock” means the common stock of the Company, par value $0.0001 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed.
 
“Common Stock Equivalents” means any securities of the Company or any Subsidiary
which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, right, option,
warrant, unit, 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.
 
“Conversion” means any conversion of any Conversion Amount under this Note into
shares of Common Stock pursuant to Section 4 herein.
 
“Conversion Amount” means, with respect to a Conversion pursuant to Section 4
herein, the sum of: (a) the principal amount of this Note to be converted in
such Conversion, (b) 100% of the accrued and unpaid interest on the principal
amount of this Note to be converted in such Conversion, (c) 100% of the
Make-Whole Amount payable in respect of the principal amount of this Note to be
converted in such Conversion (as applicable), and (d) all liquidated damages,
costs of collection and other amounts payable in respect of this Note as of the
applicable Conversion Date for such Conversion.
 
“Conversion Date” shall have the meaning set forth in Section 4(a).
 
 “Conversion Rate” means, as applicable, the Amortization Conversion Rate, the
Fixed Conversion Price, the Base Conversion Price and the EOD Conversion Rate.
 
“Conversion Schedule” means the Conversion Schedule in the form of Schedule 1
attached hereto.
 
“Conversion Shares” means, collectively, the shares of Common Stock issuable
upon Conversion of this Note pursuant to Section 4 hereof in accordance with the
terms of this Note.
 
“Deferral Notice” shall have the meaning set forth in Section 2(d).
 
“Dilutive Issuance” shall have the meaning set forth in Section 5(e).
 
“Dilutive Issuance Notice” shall have the meaning set forth in Section 5(e).
 
 “Dollar”, “U.S. Dollar”, “United States Dollar”, “$”, “USD” and like
expressions means United States of America dollars.
 
“DTC” means the Depository Trust Company.
 
“DWAC Eligible” means that (a) the Common Stock is eligible at DTC for full
services pursuant to DTC’s Operational Arrangements, including without
limitation transfer through DTC’s DWAC system, (b) the Company has been approved
(without revocation) by the DTC’s underwriting department, (c) the Transfer
Agent is approved as an agent in the DTC/FAST Program, (d) the Conversion Shares
are otherwise eligible for delivery via DWAC, and (e) the Transfer Agent does
not have a policy prohibiting or limiting delivery of the Conversion Shares via
DWAC.
 
“EOD Conversion Rate” shall have the meaning set forth in Section 6(b).
 
“EOD Interest Rate” shall have the meaning set forth in Section 2(e).
 
“Event of Default” shall have the meaning set forth in Section 6(a).
 
“Event of Default Notice” shall have the meaning set forth in Section 6(b).
 
“Event of Default Notice Date” shall have the meaning set forth in Section 6(b).
 
“Event of Default Redemption” shall have the meaning set forth in Section 6(b).
 
 
 
-3-

 

“Event of Default Redemption Amount” means, with respect to an Event of Default
Redemption pursuant to Section 6(b) herein, the greater of (i) the product of
(a) 135%, multiplied by (b) the sum of (I) the principal amount of this Note
that is subject to such Event of Default Redemption, irrespective of when the
applicable Event of Default Redemption Date for such Event of Default occurs,
(II) 100% of the accrued and unpaid interest on the principal amount of this
Note that is subject to such Event of Default Redemption, (III) 100% of the
Make-Whole Amount payable in respect of the principal amount of this Note that
is subject to such Event of Default Redemption (as applicable), and (IV) all
liquidated damages, costs of collection and other amounts payable in respect of
this Note as of the applicable Event of Default Redemption Date for such Event
of Default (the sum of (I), (II), (III), and (IV) being “the Sum Amount”), and
(ii) (a) the outstanding principal amount of this Note and accrued and unpaid
interest hereon, in addition to the payment of all other amounts, costs,
expenses and liquidated damages due in respect of this Note, divided by the
lower of the (x) the Fixed Conversion Price and (y) the EOD Conversion Rate,
multiplied by (b) the highest closing price for the Common Stock on the Trading
Market (as defined in the Purchase Agreement) during the period beginning on the
date of first occurrence of the Event of Default and ending on the date the
Event of Default Redemption Amount is paid in full.
 
“Event of Default Redemption Date” shall have the meaning set forth in Section
6(b).
 
“Event of Default Redemption Notice” shall have the meaning set forth in Section
6(b).
 
“Event of Default Redemption Notice Date” shall have the meaning set forth in
Section 6(b).
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
 
“Exempt Issuance” means (i) the issuance of Common Stock by the Company pursuant
to the terms and conditions of the Purchase Agreement, (ii) the issuance of (a)
Conversion Shares upon conversion of this Note or any other Notes issued under
the Purchase Agreement in accordance with the terms of such Notes, which for the
avoidance of doubt, includes any adjustment to the conversion price prior to
conversion hereof or thereof, and (b) Warrant Shares upon exercise of the
Warrants in accordance with the terms of the Warrants, which for the avoidance
of doubt, includes any adjustment to the exercise price prior to exercise
thereof, (iii) the issue of shares of Common Stock or options to employees,
officers, directors, consultants, advisors or contractors of the Company
(pursuant to any stock or option plan duly adopted for any such purpose, by a
majority of the non-employee members of the Board of Directors or a majority of
the members of a committee of non-employee directors established for such
purpose, provided, in no event shall the aggregate amount of such issuances to
employees, officers, directors, consultants, advisors or contractors of the
Company during the period commencing on the Original Issuance Date and ending on
the date no Notes are outstanding exceed five (5%) percent of the number of
issued and outstanding shares of Common Stock (as adjusted for stock splits,
stock dividends, stock combinations, recapitalizations or other similar
transactions following the Closing Date), (iv) issuance of securities in
connection with strategic license agreements, mergers, acquisitions, purchases
or leases of assets and other partnering arrangements so long as such issuances
are not primarily for the purpose of raising capital  and (v) the issuance of
Common Stock upon the exercise or exchange of or conversion of any Common Stock
Equivalents issued and outstanding on the date of the Purchase Agreement
pursuant to terms and conditions applicable to such Common Stock Equivalents in
effect as of the date of the Purchase Agreement and disclosed in filings of the
Company with the Commission prior to the date of the Purchase Agreement,
provided that such Common Stock Equivalents have not been amended since the date
of the Purchase Agreement to increase the number of such Common Stock
Equivalents or shares of Common Stock issuable upon the exercise or exchange of
or conversion of such Common Stock Equivalents, or to decrease the exercise
price, exchange price or conversion price of such Common Stock Equivalents
(other than Common Stock Equivalents issued and outstanding on the date of the
Purchase Agreement, subject to exchange prices or conversion prices adjustable
pursuant to anti-dilution protection or in connection with stock splits or
combinations) or to extend the term of such Common Stock Equivalents.
 
“Fixed Conversion Price” shall have the meaning set forth in Section 4(b).
 
“Fundamental Transaction” shall have the meaning set forth in Section 5(d).
 
 
 
-4-

 

“Intellectual Property Security Agreement” means that certain Intellectual
Property Security Agreement, by the Company in favor of Holder, as secured
lender, dated November 27, 2019.
 
“Interest Payment Date” shall have the meaning set forth in Section 2(a).
 
“Make-Whole Amount” shall have the meaning set forth in Section 2(a).
 
“Mandatory Redemption” shall have the meaning set forth in Section 7(c).
 
“Mandatory Redemption Payment Amount and Order” means the amount and order that
the Mandatory Redemption Amount is used by the Company to redeem from the Holder
amounts due and/or outstanding under this Note in connection with each Mandatory
Redemption pursuant to Section 7(c) and Section 7(d) herein as follows: First,
110% of the then accrued and unpaid interest on the principal amount of this
Note, Second, 110% of any Make-Whole Amount payable on or prior to the Mandatory
Redemption Date in respect of the principal amount of this Note including with
respect to any principal amount of this Note being paid on the Mandatory
Redemption Date, Third, 110% of all liquidated damages, costs of collection and
other amounts payable in respect of this Note (other than principal) as of and
including the applicable Mandatory Redemption Date for such Mandatory
Redemption, and Fourth, any remaining portion of the Mandatory Redemptions
Amount as follows: (i) 110% of the then principal amount of this Note
outstanding.
 
“Mandatory Redemption Amount” means, with respect to any given Subsequent
Financing, thirty percent (30%) of the aggregate gross proceeds of such
Subsequent Financing (together with all prior Subsequent Financings) less than
or equal to $3,000,000 and sixty percent (60%) of the aggregate gross proceeds
of such Subsequent Financing (together with all prior Subsequent Financings) in
excess of $3,000,000.
 
“Mandatory Redemption Date” shall have the meaning set forth in Section 7(c).
 
“Mandatory Redemption Notice” shall have the meaning set forth in Section 7(c).
 
“Mandatory Redemption Notice Date” shall have the meaning set forth in Section
7(c).
 
“Maturity Date” shall mean November 26, 2020; provided, however, the Maturity
Date may be extended at the option of the Holder (i) in the event that, and for
so long as, an Event of Default shall have occurred and be continuing or any
event shall have occurred and be continuing that with the passage of time and
the failure to cure would result in an Event of Default, or (ii) through the
date that is twenty (20) Trading Days after the consummation of a Fundamental
Transaction in the event that a Fundamental Transaction is publicly announced or
a Fundamental Transaction Notice is delivered prior to the Maturity Date,
provided further that if a Holder elects to convert some or all of this Note
pursuant to Section 4 hereof, and the Conversion Amount would be limited
pursuant to Section 4(d) or Section 4(e) hereunder, the Maturity Date shall
automatically be extended until such time as such provision shall not limit the
conversion of this Note.
 
“New York Courts” shall have the meaning set forth in Section 9(d).
 
“Note Register” shall have the meaning set forth in Section 2(b).
 
“Notice of Conversion” shall have the meaning set forth in Section 4(a).
 
