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. 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: February 8, 2019

 

Verus International, Inc.,

CONVERTIBLE NOTE

 

This note is a duly authorized and validly issued promissory note of Verus
International, Inc., Inc., a Delaware corporation (F/K/A RealBiz Media Group,
Inc.) (the “Company”), having its principal place of business at 9841
Washingtonian Blvd., #390, Gaithersburg, MD 20878, designated as its convertible
note (the “Note” and, collectively with the other notes issuable hereunder, the
“Notes”).

 

FOR VALUE RECEIVED, the Company promises to pay to the order of
[                     ], or its registered assigns (the “Holder”), the principal
sum of One Million, Two Hundred Fifty Thousand US Dollars ($1,250,000.00 USD) on
November 8, 2019 (the “Maturity Date”) or such earlier date as this Note is
required or permitted to be repaid as provided hereunder, and to pay interest to
the Holder on the aggregate unconverted and then 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 Securities Purchase Agreement
and (b) the following terms shall have the following meanings:

 

“Affiliate” means, with respect to any Person, any other Person that directly or
indirectly controls, is controlled by, or is under common control with, such
Person, it being understood for purposes of this definition that “control” of a
Person means the power directly or indirectly either to vote 10% or more of the
stock having ordinary voting power for the election of directors of such Person
or direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.

 

“Alternate Consideration” shall have the meaning set forth in Section 5(e).

 

  1

 

 

“Attribution Parties” means, collectively, the following Persons and entities:
(i) any investment vehicle, including, any funds, feeder funds or managed
accounts, currently, or from time to time after the Original Issue Date,
directly or indirectly managed or advised by the Holder or any of its Affiliates
or principals, (ii) any direct or indirect Affiliates of the Holder or any of
the foregoing, (iii) any Person acting or who could be deemed to be acting as a
Group together with the Holder or any of the foregoing and (iv) any other
Persons whose beneficial ownership of the Company’s Common Stock would or could
be aggregated with the Holder’s and the other Attribution Parties for purposes
of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is
to subject collectively the Holder and all other Attribution Parties to the
Beneficial Ownership Limitation.

 

“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) 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 or takes any corporate or other action for the purpose of effecting
any of the foregoing.

 

“Base Conversion Price” shall have the meaning set forth in Section 5(b).

 

“Business Day” means any day except any Saturday, any Sunday, any day which
shall be a federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or required by law
or other governmental action to close.

 

“Buy-In” shall have the meaning set forth in Section 4(d)(v).

 

  2

 

 

“Change of Control Transaction” means the occurrence after the date hereof of
any of the following: (i) an acquisition after the date hereof by an individual
or legal entity or “group”, as described in Rule 13d-5(b)(1) promulgated under
the Securities Exchange Act of 1934, as amended (“Exchange Act”) of effective
control (whether through legal or beneficial ownership of capital stock of the
Company, by contract or otherwise) of in excess of 25% of the voting securities
of the Company (other than by means of conversion or exercise of this Note and
the Securities issued together with this Note) or (ii) the Company merges into
or consolidates with any other Person, or any Person merges into or consolidates
with the Company and, after giving effect to such transaction, the stockholders
of the Company immediately prior to such transaction own less than 50% of the
aggregate voting power of the Company or the successor entity of such
transaction, or (iii) the Company sells or transfers all or substantially all of
its assets to another Person and the stockholders of the Company immediately
prior to such transaction own less than 50% of the aggregate voting power of the
acquiring entity immediately after the transaction, or (iv) a replacement at one
time or within a three (3) year period of more than one-half of the members of
the Company’s board of directors which is not approved by a majority of those
individuals who are members of the board of directors on the date hereof (or by
those individuals who are serving as members of the board of directors on any
date whose nomination to the board of directors was approved by a majority of
the members of the board of directors who are members on the date hereof), or
(v) the execution by the Company of an agreement to which the Company is a party
or by which it is bound, providing for any of the events set forth in clauses
(i) through (iv) above.

 

“Common Stock” means common stock of the Company, par value $0.001 per share.

 

“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.

 

“Conversion Date” shall have the meaning set forth in Section 4(a).

 

“Conversion Price” shall have the meaning set forth in Section 4(b).

