Seaniemac International, Ltd.

Secured Convertible Promissory Note

 

Issuance Date: December 2, 2013 U.S. $667,500.00

 

FOR VALUE RECEIVED, Seaniemac International, Ltd., a Nevada corporation (the
“Company”), hereby promises to pay to the order of Iliad Research and Trading,
L.P., a Delaware limited partnership, or its registered assigns (the “Holder”),
the initial principal sum of $667,500.00 (the “Original Principal Amount”), and
any additional advances and other amounts that may accrue or become due under
the terms of this Secured Convertible Promissory Note (this “Note”) when due,
whether upon the Maturity Date, on any Installment Date with respect to the
Installment Amount due on such Installment Date (each as defined below),
acceleration, redemption or otherwise (in each case in accordance with the terms
hereof), and to pay interest (“Interest”) on any Outstanding Balance (as defined
below) at the applicable interest rate as set forth herein, whether upon any
Installment Date, the Maturity Date or acceleration, conversion, redemption or
otherwise (in each case in accordance with the terms hereof). Certain
capitalized terms used herein are defined in Attachment 1 attached hereto and
incorporated herein by this reference. For purposes hereof, the term
“Outstanding Balance” means the Original Principal Amount (including all
Tranches, whether Conversion Eligible Tranches or not), as reduced or increased,
as the case may be, pursuant to the terms hereof for redemption, conversion or
otherwise, plus any accrued but unpaid Interest, collection and enforcements
costs, and any other fees or charges (including without limitation Late Charges
(as defined below)) incurred under this Note or under the Agreement (defined
below).

 

This Note is issued pursuant to that certain Securities Purchase Agreement dated
December 2, 2013, as the same may be amended from time to time (the
“Agreement”), by and between the Company and the Holder.

 

1. PAYMENTS OF PRINCIPAL; PREPAYMENT. On each Installment Date (which includes
the Maturity Date), the Company shall pay to the Holder an amount equal to the
Installment Amount due on such Installment Date in accordance with Section 8.
Additionally, so long as no Event of Default (as defined below) shall have
occurred, the Company may, in its sole and absolute discretion and upon giving
the Holder not less than five (5) Trading Days written notice (a “Prepayment
Notice”), pay in cash all or any portion of the Outstanding Balance at any time
prior to the Maturity Date; provided that in the event the Company elects to
prepay all or any portion of the Outstanding Balance, it shall pay to the Holder
125% of the portion of the Outstanding Balance the Company elects to prepay,
without regard to Conversion Eligible Tranches (the “Prepayment Premium”).

 

2. INTEREST; INTEREST RATE. The Company acknowledges that the Original Principal
Amount of this Note as of the date set forth above as the Issuance Date (the
“Issuance Date”) exceeds the Purchase Price (as defined in the Agreement) and
that such excess consists of (a) the OID (as defined in the Agreement) in the
amount of $60,000.00 and (b) the Transaction Expense Amount (as defined in the
Agreement) in the amount of $5,000.00. The Carried Transaction Expense Amount
and $20,000.00 of the OID shall be fully earned and charged to the Company as of
the Issuance Date and paid to the Holder as part of the Original Principal
Amount as set forth in this Note. Without regard to Conversion Eligible Tranches
(defined below), Interest on the Outstanding Balance shall accrue from the
Issuance Date at the rate of eight percent (8%) per annum, provided that upon
the occurrence of an Event of Default, Interest shall accrue on the Outstanding
Balance both before and after judgment at the rate of twenty-two percent (22%)
per annum, as set forth in Section 4.3(d) hereof. All Interest calculations
hereunder shall be computed on the basis of a 360-day year comprised of twelve
(12) thirty (30) day months, shall compound daily and shall be payable in
accordance with the terms of this Note. 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. All payments
owing hereunder shall be in lawful money of the United States of America or
Conversion Shares, as provided for herein, and delivered to Holder at the
address furnished to the Company for that purpose. All payments shall be applied
first to (a) costs of collection, if any, then to (b) fees and charges, if any,
then to (c) accrued and unpaid Interest, and thereafter to (d) principal.

 

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3. CONVERSION OF NOTE. At any time after the date that is one hundred eighty
(180) days from the Issuance Date, at the option of the Holder, this Note is
convertible into validly issued, fully paid and non-assessable shares of Common
Stock, on the terms and conditions set forth in this Section 3.

 

3.1. Conversion Right.

 

(a) Subject to the provisions of Section 3.4, at any time or times on or after
the Issuance Date, the Holder shall be entitled to convert any portion of the
Outstanding Balance into validly issued, fully paid and non-assessable shares of
Common Stock (the “Section 3 Conversion Shares”) in accordance with Section 3.3,
calculated using the Conversion Rate (as defined below); provided, however,
that, notwithstanding any other provision contained in this Note, the conversion
by the Holder of any portion of the Outstanding Balance shall only be
exercisable in five (5) tranches (each, a “Tranche”), consisting of (i) an
initial Tranche in an amount equal to $227,500.00 and any interest, costs, fees
or charges (including without limitation Late Charges) accrued thereon or added
thereto under the terms of this Note and the other Transaction Documents (as
defined in the Agreement) (“Tranche #1”), and (ii) four (4) additional Tranches,
in the amounts of $110,000.00, $110,000.00, $110,000.00 and $110,000.00,
respectively, plus any interest, costs, fees or charges (including without
limitation Late Charges) accrued thereon or added thereto under the terms of
this Note and the other Transaction Documents (each, a “Subsequent Tranche”).
Tranche #1 shall correspond to the Initial Cash Purchase Price (as defined in
the Agreement), $20,000.00 of the OID (as defined in the Agreement) and the
Transaction Expense Amount, and may be converted any time subsequent to the
Issuance Date. The first Subsequent Tranche shall correspond to Buyer Note #1
and $10,000.00 of the OID, the second Subsequent Tranche shall correspond to
Buyer Note #2 and $10,000.00 of the OID, the third Subsequent Tranche shall
correspond to Buyer Note #3 and $10,000.00 of the OID, and the fourth Subsequent
Tranche shall correspond to Buyer Note #4 and $10,000.00 of the OID (as each
such Buyer Note is defined in the Agreement). The Holder’s right to convert any
portion of any of the Subsequent Tranches is conditioned upon the Holder’s
payment in full of the Buyer Note corresponding to such Subsequent Tranche (upon
the satisfaction of such condition, such Subsequent Tranche becomes a
“Conversion Eligible Tranche”). For the avoidance of doubt, subject to the other
terms and conditions hereof, Tranche #1 shall be deemed a Conversion Eligible
Tranche as of the Issuance Date for all purposes hereunder and may be converted
in whole or in part at any time subsequent to the Issuance Date, and each
Subsequent Tranche that becomes a Conversion Eligible Tranche may be converted
in whole or in part at any time subsequent to the first date on which such
Subsequent Tranche becomes a Conversion Eligible Tranche. For all purposes
hereunder, Conversion Eligible Tranches shall be converted (or redeemed, as
applicable) in order of the lowest-numbered Conversion Eligible Tranche. At all
times hereunder, the aggregate amount of any costs, fees or charges (including
without limitation Late Charges) incurred by or assessable against the Company
hereunder, including, without limitation, any fees, charges or premiums incurred
in connection with an Event of Default, shall be added to the lowest-numbered
then-current Conversion Eligible Tranche.

 

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(b) The Company shall not issue any fraction of a share of Common Stock upon any
conversion. All shares issuable upon each conversion of this Note shall be
aggregated for purposes of determining whether such conversion would result in
the issuance of a fractional share. If the issuance would result in the issuance
of a fraction of a share of Common Stock, the Company shall round such fraction
of a share of Common Stock up to the nearest whole share. The Company shall pay
any and all transfer, stamp, issuance and similar taxes that may be payable with
respect to the issuance and delivery of Section 3 Conversion Shares.

 

3.2. Conversion Rate. The number of Section 3 Conversion Shares issuable upon
conversion of any portion of the Outstanding Balance pursuant to Section 3.1(a)
shall be determined by dividing (x) the applicable Conversion Amount by (y) the
Conversion Price (such formula is referred to herein as the “Conversion Rate”).

 

(a) “Conversion Amount” means the portion of the Outstanding Balance to be
converted.

 

(b) “Conversion Price” means, as of any Conversion Date or other date of
determination, $0.12, subject to adjustment as provided herein.

 

3.3. Mechanics of Conversion.

 

(a) Conversion by the Holder. To convert any Conversion Amount into shares of
Common Stock on any date, the Holder shall deliver (whether via email, facsimile
or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such
date (a “Conversion Date”), a copy of an executed notice of conversion
substantially in the form attached hereto as Exhibit A (the “Conversion Notice”)
to the Company. If required by Section 3.3(c), within five (5) Trading Days
following a conversion of this Note as aforesaid, the Holder shall surrender
this Note to a reputable overnight courier for delivery to the Company (or an
indemnification undertaking with respect to this Note in the case of its loss,
theft or destruction as contemplated by Section 15.2). On or before the first
(1st) Trading Day following the date of receipt of a Conversion Notice, the
Company shall transmit by facsimile or email an acknowledgment of confirmation,
in the form attached hereto as Exhibit B, of receipt of such Conversion Notice
to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or
before the close of business on the third (3rd) Trading Day following the date
of receipt of a Conversion Notice (the “Delivery Date”), the Company shall,
provided that all DWAC Eligible Conditions are then satisfied, credit the
aggregate number of Section 3 Conversion Shares to which the Holder shall be
entitled to the account specified on the Conversion Notice via the DWAC system.
If all DWAC Eligible Conditions are not then satisfied, the Company shall
instead issue and deliver (via reputable overnight courier) to the address as
specified in the Conversion Notice, a certificate, registered in the name of the
Holder or its designee, for the number of Section 3 Conversion Shares to which
the Holder shall be entitled; provided, however, that, in addition to any other
rights or remedies that Holder may have under this Note, such number of shares
issued by certificate rather than via the DWAC system shall be increased by 5%
for each conversion that occurs more than six (6) months after the Issuance
Date. For the avoidance of doubt, the Company has not met its obligation to
deliver Section 3 Conversion Shares by the Delivery Date unless the Holder or
its broker, as applicable, has actually received the shares electronically into
the applicable account, or if the DWAC Eligible Conditions are not then
satisfied, has actually received the certificate representing the applicable
Section 3 Conversion Shares no later than the close of business on the relevant
Delivery Date pursuant to the terms set forth above. If this Note is physically
surrendered for conversion pursuant to Section 3.3(c) and the Outstanding
Balance of this Note is greater than the principal portion of the Conversion
Amount being converted, then the Company shall as soon as practicable and in no
event later than three (3) Trading Days after receipt of this Note and at its
own expense, issue and deliver to the Holder (or its designee) a new Note (in
accordance with Section 15.4)) representing the Outstanding Balance not
converted. The Person or Persons entitled to receive the shares of Common Stock
issuable upon a conversion of this Note shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the Conversion Date.
In the event of a partial conversion of this Note pursuant hereto, the principal
amount converted shall be deducted from the Conversion Eligible Tranche(s) set
forth in the applicable Conversion Notice.

 

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(b) Company’s Failure to Timely Deliver. Failure for any reason whatsoever to
issue any portion of the Common Stock by the applicable due date in the manner
required under any section of this Note shall be a “Conversion Failure”. Upon
the occurrence of a Conversion Failure, in addition to all other remedies
available to the Holder, (1) the Company shall pay in cash to the Holder on each
day after such third (3rd) Trading Day that the issuance of such shares of
Common Stock is not timely effected (not to exceed the highest of (i) $10,000,
(ii) 50% of the Conversion Amount, and (iii) 10% of the Original Principal
Amount) an amount equal to the greater of (A) $2,000.00 per day and (B) 2% of
the product of (i) the sum of the number of shares of Common Stock not issued to
the Holder on a timely basis and to which the Holder is entitled, multiplied by
(ii) the Closing Sale Price of the Common Stock on the Trading Day immediately
preceding the last possible date which the Company could have issued such shares
of Common Stock to the Holder without violating the provisions of this Note; and
(2) with respect to Section 3 Conversion Shares, the Holder, upon written notice
to the Company, may void its Conversion Notice with respect to, and retain or
have returned (as the case may be) any portion of this Note that has not been
converted pursuant to the applicable Conversion Notice, provided that the
voiding of a Conversion Notice shall not affect the Company’s obligations to
make any payments which have accrued or are owed to the Holder prior to the date
of such notice pursuant to this Section 3.3(b) or otherwise. Notwithstanding the
foregoing, a Conversion Failure shall not exist to the extent shares of Common
Stock are not issued by the Company in order to comply with the limitations set
forth in Section 3.4 hereof. Upon the occurrence of a Conversion Failure (unless
Holder elects to void the Conversion Notice), in addition to such failure being
considered an Event of Default hereunder, for purposes of Section 7.1 the
Company shall also be deemed to have issued the applicable shares of Common
Stock on the latest possible permitted date and pursuant to the terms set forth
herein, with Holder entitled to all the rights and privileges associated with
such deemed issued shares (the “Deemed Conversion Issuance”).