“Optional Redemption” shall have the meaning set forth in Section 7(a).
 
“Optional Redemption Amount” means, with respect to an Optional Redemption
pursuant to Section 7(a) and Section 7(b) herein, the product of: (a) (i) 110%,
and (b) the sum of (i) the principal amount of this Note that is subject to the
Optional Redemption and (ii) 100% of the accrued and unpaid interest on the
principal amount of this Note that is subject to such Optional Redemption, (iii)
100% of the Make-Whole Amount payable in respect of the principal amount of this
Note that is subject to such Optional Redemption (as applicable), and (iv) all
liquidated damages, costs of collection and other amounts payable in respect of
this Note as of the applicable Optional Redemption Date for such Optional
Redemption.
 
“Optional Redemption Date” shall have the meaning set forth in Section 7(a).
 
 
 
-5-

 

“Optional Redemption Notice” shall have the meaning set forth in Section 7(a).
 
“Optional Redemption Notice Date” shall have the meaning set forth in Section
7(a).
 
“Original Issue Date” means the date of the first issuance of this Note,
regardless of any transfers of any Note and regardless of the number of
instruments which may be issued to evidence such Note.
 
“Permitted Indebtedness” means indebtedness of the Company or any Subsidiary (i)
evidenced by this Note, (ii) outstanding on the date hereof and set forth on
Schedule 3.1(n) to the Purchase Agreement, provided no such indebtedness shall
constitute Permitted Indebtedness if such indebtedness has been incurred and
expensed and/or otherwise modified following the date of its original issuance
and not disclosed in Schedule 3.1, other than indebtedness evidenced by the
Notes, which in no event shall all or any portion thereof constitute Permitted
Indebtedness; and (iii) indebtedness disclosed in the Company’s consolidated
balance sheet at September 30, 2019.
 
“Permitted Lien” means the individual and collective reference to the following:
(a) Liens for taxes, assessments and other governmental charges or levies not
yet due or Liens for taxes, assessments and other governmental charges or levies
being contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of the Company) have been
established in accordance with GAAP, (b) Liens imposed by law which were
incurred in the ordinary course of the Company’s business, such as carriers’,
warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and
which (x) do not individually or in the aggregate materially detract from the
value of such property or assets or materially impair the use thereof in the
operation of the business of the Company and its consolidated Subsidiaries, or
(y) are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing for the foreseeable future the
forfeiture or sale of the property or asset subject to such Lien, or (z) that
are not overdue by more than thirty (30) days or are being contested in good
faith, (c) pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations, (d) 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, (e) liens for Indebtedness and other obligations of
the Company to the Holder including under this Note and the other Transaction
Documents (f) any other lien in favor of the Holders, and (g) Liens permitted as
set forth on Schedule 2 hereto.
 
“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
 
 “Purchase Agreement” means that certain Securities Purchase Agreement, by and
between the Company and the Holder, dated November 27, 2019.
 
“Registration Rights Agreement” means that certain Registration Rights
Agreement, by and between the Company and the Holder, dated November 27, 2019.
 
“Registration Statement” has the meaning set forth in the Registration Rights
Agreement.
 
“Required Minimum” means, (i) 300% of the maximum aggregate number of shares of
Common Stock (including all Conversion Shares), then issued or potentially
issuable in the future upon conversion in full of the Notes, and (ii) 100% of
the maximum aggregate number of shares of Common Stock (including all Warrant
Shares), then issued or potentially issuable upon exercise in full of the
Warrants or otherwise in any Transaction Document, ignoring any conversion or
exercise limits set forth in the Notes and the Warrants, and assuming (a) no
Conversions or redemptions of any principal amount of and/or any other payments
due under the Notes from the Original Issue Date through the Trading Day
immediately preceding the Maturity Date, (b) no exercise of the Warrants until
the Trading Day immediately preceding the Termination Date (as defined in the
Warrants), (c) on the Maturity Date and Termination Date, the Notes are fully
converted and the Warrants are fully exercised, respectively, and (d) (A) the
Notes convert into Common Stock at the Amortization Conversion Rate as of a
determination date, and (B) the Warrants exercise into Warrant Shares at the
Exercise Price (as defined in the Warrants) as of any determination date.
 
 
 
-6-

 

“SEC” or “Commission” means the United States Securities and Exchange
Commission.
 
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
 
“Security Agreement” means that certain Security Agreement, by and among the
Company, any Subsidiary of the Company now joined or joined in the future, and
the Holder, dated November 27, 2019.
 
“Share Delivery Date” shall have the meaning set forth in Section 4(c)(ii).
 
“Subsequent Financing” means any issuance by the Company or any of its
Subsidiaries for capital-raising purposes of (i) Common Stock or Common Stock
Equivalents for cash consideration, (ii) Indebtedness, and/or (iii) a
combination of units thereof.
 
“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a)
of the Purchase Agreement and shall also include any direct or indirect
subsidiary of the Company formed or acquired after the date hereof, to the
extent permitted under the Security Agreement.
 
“Subsidiary Guarantee” means the Subsidiary Guarantee by each Guarantor (as
defined in the Security Agreement) in favor of the Holders.
 
“Successor Entity” shall have the meaning set forth in Section 5(d).
 
“Trading Day” means a day on which the principal Trading Market is open for
trading.
 
“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
American; the Nasdaq Capital Market; the Nasdaq Global Market; the Nasdaq Global
Select Market; the New York Stock Exchange, the OTCQB or OTCQX.
 
“Transaction Documents” means the Notes (including this Note), the Warrants, the
Purchase Agreement, the Registration Rights Agreement, the Security Agreement,
the Subsidiary Guarantees, the Intellectual Property Security Agreement, the
Transfer Agent Instruction Letter, the Perfection Certificate and all other
security related instruments, agreements, documents and filings, and all
exhibits and schedules thereto and hereto and any other documents or agreements
and/or delivered in connection with the transactions contemplated hereunder.
 
“VWAP” means, 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 OTCQB or OTCQX is not a Trading Market, the volume weighted
average price of the Common Stock for such date (or the nearest preceding date)
on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or
quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then
reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported, or (d) 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 of a majority in
interest of the Securities (as defined in the Purchase Agreement) then
outstanding and reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.
 
“Warrants” means the Company’s Common Stock Purchase Warrants issued to the
Holders to purchase up to the aggregate 275,612 of shares of Common Stock (as
adjusted for stock splits, stock dividends, stock combinations,
recapitalizations or other similar transactions following the sale of the
Warrants).
 
 
 
-7-

 

 
Section 2. Interest; Mandatory Prepayment and Amortization.
 
a) Payment of Interest. The Company shall pay interest to the Holder on the
aggregate unconverted and then outstanding principal amount of this Note at the
rate of eight (8%) percent per annum, payable monthly on the first (1st) day of
each month, beginning on the first such date after the Original Issue Date (in
accordance with the Amortization Schedule attached as Annex B), on each
Conversion Date (as to that principal amount then being converted), on each
Optional Redemption Date (as to that principal amount then being redeemed), on
each Event of Default Redemption Date (as to that principal amount then being
redeemed), on each Amortization Redemption Payment Date (as to that principal
amount then being redeemed and in accordance with the Amortization Schedule
attached as Annex B), on each Mandatory Redemption Date (as to the principal
amount then being redeemed) and on the Maturity Date (each such date, an
“Interest Payment Date”) (if any Interest Payment Date is not a Business Day,
then the applicable payment shall be due on the next succeeding Business Day),
in whole or in part, in cash, or , in shares of Common Stock (provided they can
be issued without a restrictive legend) at the lesser of (i) the Fixed
Conversion Price, and (ii) the Amortization Conversion Rate. With respect to any
principal amount of this Note being converted or redeemed hereunder on any
Conversion Date, Optional Redemption Date, Event of Default Redemption Date,
Mandatory Redemption Date, or Amortization Redemption Payment Date (as
applicable) that occurs on or and prior to the Maturity Date, and in addition to
the amount of interest payable to the Holder in accordance with the immediately
preceding sentence of this Section 2(a) on such Conversion Date, Optional
Redemption Date, Event of Default Redemption Date, Mandatory Redemption Date, or
Amortization Redemption Payment Date (as applicable), the amount of interest
that would have accrued with respect to such principal amount of this Note being
converted or redeemed hereunder at the applicable interest rate hereunder for
the period from such applicable Conversion Date, Optional Redemption Date, Event
of Default Redemption Date, Mandatory Redemption Date, or Amortization
Redemption Payment Date (as applicable) through and including the Maturity Date
(such additional interest amount, the “Make-Whole Amount”), shall be guaranteed
and shall be accelerated and payable to the Holder in connection with the
conversion or redemption of this Note on any such applicable Conversion Date,
Optional Redemption Date, Event of Default Redemption Date, Mandatory Redemption
Date, or Amortization Redemption Payment Date (as applicable).
 
b) Interest Calculations. Interest shall be calculated on the basis of a 360-day
year, consisting of twelve (12) thirty (30) calendar day periods, and shall
accrue daily commencing on the Original Issue Date until payment in full of the
outstanding principal, together with all accrued and unpaid interest, liquidated
damages and other amounts which may become due hereunder, has been made.
Interest hereunder will be paid to the Person in whose name this Note is
registered on the records of the Company regarding registration and transfers of
this Note (the “Note Register”).
 
c) Reserved
 
 
 