 

“Conversion Shares” means, collectively, the shares of Common Stock issued or
issuable upon conversion of this Note in accordance with the terms hereof,
including, without limitation, shares of Common Stock issued or issuable as
interest or in payment of principal hereunder or as damages under the
Transaction Documents.

 

“Note Register” shall have the meaning set forth in Section 2(c).

 

“Dilutive Issuance” shall have the meaning set forth in Section 5(b).

 

“Dilutive Issuance Notice” shall have the meaning set forth in Section 5(b).

 

“Event of Default” shall have the meaning set forth in Section 8(a).

 

  3

 

 

“Equity Conditions” means, during the period in question, (i) the Company shall
have duly honored all conversions and redemptions scheduled to occur or
occurring by virtue of one or more Notices of Conversion of the Holder, if any,
(ii) the Company shall have paid all liquidated damages and other amounts owing
to the Holder in respect of this Note, (iii) all of the shares of Common Stock
issued or issuable pursuant to the Transaction Documents may be sold by the
Holder pursuant to either (a) clause (i) or (ii) of Section (b)(1) of Rule 144
and, with respect to such clause (i), the Company has been subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act for the then
preceding 90 days and has filed all reports required to be filed thereunder
during the then preceding 12 months (or such shorter period that the Company was
required to file such reports) or (b) an effective Registration Statement (and
the Company believes, in good faith, that such effectiveness will continue
uninterrupted for the foreseeable future) with current prospectus, (iv) the
Common Stock is trading on a Trading Market and all of the shares issuable
pursuant to the Transaction Documents are listed or quoted for trading on such
Trading Market (and the Company believes, in good faith, that trading of the
Common Stock on a Trading Market will continue uninterrupted for the foreseeable
future), (v) there is a sufficient number of authorized but unissued and
otherwise unreserved shares of Common Stock for the issuance of all of the
shares issuable pursuant to the Transaction Documents, (vi) there is no existing
Event of Default or no existing event which, with the passage of time or the
giving of notice, would constitute an Event of Default, (vii) the issuance of
the shares in question (or, in the case of an Optional Redemption or Mandatory
Conversion, the shares issuable upon conversion in full of the Optional
Redemption Amount or Mandatory Conversion amount) to the Holder would not
violate the limitations set forth in Section 4(c) below, (viii) there has been
no public announcement of a pending or proposed Fundamental Transaction or
Change of Control Transaction that has not been consummated, and (ix) the Holder
is not in possession of any information provided by the Company that
constitutes, or may constitute, material non-public information.

 

“Mandatory Default Amount” means the sum of (i) the greater of (A) 200% of the
outstanding principal amount of this Note, plus 100% of accrued and unpaid
interest hereon, or (B) the outstanding principal amount of this Note, plus all
accrued and unpaid interest hereon, divided by the Conversion Price on the date
the Mandatory Default Amount is either (a) demanded (if demand or notice is
required to create an Event of Default) or otherwise due or (b) paid in full,
whichever has a lower Conversion Price, multiplied by the daily VWAP (as defined
in the Warrants) on the date the Mandatory Default Amount is either (x) demanded
or otherwise due or (y) paid in full, whichever has a higher daily VWAP, and
(ii) all other amounts, costs, expenses and liquidated damages due in respect of
this Note.

 

“New York Courts” shall have the meaning set forth in Section 9(d).

 

“Notice of Conversion” shall have the meaning set forth in Section 4(a).

 

“Original Issue Date” means the date of the issuance of this Note, regardless of
any transfers of any Note and regardless of the number of instruments which may
be issued to evidence this Note.

 

“Permitted Indebtedness” means (a) the indebtedness evidenced by the Note, (b)
the Indebtedness existing on the Original Issue Date and set forth on Schedule
(m)(ii) attached to the Securities Purchase Agreement and defined therein as
“Permitted Indebtedness” provided that the terms of any such Indebtedness have
not been changed from the terms existing on the Closing Date, (c) lease
obligations and purchase money indebtedness (secured only by the assets
purchased with such indebtedness) of up to $100,000, in the aggregate, incurred
in connection with the acquisition of capital assets and lease obligations with
respect to newly acquired or leased assets, (d) indebtedness that (i) is
expressly subordinate to the Note pursuant to a written subordination agreement
with the Buyer that is acceptable to the Buyer in its sole and absolute
discretion and (ii) matures at a date later than the Maturity Date.

 

  4

 

 

“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 on the financial statements of the Company in accordance with GAAP;
and (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.