 

(c) Registration; Book-Entry. The Company shall maintain a register (the
“Register”) for the recordation of the name and address of the holders of all or
any portion of this Note and the principal amount of this Note held by such
holder (the “Registered Note”). The entries in the Register shall be conclusive
and binding for all purposes absent manifest error. The Company and the holder
shall treat each Person whose name is recorded in the Register as the owner of
this Note for all purposes (including, without limitation, the right to receive
payments of principal and Interest hereunder) notwithstanding notice to the
contrary. The Registered Note may be assigned, transferred or sold in whole or
in part only by registration of such assignment or sale on the Register. The
Registered Note shall not be assigned, transferred or sold without the prior
written consent of the Company, which shall not be unreasonably withheld;
provided, however, that Holder may assign, transfer or sell the Registered Note
without the need to obtain the consent of the Company if all of the Buyer Notes
(as defined in the Agreement) have been paid in full or all payment obligations
of the Holder thereunder have otherwise been completely offset and satisfied
pursuant to the Holder Offset Right (as defined below) or the Company Offset
Right (as defined below). Upon its receipt of a request to assign, transfer or
sell all or part of the Registered Note by the holder thereof, the Company shall
record the information contained therein in the Register and issue one or more
new Registered Notes in the same aggregate principal amount as the principal
amount of the surrendered Registered Note to the designated assignee or
transferee pursuant to Section 15. Notwithstanding anything to the contrary in
this Section 3.3(c), the Holder may assign this Note or any portion thereof to
its Affiliate without delivering a request to assign or sell this Note to the
Company and the recordation of such assignment or sale in the Register (a
“Related Party Assignment”); provided, that (A) the Company may continue to deal
solely with such assigning or selling Holder unless and until such Holder has
delivered a request to assign or sell this Note or portion thereof to the
Company for recordation in the Register; (B) the failure of such assigning or
selling Holder to deliver a request to assign or sell such Note or portion
thereof to the Company shall not affect the legality, validity, or binding
effect of such assignment or sale; and (C) such assigning or selling Holder
shall, acting solely for this purpose as a non-fiduciary agent of the Company,
maintain a register (the “Related Party Register”) comparable to the Register on
behalf of the Company, and any such assignment or sale shall be effective upon
recordation of such assignment or sale in the Related Party Register.
Notwithstanding anything to the contrary set forth in this Section 3, upon
conversion of any portion of this Note in accordance with the terms hereof, the
Holder shall not be required to physically surrender this Note to the Company
unless (A) the entire Outstanding Balance of this Note is being converted (in
which event this Note shall be delivered to the Company as contemplated by
Section 3.3(a)) or (B) the Holder has provided the Company with prior written
notice (which notice may be included in a Conversion Notice) requesting
reissuance of this Note upon physical surrender of this Note. The Holder and the
Company shall maintain records showing the Outstanding Balance and Late Charges
converted and/or paid (as the case may be) and the dates of such conversions
and/or payments (as the case may be) or shall use such other method, reasonably
satisfactory to the Holder and the Company, so as not to require physical
surrender of this Note upon conversion.

 

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3.4. Limitations on Conversions.

 

(a) Notwithstanding anything to the contrary contained in this Note or the other
Transaction Documents, if at any time the Holder shall or would be issued shares
of Common Stock under any of the Transaction Documents, but such issuance would
cause the Holder (together with its Affiliates) to beneficially own a number of
shares exceeding 4.99% of the number of shares of Common Stock outstanding on
such date (including for such purpose the shares of Common Stock issuable upon
such issuance) (the “Maximum Percentage”), then the Company must not issue to
the Holder shares of the Common Stock which would exceed the Maximum Percentage.
For purposes of this Section, beneficial ownership of Common Stock will be
determined under the 1934 Act. The shares of Common Stock issuable to the Holder
that would cause the Maximum Percentage to be exceeded are referred to herein as
the “Ownership Limitation Shares”. The Company will reserve the Ownership
Limitation Shares for the exclusive benefit of the Holder. From time to time,
the Holder may notify the Company in writing of the number of the Ownership
Limitation Shares that may be issued to the Holder without causing the Holder to
exceed the Maximum Percentage. Upon receipt of such notice, the Company shall be
unconditionally obligated to immediately issue such designated shares to the
Holder, with a corresponding reduction in the number of the Ownership Limitation
Shares. Notwithstanding the forgoing, the term “4.99%” above shall be replaced
with “9.99%” at such time as the Market Capitalization of the Common Stock is
less than $10,000,000.00. Notwithstanding any other provision contained herein,
if the term “4.99%” is replaced with “9.99%” pursuant to the preceding sentence,
such increase to “9.99%” shall remain at 9.99% until increased, decreased or
waived by the Holder as set forth below. For purposes of this Note, the term
“Market Capitalization of the Common Stock” shall mean the product equal to (A)
the average VWAP of the Common Stock for the immediately preceding fifteen (15)
Trading Days, multiplied by (B) the aggregate number of outstanding shares of
Common Stock as reported on the Company’s most recently filed Form 10-Q or Form
10-K. By written notice to the Company, the Holder may increase, decrease or
waive the Maximum Percentage as to itself but any such waiver will not be
effective until the 61st day after delivery thereof. The foregoing 61-day notice
requirement is enforceable, unconditional and non-waivable and shall apply to
all Affiliates and assigns of the Holder.

 

(b) To the extent the limitation set forth in subsection (a) immediately above
applies, the determination of whether this Note shall be convertible (vis-à-vis
other convertible, exercisable or exchangeable securities owned by the Holder or
any of its Affiliates) and of which such securities shall be convertible,
exercisable or exchangeable (as among all such securities owned by the Holder
and its Affiliates) shall, subject to such Maximum Percentage limitation, be
determined on the basis of the first submission to the Company for conversion,
exercise or exchange (as the case may be). No prior inability to convert this
Note, or to issue shares of Common Stock, pursuant to this Section 3.4 shall
have any effect on the applicability of the provisions of this Section 3.4 with
respect to any subsequent determination of convertibility. For purposes of this
Section 3.4, beneficial ownership and all determinations and calculations
(including, without limitation, with respect to calculations of percentage
ownership) shall be determined in accordance with Section 13(e) of the 1934 Act
(as defined in the Agreement) and the rules and regulations promulgated
thereunder. The provisions of this Section 3.4 shall be implemented in a manner
otherwise than in strict conformity with the terms of this Section 3.4 to
correct this Section 3.4 (or any portion hereof) which may be defective or
inconsistent with the intended Maximum Percentage beneficial ownership
limitation herein contained or to make changes or supplements necessary or
desirable to properly give effect to such Maximum Percentage limitation. The
limitations contained in this Section 3.4 shall apply to a successor Holder of
this Note. The holders of Common Stock shall be third party beneficiaries of
this Section 3.4 and the Company may not waive this Section 3.4 without the
consent of holders of a majority of its Common Stock. For any reason at any
time, upon the written or oral request of the 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, including by virtue of any prior
conversion or exercise of convertible or exercisable securities into Common
Stock, including, without limitation, pursuant to this Note.

 

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4. RIGHTS UPON EVENT OF DEFAULT.

 

4.1. Event of Default. Each of the following events shall constitute an “Event
of Default” as of the date such event first occurred:

 

(a) Failure to Pay. The Company shall fail to make any payment when due and
payable under the terms of this Note including, without limitation, any payment
of costs, fees, interest, principal (including, without limitation, the
Company’s failure to deliver any Installment Amount when due or to pay any
redemption payments or amounts hereunder), or other amount due hereunder or
under any other Transaction Document.

 

(b) Failure to Deliver or Process Shares. The Company (or its Transfer Agent, as
applicable) (i) fails to issue Section 3 Conversion Shares by the Delivery Date;
(ii) fails to issue any Installment Conversion Shares, True-Up Conversion
Shares, Installment Certificated Shares, or True-Up Certificated Shares, as
applicable, within the time periods required by Section 8; (iii) announces (or
threatens in writing) that it will not honor its obligation to issue Conversion
Shares to Holder in accordance with Section 3 and/or Section 8 of this Note;
(iv) fails to transfer or cause its Transfer Agent to transfer or issue
(electronically or in certificated form, as applicable) any Conversion Shares to
Holder as and when required by this Note; (v) directs its Transfer Agent not to
transfer, or delays, impairs, and/or hinders its Transfer Agent in transferring
or issuing (electronically or in certificated form, as applicable) any
Conversion Shares to the Holder as and when required by this Note; or (vi) as
applicable, fails to remove (or directs its Transfer Agent not to remove or
impairs, delays, and/or hinders its Transfer Agent from removing) any
restrictive legend (or to withdraw any stop transfer instructions in respect
thereof) on any certificate for any Section 3 Conversion Shares, Installment
Certificated Shares, or True-Up Certificated Shares as and when required by this
Note (or makes any written announcement, statement or threat that it does not
intend to honor any such obligations).

 

(c) Judgment. A final judgment or judgments for the payment of money aggregating
in excess of $100,000 are rendered against the Company and/or any of its
Subsidiaries and which judgments are not, within thirty (30) calendar days after
the entry thereof, bonded, discharged or stayed pending appeal, or are not
discharged within thirty (30) calendar days after the expiration of such stay;
provided, however, any judgment which is covered by insurance or an indemnity
from a credit worthy party shall not be included in calculating the $100,000
amount set forth above so long as the Company provides the Holder a written
statement from such insurer or indemnity provider (which written statement shall
be reasonably satisfactory to the Holder) to the effect that such judgment is
covered by insurance or an indemnity and the Company or such Subsidiary (as the
case may be) will receive the proceeds of such insurance or indemnity within
thirty (30) calendar days of the issuance of such judgment.

 

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(d) Breach of Obligations; Covenants. The Company or its Subsidiaries, if any,
shall fail to observe or perform any other covenant, obligation, condition or
agreement contained in this Note or any of the other Transaction Documents,
including without limitation (i) all reporting covenants and covenants to timely
file all required quarterly and annual reports and any other filings required
pursuant to Rule 144, and (ii) strict compliance with all provisions of Sections
3, 8, and 10 of this Note.

 

(e) Breach of Representations and Warranties. Any representation, warranty,
certificate, or other statement (financial or otherwise) made or furnished by or
on behalf of the Company to the Holder in writing included in this Note or in
connection with any of the Transaction Documents, or as an inducement to the
Holder to enter into this Note or any of the other Transaction Documents, shall
be false, incorrect, incomplete or misleading in any material respect when made
or furnished or becomes false thereafter.

 

(f) Receiver or Trustee. The Company shall make an assignment for the benefit of
creditors, or apply for, or consent to, or otherwise be subject to, the
appointment of a receiver, trustee, liquidator, assignee, custodian,
sequestrator, or other similar official for a substantial part of its property
or business.

 

(g) Failure to Pay Debts. If any of the Company’s assets are assigned to its
creditors, or upon the occurrence of any default under, redemption of or
acceleration prior to maturity of any Indebtedness of the Company or any of its
Subsidiaries in an amount equal to $100,000 or more.

 

(h) Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings, voluntary or involuntary, for relief under any
bankruptcy law or any law for the relief of debtors shall be instituted by or
against the Company.

 

(i) Delisting of Common Stock. The suspension from trading or the failure of the
Common Stock to be trading on an Eligible Market for a period of five (5)
consecutive Trading Days or for more than an aggregate of ten (10) Trading Days
in any 365-day period.

 

(j) Liquidation. Any dissolution, liquidation, or winding up of the Company or
any substantial portion of its business.

 

(k) Cessation of Operations. Any cessation of operations by the Company or the
Company admits it is otherwise generally unable to pay its debts as such debts
become due; provided, however, that any disclosure of the Company’s ability to
continue as a “going concern” shall not be an admission that the Company cannot
pay its debts as they become due.

 

(l) Maintenance of Assets. The failure by the Company to maintain any material
intellectual property rights, personal, real property or other assets which are
necessary to conduct its business (whether now or in the future).

 

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(m) Financial Statement Restatement. The restatement of any financial statements
filed by the Company with the SEC for any date or period from two years prior to
the date of this Note and until this Note is no longer outstanding, if the
result of such restatement would, by comparison to the unrestated financial
statement, have constituted a material adverse effect on the rights of the
Company with respect to this Note or the Agreement.

 

(n) Reverse Split. The Company effectuates a reverse split of its Common Stock
without twenty (20) Trading Days prior written notice to the Holder.

 

(o) Replacement of Transfer Agent. In the event that the Company proposes to
replace its Transfer Agent, the Company fails to provide, prior to the effective
date of such replacement, a fully executed Transfer Agent Letter (as defined by
the Agreement) in a form as required to be initially delivered pursuant to the
Agreement (including but not limited to the provision to irrevocably reserve
shares of Common Stock for the Share Reserve) signed by the successor transfer
agent and delivered to the Company and the Holder.

 

(p) Governmental Action. If any governmental or regulatory authority takes or
institutes any action against the Company, a Subsidiary, or an executive officer
or director of the Company, that will materially affect the Company’s financial
condition, operations or ability to pay or perform the Company’s obligations
under this Note.

 

(q) Transfer Agent Reserve; Share Reserve. The Company’s failure to maintain the
Transfer Agent Reserve (as defined in the Agreement) at any time following the
Issuance Date or the Share Reserve (as defined in the Agreement) at any time
following the date that is six (6) months from the Issuance Date.

 

(r) Certification of Equity Conditions. A false or inaccurate certification
(including, without limitation, a false or inaccurate deemed certification) by
the Company that the Equity Conditions are satisfied, that there has been no
Equity Conditions Failure or as to whether any Event of Default has occurred.

 

(s) DWAC Eligibility. The failure of any of the DWAC Eligible Conditions to be
satisfied at any time during which the Company has obligations under this Note.