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d) Amortization Payments. Commencing on the date that is ninety (90) days after
the Original Issue Date, and continuing on the first (1st) Trading Day of each
of the following eight (8) successive months thereafter (each an “Amortization
Redemption Payment Date”), until no principal amount of this Note is
outstanding, the Company shall redeem (each, an “Amortization Redemption”),
one-ninth (1/9th) of the Original Principal Amount of this Note in accordance
with the Amortization Schedule attached as Annex B by paying to the Holder on
each Amortization Redemption Payment Date, the Amortization Redemption Payment
Amount in cash. Notwithstanding anything to the contrary contained in this
Section 2(d), the Holder, at its option, shall be entitled to accelerate up to
six (6) future Amortization Redemptions and demand such corresponding
Amortization Redemption Payment Amounts to be paid in Common Stock at the lesser
of (i) the Fixed Conversion Price, and (ii) Amortization Conversion Rate. In the
event that the Holder elects to accelerate an Amortization Redemption Payment,
such accelerated Amortization Redemption Payment shall be applied to, and in the
order of, the last scheduled Amortization Redemption Payment then due.
Furthermore, notwithstanding anything to the contrary contained in this Section
2(d), any Holder, at its option and without regard to the actions of any other
Holder, shall be entitled to defer by delivery of written notice (each such
notice, a “Deferral Notice”) each and any Amortization Payment in its sole
discretion and for as long as it wishes to defer such Amortization Payment and
receive such payments in Common Stock pursuant to the Amortization Conversion
Rate, to be calculated as of the delivery of the Deferral Notice. Such Deferral
Notice shall be effective upon delivery to the Company, and any Amortization
Payment shall be settled no later than two (2) Trading Days after delivery of
the Deferral Notice to the Company. In addition, in the event the Company shall
fail to make any monthly amortization payment as provided in this Section 2(d),
the Holder at any time shall be entitled to convert an amount, in whole or in
part, equal to the sum of (i) one-ninth (1/9th) of the Original Principal Amount
of this Note, (ii) 100% of all accrued and unpaid interest on the principal
amount of this Note that is subject to such Amortization Redemption, (iii) 100%
of the Make-Whole Amount payable in respect of the principal amount of this Note
that is subject to such Amortization Redemption (as applicable), and (iv) all
liquidated damages, costs of collection and other amounts payable in respect of
this Note as of the applicable Amortization Redemption Payment Date for such
Amortization Redemption, into shares of Common Stock at the lower of (i) the
Fixed Conversion Price and (ii) the Amortization Conversion Price.
 
e) Event of Default Interest Rate. If an Event of Default occurs, interest shall
accrue from the date of such Event of Default at the rate equal to the lesser of
(i) eighteen (18%) percent per annum, and (ii) the maximum amount permitted by
New York law (the lesser of (i) and (ii) being the “EOD Interest Rate”). In the
event that such Event of Default is subsequently cured, the adjustment to the
interest rate referred to in the preceding sentence shall cease to be effective
as of the calendar day immediately following the date of such cure of such Event
of Default.
 
Section 3. Registration of Transfers and Exchanges.
 
a) Different Denominations. This Note is exchangeable for an equal aggregate
principal amount of Note of different authorized denominations, as requested by
the Holder surrendering the same. No service charge will be payable for such
registration of transfer or exchange.
 
b) Investment Representations. This Note has been issued subject to certain
investment representations of the original Holder and may be transferred or
exchanged only in compliance with applicable federal and state securities laws
and regulations.
 
c) Reliance on Note Register. Prior to due presentment for transfer to the
Company of this Note, the Company and any agent of the Company may treat the
Person in whose name this Note is duly registered on the Note Register as the
owner hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Note is overdue, and neither the Company nor
any such agent shall be affected by notice to the contrary.
 
 
 
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Section 4. Conversion.
 
a) Voluntary Conversion. At any time after the Original Issue Date until this
Note is no longer outstanding, this Note shall be convertible, in whole or in
part, into shares of Common Stock at the option of the Holder, at any time and
from time to time (subject to the conversion limitations set forth in Section
4(d) and Section 4(e) hereof). The Holder shall effect Conversions by delivering
to the Company a Notice of Conversion, the form of which is attached hereto as
Annex A (each, a “Notice of Conversion”), specifying therein the Conversion
Amount to be converted and the date on which such Conversion shall be effected
(such date, the “Conversion Date”). If no Conversion Date is specified in a
Notice of Conversion, the Conversion Date shall be the date that such Notice of
Conversion is deemed delivered hereunder. Except as required by the Transfer
Agent, no ink-original Notice of Conversion shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of any Notice
of Conversion form be required. To effect Conversions hereunder, the Holder
shall not be required to physically surrender this Note to the Company unless
the entire principal amount of this Note, plus all accrued and unpaid interest
thereon, Make-Whole Amounts (as applicable) and other amounts payable in respect
of this Note, has been so converted. Conversions hereunder shall have the effect
of lowering the outstanding principal amount of this Note in an amount equal to
100% (irrespective of any higher percentage used in calculating the Conversion
Amount hereunder as set forth in the definition of “Conversion Amount”) of the
principal amount of this Note to be converted in such Conversion. The Holder and
the Company shall maintain a Conversion Schedule showing the principal amount(s)
converted and the date of such Conversion(s). The Company may deliver an
objection to any Notice of Conversion within one (1) Business Day of delivery of
such Notice of Conversion. In the event of any dispute or discrepancy, the
records of the Holder shall be controlling and determinative in the absence of
manifest error. 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 may be less than the amount stated on the face
hereof.
 
b) Conversion Price. The conversion price in effect on any Conversion Date shall
be equal to $0.50 per share of Common Stock, subject to adjustment as provided
elsewhere in this Note (the “Fixed Conversion Price”). Nothing herein shall
limit a Holder’s right to pursue actual damages or declare an Event of Default
pursuant to Section 6 hereof and the Holder shall have the right to pursue all
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief. The
exercise of any such rights shall not prohibit the Holder from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.
 
c) Mechanics of Conversion.
 
i. Conversion Shares Issuable Upon Conversion of Conversion Amount. The number
of Conversion Shares issuable upon a Conversion of any Conversion Amount
hereunder shall be determined by the quotient obtained by dividing (x) such
Conversion Amount by (y) the Fixed Conversion Price.
 
ii. Delivery of Certificate Upon Conversion. Not later than the earlier of (i)
two (2) Trading Days and (ii) the number of Trading Days comprising the Standard
Settlement Period (as defined below) after each Conversion Date (the “Share
Delivery Date”), the Company shall deliver, or cause to be delivered, to the
Holder (A) the Conversion Shares which, on or after the earlier of (i) the six
month anniversary of the Original Issue Date or (ii) the Effective Date (as
defined in the Registration Rights Agreement), shall be free of restrictive
legends and trading restrictions (other than those which may then be required by
the Purchase Agreement) representing the number of Conversion Shares being
acquired upon the conversion of this Note and (B) a bank check in the amount of
accrued and unpaid interest. On or after the earlier of (i) the six-month
anniversary of the Original Issue Date or (ii) the Effectiveness Date of the
Initial Registration Statement (as defined in the Registration Rights
Agreement), the Company shall deliver any Conversion Shares required to be
delivered by the Company under this Section 4(c) electronically through the DTC
or another established clearing corporation performing similar functions. As
used herein, “Standard Settlement Period” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s primary Trading Market
with respect to the Common Stock as in effect on the date of delivery of the
Notice of Conversion.
 
 
 
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Notwithstanding the foregoing, commencing on such date that the Conversion
Shares are eligible for resale under Rule 144 by the Holder subject to current
public information requirements and compliance with any other requirements of
Rule 144, the Company, upon request and at the Company’s sole cost and expense,
shall obtain a legal opinion that is acceptable to each of the Holder and the
Company and the Company’s Transfer Agent, to permit resale of Conversion Shares
received by Holder under Holder’s Conversion Notice, pursuant to Rule 144.
 
iii. Failure to Deliver Certificates. If, in the case of any Notice of
Conversion, such certificate or certificates are not delivered to or as directed
by the applicable Holder by the Share Delivery Date, the Holder shall be
entitled to elect by written notice to the Company at any time on or before its
receipt of such certificate or certificates, to rescind such Conversion, in
which event the Company shall promptly return to the Holder any original Note
delivered to the Company and the Holder shall promptly return to the Company the
Common Stock certificates issued to such Holder pursuant to the rescinded
Conversion Notice.
 
iv. Obligation Absolute; Partial Liquidated Damages. The Company’s obligations
to issue and deliver the Conversion Shares upon conversion of this Note in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of such Conversion Shares;
provided, however, that such delivery shall not operate as a waiver by the
Company of any such action the Company may have against the Holder. In the event
the Holder of this Note shall elect to convert any or all of the outstanding
Conversion Amount hereof, the Company may not refuse conversion based on any
claim that the Holder or anyone associated or affiliated with the Holder has
been engaged in any violation of law, agreement or for any other reason, unless
an injunction from a court, on notice to Holder, restraining and or enjoining
conversion of all or part of this Note shall have been sought. If the injunction
is not granted, the Company shall promptly comply with all conversion
obligations herein. If the injunction is obtained, the Company must post a
surety bond for the benefit of the Holder in the amount of one hundred fifty
percent (150%) of the outstanding Conversion Amount of this Note, which is
subject to the injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the underlying dispute and the proceeds
of which shall be payable to the Holder to the extent it obtains judgment. In
the absence of seeking such injunction, the Company shall issue Conversion
Shares or, if applicable, cash, upon a properly noticed Conversion. If the
Company fails for any reason to deliver to the Holder such certificate or
certificates pursuant to Section 4(c)(ii) by the Share Delivery Date, the
Company shall pay to the Holder, in cash, as liquidated damages and not as a
penalty, $1,000 per Trading Day for each Trading Day after such Share Delivery
Date until such certificates are delivered or Holder rescinds such Conversion.
Nothing herein shall limit a Holder’s right to pursue actual damages or declare
an Event of Default pursuant to Section 6 hereof for the Company’s failure to
deliver Conversion Shares within the period specified herein and the Holder
shall have the right to pursue all remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit the Holder
from seeking to enforce damages pursuant to any other Section hereof or under
applicable law.
 
