THIS NOTE MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE ALIENATED OR ENCUMBERED WITHOUT THE PRIOR WRITTEN CONSENT OF THE
BORROWER.
 
 
$200,000.00
State of Utah
February 23, 2011

BUYER TRUST DEED NOTE #1
 
FOR VALUE RECEIVED, John M. Fife, an individual (the “Borrower”), hereby
promises to pay to A5 Laboratories Inc., a Nevada corporation (the “Lender,” and
together with the Borrower, the “Parties”), the principal sum of $200,000.00
together with all accrued and unpaid interest thereon, fees incurred or other
amounts owing hereunder, all as set forth below in this Buyer Trust Deed Note #1
(this “Note”). This Note is issued pursuant to that certain Note and Warrant
Purchase Agreement of even date herewith, entered into by and between the
Borrower and the Lender (the “Purchase Agreement”), pursuant to which the Lender
issued to the Borrower that certain Secured Convertible Promissory Note in the
amount of $2,545,000.00 (the “Lender Note”) and a warrant to purchase shares of
the Company’s Common Stock (as defined in the Purchase Agreement). All terms
used herein but not otherwise defined shall have the meanings ascribed thereto
in the Purchase Agreement.
 
1.           Principal and Interest. Interest shall accrue on the unpaid
principal balance and any unpaid late fees or other fees under this Note at a
rate of 5.0% per annum until the full amount of the principal and fees has been
paid. Notwithstanding any provision to the contrary herein, in no event shall
the applicable interest rate at any time exceed the maximum interest rate
allowed under applicable law, as provided in Section 12 below. The entire unpaid
principal balance and all accrued and unpaid interest, if any, shall be due and
payable on or before the earlier of (i) fifty (50) months from the date hereof,
or (ii) so long as the Conversion Shares (as defined in the Lender Note) are
then freely saleable under Rule 144 promulgated under the Securities Act of
1933, as amended, the later of (A) the date on which the Outstanding Balance (as
defined in the Lender Note) owed by the Lender under the Lender Note is equal to
or less than $2,200,000.00, and (B) October 23, 2011 (the “Maturity Date”).
 
2.           Payment. Unless prepaid, all principal and accrued interest under
this Note is payable in one lump sum on the Maturity Date. All payments of
interest and principal shall be (i) in lawful money of the United States of
America, and (ii) in the form of immediately available funds. All payments shall
be applied first to costs of collection, if any, then to accrued and unpaid
interest, and thereafter to principal. Payment of principal and interest
hereunder shall be delivered to the Lender at the address furnished to the
Borrower for that purpose.
 
3.           Prepayment by the Borrower. The Borrower may, in his sole and
absolute discretion, pay, without penalty, all or any portion of the outstanding
balance along with any accrued but unpaid interest on this Note at any time
prior to the Maturity Date.
 
4.           Security. The payment of this Note is secured by that certain Trust
Deed (the “Trust Deed”) of even date herewith executed by the Borrower, as
Trustor, in favor of the Lender, as Beneficiary, encumbering certain real
property of the Borrower, as more specifically set forth in the Trust Deed, all
the terms and conditions of which are hereby incorporated and made a part of
this Note.  The Lender covenants and agrees to release the Trust Deed pursuant
to the terms of Section 5 below.
 
 
 

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5.           Release. The Lender covenants and agrees that simultaneous with the
receipt of this Note, duly executed by the Borrower, it shall execute and
deliver a Request for Full Reconveyance substantially in the form attached
hereto as Exhibit A (the “Request”), which will request that the trustee under
the Trust Deed release the Trust Deed upon satisfaction of the conditions for
release of the Trust Deed set forth in the Escrow Agreement (as defined in the
Purchase Agreement). An escrow agent (the “Escrow Agent”), mutually satisfactory
to the Borrower and the Lender, shall hold the Request in escrow, subject to the
condition that the Escrow Agent may not record the a deed of reconveyance until
all of the conditions for release of the Trust Deed set forth in the Escrow
Agreement have been satisfied. In accordance with the terms of the Escrow
Agreement and the Request, a deed of reconveyance shall be recorded (and thereby
the Trust Deed reconveyed) the earlier of (i) the first date on which the Buyer
Notes (as defined in the Purchase Agreement) are repaid in full, or (ii) six
months and three days following the date the Trust Deed is recorded (the
“Release Date”).  For avoidance of doubt, after the Release Date, there shall be
no collateral securing this Note.
 
6.           Right of Offset. Notwithstanding anything to the contrary herein or
in any other Transaction Document, in the event of (i) the occurrence of any
Event of Default (as defined in the Lender Note) under the Lender Note or any
other note issued by Lender in connection with the Purchase Agreement, or (ii) a
breach of any material term, condition, representation, warranty, covenant or
obligation of the Lender under any Transaction Document, the Borrower shall be
entitled to deduct and offset any amount owing by the Lender under the Lender
Note from any amount owed by the Borrower under this Note.  In the event that
the Borrower’s exercise of its offset rights under this Section 6 results in the
full satisfaction of the Borrower’s obligations under this Note, then the Lender
shall return this Note to the Borrower for cancellation or, in the event this
Note has been lost, stolen or destroyed, a lost note affidavit in a form
reasonably acceptable to the Borrower.
 
7.           Default. If any of the events specified below shall occur (each, an
“Event of Default”) the Lender may declare the unpaid principal balance together
with all accrued and unpaid interest thereon, fees incurred or other amounts
owing hereunder immediately due and payable, by notice in writing to the
Borrower.  If any default, other than a Payment Default (as defined below), is
curable, then the default may be cured (and no Event of Default will have
occurred) if the Borrower, after receiving written notice from the Lender
demanding cure of such default, either (a) cures the default within fifteen (15)
days, or (b) if the cure requires more than fifteen (15) days, immediately
initiates steps that the Lender deems in the Lender’s reasonable discretion to
be sufficient to cure the default and thereafter diligently continues and
completes all reasonable and necessary steps sufficient to produce compliance as
soon as reasonably practical. Each of the following events shall constitute an
Event of Default:
 
(a)           Failure to Pay. The Borrower’s failure to make any payment when
due and payable under the terms of this Note (a “Payment Default”);
 
 
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(b)           Breaches of Covenants. The Borrower shall fail to observe or
perform any other covenant, obligation, condition or agreement contained in this
Note;
 
(c)           Representations and Warranties. Any representation, warranty,
certificate, or other statement (financial or otherwise) made or furnished by or
on behalf of the Borrower to the Lender in writing in connection with this Note,
or as an inducement to the Lender to enter into the Purchase Agreement, shall be
false, incorrect, incomplete or misleading in any material respect when made or
furnished; and
 
(d)           Involuntary Bankruptcy. If any involuntary petition is filed under
any bankruptcy or similar law or rule against the Borrower, and such petition is
not dismissed within 60 days, or a receiver, trustee, liquidator, assignee,
custodian, sequestrator or other similar official is appointed to take
possession of any of the assets or properties of the Borrower or any guarantor.
 
8.           Binding Effect; Assignment. This Note shall be binding on the
Parties and their respective heirs, successors, and assigns; provided, however,
that the Lender shall not assign any of its rights hereunder without the prior
written consent of the Borrower.
 
9.           Governing Law; Venue. The terms of this Note shall be construed in
accordance with the laws of the State of Utah as applied to contracts entered
into by Utah residents within the State of Utah which contracts are to be
performed entirely within the State of Utah.  With respect to any disputes
arising out of or related to this Note, the Parties consent to the exclusive
personal jurisdiction of, and venue in, the state courts located in Salt Lake
County, State of Utah (or in the event of federal jurisdiction, the United
States District Court for the District of Utah), and hereby waive, to the
maximum extent permitted by law, any objection, including any objection based on
forum non conveniens, to the bringing of any such proceeding in such
jurisdiction or to any claim that such venue of the suit, action or proceeding
is improper.
 
10.         Compliance with Applicable Law. The Borrower agrees that the
obligations evidenced by this Note constitute an exempted transaction under the
Truth-In-Lending Act, 15 U.S.C. Section 1601, et seq. and such obligations
constitute a business loan which comes within the purview of Section 4(l)(c) of
“An Act in Relation to the Rule of Interest and Lending of Money,” approved May
24, 1879, as amended, 815 ILCS 205/4(l)(a).
 
11.         Customer Identification–USA Patriot Act Notice. The Lender hereby
notifies the Borrower that pursuant to the requirements of the USA Patriot Act
(Title III of Pub. L. 107-56, signed into law October 26, 2001) (the “Act”), and
the Lender’s policies and practices, the Lender is required to obtain, verify
and record certain information and documentation that identifies the Borrower,
which information includes the name and address of the Borrower and such other
information that will allow the Lender to identify the Borrower in accordance
with the Act.
 
 
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12.         Lawful Interest. It being the intention of the Lender and the
Borrower to comply with all applicable laws with regard to the interest charged
hereunder, it is agreed that, notwithstanding any provision to the contrary in
this Note or the other Transaction Documents, no such provision, including
without limitation any provision of this Note providing for the payment of
interest or other charges, shall require the payment or permit the collection of
any amount  in excess of the maximum amount of interest permitted by law to be
charged for the use or detention, or the forbearance in the collection, of all
or any portion of the indebtedness evidenced by this Note or by any extension or
renewal hereof (“Excess Interest”). If any Excess Interest is provided for, or
is adjudicated to be provided for, in this Note or the other Transaction
Documents, then in such event:
 
(a)           the provisions of this Section shall govern and control;
 
(b)           the Borrower shall not be obligated to pay any Excess Interest;
 
(c)           any Excess Interest that the Lender may have received hereunder
shall, at the option of the Lender, be (i) applied as a credit against the
principal balance due under this Note or accrued and unpaid interest thereon not
to exceed the maximum amount permitted by law, or both, (ii) refunded to the
Borrower, or (iii) any combination of the foregoing;
 
(d)           the applicable interest rate or rates shall be automatically
subject to reduction to the maximum lawful rate allowed to be contracted for in
writing under the applicable governing usury laws, and this Note and the
Transaction Documents shall be deemed to have been, and shall be, reformed and
modified to reflect such reduction in such interest rate or rates; and
 
(e)           the Borrower shall not have any action or remedy against the
Lender for any damages whatsoever or any defense to enforcement of this Note or
arising out of the payment or collection of any Excess Interest.
 
13.         Pronouns. Regardless of their form, all words shall be deemed
singular or plural and shall have the gender as required by the text.
 
14.         Headings. The various headings used in this Note as headings for
sections or otherwise are for convenience and reference only and shall not be
used in interpreting the text of the section in which they appear and shall not
limit or otherwise affect the meanings thereof.
 
15.         Time of Essence. Time is of the essence with this Note.
 
16.         Severability. If any part of this Note is construed to be in
violation of any law, such part shall be modified to achieve the objective of
the Parties to the fullest extent permitted by law and the balance of this Note
shall remain in full force and effect.
 
17.         Attorneys’ Fees. If any action at law or in equity is necessary to
enforce this Note or to collect payment under this Note, the Lender shall be
entitled to recover reasonable attorneys’ fees directly related to such
enforcement or collection actions.
 
 
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18.         Amendments and Waivers; Remedies. No failure or delay on the part of
a Party hereto in exercising any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to a
Party hereto at law, in equity or otherwise. Any amendment, supplement or
modification of or to any provision of this Note, any waiver of any provision of
this Note, and any consent to any departure by either Party from the terms of
any provision of this Note, shall be effective (i) only if it is made or given
in writing and signed by the Borrower and the Lender and (ii) only in the
specific instance and for the specific purpose for which made or given.
 
19.         Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if it is sent by
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient, as set forth in the Purchase Agreement. Any
Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth in the Purchase
Agreement using any other means (including personal delivery, expedited courier,
messenger service, facsimile, ordinary mail, or electronic mail), but no such
notice, request, demand, claim or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient or receipt is confirmed electronically or by return mail.  Any Party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Party notice in
any manner herein set forth.
 
20.         Final Note. This Note, together with the other Transaction
Documents, contains the complete understanding and agreement of the Borrower and
the Lender and supersedes all prior representations, warranties, agreements,
arrangements, understandings, and negotiations. THIS NOTE, TOGETHER WITH THE
OTHER TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY ALLEGED PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
 
[Remainder of page intentionally left blank]
 
 
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IN WITNESS WHEREOF, the Parties have executed this Note as of the date set forth
above.

 
BORROWER:
         
John M. Fife, individually

ACKNOWLEDGED, ACCEPTED AND AGREED:
 
A5 LABORATORIES INC.

By:
   
Name:
   
Title:
 

[Signature page to Buyer Trust Deed Note #1]
 
 
 

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