 

(t) Cross Default. Notwithstanding anything to the contrary contained in this
Note or the other Transaction Documents, a breach or default by the Company of
any covenant or other term or condition contained in (i) any of the other
Transaction Documents, or (ii) any Other Agreements (defined below); shall, at
the option of the Holder, be considered a default under this Note, in which
event the Holder shall be entitled (but in no event required) to apply all
rights and remedies of the Holder under the terms of this Note. The Company
hereby agrees to notify the Holder in writing within three (3) Trading Days
after any such default; provided, however, any filing of an 8-K that identifies
any such default shall not be deemed notice under this Section 4.1(t). “Other
Agreements” means, collectively, (1) all existing and future agreements and
instruments between, among or by the Company (or a Subsidiary), on the one hand,
and the Holder (or an Affiliate of Holder), on the other hand, and (2) any
financing agreement or a material agreement that affects the Company’s ongoing
business operations. For the avoidance of doubt, all existing and future loan
transactions between the Company and the Holder and its Affiliates will be
cross-defaulted with each other loan transaction and with all other existing and
future debt of the Company to the Holder.

 

(u) Reduced Market Capitalization of the Common Stock. If at any time the Market
Capitalization of the Common Stock is less than five (5) times the Original
Principal Amount.

 

8

 

 

Each subsection of this Section 4.1 shall be interpreted and applied
independently, and no such subsection shall be deemed to limit or qualify any
other subsection in any manner whatsoever.

 

4.2. Notice of an Event of Default.

 

(a) Company’s Obligation to Provide Default Notice. Upon the occurrence of an
Event of Default, the Company shall within one (1) Trading Day deliver written
notice thereof via email, facsimile or reputable overnight courier (with next
day delivery specified) (an “Event of Default Notice”) to the Holder.

 

(b) Holder’s Right to Provide Default Notice. If Holder becomes aware of the
occurrence of an Event of Default, Holder may at any time thereafter (but shall
not be obligated to) provide an Event of Default Notice to the Holder via email,
facsimile or reputable overnight courier (with next day delivery specified). Any
remedies set forth in an Event of Default Notice provided by Holder to the
Company will not waive Holder’s rights to assert any other remedies available
under the Transaction Documents.

 

(c) Default Date. For each Event of Default, the “Default Date” shall mean the
date of the first occurrence of such Event of Default, regardless of the date
that an Event of Default Notice is actually given by one party to the other.

 

4.3. Remedies; Redemption Right After Default.

 

(a) At any time and from time to time after the earlier of the Holder’s receipt
of an Event of Default Notice and the Holder becoming aware of an Event of
Default, the Holder may, at Holder’s option, require the Outstanding Balance to
be increased to an amount equal to the Outstanding Balance multiplied by the
Default Premium (the “Default Adjustment”); provided, however, that a Default
Adjustment may only be applied to two separate Events of Default under this
Note, and not to any additional Events of Default. A Default Adjustment will be
calculated as of the applicable Default Date and the entire amount of such
increase shall be added to the lowest-numbered then-current Conversion Eligible
Tranche. Holder’s election to apply a Default Adjustment does not preclude
Holder from applying any other remedies that may be available under the
Transaction Documents.

 

(b) At any time and from time to time after the earlier of the Holder’s receipt
of an Event of Default Notice and the Holder becoming aware of an Event of
Default, 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. An Event of Default Redemption Notice shall automatically trigger a
Default Adjustment, subject to the limitations set forth in Section 4.3(a)
hereof. The Event of Default Redemption Notice shall indicate the portion of the
Outstanding Balance (without regard to Conversion Eligible Tranches) the Holder
is electing to redeem (the “Default Redemption Amount”). Redemptions required by
this Section 4.3(b) shall be made in accordance with the provisions of Section
10. Notwithstanding anything to the contrary in this Section 4, but subject to
Section 3.4, until the Default Redemption Amount (together with Late Charges
thereon) is paid in full pursuant to and in accordance with the terms set forth
in Section 10, the Outstanding Balance (together with any Late Charges thereon),
may be converted, in whole or in part from time to time, by the Holder into
Common Stock pursuant to the other terms of this Note. In the event of a partial
redemption of this Note pursuant hereto, the applicable Default Redemption
Amount shall be deducted from the Tranches set forth in the Event of Default
Redemption Notice. Notwithstanding the foregoing, this Section 4.3(b) shall not
apply to an Event of Default arising under Section 4.1(h) (Bankruptcy).

 

9

 

 

(c) Upon the occurrence of an Event of Default occurring under Section 4.1(h)
due to the institution by or against the Company of any bankruptcy proceeding
for relief under any bankruptcy law or any law for the relief of debtors, (i)
the Outstanding Balance shall automatically increase to an amount equal to the
Outstanding Balance immediately prior to such Event of Default multiplied by the
Default Premium, and (ii) all amounts owed under this Note (without regard to
Conversion Eligible Tranches) shall accelerate and be immediately due and
payable, all without the need for any further notice to or action by any party
hereunder.

 

(d) As of the first Default Date, if any, this Note (without regard to
Conversion Eligible Tranches) shall thereafter accrue interest at the rate of
1.83% per month (or 22% per annum), compounding daily, whether before or after
judgment; provided, however, that 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.

 

(e) After any Event of Default arising under Section 4.1(b), Holder will be
entitled to the remedies set forth in Section 3.3(b) hereof.

 

(f) Notwithstanding and in addition to any other provision contained herein, if
Section 3 Conversion Shares are delivered to Holder in certificated form rather
than electronic form, the Outstanding Balance shall automatically increase by an
amount equal to the decline in Value (defined below), if any, of such shares
between the time the certificate representing such shares was required to be
delivered to the Holder hereunder, and the date such shares become Free Trading.
The Company agrees to use its best efforts to cause such shares to become Free
Trading. “Value”, as used in this subsection, shall mean the five (5) Trading
Day trailing average VWAP for the applicable shares.

 

5. RIGHTS UPON FUNDAMENTAL TRANSACTION.

 

5.1. Assumption. The Company shall not enter into or be party to a Fundamental
Transaction unless (i) the Successor Entity assumes in writing all of the
obligations of the Company under this Note and the other Transaction Documents
in accordance with the provisions of this Section 5.1 pursuant to written
agreements in form and substance satisfactory to the Holder and approved by the
Holder, in its sole discretion, prior to such Fundamental Transaction, including
agreements to 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, including, without limitation, having a principal
amount and interest rate equal to the principal amounts then outstanding and the
interest rates of this Note, having similar conversion rights as this Note and
having similar ranking to this Note, and being satisfactory to the Holder in its
sole discretion, (ii) the Successor Entity is a publicly traded corporation
whose common stock is quoted on or listed for trading on an Eligible Market, and
(iii) the Company has received the Holder’s prior written consent to enter into
such Fundamental Transaction. Upon the occurrence of any 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. Upon consummation of a
Fundamental Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon conversion or redemption of this
Note at any time after the consummation of such Fundamental Transaction, in lieu
of the shares of the Company’s Common Stock (or other securities, cash, assets
or other property (except such items still issuable under Section 6, which shall
continue to be receivable thereafter) issuable upon the conversion or redemption
of this Note prior to such Fundamental Transaction), such shares of the publicly
traded common stock (or their equivalent) of the Successor Entity (including its
Parent Entity) which the Holder would have been entitled to receive upon the
happening of such Fundamental Transaction had this Note been converted
immediately prior to such Fundamental Transaction (without regard to any
limitations on the conversion of this Note), as adjusted in accordance with the
provisions of this Note. The provisions of this Section 5 shall apply similarly
and equally to successive Fundamental Transactions and shall be applied without
regard to any limitations on the conversion of this Note.

 

10

 

 

5.2. Notice of a Fundamental Transaction; Redemption Right. No sooner than
twenty (20) Trading Days nor later than ten (10) Trading Days prior to the
consummation of a Fundamental Transaction, but not prior to the public
announcement of such Fundamental Transaction, the Company shall deliver written
notice thereof via facsimile and reputable overnight courier to the Holder (a
“Fundamental Transaction Notice”). At any time during the period beginning after
the Holder’s receipt of a Fundamental Transaction Notice or the Holder becoming
aware of a Fundamental Transaction if a Fundamental Transaction Notice is not
delivered to the Holder in accordance with the immediately preceding sentence
(as applicable) and ending on the later of twenty (20) Trading Days after (i)
consummation of such Fundamental Transaction and (ii) the date of receipt of
such Fundamental Transaction Notice, the Holder may require the Company to
redeem all or any portion of this Note by delivering written notice thereof
(“Fundamental Transaction Redemption Notice”) to the Company, which Fundamental
Transaction Redemption Notice shall indicate the portion of the Outstanding
Balance (without regard to Conversion Eligible Tranches) the Holder is electing
to redeem (the “Fundamental Transaction Redemption Amount”). The Fundamental
Transaction Redemption Amount shall be redeemed by the Company in cash pursuant
to and in accordance with Section 10 and shall have priority to payments to
stockholders in connection with such Fundamental Transaction. Notwithstanding
anything to the contrary in this Section 5, but subject to Section 3.4, until
the Fundamental Transaction Redemption Amount (together with any Late Charges
thereon) is paid in full pursuant to and in accordance with the terms set forth
in Section 10, the Outstanding Balance (together with any Late Charges thereon),
may be converted, in whole or in part from time to time, by the Holder into
Common Stock pursuant to Section 3. In the event of a partial redemption of this
Note pursuant hereto, the applicable Fundamental Transaction Redemption Amount
shall be deducted from the Tranches set forth in the Fundamental Transaction
Redemption Notice.

 

5.3. Paid in Full. Notwithstanding anything to the contrary in this Section 5,
in no case shall any Fundamental Transaction be consummated prior to the
prepayment in full of the Outstanding Balance of this Note, with such prepayment
subject to the Prepayment Premium for the entire Outstanding Balance.

 

6. DISTRIBUTION OF ASSETS; RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER
CORPORATE EVENTS.

 

6.1. Distribution of Assets. Without the prior written consent of Holder, the
Company agrees not to declare or make any dividend or other distributions of its
assets (or rights to acquire its assets) to any or all 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).

 

11

 

 

6.2. Purchase Rights. In addition to any adjustments pursuant to Section 7
below, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class 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 all Conversion Eligible Tranches
(without taking into account any other limitations or restrictions on the
convertibility of this Note) in existence immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights, or, if
no such record is taken, the date as of which the record holders of Common Stock
are to be determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder’s right to participate in any
such Purchase Right would result in the Holder exceeding the Maximum Percentage,
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 Maximum Percentage).

 

6.3. Other Corporate Events. In addition to and not in substitution for any
other rights hereunder, prior to the consummation of any Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for shares of Common
Stock (a “Corporate Event”), the Company shall make appropriate provision to
insure that the Holder will thereafter have the right to receive upon a
conversion of this Note (i) in addition to the shares of Common Stock receivable
upon such conversion, such securities or other assets to which the Holder would
have been entitled with respect to such shares of Common Stock had such shares
of Common Stock been held by the Holder upon the consummation of such Corporate
Event (without taking into account any limitations or restrictions on the
convertibility of this Note) or (ii) in lieu of the shares of Common Stock
otherwise receivable upon such conversion, such securities or other assets
received by the holders of shares of Common Stock in connection with the
consummation of such Corporate Event in such amounts as the Holder would have
been entitled to receive had this Note initially been issued with conversion
rights for the form of such consideration (as opposed to shares of Common Stock)
using a conversion rate for such consideration commensurate with the Conversion
Rate. Provision made pursuant to the preceding sentence shall be in a form and
substance satisfactory to the Holder. The provisions of this Section 6 shall
apply similarly and equally to successive Corporate Events and shall be applied
without regard to any limitations on the conversion or redemption of this Note.

 

7. RIGHTS UPON ISSUANCE OF SECURITIES.

 

7.1. Adjustment of Conversion Price upon Issuance of Common Stock. Except with
respect to Excluded Securities, if and whenever on or after the Issuance Date
the Company issues or sells Common Stock, Options, Convertible Securities, or
upon any conversion or Deemed Issuance, or in accordance with subsections (a)
through (g) below is deemed to have issued or sold, any shares of Common Stock
(including without limitation the issuance or sale of shares of Common Stock
owned or held by or for the account of the Company, but excluding any Excluded
Securities issued or sold or deemed to have been issued or sold) for a
consideration per share (the “New Issuance Price”) less than a price equal to
the Conversion Price in effect immediately prior to such issue, conversion, or
sale or deemed issuance or sale (such Conversion Price then in effect is
referred to herein as the “Applicable Price”) (the foregoing a “Dilutive
Issuance”), then, immediately after such Dilutive Issuance, the Conversion Price
then in effect shall be reduced to an amount equal to the New Issuance Price.
For the avoidance of doubt, if the New Issuance Price is greater than the
Applicable Price, there shall be no adjustment to the Conversion Price. For
purposes of determining the adjusted Conversion Price under this Section 7.1,
the following shall be applicable:

 

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(a) Issuance of Options. If the Company in any manner grants or sells any
Options and the lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of any such Option
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per share. For
purposes of this Section 7.1(a), the “lowest price per share for which one share
of Common Stock is issuable upon the exercise of any such Options or upon
conversion, exercise or exchange of any Convertible Securities issuable upon
exercise of any such Option” shall be equal to (1) the lower of (x) the sum of
the lowest amounts of consideration (if any) received or receivable by the
Company with respect to any one share of Common Stock upon the granting or sale
of such Option, upon exercise of such Option and upon conversion, exercise or
exchange of any Convertible Security issuable upon exercise of such Option and
(y) the lowest exercise price set forth in such Option for which one share of
Common Stock is issuable upon the exercise of any such Options or upon
conversion, exercise or exchange of any Convertible Securities issuable upon
exercise of any such Option minus (2) the sum of all amounts paid or payable to
the holder of such Option (or any other Person) upon the granting or sale of
such Option, upon exercise of such Option and upon conversion, exercise or
exchange of any Convertible Security issuable upon exercise of such Option plus
the value of any other consideration received or receivable by, or benefit
conferred on, the holder of such Option (or any other Person). Except as
contemplated below, no further adjustment of the Conversion Price shall be made
upon the actual issuance of such share of Common Stock or of such Convertible
Securities upon the exercise of such Options or upon the actual issuance of such
share of Common Stock upon conversion, exercise or exchange of such Convertible
Securities.