 

“Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity or a government or any department or agency thereof.

 

“Securities Purchase Agreement” means the Securities Purchase Agreement pursuant
to which this Note was issued, dated on or about the date hereof, by and between
the Company and the Buyer of the Note, as amended, modified or supplemented from
time to time in accordance with its terms.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Share Delivery Date” shall have the meaning set forth in Section 4(d)(ii).

 

“Stockholder Approval Date” shall have the meaning given to it in Section 4(z)
of the Securities Purchase Agreement.

 

“Subsidiary” shall have the meaning set forth in the Securities Purchase
Agreement.

 

“Trading Day” means a day on which the Principal Market is open for business.

 

Section 2. Interest.

 

a) Interest Rate. Interest shall accrue daily (based on a 360-day year) on the
outstanding principal amount of this Note at a rate per annum equal to eight
percent (8%). If an Event of Default occurs hereunder, then interest hereunder
shall thereafter accrue at an interest rate equal to the lesser of twenty four
percent (24%) per annum or the maximum rate permitted by applicable law
(“Default Rate”).

 

b) Payment of Interest. On the six-month anniversary of the date hereof and then
again on the Maturity Date, Company shall pay the accrued but unpaid interest
then due. On the Maturity Date, the Company shall pay to the Holder any accrued
but unpaid interest hereunder on the aggregate unconverted and then outstanding
principal amount of this Note, and on each Conversion Date the Company shall pay
to the Holder any accrued but unpaid interest hereunder on that portion of the
principal amount then being converted, only if such accrued but unpaid interest
is added to and included in the principal amount being so converted on such date
by the Holder. Interest may be paid, at the option of the Holder, either in cash
or in kind at the then-applicable Conversion Price.

 

  5

 

 

c) Interest Calculations. Interest shall be calculated on the basis of a 360-day
year and actual days elapsed 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”).

 

Section 3. Registration of Transfers and Exchanges.

 

a) Different Denominations. This Note is exchangeable for an equal aggregate
principal amount of Notes of different authorized denominations, as requested by
the Holder surrendering the same. No service charge will be payable for such
exchange.

 

b) Investment Representations. This Note has been issued subject to certain
investment representations of the original Holder set forth in the Securities
Purchase Agreement and may be transferred or exchanged only in compliance with
the Securities Purchase Agreement and 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.

 

Section 4. Conversion.

 

a) Voluntary and Mandatory Conversion.

 

(i) Voluntary Conversion. At any time after the Company increases its authorized
Common Stock to 7,500,000,000 shares of Common Stock, until all amounts due
under this Note have been paid, this Note shall be convertible, in whole or in
part, into shares of Common Stock of the Company at the option of the Holder, at
any time and from time to time (subject to the conversion limitations set forth
in Section 4(c) hereof). Notwithstanding the foregoing, or anything else in this
Note, the conversion of this Note may only be done in increments of a minimum
value of twenty-five (25%) percent of then-outstanding principal balance of, and
all accrued interest and penalties on, this Note. The Holder shall effectuate
conversions by delivering to the Company a Notice of Conversion, the form of
which is attached hereto as Annex A (a “Notice of Conversion”), specifying
therein the principal amount of this Note to be converted together with any
interest accrued thereon and the date on which such conversion shall be
effectuated (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. 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, has been so converted. Conversions hereunder shall
have the effect of lowering the outstanding principal amount of this Note and
any accrued but unpaid interest in an amount equal to the applicable conversion.
The Holder and the Company shall maintain records showing the principal
amount(s) converted and the date of such conversion(s). 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.

 

  6

 

 

(ii) Mandatory Conversion. On the Maturity Date and without action by the
Holder, this Note shall automatically convert into shares of Common Stock of the
Company at the then-effective Conversion Price (as defined herein), provided
tahthhe Equity Conditions have been fulfilled.