 
 
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v. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to the Holder such certificate or
certificates by the Share Delivery Date pursuant to Section 4(c)(ii), and if
after such Share Delivery Date the Holder is required by its brokerage firm to
purchase (in an open market transaction or otherwise), or the Holder’s brokerage
firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Conversion Shares which the Holder was entitled to
receive upon the conversion relating to such Share Delivery Date (a “Buy-In”),
then the Company shall (A) pay in cash to the Holder (in addition to any other
remedies available to or elected by the Holder) the amount, if any, by which (x)
the Holder’s total purchase price (including any brokerage commissions) for the
Common Stock so purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that the Holder was entitled to receive from the
conversion at issue multiplied by (2) the actual sale price at which the sell
order giving rise to such purchase obligation was executed (including any
brokerage commissions) and (B) at the option of the Holder, either reissue (if
surrendered) this Note in a principal amount equal to the principal amount of
the attempted conversion (in which case such conversion shall be deemed
rescinded) or deliver to the Holder the number of shares of Common Stock that
would have been issued if the Company had timely complied with its delivery
requirements under Section 4(c)(ii). For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of this Note with respect to which the actual sale price
of the Conversion Shares (including any brokerage commissions) giving rise to
such purchase obligation was a total of $10,000 under clause (A) of the
immediately preceding sentence, the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In and, upon request of the
Company, evidence of the amount of such loss. Nothing herein shall limit a
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 failure to timely deliver
certificates representing shares of Common Stock upon conversion of this Note as
required pursuant to the terms hereof.
 
vi. Reservation of Shares Issuable Upon Conversion. The Company covenants that
it will at all times reserve and keep available out of its authorized and
unissued shares of Common Stock a number of shares of Common Stock at least
equal to the Required Minimum (the “Reserve Amount”) for the sole purpose of
issuance upon conversion of this Note as herein provided, free from preemptive
rights or any other actual contingent purchase rights of Persons other than the
Holder (and the other Holders of the Notes). The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly
authorized, validly issued, fully paid and nonassessable.
 
vii. Fractional Shares. No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of this Note. As to any fraction of a
share which the Company shall round up to the next whole share.
 
viii. Transfer Taxes and Expenses. The issuance of certificates for shares of
the Common Stock on conversion of this Note shall be made without charge to the
Holder hereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificates, provided that, the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of this Note so converted and
the Company shall not be required to issue or deliver such certificates unless
or until the Person or Persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The Company shall pay
all Transfer Agent fees required for same-day processing of any Notice of
Conversion.
 
 
 
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d) Holder’s Conversion Limitations. The Company shall not effect any conversion
of this Note, and a Holder shall not have the right to convert any portion of
this Note, to the extent that after giving effect to the conversion set forth on
the applicable Notice of Conversion, the Holder (together with the Holder’s
Affiliates, and any other Persons acting as a group together with the Holder or
any of the Holder’s Affiliates (such Persons, “Attribution Parties”)) would
beneficially own in excess of the Beneficial Ownership Limitation (as defined
below). For purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its Affiliates and Attribution
Parties shall include the number of shares of Common Stock issuable upon
conversion of this Note with respect to which such determination is being made,
but shall exclude the number of shares of Common Stock which are issuable upon
(i) conversion of the remaining, unconverted principal amount of this Note
beneficially owned by the Holder or any of its Affiliates or Attribution
Parties, and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company subject to a limitation on
conversion or exercise analogous to the limitation contained herein (including,
without limitation, any other Notes) beneficially owned by the Holder or any of
its Affiliates or Attribution Parties. Except as set forth in the preceding
sentence, for purposes of this Section 4(d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. To the extent that the limitation
contained in this Section 4(d) applies, the determination of whether this Note
is convertible (in relation to other securities owned by the Holder together
with any Affiliates and Attribution Parties) and of which principal amount of
this Note is convertible shall be in the sole discretion of the Holder, and the
submission of a Notice of Conversion shall be deemed to be the Holder’s
determination of whether this Note may be converted (in relation to other
securities owned by the Holder together with any Affiliates or Attribution
Parties) and which principal amount of this Note is convertible, in each case
subject to the Beneficial Ownership Limitation. To ensure compliance with this
restriction, the Holder will be deemed to represent to the Company each time it
delivers a Notice of Conversion that such Notice of Conversion has not violated
the restrictions set forth in this paragraph and the Company shall have no
obligation to verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 4(d), in
determining the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as stated in the most
recent of the following: (i) the Company’s most recent periodic or annual report
filed with the Commission, as the case may be, (ii) a more recent public
announcement by the Company, or (iii) a more recent written notice by the
Company or the Company’s Transfer Agent setting forth the number of shares of
Common Stock outstanding. Upon the written or oral request of a Holder, the
Company shall within one (1) Trading Day confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including
this Note, by the Holder or its Affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of this Note held by the Holder. The Holder, upon
notice to the Company, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 4(d), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock upon conversion of this Note held by the Holder and the
Beneficial Ownership Limitation provisions of this Section 4(d) shall continue
to apply. Any increase in the Beneficial Ownership Limitation will not be
effective until the 61st day after such notice is delivered to the Company. The
Beneficial Ownership Limitation provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity with the terms
of this Section 4(d) to correct this paragraph (or any portion hereof) which may
be defective or inconsistent with the intended Beneficial Ownership Limitation
contained herein or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitations contained in this
paragraph shall apply to a successor Holder of this Note.
 
 
 
-13-

 
 
 
Section 5. Certain Adjustments.
 
a) Stock Dividends and Stock Splits. If the Company, at any time while this Note
is outstanding: (i) pays a stock dividend or otherwise makes a distribution or
distributions payable in shares of Common Stock on shares of Common Stock or any
Common Stock Equivalents (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company upon conversion of, or payment of
interest on, this Note), (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, (iii) combines (including by way of a reverse stock
split) outstanding shares of Common Stock into a smaller number of shares or
(iv) issues, in the event of a reclassification of shares of the Common Stock,
any shares of capital stock of the Company, then the Fixed Conversion Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding any treasury shares of the Company)
outstanding immediately before such event, and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this Section 5 shall become effective
immediately after the record date for the determination of shareholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
 
b) Subsequent Rights Offerings. In addition to any adjustment pursuant to
Section 5(e) below, if at any time the Company grants, issues or sells any
Common Stock Equivalents or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of shares of Common
Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which the Holder could have acquired if the Holder had held the number of shares
of Common Stock acquirable upon complete conversion of this Note (without regard
to any limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) 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 shares of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder’s right to participate in any
such Purchase Right would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such shares of
Common Stock as a result of such Purchase Right to such extent) and such
Purchase Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation).
 
c) Pro Rata Distributions. While this Note is outstanding, the Company shall not
declare or make any dividend or other distribution of its assets (or rights to
acquire its assets) to holders of shares of Common Stock, by way of return of
capital or otherwise (including, without limitation, any distribution of cash,
stock or other securities, property or options by way of a dividend, spin-off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a “Distribution”). In the event that the Note is repaid at
the time of such Distribution, the Holder shall not be entitled to participate
in such Distribution. If the Holder and the Company mutually agree, and the Note
is not repaid at the time of such Distribution, then the Holder shall be
entitled to participate in such Distribution to the same extent that the Holder
would have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Note (without regard to
any limitations on exercise hereof, including without limitation, the Beneficial
Ownership Limitation) immediately before the date of which a record is taken for
such Distribution, or, if no such record is taken, the date as of which the
record holders of shares of Common Stock are to be determined for the
participation in such Distribution (provided, however, to the extent that the
Holder’s right to participate in any such Distribution would result in the
Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not
be entitled to participate in such Distribution to such extent (or in the
beneficial ownership of any shares of Common Stock as a result of such
Distribution to such extent) and the portion of such Distribution shall be held
in abeyance for the benefit of the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial Ownership
Limitation).
 
 
 
-14-

 
 
 
d) Fundamental Transaction. If, at any time while this Note is outstanding, (i)
the Company, directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another Person, (ii) the
Company, directly or indirectly, effects any sale, lease, license, assignment,
transfer, conveyance or other disposition of all or substantially all of its
assets in one or a series of related transactions, (iii) any, direct or
indirect, purchase offer, tender offer or exchange offer (whether by the Company
or another Person) is completed pursuant to which holders of Common Stock are
permitted to sell, tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of fifty percent (50%) or more of
the outstanding Common Stock, (iv) the Company, directly or indirectly, in one
or more related transactions effects any reclassification, reorganization or
recapitalization 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, (v) the Company, directly or indirectly, in one or
more related transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby
such other Person acquires more than fifty percent (50%) of the outstanding
shares of Common Stock (not including any shares of Common Stock held by the
other Person or other Persons making or party to, or associated or affiliated
with the other Persons making or party to, such stock or share purchase
agreement or other business combination) (each a “Fundamental Transaction”),
then, upon any subsequent conversion of this Note, the Holder shall have the
right to receive, for each Conversion Share that would have been issuable upon
such conversion immediately prior to the occurrence of such Fundamental
Transaction (without regard to any limitation in Section 4(d) and Section 4(e)
on the conversion of this Note), the number of shares of Common Stock of the
successor or acquiring corporation or of the Company, if it is the surviving
corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number
of shares of Common Stock for which this Note is convertible immediately prior
to such Fundamental Transaction (without regard to any limitation in Section
4(d) and Section 4(e) on the conversion of this Note). For purposes of any such
conversion, the determination of the Fixed Conversion Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one (1) share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the Fixed
Conversion Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any conversion of this Note following such Fundamental
Transaction. The Company shall use its reasonable best efforts to cause any
successor entity in a Fundamental Transaction in which the Company is not the
survivor (the “Successor Entity”) to assume in writing all of the obligations of
the Company under this Note and any document ancillary hereto, in accordance
with the provisions of this Section 5(d) pursuant to written agreements in form
and substance reasonably satisfactory to the Holder and approved by the Holder
(without unreasonable delay) prior to such Fundamental Transaction and shall, at
the option of the holder of this Note, deliver to the Holder in exchange for
this Note a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Note which is convertible
for a corresponding number of shares of capital stock of such Successor Entity
(or its parent entity) equivalent to the shares of Common Stock acquirable and
receivable upon conversion of this Note (without regard to any limitations on
the conversion of this Note) prior to such Fundamental Transaction, and with a
conversion price which applies the conversion price hereunder to such shares of
capital stock (but taking into account the relative value of the shares of
Common Stock pursuant to such Fundamental Transaction and the value of such
shares of capital stock, such number of shares of capital stock and such
conversion price being for the purpose of protecting the economic value of this
Note immediately prior to the consummation of such Fundamental Transaction), and
which is reasonably satisfactory in form and substance to the Holder. Upon the
occurrence of any such Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Note and the other Transaction
Documents referring to the “Company” shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and shall assume
all of the obligations of the Company under this Note and the other Transaction
Documents with the same effect as if such Successor Entity had been named as the
Company herein.
 
e) Intentionally omitted.
 