 

(b) Issuance of Convertible Securities. If the Company in any manner issues or
sells any Convertible Securities and the lowest price per share for which one
share of Common Stock is issuable upon the conversion, exercise or exchange
thereof is less than the Applicable Price, then such share of Common Stock shall
be deemed to be outstanding and to have been issued and sold by the Company at
the time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this Section 7.1(b), the “lowest price per share
for which one share of Common Stock is issuable upon the conversion, exercise or
exchange thereof” shall be equal to (1) the lower of (x) the sum of the lowest
amounts of consideration (if any) received or receivable by the Company with
respect to one share of Common Stock upon the issuance or sale of the
Convertible Security and upon conversion, exercise or exchange of such
Convertible Security and (y) the lowest conversion price set forth in such
Convertible Security for which one share of Common Stock is issuable upon
conversion, exercise or exchange thereof minus (2) the sum of all amounts paid
or payable to the holder of such Convertible Security (or any other Person) upon
the issuance or sale of such Convertible Security plus the value of any other
consideration received or receivable by, or benefit conferred on, the holder of
such Convertible Security (or any other Person). Except as contemplated below,
no further adjustment of the Conversion Price shall be made upon the actual
issuance of such share of Common Stock upon conversion, exercise or exchange of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of the
Conversion Price has been or is to be made pursuant to other provisions of this
Section 7.1, except as contemplated below, no further adjustment of the
Conversion Price shall be made by reason of such issue or sale.

 

(c) Change in Option Price or Rate of Conversion. If the purchase or exercise
price provided for in any Options, the additional consideration, if any, payable
upon the issue, conversion, exercise or exchange of any Convertible Securities,
or the rate at which any Convertible Securities are convertible into or
exercisable or exchangeable for shares of Common Stock increases or decreases at
any time, the Conversion Price in effect at the time of such increase or
decrease shall be adjusted to the Conversion Price which would have been in
effect at such time had such Options or Convertible Securities provided for such
increased or decreased purchase price, additional consideration or increased or
decreased conversion rate (as the case may be) at the time initially granted,
issued or sold. For purposes of this Section 7.1(c), if the terms of any Option
or Convertible Security that was outstanding as of the Issuance Date are
increased or decreased in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the shares of Common
Stock deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such increase or decrease. No
adjustment pursuant to this Section 7.1 shall be made if such adjustment would
result in an increase of the Conversion Price then in effect.

 

13

 

 

(d) Calculation of Consideration Received. If any Option or Convertible Security
is issued or deemed issued in connection with the issuance or sale or deemed
issuance or sale of any other securities of the Company, together comprising one
integrated transaction, (x) such Option or Convertible Security (as applicable)
will be deemed to have been issued for consideration equal to the Black Scholes
Consideration Value thereof and (y) the other securities issued or sold or
deemed to have been issued or sold in such integrated transaction shall be
deemed to have been issued for consideration equal to the difference of (I) the
aggregate consideration received by the Company minus (II) the Black Scholes
Consideration Value of each such Option or Convertible Security (as applicable).
If any shares of Common Stock, Options or Convertible Securities are issued or
sold or deemed to have been issued or sold for cash, the consideration received
therefor will be deemed to be the net amount received by the Company therefor.
If any shares of Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of such consideration
received by the Company will be the fair value of such consideration, except
where such consideration consists of publicly traded securities, in which case
the amount of consideration received by the Company for such securities will be
the average VWAP of such security for the five (5) Trading Day period
immediately preceding the date of receipt. If any shares of Common Stock,
Options or Convertible Securities are issued to the owners of the non-surviving
entity in connection with any merger in which the Company is the surviving
entity, the amount of consideration therefor will be deemed to be the fair value
of such portion of the net assets and business of the non-surviving entity as is
attributable to such shares of Common Stock, Options or Convertible Securities
(as the case may be). The fair value of any consideration other than cash or
publicly traded securities will be determined jointly by the Company and the
Holder. If such parties are unable to reach agreement within ten (10) Trading
Days after the occurrence of an event requiring valuation (the “Valuation
Event”), the fair value of such consideration will be determined within five (5)
Trading Days after the tenth (10th) day following such Valuation Event by an
independent, reputable appraiser jointly selected by the Company and the Holder.
The determination of such appraiser shall be final and binding upon all parties
absent manifest error and the fees and expenses of such appraiser shall be borne
by the Company.

 

(e) Deemed Warrant Issuance. If Company fails to deliver Warrant Shares as
required by the Warrant (as both such terms are defined in the Agreement) issued
to Holder pursuant to the Transaction Documents, in addition to such failure to
act being considered an Event of Default hereunder, for purposes of this Section
7.1 the Company shall also be deemed to have issued the Warrant Shares to Holder
on the applicable date set forth in the Warrant and pursuant to the terms set
forth therein (the “Deemed Warrant Issuance”).

 

(f) Deemed Installment Issuance. If the Company (or its Transfer Agent) fails to
deliver shares as required by any portion of Section 8 or Section 8.5, in
addition to such failure to act being considered an Event of Default hereunder,
for purposes of Section 7.1, the Company shall also be deemed to have issued the
Installment Conversion Shares, True-Up Conversion Shares, Installment
Certificated Shares, or True-Up Certificated Shares, as applicable, to Holder on
the latest possible permitted date pursuant to the terms set forth in Section 8
or Section 8.5, as applicable, with Holder entitled to all the rights and
privileges associated with such deemed issued shares (the “Deemed Installment
Issuance”).

 

(g) Record Date. If the Company takes a record of the holders of shares of
Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible Securities
or (B) to subscribe for or purchase shares of Common Stock, Options or
Convertible Securities, then such record date will be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase (as the case may be).

 

14

 

 

7.2. Adjustment of Conversion Price upon Subdivision or Combination of Common
Stock. Without limiting any provision of Section 5 or Section 7.1, if the
Company at any time on or after the Issuance Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. Without limiting any provision of Section 5 or Section
7.1, if the Company at any time on or after the Issuance Date combines (by
combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination will be
proportionately increased. Any adjustment pursuant to this Section 7.2 shall
become effective immediately after the effective date of such subdivision or
combination. If any event requiring an adjustment under this Section 7.2 occurs
during the period that a Conversion Price is calculated hereunder, then the
calculation of such Conversion Price shall be adjusted appropriately to reflect
such event.

 

7.3. Other Events. In the event that the Company (or any Subsidiary) shall take
any action to which the provisions hereof are not strictly applicable, or, if
applicable, would not operate to protect the Holder from dilution or if any
event occurs of the type contemplated by the provisions of this Section 7 but
not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company’s board of directors shall in good faith
determine and implement an appropriate adjustment in the Conversion Price so as
to protect the rights of the Holder, provided that no such adjustment pursuant
to this Section 7.3 will increase the Conversion Price as otherwise determined
pursuant to this Section 7, provided further that if the Holder does not accept
such adjustments as appropriately protecting its interests hereunder against
such dilution, then the Company’s board of directors and the Holder shall agree,
in good faith, upon an independent investment bank of nationally recognized
standing to make such appropriate adjustments, whose determination shall be
final and binding and whose fees and expenses shall be borne by the Company.

 

8. COMPANY INSTALLMENT CONVERSION OR REDEMPTION. Beginning on the date that is
six (6) months after the later of (i) the Issuance Date, and (ii) the date the
Initial Cash Purchase Price is paid to the Company (the “Initial Installment
Date”), and on each applicable Installment Date thereafter, the Company shall
pay to the Holder of this Note the applicable Installment Amount due on such
date, subject to the provisions of this Section 8. Payments of the Installment
Amount may be made (a) in cash (a “Company Redemption”), (b) by converting such
Installment Amount into shares of Common Stock in accordance with this Section 8
(a “Company Conversion”), or (c) by any combination of a Company Conversion and
a Company Redemption so long as the entire amount of such Installment Amount due
shall be converted and/or redeemed by the Company on the applicable Installment
Date. Notwithstanding the foregoing, the Company will not be entitled to elect a
Company Conversion with respect to any portion of such Installment Amount and
shall be required to pay the entire amount of such Installment Amount in cash
pursuant to a Company Redemption if on the applicable Installment Notice Due
Date (defined below) there is an Equity Conditions Failure, and such failure is
not waived by the Holder as permitted herein. The portion of the Installment
Amount designated hereunder as a Company Redemption is referred to herein as the
“Company Redemption Amount” and the portion of the Installment Amount designated
for a Company Conversion is referred to herein as the “Company Conversion
Amount”.

 

15

 

 

8.1. Installment Notice. Subject to Section 8.5, on or prior to the date which
is the third (3rd) Trading Day prior to each Installment Date (each, an
“Installment Notice Due Date”), the Holder will propose an allocation between
the Company Redemption Amount and the Company Conversion Amount by delivery of a
notice to the Company by email or fax substantially in the form attached hereto
as Exhibit C-1 (each, an “Installment Notice”); provided, however, that the
Company may, at its option, elect to change such allocation by written notice to
the Holder by email or fax on or before 12:00 p.m. New York time on the
applicable Installment Date so long as the sum of the Company Redemption Amount
and the Company Conversion Amount equals the applicable Installment Amount and
so long as the Company Redemption Amount and the Company Conversion Amount, as
applicable, are transferred to the Holder no later than the Installment Date. If
the Company does not provide written notice to the Holder of a different
allocation as permitted under this Section, then the Company will be deemed to
have agreed to the allocation set forth on the applicable Installment Notice
prepared by the Holder. If the applicable Installment Amount is to be paid, in
whole or in part, pursuant to a Company Conversion, the Company must certify by
12:00 p.m. New York time on the Installment Date that there is not an Equity
Conditions Failure as of the Installment Notice Due Date. If the Company does
not modify or prepare a replacement Installment Notice on or prior to 12:00 p.m.
New York time on the applicable Installment Date, then the Company shall be
deemed to have ratified and confirmed such notice and, unless otherwise stated,
certified that there is not an Equity Conditions Failure as of the Installment
Notice Due Date. If an Equity Conditions Failure has occurred or exists as of
the applicable Installment Notice Due Date, then the Company shall identify each
such Equity Conditions Failure in a revised Installment Notice delivered to the
Holder no later than 12:00 p.m. New York time on the applicable Installment Date
and request a waiver thereof from the Holder pursuant to Section 8.4 hereof.
Notwithstanding anything herein to the contrary, if such Equity Conditions
Failure arises from a Non-Waivable Equity Condition, then the applicable
Installment Amount must be paid on the Installment Date as a Company Redemption
under Section 8.2 hereof. Subject to the preceding sentence, unless and until
the Holder delivers written notice to the Company that it will not waive such
Equity Conditions Failure, then the Company will proceed to complete a Company
Conversion under Section 8.3. If the Holder elects in writing delivered to the
Company by fax or email not to waive such Equity Conditions Failure, then any
Conversion Shares previously received for such Company Conversion will be
promptly returned to the Company and the Company will immediately after receipt
of such returned Conversion Shares pay the applicable Company Redemption Amount
to the Holder.

 

8.2. Mechanics of Company Redemption. On or before each Installment Date, the
Company must pay to the Holder in cash the applicable Company Redemption Amount
by wire transfer of immediately available funds. If the Company fails to pay the
applicable Company Redemption Amount by the applicable Installment Date, then
the Holder may from time to time by written notice to the Company elect to
convert any of the unpaid Company Redemption Amount (together with any Late
Charges thereon) pursuant to Section 3.3; provided, however, that the Default
Conversion Price will apply to any such conversion rather than the Conversion
Price described in Section 3.2(b) hereof.

 

8.3. Mechanics of Company Conversion.

 

(a) Installment Date. Subject to Section 3.4, no later than the applicable
Installment Date, the Company must deliver to the Holder’s account the
applicable Installment Conversion Shares set forth in the applicable Installment
Notice. The Holder shall be deemed the owner of such shares as of the applicable
Installment Date.

 

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(b) True-Up Date. Twenty-three (23) Trading Days after the applicable
Installment Conversion Shares delivered to the Holder under Section 8.3(a) above
become Free Trading (such date is referred to herein as the “True-Up Date”), the
Company shall deliver to the Holder’s account a number of shares of Common Stock
equal to the amount, if any, by which the True-Up Conversion Shares exceed the
applicable Installment Conversion Shares previously delivered to the Holder,
registered in the name of the Holder or its designee. So long as no Payment
Default has occurred, if the Installment Conversion Shares exceed the True-Up
Shares, then the excess will be applied toward the next Installment Conversion
Shares to be issued by the Company hereunder (unless the Outstanding Balance has
been reduced to zero, in which case the Holder will return such excess shares to
the Company). If a Payment Default has occurred and the Installment Conversion
Shares for the applicable Installment Date exceed the True-Up Conversion Shares,
then the Holder shall not be required to return to the Company any of the excess
shares or apply such excess shares to any future issuance or conversion of
shares hereunder. For each True-Up Date, the Company agrees to deliver to the
Holder by fax or email such information and calculations required under this
Section 8.3(b) substantially in the form attached hereto as Exhibit C-2.