 

b) Conversion Price. The “Conversion Price” shall be determined as follows,
subject to adjustment herein as provided in Section 5 below. Except during the
occurrence and continuation of an uncured Event of Default, the Conversion Price
shall be ninety (90%) percent of the lowest sale price per share on the
Principal Market during the thirty (30) Trading Days immediately preceding the
date of the Notice of Conversion (“Base Conversion Rate”). Upon the occurrence
and continuation of an uncured Event of Default, the Conversion Price shall be
fifty (50%) percent of the Base Conversion Rate (“Default Conversion Rate”).
Moreover, in the event that, at any time, the Base Conversion Rate or Default
Conversion Rate then in effect shall be less than the par value per share of the
Common Stock, then, in such event, the principal balance of this Note shall be
increased by such amount as shall enable the Holder to receive that number of
shares of Common Stock it would have been entitled to receive had the Base
Conversion Rate or Default Conversion Rate not fallen below the par value per
share of the Common Stock.

 

  7

 

 

c) Conversion Limitation – Holder’s Restriction on Conversion. Provided Holder
has given Company notice of its intention to invoke the within limitation in its
sole discretion, and not automatically, the Company shall not effectuate any
conversion of this Note, and the 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, in its sole discretion, the
Holder (together with the other 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 the other 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 (A) conversion of the remaining,
unconverted principal amount of this Note beneficially owned by the Holder or
any other Attribution Parties and (B) 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 or the Warrant)
beneficially owned by the Holder or any other Attribution Parties. Except as set
forth in the preceding sentence, for purposes of this Section 4(c), 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 paragraph applies, the determination of whether
this Note is convertible (in relation to other securities owned by the Holder
together with any other 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 other Attribution Parties) and
which principal amount of this Note is convertible, in each case subject to the
Beneficial Ownership Limitation if applicable. 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 paragraph, 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: (A) the Company’s most recent periodic or annual report with the SEC,
as the case may be; (B) a more recent public announcement by the Company; or (C)
a more recent 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 two (2) Trading Days 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 together with any other
Attribution Parties since the date as of which such number of outstanding shares
of Common Stock was reported. The “Beneficial Ownership Limitation” shall be
9.99% 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. By written notice to the Company, the Holder
may at any time and from time to time increase or decrease the Beneficial
Ownership Limitation to any other percentage specified in such notice (or
specify that the Beneficial Ownership Limitation shall no longer be applicable);
provided, however, that (A) any such increase (or inapplicability) shall not be
effective until the sixty-first (61st) day after such notice is delivered to the
Company, and (B) any such increase or decrease shall apply only to the specific
Holder and not to any other holder of Notes. The provisions of this paragraph
shall be construed and implemented in a manner otherwise than in strict
conformity with the terms of this paragraph to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such limitation.
In addition to, and not in derogation of, the restrictions contained in the
preceding balance of this paragraph, no conversion hereunder shall be
effectuated during any period of thirty (30) days after Holder has sold more
than ten percent (10%) of the trailing trading volume during such period. The
limitations contained in this paragraph shall also apply to any successor holder
of this Note or any subdivision thereof.

 

  8

 

 

d) Mechanics of Conversion.

 

i. Conversion Shares Issuable Upon Conversion of Principal Amount. The number of
Conversion Shares issuable upon a conversion hereunder shall be determined by
the quotient obtained by dividing (x) the outstanding principal amount of this
Note to be converted plus any accrued but unpaid interest thereon, by (y) the
then-effective Conversion Price.

 

ii. Delivery of Certificate Upon Conversion. Not later than three (3) Trading
Days after each Conversion Date (the “Share Delivery Date”), the Company shall
deliver, or cause to be delivered, to the Holder a certificate or certificates
or shall credit such number of shares of Common Stock to the Holder’s balance
account with the Depository Trust Company or another established clearing
corporation performing similar functions, as applicable, representing the number
of Conversion Shares being acquired upon the conversion of this Note. The
certificate or certificates representing the Conversion Shares shall, if
required to be issued without legends in accordance with the Securities Purchase
Agreement, be free of restrictive legends and trading restrictions (other than
those which may then be required by the Securities Purchase Agreement).

 

iii. Failure to Deliver Certificates. If in the case of any Notice of Conversion
such certificate(s) or shares are not delivered to or as directed by the
applicable Holder by the third (3rd) Trading Day after the Conversion 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 representing the principal amount of this Note
unsuccessfully tendered for conversion to the Company.