 
 
-15-

 
 
 
f) Calculations. All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 5, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding any treasury shares of the Company) issued and
outstanding.
 
g) Notice to the Holder.
 
i. Adjustment to Fixed Conversion Price. Whenever the Fixed Conversion Price is
adjusted pursuant to any provision of Section 5, the Company shall promptly
deliver to each Holder a notice setting forth the Fixed Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment.
 
ii. Notice to Allow Conversion by Holder. If (A) the Company shall declare a
dividend (or any other distribution in whatever form) on the Common Stock, (B)
the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the granting to
all holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the
approval of any shareholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company, then, in each case, the Company shall cause to be
filed at each office or agency maintained for the purpose of conversion of this
Note, and shall cause to be delivered to the Holder at its last address as it
shall appear upon the Note Register, at least twenty (20) calendar days prior to
the applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, provided that the
failure to deliver such notice or any defect therein or in the delivery thereof
shall not affect the validity of the corporate action required to be specified
in such notice. To the extent that any notice provided hereunder constitutes, or
contains, material, non-public information regarding the Company or any of the
Subsidiaries, the Company shall within one (1) Trading Day file such notice with
the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain
entitled to convert this Note during the 20-day period commencing on the date of
such notice through the effective date of the event triggering such notice
except as may otherwise be expressly set forth herein.
 
h) Subsequent Equity Sales; Variable Rate Transactions; Other.
 
(1) Intentionally omitted.
 
(2) So long as this Note remains outstanding or the Holder holds any Securities
(as defined in the Purchase Agreement), the Company shall not, directly or
indirectly, amend, modify, waive or alter any terms or conditions of any Common
Stock Equivalents outstanding as of the date of the Purchase Agreement to
decrease the exercise, conversion and/or exchange price, as applicable,
thereunder or otherwise increase the aggregate number of shares of Common Stock
issuable in connection therewith (other than Common Stock Equivalents issued and
outstanding on the date of the Purchase Agreement that are subject to exchange
prices or conversion prices adjustable pursuant to anti-dilution protection or
in connection with stock splits or combinations).
 
 
 
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(3) During the period commencing on the Original Issue Date through and
including the date that is the later of (i) twelve (12) months following the
Original Issue Date and (ii) the date that this Note is no longer outstanding,
the Company and each Subsidiary of the Company shall be prohibited from
effecting or entering into (or publicly announcing or recommending to its
shareholders the approval or adoption thereof by such shareholders) any
agreement, plan, arrangement or transaction to effect, directly or indirectly,
any issuance by the Company or any of its Subsidiaries of Common Stock or Common
Stock Equivalents (or a combination of units thereof) involving a Variable Rate
Transaction, without the prior written consent of the Holder (which consent may
be withheld, delayed or conditioned in the sole discretion of such Holder).
“Variable Rate Transaction” means a transaction in which the Company (i) issues
or sells any debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive, additional shares of Common
Stock either (A) at a conversion price, exercise price or exchange rate or other
price that is based upon, and/or varies with, the trading prices of or
quotations for the shares of Common Stock at any time after the initial issuance
of such debt or equity securities, or (B) with a conversion, exercise or
exchange price that is subject to being reset at some future date after the
initial issuance of such debt or equity security or upon the occurrence of
specified or contingent events directly or indirectly related to the business of
the Company or the market for the Common Stock or (ii) enters into, or effects a
transaction under, any agreement, including, but not limited to, an equity line
of credit, an at-the-market offering (as defined in SEC Rule 415) or a similarly
structured transaction, whereby the Company may issue securities at a future
determined price.
 
(4) So long as this Note remains outstanding, neither the Company nor any
Subsidiary shall, directly or indirectly, effect or enter into (or publicly
announce or recommend to its shareholders the approval or adoption thereof by
such shareholders) any agreement, plan, arrangement or transaction structured in
accordance with, based upon, or related or pursuant to Section 3(a)(9) or
Section 3(a)(l0) of the Securities Act, without the prior written consent of the
Holder (which consent may be withheld, delayed or conditioned in the sole
discretion of such Holder).
 
(5) So long as this Note remains outstanding, the Company and each of its
Subsidiaries shall be prohibited from, directly or indirectly, effecting or
entering into (or publicly announcing or recommending to its shareholders the
approval or adoption thereof by such shareholders) any agreement, plan,
arrangement or transaction, including, without limitation, any Subsequent
Financing, that would or would reasonably be expected to restrict, delay,
conflict with or impair the ability or right of the Company and/or a Subsidiary
to timely perform its obligations under the Purchase Agreement, this Note, the
Warrants and/or the other Transaction Documents, including, without limitation,
the obligation of the Company to timely (i) deliver shares of Common Stock to
any Holder of the Notes (or a designee thereof, if applicable) in accordance
with the Purchase Agreement or the Notes and/or (ii) repay in cash all
outstanding principal and other amounts outstanding under the Notes at maturity
or at any other times when payments are required to be made in cash pursuant to
the terms of the Notes whether pursuant to a redemption and/or otherwise.
 
(6) The Holder shall be entitled to obtain injunctive relief against the Company
to preclude any such issuance in this Section 6 (without the need for the
posting of any bond or similar item, which the Company hereby expressly and
irrevocably waives the requirement for), which remedy shall be in addition to
any right to collect damages.
 
i) Issuance Price. So long as this Note remains outstanding, except with respect
to any Exempt Issuance pursuant to clauses (i), (ii), (iii) or (v) of thereof,
the Company shall not issue shares of Common Stock or Common Stock Equivalents
at a price lower than the Fixed Conversion Price (as adjusted for stock splits,
stock dividends, stock combinations, recapitalizations or other similar
transactions following the sale of this Note) (subject to adjustment in
accordance with Section 5(a)) without the prior written consent of the Holder
(which consent may be withheld, delayed or conditioned in the sole discretion of
such Holder).
 
 
 
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Section 6. Events of Default.
 
a) “Event of Default” means, wherever used herein, any of the following events
(whatever the reason for such event and whether such event shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
 
i. any failure to pay any amount of principal, interest, Make-Whole Amount,
liquidated damages or other amounts as and when the same shall become due and
payable under any of the Notes and/or any of the other Transaction Documents
(whether on a Conversion Date, Optional Redemption Date, Event of Default
Redemption Date, Mandatory Redemption Date, the Maturity Date and/or any other
date when any funds are due to be redeemed, converted and/or otherwise paid to
the Holder by the Company and/or any Subsidiary, whether by acceleration or
otherwise), including, without limitation, any failure to pay any redemption
payments or amounts thereunder, or under any other Transaction Document (as
defined in the Purchase Agreement) or any other agreement, document, certificate
or other instrument delivered in connection with the transactions contemplated
hereby and thereby, except, in the case of a failure to pay interest and
Make-Whole Amounts when and as due, in which case only if such failure is not
cured within three (3) Trading Days and except any failure to make an
amortization payment on an Amortization Redemption Payment Date, which failure
shall only be deemed an Event of Default if the Conversion Shares to be issued
upon conversion of this Note cannot be issued without a restrictive legend;
 
ii. the Company and/or any Subsidiary shall fail to observe, perform and/or
breaches any material covenant, provision, or agreement contained in any of the
Notes (other than payment failures set forth in Section 6(a)(i) above, a breach
by the Company of its obligations to deliver Conversion Shares to the Holder
upon conversion of this Note, which such certain breach is addressed in Section
6(a)(ix) below and any other failure, breaches and/or other events covered by
another provision of this Section 6(a)); (ii) the Warrants (a breach by the
Company of its obligations to exercise the Warrants, issue Common Stock, and any
other failure, breaches and/or other events covered by another provision of this
Section 6(a)); and/or (iii) any of the other Transaction Documents (except those
covered in any other provision if this Section 6(a)), which failure is not
cured, if possible to cure, within the earlier to occur of (A) five (5) Trading
Days after notice of such failure is sent by the Holder or by any other Holder
to the Company and (B) ten (10) Trading Days after the Company has become or
should have become aware of such failure;
 
iii. a default or event of default (subject to any grace or cure period provided
in the applicable agreement, document or instrument) shall occur under (A) any
of the Transaction Documents, or (B) any other material agreement, lease,
document or instrument to which the Company or any Subsidiary is obligated (and
not covered by clause (vi) below;
 
iv. any material representation or warranty made in any of the Notes, any other
Transaction Documents, any written statement pursuant hereto or thereto, any
other agreement, contract, lease, document or instrument to which the Company or
any Subsidiary is obligated (including those covered by clause (vi) below), or
any other report, financial statement or certificate made or delivered to the
Holder or any other Holder shall be untrue or incorrect in any material respect
as of the date when made or deemed made;
 
v. the Company or any Significant Subsidiary (as such term is defined in Rule
1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;
 
vi. the Company or any Subsidiary shall default on any of its obligations under
any mortgage, credit and/or loan agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced, any indebtedness for
borrowed money or money due under any long term leasing or factoring arrangement
that (a) involves an obligation greater than $50,000 whether such indebtedness
now exists or shall hereafter be created, and (b) results in such indebtedness
becoming or being declared due and payable prior to the date on which it would
otherwise become due and payable;
 