 

(c) Failure to Delivery Shares. If the Company fails to deliver the shares
required under Section 8.3(b) by the True-Up Date, then in addition to such
failure being an Event of Default under Section 4.1(b), the Company will be
required to deliver an additional number of shares equal to ten percent (10%) of
the total undelivered shares. The addition of ten percent (10%) of the total
undelivered shares shall continue to be applied on the same day of each
successive calendar month if the Company fails to deliver the shares required
under Section 8.3(b) and this Section 8.3(c).

 

(d) Company Conversion Measuring Period. The period beginning on the applicable
Installment Notice Due Date and ending on the applicable True-Up Date is
referred to herein as the “Company Conversion Measuring Period”.

 

(e) Event of Default. If an Event of Default occurs during a Company Conversion
Measuring Period, then the Holder may elect during such time period to either
(i) return any Installment Conversion Shares delivered for such period and
adjust the Outstanding Balance as if such shares had never been issued, or (ii)
retain such Installment Conversion Shares and cause the adjustment to the
Outstanding Balance in connection therewith to equal the retained Installment
Conversion Shares multiplied by the lower of (a) the Installment Conversion
Price, and (b) the True-Up Conversion Price.

 

(f) Equity Conditions Failure. If no Equity Conditions Failure existed as of the
Installment Notice Due Date, but an Equity Conditions Failure exists as of the
applicable True-Up Date, and such is not waived as permitted herein, then, at
the option of the Holder designated in writing to the Company, the Holder may
require the Company to do any one or more of the following:

 

(i) the Company must redeem all or any part designated by the Holder of the
Company Conversion Amount for which shares have not yet been delivered to Holder
(such designated amount is referred to as the “Designated Redemption Amount”).
The Company must pay the Designated Redemption Amount to the Holder on the later
of (1) the applicable True-Up Date, and (2) three (3) Trading Days after the
Holder notifies the Company of the Designated Redemption Amount required to be
paid under this Section. The Designated Redemption Amount must be paid by wire
transfer of immediately available funds. If the Company fails to pay the
Designated Redemption Amount within the time period required by this Section,
then in addition to any other remedies set forth herein, the Designated
Redemption Amount shall automatically increase to an amount equal to the
Designated Redemption Amount multiplied by the Default Premium (with such
corresponding increase added to the Outstanding Balance); or

 

17

 

 

(ii) the Company Conversion shall be null and void with respect to the Company
Conversion Amount for which shares have not yet been delivered to the Holder;
the Outstanding Balance will be reduced by an amount equal to the retained
Installment Conversion Shares multiplied by the lower of (1) the Installment
Conversion Price, and (2) the True-Up Conversion Price; and the Holder shall be
entitled to all the rights of a holder of this Note with respect to such
remaining Company Conversion Amount, including without limitation, requiring
such remaining Company Conversion to occur after one or more subsequent written
notices (each a “Subsequent Notice”) are delivered by the Holder to the Company;
provided, however, the Conversion Price for such remaining Company Conversion
Amount shall thereafter be adjusted to equal the lesser of (Y) the Default
Conversion Price as in effect on the date on which the Holder voided the Company
Conversion and (Z) the Default Conversion Price that would be in effect on the
date on which the Holder delivers the Subsequent Notice to the Company electing
to proceed with all or a portion of the remaining Company Conversion Amount
(such date to be treated as if it were an Installment Date for the designated
Company Conversion Amount).

 

(g) Method of Delivery of Shares. All Common Stock to be delivered to the Holder
under this Section 8.3 shall be transferred via the DWAC system. Failure to do
so within the required time period shall constitute an Event of Default under
Section 4.1(b) hereof and a permanent Equity Conditions Failure. Subject to the
foregoing, if the Company is unable to deliver shares via the DWAC system, then
the Company must deliver to the Holder or its broker, via nationally recognized
overnight courier, the original Installment Certificated Shares and original
True-Up Certificated Shares, with such mailing to occur no later than the
Installment Date and the True-Up Date, respectively, registered in the name of
the Holder or its designee. So long as no Payment Default has occurred, if the
Installment Certificated Shares for the applicable True-Up Date exceed the
True-Up Certificated Shares, then the excess will be applied towards the next
Conversion Shares to be issued by the Company (unless the Outstanding Balance
has been reduced to zero, in which case the Holder will return such excess
shares to the Company). If a Payment Default has occurred and the Installment
Certificated Shares for the applicable True-Up Date exceed the True-Up
Certificated Shares, then the Holder shall not be required to return to the
Company any of the excess shares or apply such excess shares to any future
issuance or conversion of shares hereunder.

 

8.4. Waiver of Equity Conditions Failure. Notwithstanding anything in this Note
to the Contrary, the Holder may waive in writing any Equity Conditions Failure,
except for the Non-Waivable Equity Conditions. Any such waiver shall only be
made for the purposes of permitting a Company Conversion to occur under this
Section 8 and shall not be deemed a waiver of the underlying default or a
continuing waiver of a future Equity Conditions Failure. Any such waiver shall
not excuse the Company from the performance of any of its current or future
obligations under this Note.

 

8.5. Payment Default. After the occurrence of a Payment Default, the Holder may
at any time thereafter make an election by written notice to the Company to
require all subsequent Installment Dates and subsequent Installment Amounts to
be determined under this Section 8.5 (a “Section 8 Election”). After a Section 8
Election is made, the Installment Dates and the Installment Amounts will be
determined by the Holder in the Holder’s sole discretion, notwithstanding any
scheduled dates or amounts otherwise described in this Note. After a Section 8
Election, the Holder may at any time thereafter submit one or more Installment
Notices using the form attached hereto as Exhibit C-1, provided, however, that
the Holder shall be permitted to designate all or any portion of the Outstanding
Balance as the Installment Amount. The date that any such Installment Notice is
delivered by the Holder to the Company shall be deemed the Installment Notice
Due Date, with the Installment Date deemed to be three (3) Trading Days
thereafter. Except for the Holder’s right to determine the Installment Amount
and the Installment Date, all other terms in this Section 8 shall remain the
same. For the avoidance of doubt, a Section 8 Election will in no event be
deemed a waiver of any of the Holder’s other rights or remedies available under
this Note and thus the Holder may at any time thereafter declare an Event of
Default and seek those remedies available under Section 4.3 hereof, under any
other section of this Agreement or any other Transaction Document, or at law.

 

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9. TRANSFER FEES. The Company shall pay any and all transfer, stamp, issuance
and similar taxes, transfer agent fees, postage, expedite fees, and other actual
costs and fees necessary to cause the Conversion Shares to be issued to the
Holder and cleared for trading as contemplated hereunder. Any such fees or costs
paid by the Holder will be promptly reimbursed by the Company or added to the
Outstanding Balance.

 

10. HOLDER’S REDEMPTIONS. If the Holder has submitted to Company an Event of
Default Redemption Notice in accordance with Section 4.3(b), then the Company
shall pay to the Holder in cash within ten (10) Trading Days after the Company’s
receipt of such Event of Default Redemption Notice an amount equal to the
Default Redemption Amount. If the Holder has submitted to Company a Fundamental
Transaction Redemption Notice in accordance with Section 5.2, then the Company
shall pay to Holder in cash an amount equal to the Fundamental Transaction
Redemption Amount multiplied by the Default Premium (the “Fundamental
Transaction Redemption Price”) on the earlier of (i) the closing of such
Fundamental Transaction, and (ii) ten (10) Trading Days after the Company’s
receipt of such notice. Notwithstanding anything in this Note to the contrary,
the failure of the Company to pay the Default Redemption Amount under this
Section 10 shall not be considered a separate Event of Default hereunder. At any
time prior to the payment of the applicable Default Redemption Amount by the
Company, the Holder shall have the option, in lieu of redemption, to cancel the
Event of Default Redemption Notice or the Fundamental Transaction Redemption
Notice, as applicable, by written notice to the Company (the “Redemption
Cancellation Notice”). Upon the Company’s receipt of a Redemption Cancellation
Notice, (x) this Note shall thereafter be due and payable upon demand in whole
or in part, with payment of the designated Outstanding Balance being due ten
(10) Trading Days after written demand therefor from the Holder; (y) for each
conversion thereafter under Section 3 of this Note, the Conversion Price of this
Note shall be automatically adjusted with respect to each conversion under this
Note effected thereafter by the Holder to the lowest of (A) 65% of the lowest
Closing Bid Price of the Common Stock during the period beginning on and
including the date on which the applicable Redemption Notice is delivered to the
Company and ending on and including the date of the Redemption Cancellation
Notice, (B) the Market Price as of the date of the Redemption Cancellation
Notice, (C) the then current Market Price, and (D) the then current Conversion
Price; and (z) for each conversion thereafter under Section 3 of this Note,
twenty-three (23) Trading Days following Company’s delivery to the Holder of
Conversion Shares (the “Section 10 True-Up Date”), there shall be a true-up
where the number of Conversion Shares delivered shall be multiplied by the
Market Price as of the Section 10 True-Up Date and if the product thereof is
less than the Conversion Amount applicable to such conversion, the difference
shall be added to the Outstanding Balance of this Note as of the Section 10
True-Up Date. The Holder’s delivery of a Redemption Cancellation Notice and
exercise of its rights following such notice shall not affect the Company’s
obligations to make any payments of Late Charges which have accrued prior to the
date of such Redemption Cancellation Notice and shall not be deemed a waiver of
any Event of Default identified in the applicable Event of Default Redemption
Notice.

 

11. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company
will not, by amendment of its Certificate of Incorporation (as defined in the
Agreement), bylaws, or through any reorganization, transfer of assets,
consolidation, merger, scheme of arrangement, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Note, and will at all times in good
faith carry out all of the provisions of this Note and take all action as may be
required to protect the rights of the Holder of this Note. Without limiting the
generality of the foregoing, the Company (i) shall not increase the par value of
any shares of Common Stock receivable upon conversion of this Note above the
Conversion Price then in effect, (ii) shall take all such actions as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares of Common Stock upon the conversion of this
Note, and (iii) shall, so long as this Note is outstanding, take all action
necessary to maintain the Share Reserve.

 

19

 

 

12. VOTING RIGHTS. The Holder shall have no voting rights as the holder of this
Note, except as required by law and as expressly provided in this Note.

 

13. AMENDING THE TERMS OF THIS NOTE. The prior written consent of the Holder
shall be required for any change or amendment to this Note.

 

14. TRANSFER. This Note and any shares of Common Stock issued upon conversion of
this Note may be offered, sold, assigned or transferred by the Holder without
the consent of the Company.

 

15. REISSUANCE OF THIS NOTE.

 

15.1. Transfer. If this Note is to be transferred, the Holder shall surrender
this Note to the Company, whereupon the Company will forthwith issue and deliver
upon the order of the Holder a new Note (in accordance with Section 15.4),
registered as the Holder may request, representing the Outstanding Balance being
transferred by the Holder and, if less than the entire Outstanding Balance is
being transferred, a new Note (in accordance with Section 15.4) to the Holder
representing the Outstanding Balance not being transferred.

 

15.2. Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note (as to which a written certification and the
indemnification contemplated below shall suffice as such evidence), and, in the
case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary and reasonable form and, in the case of
mutilation, upon surrender and cancellation of this Note, the Company shall
execute and deliver to the Holder a new Note (in accordance with Section 15.4)
representing the Outstanding Balance.

 

15.3. Note Exchangeable for Different Denominations. This Note is exchangeable,
upon the surrender hereof by the Holder by delivery to the principal office of
the Company, for a new Note or Notes (in accordance with Section 15.4 and in
principal amounts of at least $1,000) representing in the aggregate the
Outstanding Balance of this Note, and each such new Note will represent such
portion of such Outstanding Balance as is designated by the Holder at the time
of such surrender.

 

15.4. Issuance of New Notes. Subject to Section 10, whenever the Company is
required to issue a new Note pursuant to the terms of this Note, such new Note
(i) shall be of like tenor with this Note, (ii) shall represent, as indicated on
the face of such new Note, the Outstanding Balance (or in the case of a new Note
being issued pursuant to Section 15.1 or Section 15.3, the portion of the
Outstanding Balance designated by the Holder which, when added to the
outstanding balance represented by the other new Notes issued in connection with
such issuance, does not exceed the Outstanding Balance under this Note
immediately prior to such issuance of new Notes), (iii) shall have an issuance
date, as indicated on the face of such new Note, which is the same as the
Issuance Date of this Note, (iv) shall have the same rights and conditions as
this Note, and (v) shall represent accrued and unpaid Interest and Late Charges
and other increases to the Outstanding Balance as permitted hereunder from the
Issuance Date.

 

20

 

 

16. REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS AND BREACHES. The remedies,
including without limitation the Default Premium, Prepayment Premium, and all
other charges, fees, and collection costs provided for in this Note, shall be
cumulative and in addition to all other remedies available under this Note and
any of the other Transaction Documents. 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 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 (including,
without limitation, compliance with Section 7).

 

17. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is
placed in the hands of an attorney for collection or enforcement prior to
commencing legal proceedings, 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 (b) 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 costs incurred by the Holder for such collection,
enforcement or action or in connection with such bankruptcy, reorganization,
receivership or other proceeding, including, without limitation, attorneys’ fees
and disbursements. The Company expressly acknowledges and agrees that no amounts
due under this Note shall be affected, or limited, by the fact that the Purchase
Price paid for this Note was less than the Original Principal Amount.