 

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
principal 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 and obtained, and
the Company posts a surety bond for the benefit of the Holder in the amount of
one hundred fifty percent (150%) of the outstanding principal 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 such injunction, the Company shall issue Conversion
Shares upon the delivery of a Notice of Conversion. If the Company fails for any
reason to deliver to the Holder the Conversion Shares pursuant to Section
4(d)(ii) by the second (2nd) Trading Day after the Share Delivery Date, the
Company shall pay to the Holder, in cash, as liquidated damages and not as a
penalty, one thousand dollars ($1,000) per Trading Day (increasing to two
thousand five hundred ($2,500) per Trading Day on the fifth (5th) Trading Day
after such liquidated damages begin to accrue) for each Trading Day after such
second (2nd) Trading Day after the Share Delivery Date until such Conversion
Shares are delivered. Nothing herein shall limit a Holder’s right to pursue
actual damages or declare an Event of Default pursuant to Section 8 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.

 

  9

 

 

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(s) or
shares by the Share Delivery Date pursuant to Section 4(d)(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 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 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(d)(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.

 

  10

 

 

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 for the sole purpose of issuance upon conversion
of this Note and payment of interest on this Note, each 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), not less than such
aggregate number of shares of the Common Stock as shall (subject to the terms
and conditions set forth in the Securities Purchase Agreement) be issuable
(taking into account the adjustments of Section 5) upon the conversion of the
outstanding principal amount of this Note and payment of interest hereunder. 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 and, if a Registration Statement is then effective under the
Securities Act, shall be registered for public sale in accordance with such
Registration Statement.

 

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 Holder would otherwise be entitled to purchase upon such conversion,
the Company shall pay a cash adjustment in respect of such final fraction in an
amount equal to such fraction multiplied by the fair market value of the Common
Stock.

 

viii. Transfer Taxes. 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 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.

 

  11

 

 

Section 5. Certain Adjustments.

 

a) Stock Dividends and Stock Splits. If the Company, at any time while this Note
is outstanding: (A) 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, the Note or any shares of Common Stock issued by the Company upon
exercise of the Warrant); (B) subdivides outstanding shares of Common Stock into
a larger number of shares; (C) combines (including by way of a reverse stock
split) outstanding shares of Common Stock into a smaller number of shares; or
(D) issues, in the event of a reclassification of shares of the Common Stock,
any shares of capital stock of the Company, then the 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 shall become effective immediately
after the record date for the determination of stockholders 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 Equity Sales. If, at any one or more time(s) within one hundred
eighty (180) days of a conversion, in whole or in part, of this Note, the
Company or any subsidiary thereof sells or grants any option to purchase or
sells or grants any right to reprice, or otherwise disposes of or issues (or
announces any sale, grant or any option to purchase or other disposition), any
Common Stock or Common Stock Equivalents entitling any Person to acquire shares
of Common Stock at an effective selling price per share that is lower than the
Conversion Price in effect at the time of any given conversion (such lower
price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive
Issuance”), even if Holder has approved such Dilutive Issuance, as may be
applicable, (if the holder of the Common Stock or Common Stock Equivalents so
issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise,
or due to warrants, options or rights per share which are issued in connection
with such issuance, be entitled to receive shares of Common Stock at an
effective price per share that is lower than the Conversion Price, such issuance
shall be deemed to have occurred for less than the Conversion Price on such date
of the Dilutive Issuance), then the Conversion Price shall be reduced to equal
the Base Conversion Price. Such adjustment shall be made whenever such Common
Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no
adjustment will be made under this Section 5(b) in respect of Excluded
Securities (as defined in the Warrant). If the Company enters into a Variable
Rate Transaction, despite the prohibition set forth in the Securities Purchase
Agreement, the Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the lowest possible conversion price at which such
securities may be converted or exercised. The Company shall notify the Holder in
writing, no later than one (1) Business Day following the issuance of any Common
Stock or Common Stock Equivalents subject to this Section 5(b), indicating
therein the applicable issuance price, or applicable reset price, exchange
price, conversion price and other pricing terms (such notice, the “Dilutive
Issuance Notice”). For purposes of clarification, whether or not the Company
provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the
occurrence of any Dilutive Issuance, the Holder is entitled to receive a number
of Conversion Shares based upon the Base Conversion Price on or after the date
of such Dilutive Issuance, regardless of whether the Holder accurately refers to
the Base Conversion Price in the Notice of Conversion.

 

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c) Default. If (i) the SEC notifies the Company that the Common Stock will no
longer be registered under the Exchange Act either at the time of such notice or
at some future date, or (ii) the Company fails to pay all amounts due hereunder
on or prior to the date which is ten (10) days following the occurrence of an
Event of Default hereunder, then thereafter the Conversion Price hereunder shall
be discounted by fifty (50%) percent as set forth in Section 4(b) above.