 
 
-18-

 
 
 
vii. the suspension from trading or quotation of the Common Stock, or the
failure of the Common Stock to be eligible for listing or quotation on a Trading
Market for a period of five (5) consecutive Trading Days;
 
viii. the Company shall fail for any reason to deliver certificates to a Holder
prior to the second (2nd) Trading Day after a Conversion Date or any other date
shares of Common Stock are required to be delivered to the Holder pursuant to
Section 4(c) or otherwise, or the Company shall provide at any time notice to
the Holder, including by way of public announcement, of the Company’s intention
to not honor requests for conversions of this Note in accordance with the terms
hereof;
 
ix. the Company fails to file with the Commission any required reports under
Section 13 or 15(d) of the Exchange Act such that it is not in compliance with
Rule 144(c)(1) (or Rule 144(i)(2), if applicable), which failure is not cured,
if possible to cure, within two (2) Trading Days after the expiration of the
applicable grace period permitted under Rule 12b-25 of the Exchange Act, further
provided that the Company files a Form 12b-25 for such report;
 
x. the Company shall fail to maintain the Reserve Amount and such failure is not
cured within five (5) Trading Days;
 
xi. any monetary judgment, writ or similar final process shall be entered or
filed against the Company, any Subsidiary or any of their respective property or
other assets for more than $250,000, and such judgment, writ or similar final
process shall remain unvacated, unbonded or unstayed for a period of forty-five
(45) calendar days;
 
xii. the Company shall fail to obtain all necessary approvals of the issue and
sale of all shares of Common Stock issuable in connection with the Note, the
Warrants and/or Transaction Documents, including, but not limited to, all
Conversion Shares and Warrant Shares, and other shares of Common Stock issuable
as payment of principal, interest, liquidation damages, Make-Whole Amounts and
or otherwise, consistent with the rules and regulations of the principal Trading
Market as of the Original Issuance Date;
 
xiii. any Person shall breach any agreement delivered to the Holder pursuant to
Section 2.2 of the Purchase Agreement;
 
xiv. the electronic transfer by the Company of shares of Common Stock through
the Depository Trust Company or another established clearing corporation is no
longer available or is subject to a “chill”;
 
xv. any Change of Control occurs other than in compliance with Section 5 of the
Notes and the Purchase Agreement;
 
xvi. the Security Documents (as defined in the Security Agreement) shall for any
reason fail or cease to create a separate valid and perfected and first priority
Lien on the Collateral (as defined in the Security Agreement) in favor of each
of the Secured Parties (as defined in the Security Agreement) and such breach
remains uncured for a period of three (3) Business Days;
 
xvii. any material damage to, or loss, theft or destruction of, any Collateral,
whether or not insured, or any strike, lockout, labor dispute, embargo,
condemnation, act of God or public enemy, or other casualty which causes, for
more than fifteen (15) consecutive days, the cessation or substantial
curtailment of revenue producing activities at any facility of the Company, if
any such event or circumstance could have a Material Adverse Effect.
 
 
 
-19-

 
 
 
xviii. the Initial Registration Statement (as defined in the Registration Rights
Agreement) shall not (a) have been filed with the Commission on or prior to the
Filing Date (as defined in the Registration Rights Agreement) or declared
effective by the Effectiveness Date (as defined in the Registration Rights
Agreement), and (b) the Company does not meet the current public information
requirements under Rule 144 in respect of the Registrable Securities (as defined
under the Registration Rights Agreement); or
 
xix. if, during the Company shall at any time after the Effectiveness Date, the
Company shall fail to keep the Registration Statement continuously effective
under the Securities Act until the date when all Registrable Securities covered
by such Registration Statement have been; or
 
xx. any violation and/or breach of Section 4.10(d) of the Purchase Agreement.
 
b) Remedies Upon Event of Default. If an Event of Default occurs with respect to
this Note, then, at the Holder’s election, all or any portion of the outstanding
principal amount of this Note, plus accrued but unpaid interest thereon,
Make-Whole Amounts, liquidated damages and other amounts owing in respect
thereof through the Event of Default Redemption Notice Date, shall accelerate
and become immediately due and payable in cash and shall be redeemed by the
Company at a redemption price equal to the Event of Default Redemption Amount on
the applicable Event of Default Redemption Date in accordance herewith (the
“Event of Default Redemption”). After the occurrence of any Event of Default
that results in the eventual acceleration of this Note, the interest rate on
this Note shall accrue at the EOD Interest Rate. Upon the occurrence of an Event
of Default with respect to this Note, the Company shall within one (1) Business
Day of becoming aware of such Event of Default deliver written notice thereof
via facsimile or electronic mail and overnight courier (with next day delivery
specified) (an “Event of Default Notice”) to the Holder. At any time after the
earlier of (i) the date of the Holder’s receipt of an Event of Default Notice
and (ii) the Holder becoming aware of an Event of Default, (such earlier date,
the “Event of Default Right Commencement Date”), and each such period, an “Event
of Default Redemption Right Period”) the Holder may require the Company to
redeem (regardless of whether such Event of Default has been cured) all or any
portion of this Note by delivering written notice thereof (the “Event of Default
Redemption Notice”) to the Company and the date such Event of Default Redemption
Notice is deemed delivered to the Company (the “Event of Default Notice Date”),
which Event of Default Redemption Notice shall indicate the portion of this Note
the Holder is electing to redeem (i) the portion of this Note the Holder is
electing to redeem in such Event of Default Redemption and the total Event of
Default Redemption Amount to be paid by the Company to the Holder in cash in
such Event of Default Redemption pursuant to this Section 6(b), (ii) the Event
of Default Redemption Date the Company is required to pay such Event of Default
Redemption Amount to the Holder in cash, and (iii) the allocation of such Event
of Default Redemption Amount between this Note and any other Notes held by the
Holder.
 
 
 
-20-

 
 
 
Notwithstanding anything to the contrary provided herein or elsewhere,
commencing upon the date of an Event of Default, the then Fixed Conversion
Price, Amortization Conversion Rate and/or any other Conversion price set forth
herein shall automatically be adjusted to equal the lower of (i) the applicable
Conversion price then in effect (i.e. the Fixed Conversion Price, the
Amortization Conversion Price or others), and (ii) 70% of the lowest VWAP during
the ten (10) day consecutive Trading Days ending on the Trading day immediately
prior to the relevant Conversion Date or any other conversion of any amounts
owed under this Note to the Holder including, but not limited to, any conversion
of the Event of Default Redemption Amount (the “EOD Conversion Rate. Any
redemption upon an Event of Default shall not constitute an election of remedies
by the Holder; and all other rights and remedies of the Holder shall be
preserved. To the extent redemptions required by this Section 6(b) are deemed or
determined by a court of competent jurisdiction to be prepayments of this Note
by the Company, such redemptions shall be deemed to be voluntary prepayments.
Notwithstanding anything to the contrary in this Section 6, but subject to
Section 4(d) and Section 4(e), at any time prior to the date the Event of
Default Redemption Amount is paid in full, the Event of Default Redemption
Amount submitted for redemption under this Section 6(b) may be converted, in
whole or in part, by the Holder, at its option and in its sole discretion, into
Common Stock pursuant to and in accordance with the conversion procedures set
forth in Section 4 hereunder, mutatis mutandis except that the Conversion Rate
shall be at the EOD Conversion Rate. The Company covenants and agrees that it
will honor all Notices of Conversion tendered from the Event of Default
Redemption Notice Date through the date all amounts owing thereon are due and
paid in full. The portion of the Event of Default Redemption Amount converted by
the Holder after the Event of Default Notice Date shall reduce the Event of
Default Redemption Amount of this Note required to be redeemed on the Company
Event of Default Redemption Date. In the event of the Company’s redemption of
any portion of this Note under this Section 6(b), the Holder’s damages would be
uncertain and difficult to estimate because of the parties’ inability to predict
future interest rates and the uncertainty of the availability of a suitable
substitute investment opportunity for the Holder. Accordingly, any redemption
premium due under this Section 6(b) is intended by the parties to be, and shall
be deemed, a reasonable estimate of the Holder’s actual loss of its investment
opportunity and not as a penalty. Upon the payment in full of the Event of
Default Redemption Amount, the Holder shall promptly surrender this Note to or
as directed by the Company. In connection with such acceleration described
herein, the Holder need not provide, and the Company hereby waives, any
presentment, demand, protest or other notice of any kind (other than the
Holder’s election to declare such acceleration), and the Holder may immediately
and without expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable law.
Such acceleration may be rescinded and annulled by Holder at any time prior to
payment of the Event of Default Redemption Amount hereunder and the Holder shall
have all rights as a Holder of the Note until such time, if any, as the Holder
receives full payment of the Event of Default Redemption Amount pursuant to this
Section 6(b). No such rescission or annulment shall affect any subsequent Event
of Default or impair any right consequent thereon.
 