 

18. CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by
the Company and the Holder and shall not be construed against any Person as the
drafter hereof. The headings of this Note are for convenience of reference and
shall not form part of, or affect the interpretation of, this Note. Terms used
in this Note but defined in the other Transaction Documents shall have the
meanings ascribed to such terms on the Issuance Date in such other Transaction
Documents unless otherwise consented to in writing by the Holder.

 

19. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the
Holder in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege. No waiver shall be effective unless it is in writing
and signed by an authorized representative of the waiving party.

 

20. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the
Conversion Price, Default Conversion Price, Installment Conversion Price,
Conversion Rate, the Closing Bid Price, the Closing Sale Price, VWAP or fair
market value (as the case may be) or the arithmetic calculation of Conversion
Shares or the applicable Redemption Price (as the case may be), the Company or
the Holder (as the case may be) shall submit the disputed determinations or
arithmetic calculations (as the case may be) via facsimile (i) within two (2)
Trading Days after receipt of the applicable notice giving rise to such dispute
to the Company or the Holder (as the case may be) or (ii) if no notice gave rise
to such dispute, at any time after the Holder learned of the circumstances
giving rise to such dispute (including, without limitation, as to whether any
issuance or sale or deemed issuance or sale was an issuance or sale or deemed
issuance or sale of Excluded Securities). If the Holder and the Company are
unable to agree upon such determination or calculation within two (2) Trading
Days of such disputed determination or arithmetic calculation (as the case may
be) being submitted to the Company or the Holder (as the case may be), then the
Company shall, within two (2) Trading Days, submit via facsimile (a) the
disputed determination of the Conversion Price, Default Conversion Price,
Installment Conversion Price, Conversion Rate, the Closing Bid Price, the
Closing Sale Price, VWAP or fair market value (as the case may be) to an
independent, reputable investment bank selected by the Holder or (b) the
disputed arithmetic calculation of the Conversion Shares or any Redemption Price
(as the case may be) to the Company’s independent, outside accountant. The
Company shall cause at its expense the investment bank or the accountant (as the
case may be) to perform the determinations or calculations (as the case may be)
and notify the Company and the Holder of the results no later than ten (10)
Trading Days from the time it receives such disputed determinations or
calculations (as the case may be). Such investment bank’s or accountant’s
determination or calculation with respect to the disputes set forth in this
Section 20 (as the case may be) shall be binding upon all parties absent
demonstrable error.

 

21

 

 

21. NOTICES; PAYMENTS.

 

21.1. Notices. Whenever notice is required to be given under this Note, unless
otherwise provided herein, such notice shall be given in accordance with the
subsection of the Agreement titled “Notices.” The Company shall provide the
Holder with prompt written notice as may be required hereunder, including
without limitation the following actions (such notice to include in reasonable
detail a description of such action and the reason therefore): (i) immediately
upon any adjustment of the Conversion Price, setting forth in reasonable detail,
and certifying, the calculation of such adjustment and (ii) at least fifteen
(15) Trading Days prior to the date on which the Company closes its books or
takes a record (A) with respect to any dividend or distribution upon the Common
Stock, (B) with respect to any grant, issuances, or sales of any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property to all holders of shares of Common Stock, or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to the
Holder.

 

21.2. Currency. All dollar amounts referred to in this Note are in United States
Dollars (“U.S. Dollars”), and all amounts owing under this Note shall be paid in
U.S. Dollars. All amounts denominated in other currencies (if any) shall be
converted into the U.S. Dollar equivalent amount in accordance with the Exchange
Rate on the date of calculation. “Exchange Rate” means, in relation to any
amount of currency to be converted into U.S. Dollars pursuant to this Note, the
U.S. Dollar exchange rate as published in The Wall Street Journal on the
relevant date of calculation (it being understood and agreed that where an
amount is calculated with reference to, or over, a period of time, the date of
calculation shall be the final date of such period of time).

 

21.3. Payments. Whenever any payment of cash is to be made by the Company to any
Person pursuant to this Note, unless otherwise expressly set forth herein, such
payment shall be made in lawful money of the United States of America by wire
transfer of immediately available funds pursuant to wire transfer instructions
delivered to Company by Holder from time to time. Whenever any amount expressed
to be due by the terms of this Note is due on any day which is not a Trading
Day, the same shall instead be due on the next succeeding day which is a Trading
Day. Any amount due under the Transaction Documents which is not paid when due
shall result in a late charge being incurred and payable by the Company in an
amount equal to interest on such amount at the rate of twenty-two percent (22%)
per annum from the date such amount was due until the same is paid in full
(“Late Charge”).

 

22. CANCELLATION. After repayment or conversion of the entire Outstanding
Balance, this Note shall automatically be deemed canceled, shall be surrendered
to the Company for cancellation and shall not be reissued.

 

22

 

 

23. WAIVER OF NOTICE. To the extent permitted by law, the Company hereby
irrevocably waives demand, notice, presentment, protest and all other demands
and notices in connection with the delivery, acceptance, performance, default or
enforcement of this Note and the Agreement.

 

24. GOVERNING LAW. This Note shall be construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and
performance of this Note shall be governed by, the internal laws of the State of
Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois. The Company hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in Chicago for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. In the event that any provision of this Note is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Note.
Nothing contained herein shall be deemed or operate to preclude the Holder from
bringing suit or taking other legal action against the Company or any of its
Subsidiaries in any other jurisdiction to collect on the Company’s obligations
to the Holder, to realize on any collateral or any other security for such
obligations, or to enforce a judgment or other court ruling in favor of the
Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION
CONTEMPLATED HEREBY.

 

25. SEVERABILITY. If any provision of this Note is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this Note
so long as this Note as so modified continues to express, without material
change, the original intentions of the parties as to the subject matter hereof
and the prohibited nature, invalidity or unenforceability of the provision(s) in
question does not substantially impair the respective expectations or reciprocal
obligations of the parties or the practical realization of the benefits that
would otherwise be conferred upon the parties. The parties will endeavor in good
faith negotiations to replace the prohibited, invalid or unenforceable
provision(s) with one or more valid provisions, the effect of which comes as
close as possible to that of the prohibited, invalid or unenforceable
provision(s).

 

26. FEES AND CHARGES. The parties acknowledge and agree that upon Company’s
failure to comply with the provisions of this Note, the Holder’s damages would
be uncertain and difficult (if not impossible) to accurately estimate because of
the parties’ inability to predict future interest rates, the Holder’s increased
risk, and the uncertainty of the availability of a suitable substitute
investment opportunity for the Holder, among other reasons. Accordingly, any
fees, charges, and interest due under this Note, including without limitation
the Prepayment Premium and the Default Premium, are 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 a penalty.

 

23

 

 

27. UNCONDITIONAL OBLIGATION. Subject to the terms of the Agreement, no
provision of this Note shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, and interest on,
this Note at the time, place, and rate, and in the coin or currency or where
contemplated herein in shares of its Common Stock, as applicable, as herein
prescribed. This Note is the direct obligation of the Company and not subject to
offsets, counterclaims, defenses, credits or deductions, except as expressly
permitted herein.

 

28. DISCLOSURE. Upon receipt or delivery by the Company of any notice in
accordance with the terms of this Note, unless the Company has in good faith
determined that the matters relating to such notice do not constitute material,
non-public information relating to the Company or any of its Subsidiaries, the
Company shall within one (1) Trading Day after any such receipt or delivery,
publicly disclose such material, non-public information on a Current Report on
Form 8-K or otherwise. In the event that the Company believes that a notice
contains material, non-public information relating to the Company or any of its
Subsidiaries, the Company so shall indicate to such Holder contemporaneously
with delivery of such notice, and in the absence of any such indication, the
Holder shall be allowed to presume that all matters relating to such notice do
not constitute material, non-public information relating to the Company or its
Subsidiaries.

 

29. TIME OF THE ESSENCE. Time is expressly made of the essence of each and every
provision of this Note. If the last day of any time period stated herein shall
fall on a Saturday, Sunday or non-Trading Day, then such time period shall be
extended to the next succeeding day Trading Day.

 

30. MAXIMUM PAYMENTS. Nothing contained in this Note shall, or shall be deemed
to, establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges under this Note exceeds the
maximum permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company to the Holder and thus refunded to
the Company.

 

31. SECURITY. This Note is secured by that certain Security Agreement of even
date herewith, as the same may be amended from time to time (the “Security
Agreement”), executed by the Company in favor of the Holder encumbering all of
the Buyer Notes, as more specifically set forth in the Security Agreement, all
the terms and conditions of which are hereby incorporated into and made a part
of this Note.

 

32. OFFSET RIGHTS. Notwithstanding anything to the contrary herein or in any of
the other Transaction Documents, (a) the parties hereto acknowledge and agree
that the Holder maintains a right of offset pursuant to the terms of the Buyer
Notes that, under certain circumstances, permits the Holder to deduct amounts
owed by the Company under this Note from amounts otherwise owed by the Holder
under the Buyer Notes (the “Holder Offset Right”), and (b) in the event of the
occurrence of any Event of Default (as defined in any of the Buyer Notes or any
other note issued by the initial Holder in connection with the Agreement), or at
any other time, the Company shall be entitled to deduct and offset any amount
owing by the initial Holder under any of the Buyer Notes from any amount owed by
the Company under this Note (the “Company Offset Right”). In the event that the
Company’s exercise of the Company Offset Right results in the full satisfaction
of the Company’s obligations under this Note, the Holder shall return the
original Note to the Company marked “cancelled” or, in the event this Note has
been lost, stolen or destroyed, a lost note affidavit in a form reasonably
acceptable to the Company. For the avoidance of doubt, the Company shall not
incur the Prepayment Premium set forth in Section 1 hereof with respect to any
portions of this Note that are satisfied by way of the Company Offset Right..

 

[Remainder of page intentionally left blank]

 

24

 

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of
the Issuance Date set forth above.

 

  COMPANY:         Seaniemac International, Ltd.         By:   Name:   Title:

 

ACKNOWLEDGED, ACCEPTED AND AGREED:             HOLDER:             Iliad
Research and Trading, L.P.             By: Iliad Management, LLC, its General
Partner             By: Fife Trading, Inc., its Manager               By:      
   John M. Fife, President  

 

[Signature page to Secured Convertible Promissory Note]

 

 

 

 

ATTACHMENT 1

DEFINITIONS

 

For purposes of this Note, the following terms shall have the following
meanings:

 

A1. “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.

 

A2. “Agreement” means that certain Securities Purchase Agreement, dated as of
December 2, 2013, as may be amended from time to time, by and between the
Company and the Holder, pursuant to which the Company issued this Note.

 

A3. “Approved Stock Plan” means any stock option plan which has been approved by
the Board of Directors of the Company, pursuant to which the Company’s
securities may be issued to any employee, officer or director for services
provided to the Company.

 

A4. “Black Scholes Consideration Value” means the value of the applicable Option
or Convertible Security (as the case may be) as of the date of issuance thereof
calculated using the Black Scholes Option Pricing Model obtained from the “OV”
function on Bloomberg utilizing (i) an underlying price per share equal to the
Closing Sale Price of the Common Stock on the Trading Day immediately preceding
the public announcement of the execution of definitive documents with respect to
the issuance of such Option or Convertible Security (as the case may be), (ii) a
risk-free interest rate corresponding to the U.S. Treasury rate for a period
equal to the remaining term of such Option or Convertible Security (as the case
may be) as of the date of issuance of such Option or Convertible Security (as
the case may be), and (iii) an expected volatility equal to the greater of 100%
and the 100 day volatility obtained from the HVT function on Bloomberg
(determined utilizing a 365 day annualization factor) as of the Trading Day
immediately following the date of issuance of such Option or Convertible
Security (as the case may be).

 

A5. “Bloomberg” means Bloomberg, L.P.

 

A6. “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 Principal Market, as reported by Bloomberg, or, if the
Principal 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
Principal 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 “OTC Pink” by Pink OTC Markets Inc. (formerly
Pink Sheets LLC), and any successor thereto. 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 accordance with the procedures in Section 20. All
such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during such period.

 

A7. “Common Stock” means (i) the Company’s shares of common stock, $0.001 par
value per share, and (ii) any capital stock into which such common stock shall
have been changed or any share capital resulting from a reclassification of such
common stock.

 

A8. “Contingent Obligation” means as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to any
Indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.

 

Page 1 | Attachment 1 to Secured Convertible Promissory Note (Definitions)

 

 

A9. “Conversion Shares” means shares of Common Stock issuable by the Company
upon any conversion of this Note, including without limitation, Section 3
Conversion Shares, Installment Conversion Shares, True-Up Conversion Shares,
Installment Certificated Shares, and True-Up Certificated Shares.

 

A10. “Convertible Securities” means any stock, preferred stock, stock
appreciation rights, phantom stock, equity related rights, equity linked rights,
or other security (other than Options) that is at any time and under any
circumstances, directly or indirectly, convertible into, exercisable or
exchangeable for, or which otherwise entitles the holder thereof to acquire, any
shares of Common Stock.

 

A11. “Current Subsidiary” means any Person in which the Company on the Issuance
Date, directly or indirectly, (i) owns any of the outstanding capital stock or
holds any equity or similar interest of such Person or (ii) controls or operates
all or any part of the business, operations or administration of such Person,
and all of the foregoing, collectively, “Current Subsidiaries.”