 

d) Subsequent Rights Offerings. If the Company, at any time while any amounts
due under the Note are outstanding, shall issue rights, options or warrants to
all holders of Common Stock (and not to Holder) entitling them to subscribe for
or purchase shares of Common Stock at a price per share that is lower than the
single lowest sale price for the thirty (30) Trading Days immediately preceding
the date of such subsequent rights offering, then the Conversion Price shall be
multiplied by a fraction of which the denominator shall be the number of shares
of the Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of additional shares of Common Stock offered for
subscription or purchase, and of which the numerator shall be the number of
shares of the Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of shares which the aggregate offering price of the
total number of shares issued (assuming delivery to the Company in full of all
consideration payable upon exercise of such rights, options or warrants) would
purchase at such single lowest sale price for the thirty (30) Trading Days
immediately preceding the date of such subsequent rights offering. Such
adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants.

 

e) Pro Rata Distributions. If the Company, at any time while this Note is
outstanding, distributes to all holders of Common Stock (and not to the Holder)
evidences of its indebtedness or assets (including cash and cash dividends) or
rights or warrants to subscribe for or purchase any security (other than the
Common Stock, which shall be subject to Section 5(b)), then in each such case
the Conversion Price shall be adjusted by multiplying such Conversion Price in
effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be single lowest sale price for the thirty (30) Trading Days
immediately preceding the date of such distribution, and of which the numerator
shall be single lowest sale price for the thirty (30) Trading Days immediately
preceding the date of such distribution, less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one (1) outstanding share of the Common Stock as
determined by the Board of Directors of the Company in good faith. In either
case the adjustments shall be described in a statement delivered to the Holder
describing the portion of assets or evidences of indebtedness so distributed or
such subscription rights applicable to one (1) share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.

 

  13

 

 

f) Fundamental Transaction. If, at any time while this Note is outstanding the
Company effects any merger or consolidation of the Company with or into another
Person, (B) the Company effects any sale of all or substantially all of its
assets in one transaction or a series of related transactions, (C) any tender
offer or exchange offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender or exchange
their shares for other securities, cash or property, or (D) the Company effects
any reclassification 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 (any such occurrence, 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, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of one (1) share of Common Stock (the “Alternate
Consideration”). For purposes of any such conversion, the determination of the
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 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. To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new Note consistent with the foregoing
provisions and evidencing the Holder’s right to convert such Note into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this Section 5(e) and insuring
that this Note (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.

 

g) Calculations. All calculations under this Section 5 shall be made to two (2)
decimal places 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.

 

h) Notice to the Holder.

 

i. Adjustment to Conversion Price. Whenever the Conversion Price is adjusted
pursuant to any provision of this Section 5, the Company shall promptly deliver
to each Holder a notice setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.

 

  14

 

 

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 stockholders 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, of 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 seven (7) Business 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. The Holder is entitled to convert this Note during the seven (7)
Business Day period commencing on the date of such notice through the effective
date of the event triggering such notice.

 

Section 6. Prepayment/Redemption. This Note may be prepaid on or before the date
which is seven (7) months from the Original Issue Date (the “Prepayment Date”),
provided, that an additional premium of one hundred percent (100%) of the then
principal balance shall be due and payable upon such prepayment together with
the payment of one hundred percent (100%) of the then principal balance (i.e., a
total of two (2) times such principal balance), together with any and all
accrued interest, penalties and charges of whatever nature and provided further,
that prior to the date such repayment is to be effective, Holder shall continue
to have the right to convert this Note as provided herein and provided further,
that it shall have given the Holder fourteen (14) days’ prior and irrevocable
written notice of same. After such Prepayment Date, the Company may not prepay
this Note without the prior written consent of the Holder.

 

  15

 

 

Section 7. Negative Covenants. As long as any portion of this Note remains
outstanding, unless the Holder shall have otherwise given prior written consent,
the Company shall not, and shall not permit any of its Subsidiaries (whether or
not a Subsidiary on the Original Issue Date) to, directly or indirectly:

 

a) other than Permitted Indebtedness and indebtedness which ranks junior to this
Note, 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 or surety;

 

b) other than Permitted Liens, and such Liens as may be required by the
Company’s primary lending bank to enter into, create, incur, assume or suffer to
exist any Liens of any kind, 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;

 

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 to (a) the Conversion Shares or Warrant Shares as
permitted or required under the Transaction Documents and (b) repurchases of
Common Stock or Common Stock Equivalents of departing employees of the Company,
provided that such repurchases shall not exceed an aggregate of $25,000 for all
officers and directors during the term of this Note;

 

e) except for the Note and the Permitted Indebtedness, repay, repurchase or
offer to repay, repurchase or otherwise acquire any Indebtedness, other than
regularly scheduled principal and interest payments as such terms are in effect
as of the Closing Date;

 

f) pay cash dividends or cash distributions on any equity securities of the
Company;

 

g) 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 any of the foregoing.

 

Section 8. 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 default in the payment of (A) the principal amount of the Note or (B)
interest, liquidated damages and other amounts owing to the Holder on the Note,
as and when the same shall become due and payable (whether on a Conversion Date
or the Maturity Date or by acceleration or otherwise);

 

  16

 

 

ii. the Company shall fail to observe or perform any other covenant or agreement
contained in the promissory note evidencing the Permitted Indebtedness, this
Note, the Securities Purchase Agreement, the Warrant Agreement or the
Registration Rights Agreement (other than a breach by the Company of its
obligations to deliver shares of Common Stock to the Holder upon conversion,
which breach is addressed in clause (x) below);

 

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 any of
the Transaction Documents, including without limitation any of the Note;

 

iv. any representation or warranty made in this Note, any other Transaction
Documents, any written statement pursuant hereto or thereto 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 Subsidiary shall be subject to a Bankruptcy Event;

 

vi. the Company or any Subsidiary shall default on any of its obligations under
any mortgage, credit 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 $100,000, 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;

 

vii. if at any time the Common Stock shall not be listed or quoted for trading
on OTC Pink or another trading market and shall not resume listing or quotation
for trading thereon within five (5) trading days;

 

viii. the Company shall be a party to any Change of Control Transaction (except
a Change of Control in respect to the Holder) or Fundamental Transaction or
shall agree to sell or dispose of all or substantially all of its assets in one
transaction or a series of related transactions (whether or not such sale would
constitute a Change of Control Transaction);

 

ix. if the Company is not subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act or, subject to permitted extensions, has failed to
file all reports required to be filed thereunder during the then preceding
twelve (12) months (or such shorter period that the Company was required to file
such reports) except for the Company’s annual report on Form 10-K for the year
ended October 31, 2018;

 

  17

 

 

x. the Company shall fail for any reason to deliver certificates to a Holder as
provided in Section 4(d) 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;

 

xi. any monetary judgment, writ or similar final judicial or arbitration process
shall be entered or filed against the Company, any subsidiary or any of their
respective property or other assets for more than $50,000, and such judgment,
writ or similar final process shall remain unvacated, unbonded or unstayed for a
period of thirty (30) calendar days;

 

xii. The Company shall have failed to fully effectuate an increase in its number
of authorized shares of Common Stock from 1,500,000,000 to 7,500,000,000 within
ninety (90) days of the Closing Date; or

 

xiii. The occurrence of the events described in Section 5(c)(ii) hereof.

 

b) Remedies Upon Event of Default. If any Event of Default occurs and has not
been cured within thirty (30) calendar days of the date of the default itself,
then (a) the outstanding principal amount of this Note, plus accrued but unpaid
interest, liquidated damages in the amount of 100% of the then principal balance
of this Note, and all other amounts owing in respect thereof through the date of
acceleration, shall become, at the Holder’s election, immediately due and
payable in cash at the Mandatory Default Amount; (b) The Warrants shall become
exercisable in full at the default then in effect, as provided in Section 1(b)
of the Warrant Agreement; and (c) the Conversion Price shall be discounted as
set forth in Section 5(c) hereof. After the occurrence of any Event of Default,
the interest rate on this Note shall accrue at an interest rate equal to the
Default Rate. Upon the payment in full of the Mandatory Default 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, 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 hereunder and the
Holder shall have all rights as a holder of this Note until such time, if any,
as the Holder receives full payment pursuant to this Section 8(b). No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.