 
 
-21-

 
 
 
Section 7. Optional Redemption; Mandatory Redemption.
 
a) Optional Redemption. Subject to the provisions of this Section 7(a), at any
time after the Original Issuance Date, the Company shall have the right to
redeem all, or any part, of the then outstanding principal amount of this Note,
plus accrued but unpaid interest thereon, Make-Whole Amount, liquidated damages
and other amounts owing in respect thereof through and including the Optional
Redemption Date for a cash redemption price equal to the Optional Redemption
Amount on the Optional Redemption Date (a “Optional Redemption”). The Company
shall exercise its right to require an Optional Redemption under this Section
7(a) by delivering a written notice thereof by facsimile or electronic mail to
all, but not less than all, of the Holders of Notes (the “Optional Redemption
Notice” and the date the Holders of Note received such notice is referred to as
the “Optional Redemption Notice Date”). The Company may deliver one or more
Optional Redemption Notices hereunder and each such Optional Redemption Notice
shall be irrevocable. Each such Optional Redemption Notice shall (x) state the
date on which the Optional Redemption shall occur (the “Optional Redemption
Date”) which date shall not be less than ten (10) calendar days nor more than
fifteen (15) calendar days following the Optional Redemption Notice Date, and
(y) state the aggregate amount of the Notes which are being redeemed in such
Optional Redemption from the Holder and all of the other Holders of the Notes
pursuant to this Section 7(a) and the total Optional Redemption Amount to be
paid by the Company to the Holder in cash in such Optional Redemption pursuant
to this Section 7(a). Notwithstanding anything herein to the contrary, (i) an
Event of Default occurs and is continuing and/or with the passage of time and/or
the giving of notice or both could occur at any time prior to or on the Optional
Redemption Date, the Company shall provide the Holder a subsequent notice to
that effect, and, the Optional Redemption shall be cancelled and the applicable
Optional Redemption Notice shall be null and void, and (ii) at any time prior to
the date the Optional Redemption Amount is paid in full, but subject to Section
4(d), the Optional Redemption Amount may be converted, in whole or in part, by
the Holder, at its option and in its sole discretion, into Common Stock pursuant
to and in accordance with the conversion procedures set forth in Section 4
hereunder, mutatis mutandis. The portion of the Optional Redemption Amount
converted by the Holder after the Optional Redemption Notice Date shall reduce
the Optional Redemption Amount of this Note to be redeemed on the Optional
Redemption Date. The Company covenants and agrees that it will honor all Notices
of Conversion tendered from the time of delivery of the Optional Redemption
Notice through the date all amounts owing thereon are due and paid in full. If
the Company elects to cause an Optional Redemption of this Note pursuant to this
Section 7(a), then it must simultaneously take the same action with respect to
all of the other Notes. In the event of the Company’s redemption of any portion
of this Note under this Section 7(a), the Holder’s damages would be uncertain
and difficult to estimate because of the parties’ inability to predict future
interest rates and the uncertainty of the availability of a suitable substitute
investment opportunity for the Holder. Accordingly, any redemption premium due
under this Section 7(a) is intended by the parties to be, and shall be deemed, a
reasonable estimate of the Holder’s actual loss of its investment opportunity
and not as a penalty. For the avoidance of doubt, the Company shall have no
right to effect an Optional Redemption if any Event of Default has occurred and
is continuing, but any Event of Default shall have no effect upon the Holder’s
right to convert this Note in its discretion.
 
 
 
-22-

 
 
 
b) Optional Redemption Procedure. The Optional Redemption Amount is payable in
full in cash on the Optional Redemption Date. If any portion of the payment
pursuant to an Optional Redemption shall not be paid by the Company by the
applicable due date, interest shall accrue thereon at an interest rate equal to
the EOD Interest Rate. Notwithstanding anything herein contained to the
contrary, if any portion of the Optional Redemption Amount remains unpaid after
such date, the Holder may elect, by written notice to the Company given at any
time thereafter, to invalidate such Optional Redemption, ab initio, and, with
respect to the Company’s failure to honor the Optional Redemption, the Company
shall have no further right to exercise such Optional Redemption.
 
c) Mandatory Redemption. If at any time after the Original Issue Date, the
Company closes a Subsequent Financing, the Company shall redeem in cash from the
Holder amounts equal to the Mandatory Redemption Amount under this Note (each a
“Mandatory Redemption”) in accordance with the Mandatory Redemption Payment
Amount and Order. The Company shall effectuate such Mandatory Redemption by
delivering written notice thereof (the “Mandatory Redemption Notice” and the
date such Mandatory Redemption Notice is deemed delivered hereunder, the
“Mandatory Redemption Notice Date”) to the Holder. The Mandatory Redemption
Notice shall state (i) the gross proceeds received by the Company in the
Subsequent Financing, (ii) the Mandatory Redemption Amount (including the
calculations used in determining the Mandatory Redemption Amount), (iii) a
detailed breakdown of the Mandatory Redemption Payment Amount and Order, and
(iv) the date on which the Company is required to pay such Mandatory Redemption
Amount to the Holder in cash (the “Mandatory Redemption Date”), which date shall
be no earlier than fifteen (15) Business Days following the Mandatory Redemption
Notice Date. Notwithstanding anything herein to the contrary, at any time prior
to the date the Mandatory Redemption Amount is paid in full, but subject to
Section 4(d) and Section 4(e), the Mandatory Redemption Amount may be converted,
in whole or in part, by the Holder, at its option and in its sole discretion,
into Common Stock pursuant to and in accordance with the conversion procedures
set forth in Section 4 hereunder, mutatis mutandis. The Company covenants and
agrees that it will honor all Notices of Conversion tendered from the date of
delivery of the Mandatory Redemption Exercise Notice through the date all
amounts owing thereon are due and paid in full, provided that any such Notice of
Conversion shall first apply to any portion of the Note that is not subject to
the Mandatory Redemption unless the Notice of Conversion expressly states that
it shall apply to a portion of the Note that is subject to the Mandatory
Redemption. The portion of the Mandatory Redemption Amount converted by the
Holder after the Mandatory Redemption Notice Date shall reduce the amount of
this Note to be redeemed on the Mandatory Redemption Date. The Company covenants
and agrees that it will honor all Notices of Conversion tendered from the time
of delivery of the Mandatory Redemption Notice Date through the date all amounts
owing thereon are due and paid in full. The Company’s payment of the Mandatory
Redemption Proceeds shall be applied ratably to all of the Holders of the then
outstanding Notes which exercise the right to require a Mandatory Redemption on
the basis of their (or their predecessor’s) initial purchases of Notes pursuant
to the Purchase Agreement. To the extent redemptions required by this Section
7(c) are deemed or determined by a court of competent jurisdiction to be
prepayments of the Note by the Company, such redemptions shall be deemed to be
voluntary prepayments. Notwithstanding anything in this Section 7(c) to the
contrary, Mandatory Redemptions shall not apply to Exempt Issuances.
 
d) Mandatory Redemption Procedure. The payment of cash pursuant to a Mandatory
Redemption shall be payable in full on the Mandatory Redemption Date. If any
portion of the payment pursuant to a Mandatory Redemption shall not be paid by
the Company by the applicable due date, interest shall accrue thereon at an
interest rate equal to the EOD Interest Rate. Notwithstanding anything to the
contrary in this Section 6, in addition to, and without limiting any other
rights hereunder and under the other Transaction Documents, the Holder may
elect, by written notice to the Company at any time following the Mandatory
Redemption Notice Date through the date of actual payment in full in cash of the
Mandatory Redemption Amount, to rescind such Mandatory Redemption.
 
 
 
-23-

 
 
 
Section 8. Negative Covenants. As long as any portion of this Note remains
outstanding, unless the Holder shall have otherwise given prior written consent
(which consent may be withheld, delayed or conditioned in the sole discretion of
such Holder), the Company shall not, and shall not permit any of the
Subsidiaries to, directly or indirectly:
 
a) other than Permitted Indebtedness, enter into, create, incur, assume,
guarantee or suffer to exist any indebtedness for borrowed money of any kind,
including, but not limited to, a guarantee, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest therein or
any income or profits therefrom;
 
b) other than Permitted Liens, enter into, create, incur, assume or suffer to
exist any Liens, on or with respect to any of its property or assets now owned
or hereafter acquired or any interest therein or any income or profits
therefrom;
 
c) amend its charter documents, including, without limitation, its certificate
of incorporation and bylaws, in any manner that materially and adversely affects
any rights of the Holder (other than in connection with any reverse stock split
reasonably required in order to satisfy any requirement for listing on a Trading
Market);
 
d) repay, repurchase or offer to repay, repurchase or otherwise acquire more
than a de minimis number of shares of its Common Stock or Common Stock
Equivalents other than as permitted or required under the Transaction Documents;
 
e) repay, repurchase or offer to repay, repurchase or otherwise acquire any
indebtedness, other than the Permitted Indebtedness and the Notes if on a
pro-rata basis, other than regularly scheduled principal and interest payments
as such terms are in effect as of the Original Issue Date, provided that such
payments shall not be permitted if, at such time, or after giving effect to such
payment, any Event of Default exist or occur;
 
f) pay cash dividends or distributions on any equity securities of the Company
and/or the Subsidiaries;
 
g) other than transactions and agreements with Ceed2Med, LLC and any of its
Affiliates, enter into any transaction with any Affiliate of the Company which
would be required to be disclosed in any public filing with the Commission,
unless such transaction is made on an arm’s-length basis and expressly approved
by a majority of the disinterested directors of the Company (even if less than a
quorum otherwise required for board approval); or
 
h) Enter into any agreement with respect to the foregoing.
 
Section 9. Miscellaneous.
 
a) Notices. Any and all notices or other communications or deliveries to be
provided by the Holder hereunder including, without limitation, any Notice of
Conversion, shall be in writing and delivered personally, by facsimile or
e-mail, or sent by a nationally recognized overnight courier service, addressed
to the Company, at 80 NE 4th Avenue, Suite 28, Delray Beach, Florida 33483,
Attention: Chief Financial Officer, email address: kpuzder@exactusinc.com or an
email address or address as the Company may specify for such purposes by notice
to the Holder delivered in accordance with this Section 9(c), with a copy, which
shall not constitute notice, to Greenberg Traurig, P.A., 5100 Town Center
Circle, Suite 400,| Boca Raton, Florida 33486, email address:
rosettob@gtlaw.com. Any and all notices or other communications or deliveries to
be provided by the Company hereunder shall be delivered to the Holder pursuant
to the provisions of Section 5.4 of the Purchase Agreement, or such other email
address or address as the Holder may specify for such purposes by notice to the
Company delivered in accordance with this Section 9(c). Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the
earliest of (i) the time of transmission, if such notice or communication is
delivered via e-mail at the e-mail address set forth in this Section prior to
5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the
time of transmission, if such notice or communication is delivered via e-mail at
the e-mail address set forth in this Section on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the
second Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. To the extent that any notice
provided hereunder constitutes, or contains, material, non-public information
regarding the Company or any subsidiaries, the Company shall within one (1)
Trading Day file such notice with the Commission pursuant to a Current Report on
Form 8-K.
 
 
 
-24-

 
 
 
b) Absolute Obligation. Except as expressly provided herein, no provision of
this Note shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, liquidated damages and accrued
interest, as applicable, on this Note at the time, place, and rate, and in the
coin or currency, herein prescribed. This Note is a direct debt obligation of
the Company.
 
c) Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Note, or in lieu of or in substitution
for a lost, stolen or destroyed Note, a new Note for the principal amount of
this Note so mutilated, lost, stolen or destroyed, but only upon receipt of
evidence of such loss, theft or destruction of such Note, and of the ownership
hereof, reasonably satisfactory to the Company.
 
d) Governing Law. The parties hereto expressly and irrevocably agree that this
Note 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
conflict of laws thereof. Each party agrees that all legal proceedings
concerning this Note (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New
York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute with regard to this Note, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such New York Courts,
or such New York Courts are improper or inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or 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
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
applicable 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 NOTE OR THE TRANSACTIONS
CONTEMPLATED HEREBY. If any party shall commence an action or proceeding to
enforce any provisions of this Note, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys’ fees and
other costs and expenses incurred in the investigation, preparation and
prosecution of such action or proceeding.
 
e) Waiver. Any waiver by the Company or the Holder of a breach of any provision
of this Note shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this Note.
The failure of the Company or the Holder to insist upon strict adherence to any
term of this Note on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Note on any other occasion. Any waiver by
the Company or the Holder must be in writing.
 
f) Amendments. The prior written consent of a Holder having 50.1% in interest of
the aggregate principal amount of all Notes outstanding at any given time in
question, which shall be calculated based on the principal amount of all Notes
outstanding at the time of such consent, shall be required for any change,
wavier or amendment to the Notes. Any change, waiver or amendment so approved
shall be binding upon all existing and future holders of this Note and any other
Notes; provided, however, that no such change, waiver or, as applied to any of
the Notes held by any particular holder of Notes, shall, without the written
consent of that particular holder, (i) reduce the amount of Principal, reduce
the amount of accrued and unpaid Interest, or extend the Maturity Date, of the
Notes, (ii) disproportionally and adversely affect any rights under the Notes of
any holder of Notes; or (iii) modify any of the provisions of, or impair the
right of any holder of Notes under, this Section 9(f).
 
 
 
-25-

 
 
 
g) Severability. If any provision of this Note is invalid, illegal or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder violates the
applicable law governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum rate of interest permitted
under applicable law. The Company covenants (to the extent that it may lawfully
do so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law or other law which would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on this Note as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Note, and the Company (to the
extent it may lawfully do so) hereby expressly waives all benefits or advantage
of any such law, and covenants that it will not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the Holder,
but will suffer and permit the execution of every such as though no such law has
been enacted.
 
h) Remedies, Characterizations, Other Obligations, Breaches and Injunctive
Relief.  The remedies provided in this Note shall be cumulative and in addition
to all other remedies available under this Note and any of the other Transaction
Documents at law or in equity (including a decree of specific performance and/or
other injunctive relief), and nothing herein shall limit the Holder’s right to
pursue actual and consequential damages for any failure by the Company to comply
with the terms of this Note. The Company covenants to the Holder that there
shall be no characterization concerning this instrument other than as expressly
provided herein. Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the Holder and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the Holder shall be entitled, in
addition to all other available remedies, to an injunction restraining any such
breach or any such threatened breach, without the necessity of showing economic
loss and without any bond or other security being required. The Company shall
provide all information and documentation to the Holder that is requested by the
Holder to enable the Holder to confirm the Company’s compliance with the terms
and conditions of this Note.
 
i) Next Business Day. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.
 
j) Payment of Collection, Enforcement and Other Costs. If (i) this Note is
placed in the hands of an attorney for collection or enforcement or is collected
or enforced through any legal proceeding or the Holder otherwise takes action to
collect amounts due under this Note or to enforce the provisions of this Note,
or (ii) there occurs any bankruptcy, reorganization, receivership of the Company
or other proceedings affecting Company creditors’ rights and involving a claim
under this Note, then the Company shall pay the reasonable and documented
out-of-pocket costs incurred by the Holder for such collection, enforcement or
action or in connection with such bankruptcy, reorganization, receivership or
other proceeding, including, but not limited to, attorneys’ fees and
disbursements.
 
k) Headings. The headings contained herein are for convenience only, do not
constitute a part of this Note and shall not be deemed to limit or affect any of
the provisions hereof.
 
l) Secured Obligations. The obligations of the Company under this Note are
secured by all of the assets of the Company and each of its Subsidiaries
pursuant to the Security Agreement and the Intellectual Property Security
Agreement.
 
[SIGNATURE PAGES FOLLOW]
 
 
-26-

 
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a
duly authorized officer as of the date first above indicated.
 
 
 
EXACTUS, INC., a Nevada corporation
 
By:  /s/ Emiliano Aloi                        
Name: Emiliano Aloi
Title: President & CEO
 
 
 
 
 
 
 
 
 
 
 
[Signature Page to Exactus, Inc. 8% Senior Secured Convertible Promissory Note]
 
 
 
-27-

 

 
ANNEX A
 
NOTICE OF CONVERSION
 
The undersigned hereby elects to convert principal under the 8% Senior Secured
Convertible Promissory Note, due November 27, 2019 of Exactus, Inc., a Nevada
corporation (the “Company”), into shares of common stock of the Company (the
“Common Stock”), according to the conditions hereof, as of the date written
below. If shares of Common Stock are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the holder for any conversion, except for such transfer taxes, if
any.
 
By the delivery of this Notice of Conversion, the undersigned represents and
warrants to the Company that its ownership of the Common Stock does not exceed
the amounts specified under Section 4 of this Note, as determined in accordance
with Section 13(d) of the Exchange Act.
 
The undersigned agrees to comply with the prospectus delivery requirements under
the applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.
 
Conversion calculations:
 
Date to Effect Conversion: __________________
 
Please confirm the following information:
 
Conversion Price: ______________
 
Please check the following box if the Conversion Price is determined by:
 
EOD Conversion Price
 
Principal Amount of Note to be Converted: ____________
 
Payment of Interest in Common Stock __ Yes __ No
 
If Yes, $_____ of Interest Accrued on Account of Conversion at Issue.
 
If Yes, $_____ of Make-Whole Amount on Account of Conversion at Issue
 
Number of Shares of Common Stock to be Issued:
 
Signature: 
 
Name:
 
 
 
Delivery Instructions:
 
 
 
A-1

 
 
 
ANNEX B
 
AMORTIZATION SCHEDULE
 
Amortization Schedule - Note 1
 
 
 

 
Amortization Redemption
 
 
Day
Principal
Interest
Payment Amount
Outstanding Principal
Outstanding Interest
0
 
 
 $ -
 $ 833,333.33
 $ 66,666.67
30
 
 $ 5,555.56
 $ 5,555.56
 $ 833,333.33
 $ 61,111.11
60
 
 $ 5,555.56
 $ 5,555.56
 $ 833,333.33
 $ 55,555.56
90
 $ 92,592.59
 $ 7,407.41
 $ 110,000.00
 $ 740,740.74
 $ 48,148.15
120
 $ 92,592.59
 $ 7,407.41
 $ 110,000.00
 $ 648,148.15
 $ 40,740.74
150
 $ 92,592.59
 $ 7,407.41
 $110,000.00
 $ 555,555.55
 $ 33,333.33
180
 $ 92,592.59
 $ 7,407.41
 $ 110,000.00
 $ 462,962.96
 $ 25,925.93
210
 $ 92,592.59
 $ 7,407.41
 $ 110,000.00
 $ 370,370.37
 $ 18,518.52
240
 $ 92,592.59
 $ 7,407.41
 $ 110,000.00
 $ 277,777.78
 $ 11,111.11
270
 $ 92,592.59
 $ 7,407.41
 $ 110,000.00
 $ 185,185.18
 $ 3,703.70
300
 $ 92,592.59
 $ 3,703.70
 $105,925.93
 $ 92,592.59
 $ -
330
 $ 92,592.59
 $ -
 $ 101,851.85
 $ (0.00)
 $ -
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
B-1

 

 
Schedule 1
 
CONVERSION SCHEDULE
 
This 8% Senior Secured Convertible Promissory Note, due November 26, 2020, in
the original principal amount of $8333,333.33 is issued by Exactus, Inc., a
Nevada corporation. This Conversion Schedule reflects conversions made under
Section 4 of the above referenced Note.
 
Dated:
 
Date of Conversion (or for first entry,Original Issue Date)
Amount of Conversion
AggregatePrincipalAmountRemainingSubsequent toConversion(or
originalPrincipalAmount)
Company Attest
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
B-2

 
 
 
Schedule 2
 
PERMITTED INDEBTEDNESS AND LIENS
 
“Permitted Indebtedness” means any Indebtedness.
 
“Permitted Liens” means any Liens arising with respect to Permitted
Indebtedness.
 
 
 
 
 
B-3