 

A12. “Deemed Issuance” means (i) a Deemed Conversion Issuance as defined in
Section 3.3(b) hereof, (ii) a Deemed Warrant Issuance as defined in Section
7.1(e) hereof, and (iii) a Deemed Installment Issuance as defined in Section
7.1(f) hereof.

 

A13. “Default Conversion Price” means, with respect to a particular date of
determination, the lower of (i) the Conversion Price then in effect and (ii) the
Market Price as of the specified Installment Notice Due Date or the Installment
Date, as applicable. All such determinations to be appropriately adjusted for
any stock split, stock dividend, stock combination or other similar transaction
during any applicable Measuring Period.

 

A14. “Default Premium” means 125%.

 

A15. “DTC” means the Depository Trust Company.

 

A16. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer
Program.

 

A17. “DWAC” means Deposit Withdrawal at Custodian as defined by the DTC.

 

A18. “DWAC Eligible Conditions” means that (i) 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, (ii) the Company has been
approved (without revocation) by the DTC’s underwriting department, (iii) the
Transfer Agent is approved as an agent in the DTC/FAST Program, (iv) the
Conversion Shares are otherwise eligible for delivery via DWAC; (v) the Transfer
Agent does not have a policy prohibiting or limiting delivery of the Conversion
Shares via DWAC, and (vi) the Common Stock required to be delivered to the
Holder hereunder is actually delivered to the Holder using the DWAC system.

 

A19. “Eligible Market” means The New York Stock Exchange, NYSE Amex, the Nasdaq
Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the
OTC Bulletin Board, the OTCQX or the OTCQB, or the Principal Market. In no event
shall quotations provided in OTC Pink by Pink OTC Markets Inc., or its
successor, be considered an Eligible Market.

 

A20. “Equity Conditions” means: (i) with respect to the applicable date of
determination all of the Conversion Shares are freely tradable under Rule 144 or
without the need for registration under any applicable federal or state
securities laws (in each case, disregarding any limitation on conversion of this
Note); (ii) on each day during the period beginning one month prior to the
applicable date of determination and ending on and including the applicable date
of determination (the “Equity Conditions Measuring Period“), the Common Stock is
listed or designated for quotation (as applicable) on an Eligible Market and
shall not have been suspended from trading on an Eligible Market (other than
suspensions of not more than two (2) Trading Days and occurring prior to the
applicable date of determination due to business announcements by the Company);
(iii) on each day during the Equity Conditions Measuring Period, the Company
shall have delivered all shares of Common Stock issuable upon conversion of this
Note on a timely basis as set forth in Section 3 hereof and all other shares of
capital stock required to be delivered by the Company on a timely basis as set
forth in the other Transaction Documents; (iv) any shares of Common Stock to be
issued in connection with the event requiring determination may be issued in
full without violating Section 3.4 hereof (the Holder acknowledges that the
Company shall be entitled to assume that this condition has been met for all
purposes hereunder absent written notice from the Holder); (v) any shares of
Common Stock to be issued in connection with the event requiring determination
may be issued in full without violating the rules or regulations of the Eligible
Market on which the Common Stock is then listed or designated for quotation (as
applicable); (vi) on each day during the Equity Conditions Measuring Period, no
public announcement of a pending, proposed or intended Fundamental Transaction
shall have occurred which has not been abandoned, terminated or consummated;
(vii) the Company shall have no knowledge of any fact that would reasonably be
expected to cause any of the Conversion Shares to not be freely tradable without
the need for registration under any applicable state securities laws (in each
case, disregarding any limitation on conversion of this Note); (viii) on each
day during the Equity Conditions Measuring Period, the Company otherwise shall
have been in material compliance with each, and shall not have breached any,
term, provision, covenant, representation or warranty of any Transaction
Document; (ix) without limiting clause (viii) above, on each day during the
Equity Conditions Measuring Period, there shall not have occurred an Event of
Default or an event that with the passage of time or giving of notice would
constitute an Event of Default; (x) all DWAC Eligible Conditions shall be
satisfied as of each applicable Installment Notice Due Date and Installment
Date; (xi) on each Installment Notice Due Date and each Installment Date, the
average and median daily dollar volume of the Common Stock on its Principal
Market for the previous twenty-three (23) Trading Days shall be greater than
$10,000.00; and (xii) the ten (10) day average VWAP of the Common Stock is
greater than $0.01.

 

Page 2 | Attachment 1 to Secured Convertible Promissory Note (Definitions)

 

 

A21. “Equity Conditions Failure” means, with respect to a particular date of
determination, that on any day during the period commencing twenty-three (23)
Trading Days immediately prior to such date of determination and ending on such
date of determination, the Equity Conditions have not been satisfied (or waived
in writing by the Holder). If an Equity Conditions Failure is the result of the
failure to deliver shares via the DWAC system or any other Event of Default,
then the Equity Conditions Failure shall be deemed permanent and may not be
cured by the Company.

 

A22. “Excluded Securities” means any shares of Common Stock, options, or
convertible securities issued or issuable (i) in connection with any Approved
Stock Plan; provided that the option term, exercise price or similar provisions
of any issuances pursuant to such Approved Stock Plan are not amended, modified
or changed on or after the Issuance Date; and (ii) in connection with mergers,
acquisitions, strategic licensing arrangements, strategic business partnerships
or joint ventures, in each case with non-affiliated third parties and otherwise
on an arm’s-length basis, the purpose of which is not to raise additional
capital; provided, that such third parties are not granted any registration
rights. Notwithstanding the foregoing, any Common Stock issued or issuable to
raise capital for the Company or its Subsidiaries, directly or indirectly, in
connection with any transaction contemplated by clause (ii) above, including,
without limitation, securities issued in one or more related transactions or
that result in similar economic consequences, shall not be deemed to be Excluded
Securities.

 

A23. “Free Trading” means that (i) the shares or certificate(s) representing the
applicable shares of Common Stock have been cleared and approved for public
resale by the compliance departments of Holder’s brokerage firm and the clearing
firm servicing such brokerage, and (ii) such shares are held in the name of the
clearing firm servicing Holder’s brokerage firm and have been deposited into
such clearing firm’s account for the benefit of Holder.

 

A24. “Fundamental Transaction” means that (i) (1) the Company or any of its
Subsidiaries shall, directly or indirectly, in one or more related transactions,
consolidate or merge with or into (whether or not the Company or any of its
Subsidiaries is the surviving corporation) any other Person, or (2) the Company
or any of its Significant Subsidiaries shall, directly or indirectly, in one or
more related transactions, sell, lease, license, assign, transfer, convey or
otherwise dispose of all or substantially all of its respective properties or
assets to any other Person, or (3) the Company or any of its Subsidiaries shall,
directly or indirectly, in one or more related transactions, allow any other
Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than 50% of the outstanding shares of Voting Stock of the
Company (not including any shares of Voting Stock of the Company held by the
Person or Persons making or party to, or associated or affiliated with the
Persons making or party to, such purchase, tender or exchange offer), or (4) the
Company or any of its Subsidiaries shall, directly or indirectly, in one or more
related transactions, consummate a stock or share purchase agreement or other
business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with any other Person
whereby such other Person acquires more than 50% of the outstanding shares of
Voting Stock of the Company (not including any shares of Voting Stock of the
Company 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), or (5) the Company
or any of its Subsidiaries shall, directly or indirectly, in one or more related
transactions, reorganize, recapitalize or reclassify the Common Stock, other
than an increase in the number of authorized shares of the Company’s Common
Stock, or (ii) any “person” or “group” (as these terms are used for purposes of
Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations
promulgated thereunder) is or shall become the “beneficial owner” (as defined in
Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate
ordinary voting power represented by issued and outstanding Voting Stock of the
Company.

 

Page 3 | Attachment 1 to Secured Convertible Promissory Note (Definitions)

 

 

A25. “GAAP” means United States generally accepted accounting principles,
consistently applied.

 

A26. “Indebtedness” of any Person means, without duplication (i) all
indebtedness for borrowed money, (ii) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services, including,
without limitation, “capital leases” in accordance with GAAP (other than trade
payables entered into in the ordinary course of business), (iii) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (iv) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses,
(v) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with respect
to any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (vi) all
monetary obligations under any leasing or similar arrangement which, in
connection with GAAP, consistently applied for the periods covered thereby, is
classified as a capital lease, (vii) all indebtedness referred to in clauses (i)
through (vi) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (viii) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (i) through (vii) above.

 

A27. “Installment Amount” means $37,083.33 ($667,500.00 ÷ 18), plus the sum of
any accrued and unpaid Interest that has been added to the lowest-numbered
then-current Conversion Eligible Tranche as of the applicable Installment Date
and accrued, and unpaid Late Charges that have been added to the lowest-numbered
then-current Conversion Eligible Tranche, if any, under this Note as of the
applicable Installment Date, and any other amounts accruing or owing to Holder
under this Note as of such Installment Date; provided, however, that, if the
remaining amount owing under all then-existing Conversion Eligible Tranches or
otherwise with respect to this Note as of the applicable Installment Date is
less than the Installment Amount set forth above, then the Installment Amount
for such Installment Date (and only such Installment Amount) shall be reduced
(and only reduced) by the amount necessary to cause such Installment Amount to
equal such outstanding amount. In the event the Holder shall sell or otherwise
transfer any portion of this Note, the transferee shall be allocated a pro rata
portion (based on the portion of this Note transferred compared with the
Outstanding Balance of this Note as of the transfer date) of each unpaid
Installment Amount hereunder. Notwithstanding any other provision contained
herein, if any Installment Amount is greater than the then Outstanding Balance
of this Note, such Installment Amount shall be reduced to equal such then
Outstanding Balance. Notwithstanding anything in this subsection to the
contrary, if the Holder makes a Section 8 Election, then the Installment Amount
will thereafter be determined by the Holder as described in Section 8.5.

 

A28. “Installment Certificated Shares” means the shares of Common Stock to be
delivered by certificated shares pursuant to Section 8.3(g). The number of
Installment Certificated Shares to be delivered to the Holder pursuant to
Section 8.3(g) is equal to two (2) times the number of Installment Conversion
Shares that would otherwise be required to be delivered to the Holder via the
DWAC system in connection with the applicable Installment Notice.

 

A29. “Installment Conversion Price” means, with respect to a particular date of
determination, the lower of (i) the Conversion Price then in effect and (ii) the
Market Price for the applicable Installment Notice Due Date. All such
determinations to be appropriately adjusted for any stock split, stock dividend,
stock combination or other similar transaction during any applicable Measuring
Period.

 

A30. “Installment Conversion Shares” means the number of shares of Common Stock
to be delivered pursuant to Section 8.3(a). The Installment Conversion Shares
are equal to the quotient of (i) the Company Conversion Amount divided by (ii)
the Installment Conversion Price as of the applicable Installment Notice Due
Date.

 

Page 4 | Attachment 1 to Secured Convertible Promissory Note (Definitions)

 

 

A31. “Installment Date” means the Initial Installment Date and the same day on
each of the calendar months following the Initial Installment Date, so long as
at least one Conversion Eligible Tranche exists as of the date that would be an
Installment Notice Due Date with respect to the next Installment Date pursuant
to the terms hereof. If a Conversion Eligible Tranche does not exist as of any
given date that would otherwise be an Installment Notice Due Date hereunder,
such date will not be an Installment Notice Due Date and the next Installment
Date will not occur for thirty (30) days from when the then-current Subsequent
Tranche becomes a Conversion Eligible Tranche; following such revived
Installment Date, the Installment Dates shall continue on the same day on each
of the following calendar months following such revived Installment Date, unless
a Conversion Eligible Tranche does not exist as of a date that would otherwise
be an Installment Notice Due Date with respect to an Installment Date provided
by this sentence, in which case the Installment Date schedule shall again be
reset and then continue pursuant to this sentence. Notwithstanding any other
provision contained herein, (i) if the Outstanding Balance is not paid,
converted or offset in full on the Maturity Date, then in addition to any
remedies available under the Transaction Documents, the Installment Dates will
continue pursuant to the foregoing schedule until the Outstanding Balance is
paid, converted or offset in full (thus requiring the Company to continue to
provide Installment Notices to the Holder pursuant to Section 8 hereof), and
(ii) unless and until the Outstanding Balance has been paid, converted or offset
in full pursuant to the terms hereof, Installment Dates will continue pursuant
to the foregoing schedule regardless of whether any Event of Default has
occurred or the Company owes any Redemption Price to the Holder (or any
Redemption Cancellation Notice has been issued). If the Initial Installment Date
is on the 29th, 30th, or 31st of a calendar month, then Installment Dates for
shorter subsequent calendar months shall be deemed to be on the last day of such
applicable calendar month. Notwithstanding anything in this subsection to the
contrary, if the Holder makes a Section 8 Election, then subsequent Installment
Dates will be determined by the Holder as described in Section 8.5.

 

A32. “Market Price” means 65% of the arithmetic average of the three (3) lowest
Closing Bid Prices of the shares of Common Stock during the Measuring Period;
provided, however, that if the arithmetic average of the three (3) lowest
Closing Bid Prices of the shares of Common Stock during any twenty (20)
consecutive Trading Day Period is less than $0.05, then “65%” above shall
thereafter be permanently replaced with “60%” in this definition of Market
Price. All such determinations are to be appropriately adjusted for any stock
split, stock dividend, stock combination or other similar transaction during
such Measuring Period.

 

A33. “Maturity Date” shall mean the date that is twenty-three (23) months after
the Issuance Date.