 

  18

 

 

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 email, by
facsimile, or sent by a nationally recognized overnight courier service,
addressed to the Company, at the address set forth above or in the Securities
Purchase Agreement, or such other email address or facsimile number or address
as the Company may specify for such purpose by notice to the Holder delivered in
accordance with this Section 9. Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by email, by facsimile, or sent by a nationally recognized
overnight courier service addressed to the Holder at the email address,
facsimile number or address of the Holder appearing on the books of the Company,
or if no such email address, facsimile number or address appears, at the
principal place of business of the Holder. Except as may otherwise be provided
herein, any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile or by email prior to
5:30 p.m. (New York City time) on a Trading Day, with electronic confirmation of
such delivery, (ii) the first (1st) Trading Day immediately following the date
of transmission, if such notice or communication is delivered via facsimile or
by email not on a Trading Day or between 5:30 p.m. (New York City time) and
11:59 p.m. (New York City time) on any date, with electronic confirmation of
such delivery, (iii) the second (2nd) Business 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. The address, facsimile and email address for such notices and
communications shall be as set forth in the Securities Purchase Agreement.

 

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. This Note ranks pari passu with the note representing the Permitted
Indebtedness but superior and prior to all other notes now or hereafter issued
under the terms set forth herein.

 

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.

 

  19

 

 

d) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of 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 the interpretation, enforcement and
defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in New York County, New York (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 hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), 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, upon
delivery, 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 either 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 reasonable attorney’s fees and other costs
and expenses reasonably 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. Any waiver by the Company or the
Holder must be in writing.

 

f) 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 indenture, 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 impeded 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.

 

  20

 

 

g) 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.

 

h) 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.

 

i) Assumption. Any successor to the Company or any surviving entity in a
Fundamental Transaction shall (i) assume, prior to such Fundamental Transaction,
all of the obligations of the Company under this Note and the other Transaction
Documents pursuant to written agreements in form and substance satisfactory to
the Holder (such approval not to be unreasonably withheld or delayed) and (ii)
issue to the Holder a new Note of such successor entity evidenced by a written
instrument substantially similar in form and substance to this Note, including,
without limitation, having a principal amount and interest rate equal to the
principal amount and the interest rate of this Note and having similar ranking
to this Note, which shall be satisfactory to the Holder (any such approval not
to be unreasonably withheld or delayed). The provisions of this Section 9(i)
shall apply similarly and equally to successive Fundamental Transactions and
shall be applied without regard to any limitations of this Note. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns, including any purchaser of this Note.

 

j) Usury. This Note shall be subject to the anti-usury limitations contained in
the Securities Purchase Agreement.

 

k) New York Civil Procedure Law and Rules Section 3213. This Note shall be
deemed an unconditional obligation of the Company for the payment of money and,
without limitation to any other remedies of the Holder, may be enforced against
the Company by summary proceeding pursuant to New York Civil Procedure Law and
Rules Section 3213 or any similar rule or statute in the jurisdiction where
enforcement is sought. For purposes of such rule or statute, any other document
or agreement to which the Holder and the Company are parties or which the
Company delivered to the Holder, which may be convenient or necessary to
determine the Holder’s rights hereunder or the Company’s obligations to the
Holder are deemed a part of this Note, whether or not such other document or
agreement was delivered together herewith or was executed apart from this Note.

 

*********************

 

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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.

 

  Verus International Inc., Inc.         By:
                                                    Name: Anshu Bhatnagar  
Title: Chief Executive Officer

 

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ANNEX A

 

NOTICE OF CONVERSION

 

The undersigned hereby elects to convert principal under the Convertible Note of
VERUS INTERNATIONAL, INC., a Delaware corporation (the Company”), into shares of
common stock of the Company 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 the Note, as determined in accordance
with Section 13(d) of the Exchange Act or that compliance with same has been
waived.

 

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 pursuant to any prospectus.

 

Conversion calculations:

 

  Date to Effect Conversion:_____________________________________      
Principal Amount of Note to be Converted:________________________       Interest
Accrued on Account   of Conversion at
Issue:_______________________________________       Number of shares of Common
Stock to be issued:_________________  
_________________________________________________________      
Signature:_________________________________________________      
Name:____________________________________________________       Address for
Delivery of Common Stock Certificates:_______________  
_________________________________________________________  
_________________________________________________________       Or       DWAC
Instructions:       Broker No:___________________   Account No:_________________

 

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