 

A34. “Measuring Period” shall mean, unless otherwise stated herein, the twenty
(20) consecutive Trading Day period immediately preceding the date of
determination.

 

A35. “Non-Waivable Equity Conditions” means (A) the Equity Condition set forth
in Section A20(iv) (indicating that Holder may not own more than the Maximum
Percentage set forth in Section 3.4 of this Note), and (B) the Equity Condition
set forth in Section A20(v) (Common Stock may be issued without violating the
rules of the Eligible Market).

 

A36. “Options” means any rights, warrants or options to subscribe for or
purchase shares of Common Stock or Convertible Securities.

 

A37. “Parent Entity” of a Person means an entity that, directly or indirectly,
controls the applicable Person and whose common stock or equivalent equity
security is quoted or listed on an Eligible Market, or, if there is more than
one such Person or Parent Entity, the Person or Parent Entity with the largest
public market capitalization as of the date of consummation of the Fundamental
Transaction.

 

A38. “Payment Default” means any Event of Default arising under Section 4.1(a)
(failure to pay) or Section 4.1(b) (failure to deliver shares) hereof.

 

A39. “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.

 

A40. “Principal Market” means the OTCQB.

 

A41. “Redemption Notices” means, collectively, Event of Default Redemption
Notices and Fundamental Transaction Redemption Notices, and each of the
foregoing, individually, a “Redemption Notice.”

 

Page 5 | Attachment 1 to Secured Convertible Promissory Note (Definitions)

 

 

A42. “Redemption Price” means either the Event of Default Redemption Price or
the Fundamental Transaction Redemption Price, as the context requires or
permits.

 

A43. “SEC” means the United States Securities and Exchange Commission or the
successor thereto.

 

A44. “Significant Subsidiaries” means, as of any date of determination,
collectively, all Subsidiaries that would constitute a “significant subsidiary”
under Rule 1-02 of Regulation S-X promulgated by the SEC, and each of the
foregoing, individually, a “Significant Subsidiary.”

 

A45. “Subsidiaries” means, as of any date of determination, collectively, all
Current Subsidiaries and all New Subsidiaries, and each of the foregoing,
individually, a “Subsidiary.”

 

A46. “Successor Entity” means the Person, which may be the Company, formed by,
resulting from or surviving any Fundamental Transaction or the Person with which
such Fundamental Transaction shall have been made, provided that if such Person
is not a publicly traded entity whose common stock or equivalent equity security
is quoted or listed for trading on an Eligible Market, Successor Entity shall
mean such Person’s Parent Entity.

 

A47. “Trading Day” means any day on which the Common Stock is traded on the
Principal Market, or, if the Principal Market is not the principal trading
market for the Common Stock, then on the principal securities exchange or
securities market on which the Common Stock is then traded, provided that
“Trading Day” shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York time) unless such day is otherwise designated
as a Trading Day in writing by the Holder.

 

A48. “True-Up Certificated Shares” means a number of shares of Common Stock
equal to one (1) times the greater of (i) the True-Up Conversion Shares
calculated using the applicable Installment Date, and (ii) the True-Up
Conversion Shares calculated using the True-Up Date.

 

A49. “True-Up Conversion Price” means, with respect to a particular date of
determination, the lower of (i) the Conversion Price then in effect and (ii) the
Market Price. All such determinations to be appropriately adjusted for any stock
split, stock dividend, stock combination or other similar transaction during any
applicable Measuring Period.

 

A50. “True-Up Conversion Shares” means that number of shares of Common Stock
that would be required to be delivered pursuant to Section 8 on an applicable
True-Up Date without taking into account the delivery of any Installment
Conversion Shares. The True-Up Conversion Shares are equal to the quotient of
(i) the Company Conversion Amount divided by (ii) the True-Up Conversion Price
as of the applicable True-Up Date.

 

A51. “Voting Stock” of a Person means capital stock of such Person of the class
or classes pursuant to which the holders thereof have the general voting power
to elect, or the general power to appoint, at least a majority of the board of
directors, managers, trustees or other similar governing body of such Person
(irrespective of whether or not at the time capital stock of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency).

 

A52. “VWAP” means, for any security as of any date, the dollar volume-weighted
average price for such security on the Principal Market (or, if the Principal
Market is not the principal trading market for such security, then on the
principal securities exchange or securities market on which such security is
then traded) during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its
“Volume at Price” function or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on
the electronic bulletin board for such security during the period beginning at
9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as
reported by Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in “OTC Pink” by Pink OTC Markets Inc.
(formerly Pink Sheets LLC), and any successor thereto. If the VWAP cannot be
calculated for such security on such date on any of the foregoing bases, the
VWAP 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 accordance with the procedures in Section 20. All such
determinations shall be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during such period.

 

Page 6 | Attachment 1 to Secured Convertible Promissory Note (Definitions)

 

 

EXHIBIT A

 

Iliad Research and Trading, L.P.

303 East Wacker Drive, Suite 1200

Chicago, Illinois 60601

 

Seaniemac International Ltd. Date:   Attn: Barry M. Brookstein  CEO   780 New
York Avenue Suite A   Huntington  NY 11743  

 

CONVERSION NOTICE

 

The above-captioned Holder hereby gives notice to Seaniemac International, Ltd.,
a Nevada corporation (the “Company”), pursuant to that certain Secured
Convertible Promissory Note made by the Company in favor of the Holder on
December 2, 2013 (the “Note”), that the Holder elects to convert the portion of
the Note balance set forth below into fully paid and non-assessable shares of
Common Stock of the Company as of the date of conversion specified below. Said
conversion shall be based on the Conversion Price set forth below. In the event
of a conflict between this Conversion Notice and the Note, the Note shall
govern, or, in the alternative, at the election of the Holder in its sole
discretion, the Holder may provide a new form of Conversion Notice to conform to
the Note. Capitalized terms used in this notice without definition shall have
the meanings given to them in the Note.

 

  A. Date of conversion:     B. Conversion #:     C. Conversion Amount:     D.
Conversion Price:     E. Section 3. Conversion Shares: (C divided by D)   F.
Remaining Outstanding Balance of Note: *

  

* Subject to adjustments for corrections, defaults, interest and other
adjustments permitted by the Transaction Documents (as defined in the
Agreement).

 

The Conversion Amount converted hereunder shall be deducted from the following
Conversion Eligible Tranche(s):

 

Conversion Amount   Tranche No.                  

 

Please transfer the Section 3 Conversion Shares electronically (via DWAC) to the
following account:

 

Broker:   Address: DTC#:        

Account #:        

Account Name:        

  

 

 

 

To the extent the Section 3 Conversion Shares are not able to be delivered to
the Holder electronically via the DWAC system, please add additional
certificated Common Stock equal to five percent (5%) of the number of Section 3
Conversion Shares so converted (per Section 3.3(a) of the Note), and deliver all
such certificated shares to the Holder via reputable overnight courier after
receipt of this Conversion Notice (by facsimile transmission or otherwise) to: 

 

           

 

Sincerely,

 

Holder: Iliad Research and Trading, L.P.             By: Iliad Management, LLC,
its General Partner               By: Fife Trading, Inc., its Manager          
      By:          John M. Fife, President

 

 

 

 

EXHIBIT B

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Conversion Notice and hereby directs
_______________ to issue the above indicated number of shares of Common Stock in
accordance with the Irrevocable Instructions to Transfer Agent dated December 2,
2013 from the Company and acknowledged and agreed to by ___________________.

 

Seaniemac International, Ltd.       By:     Name:     Title:    

 

 

 

 

EXHIBIT C-1

 

Seaniemac International, Ltd.

780 New York Avenue, Suite A

Huntington, NY 11743

 

Iliad Research and Trading, L.P. Date:   Attn: John Fife     303 E. Wacker Dr.,
Suite 1200     Chicago, IL 60657    

 

INSTALLMENT NOTICE

 

The above-captioned Company hereby gives notice to Iliad Research and Trading,
L.P., a Delaware limited partnership (the “Holder”), pursuant to that certain
Secured Convertible Promissory Note made by the Company in favor of the Holder
on December 2, 2013 (the “Note”), of certain Company elections and
certifications related to payment of the Installment Amount of
$_________________ due on ___________, 201_ (the “Installment Date”). In the
event of a conflict between this Installment Notice and the Note, the Note shall
govern, or, in the alternative, at the election of the Holder in its sole
discretion, the Holder may provide a new form of Installment Notice to conform
to the Note. Capitalized terms used in this notice without definition shall have
the meanings given to them in the Note.

 

INSTALLMENT ELECTIONS AND CERTIFICATIONS

AS OF THE INSTALLMENT NOTICE DUE DATE

  

A.COMPANY ELECTIONS

 

The Company elects to pay the Installment Amount as follows (check one):

 

______(i)Redeeming the Installment Amount in cash in accordance with Section 8
of the Note (“Company Redemption”) (if selected, no other sections of this
Notice need to be completed)

 

______(ii)Converting the Installment Amount in accordance with Section 8 of the
Note (“Company Conversion”) (if selected, complete Section B(1) and Section (C)
of this Notice)

 

______(iii)Combination of Company Redemption and Company Conversion (if
selected, complete Section B(2) and Section (C) of this Notice)

 

B.COMPANY CONVERSION (if applicable)

 

1.Company Conversion:

 

A.Installment Notice Due Date: ____________, 201_

 

B.Company Conversion Amount: _____________

  

C.Installment Conversion Price: _______________ (lower of (i) Conversion Price
in effect and (ii) Market Price as of Installment Notice Due Date)

 

D.Installment Conversion Shares: _______________ (B divided by C)

 

E.Excess shares to be applied from previous installment (if any): _____________

 

F.Installment shares to be delivered: ________________ (D minus E)

 

G.Remaining Outstanding Balance of Note: ____________ *

 

 

 

 

2.Combination of Company Redemption and Company Conversion (if elected above):

 

A.Installment Notice Due Date: ____________, 201_

 

B.Installment Amount: ____________

 

C.Company Redemption Amount: _____________

 

D.Company Conversion Amount: _____________ (B minus C)

 

E.Installment Conversion Price: _______________ (lower of (i) Conversion Price
in effect and (ii) Market Price as of Installment Notice Due Date)

 

F.Installment Conversion Shares: _______________ (D divided by E)

 

G.Excess shares to be applied from previous installment (if any): _____________

 

H.Installment shares to be delivered: ________________ (F minus G)

 

I.Remaining Outstanding Balance of Note: ____________ *

 

* Subject to adjustments for corrections, defaults, interest, and other
adjustments permitted by the Transaction Documents (as defined in the
Agreement).

 

C.EQUITY CONDITIONS CERTIFICATION (if applicable)

 

1.Market Capitalization of the Common Stock:________________

 

(Check One)

 

2._________The Company hereby certifies that no Equity Conditions Failure exists
as of the Installment Notice Due Date.

 

3._________The Company hereby gives notice that an Equity Conditions Failure has
occurred and requests a waiver from the Holder with respect thereto. The Equity
Conditions Failure is as follows:

 

           

 

Sincerely,       Company: Seaniemac International, Ltd.           By:          
  Name:             Title:    

 

 

 

 

EXHIBIT C-2

 

Seaniemac International, Ltd.

780 New York Avenue, Suite A

Huntington, NY 11743

 

Iliad Research and Trading, L.P Date:   Attn: John Fife     303 E. Wacker Dr.,
Suite 1200     Chicago, IL 60657    

 

TRUE-UP NOTICE

 

The above-captioned Company hereby gives notice to Iliad Research and Trading,
L.P., a Delaware limited partnership (the “Holder”), pursuant to that certain
Secured Convertible Promissory Note made by the Company in favor of the Holder
on December 2, 2013 (the “Note”), of True-Up Conversion Shares and Equity
Conditions Certifications related to _____________, 201_ (the “Installment
Date”). In the event of a conflict between this Installment Date Notice and the
Note, the Note shall govern, or, in the alternative, at the election of the
Holder in its sole discretion, the Holder may provide a new form of Installment
Date Notice to conform to the Note. Capitalized terms used in this notice
without definition shall have the meanings given to them in the Note.

 

TRUE-UP CONVERSION SHARES AND CERTIFICATIONS

AS OF THE TRUE-UP DATE

 

1.TRUE-UP CONVERSION SHARES

 

A.Installment Notice Due Date: ____________, 201_

  

B.Company Conversion Amount: _____________

 

C.True-Up Conversion Price: _______________ (lower of (i) Conversion Price in
effect and (ii) Market Price as of Installment Date)

 

D.True-Up Conversion Shares: _______________ (B divided by C)

 

E.Installment Conversion Shares delivered: ________________

 

F.True-Up Conversion Shares to be delivered: ________________ (only applicable
if D minus E is greater than zero)

 

G.Installment Conversion Shares to be applied to next installment or
returned:_________________ (only applicable if D minus E is less than zero and
no Payment Default has occurred)

 

H.Installment Conversion Shares to be retained by the Holder because of a
Payment Default: _________________ (only applicable if D minus E is less than
zero and a Payment Default has occurred)

 

 

 

 

2.EQUITY CONDITIONS CERTIFICATION

 

A.Market Capitalization of the Common Stock:________________

 

(Check One)

 

B._________The Company hereby certifies that no Equity Conditions Failure exists
as of the applicable Installment Date.

 

C._________The Company hereby gives notice that an Equity Conditions Failure has
occurred and requests a waiver from the Holder with respect thereto. The Equity
Conditions Failure is as follows:

 

           

 

Sincerely,       Company: Seaniemac International, Ltd.           By:          
  Name:             Title: