EXHIBIT 10.1
 
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT OR OTHER APPLICABLE
EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
 
Principal Amount: US$100,000.00
 
Issue Date: February 13, 2020
Purchase Price: US$100,000.00
 

 
CONVERTIBLE PROMISSORY NOTE
 
FOR VALUE RECEIVED
,
RIGHT ON BRANDS, INC.
, a Nevada corporation (hereinafter called the “Borrower”) (Trading Symbol:
RTON), hereby promises to pay to the order of
AUCTUS FUND, LLC
, a Delaware limited liability company, or registered assigns (the “Holder”) the
sum of US$100,000.00 together with any interest as set forth herein, on December
13, 2020 (the “Maturity Date”), and to pay interest on the unpaid principal
balance hereof at the rate of twelve percent (12%) (the “Interest Rate”) per
annum from the date hereof (the “Issue Date”) until the same becomes due and
payable, whether at maturity or upon acceleration or by prepayment or otherwise.
This Note may not be prepaid in whole or in part except as otherwise explicitly
set forth herein with the written consent of the Holder which may be withheld
for any reason or for no reason. Any amount of principal or interest on this
Note which is not paid when due shall bear interest at the rate of the lesser of
(i) twenty-four percent (24%) per annum and (ii) the maximum amount permitted
under law from the due date thereof until the same is paid (the “Default
Interest”). Interest shall commence accruing on the date that the Note is funded
by the Holder and shall be computed on the basis of a 360-day year and the
actual number of days elapsed. All payments due hereunder (to the extent not
converted into common stock, $0.001 par value per share (the “Common Stock”) in
accordance with the terms hereof) shall be made in lawful money of the United
States of America. All payments shall be made at such address as the Holder
shall hereafter give to the Borrower by written notice made in accordance with
the provisions of this Note. Whenever any amount expressed to be due by the
terms of this Note is due on any day which is not a business day, the same shall
instead be due on the next succeeding day which is a business day and, in the
case of any interest payment date which is not the date on which this Note is
paid in full, the extension of the due date thereof shall not be taken into
account for purposes of determining the amount of interest due on such date. As
used in this Note, the term “business day” shall mean any day other than a
Saturday, Sunday or a day on which commercial banks in the city of New York, New
York are authorized or required by law or executive order to remain closed. Each
capitalized term used herein, and not otherwise defined, shall have the meaning
ascribed thereto in that certain Securities Purchase Agreement dated the date
hereof, pursuant to which this Note was originally issued (the “Purchase
Agreement”).
 

 1
 
 

 
This Note is free from all taxes, liens, claims and encumbrances with respect to
the issue thereof and shall not be subject to preemptive rights or other similar
rights of shareholders of the Borrower and will not impose personal liability
upon the holder thereof.
 
The following terms shall also apply to this Note:
 
ARTICLE I. CONVERSION RIGHTS
 
1.1
Conversion Right
. The Holder shall have the right from time to time, and at any time following
the Issue Date, and ending on the later of (i) the Maturity Date and (ii) the
date of payment of the Default Amount (as defined in Article III) pursuant to
Section 1.6(a) or Article III, each in respect of the remaining outstanding
principal amount of this Note to convert all or any part of the outstanding and
unpaid principal, interest, penalties, and all other amounts under this Note
into fully paid and non-assessable shares of Common Stock, as such Common Stock
exists on the Issue Date, or any shares of capital stock or other securities of
the Borrower into which such Common Stock shall hereafter be changed or
reclassified at the Conversion Price (as defined below) determined as provided
herein (a “Conversion”);
provided
,
however
, that in no event shall the Holder be entitled to convert any portion of this
Note in excess of that portion of this Note upon conversion of which the sum of
(1) the number of shares of Common Stock beneficially owned by the Holder and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the Notes
or the unexercised or unconverted portion of any other security of the Borrower
subject to a limitation on conversion or exercise analogous to the limitations
contained herein) and (2) the number of shares of Common Stock issuable upon the
conversion of the portion of this Note with respect to which the determination
of this proviso is being made, would result in beneficial ownership by the
Holder and its affiliates of more than 4.99% of the outstanding shares of Common
Stock. For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and
Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such
proviso. The number of shares of Common Stock to be issued upon each conversion
of this Note shall be determined by dividing the Conversion Amount (as defined
below) by the applicable Conversion Price then in effect on the date specified
in the notice of conversion, in the form attached hereto as Exhibit A (the
“Notice of Conversion”), delivered to the Borrower or Borrower’s transfer agent
by the Holder in accordance with Section 1.4 below; provided that the Notice of
Conversion is submitted by facsimile or e-mail (or by other means resulting in,
or reasonably expected to result in, notice) to the Borrower or Borrower’s
transfer agent before 11:59 p.m., New York, New York time on such conversion
date (the “Conversion Date”). The term “Conversion Amount” means, with respect
to any conversion of this Note, the sum of (1) the principal amount of this Note
to be converted in such conversion
plus
(2) at the Holder’s option, accrued and unpaid interest, if any, on such
principal amount at the interest rates provided in this Note to the Conversion
Date, provided however, that the Borrower shall have the right to pay any or all
interest in cash
plus
(3) at the Holder’s option, Default Interest, if any, on the amounts referred to
in the immediately preceding clauses (1) and/or (2)
plus
(4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections
1.3 and 1.4(g) hereof.
 

 2
 
 

 
1.2
Conversion Price
.
 
C
a
lculation of Conversion Price
. Subject to the adjustments described herein, the conversion price (the
“Conversion Price”) shall equal the lesser of: (i) the lowest Trading Price (as
defined below) during the previous twenty (20) Trading Day period ending on the
latest complete Trading Day prior to the date of this Note, and (ii) the
Variable Conversion Price (as defined herein) (subject to equitable adjustments
for stock splits, stock dividends or rights offerings by the Borrower relating
to the Borrower’s securities or the securities of any subsidiary of the
Borrower, combinations, recapitalization, reclassifications, extraordinary
distributions and similar events). The “Variable Conversion Price” shall mean
60% multiplied by the Market Price (as defined herein) (representing a discount
rate of 40%). “Market Price” means the lowest Trading Price (as defined below)
for the Common Stock during the twenty (20) Trading Day period ending on the
latest complete Trading Day prior to the Conversion Date. “Trading Price” means,
for any security as of any date, the lesser of: (i) the lowest trade price on
the OTC Pink, OTCQB or applicable trading market as reported by a reliable
reporting service (“Reporting Service”) designated by the Holder or, if the OTC
Pink is not the principal trading market for such security, the trading price of
such security on the principal securities exchange or trading market where such
security is listed or traded or, if no trading price of such security is
available in any of the foregoing manners, the average of the trading prices of
any market makers for such security that are listed in the “pink sheets” by the
National Quotation Bureau, Inc., or (ii) the closing bid price on the OTC Pink,
OTCQB or applicable trading market as reported by a Reporting Service designated
by the Holder or, if the OTC Pink is not the principal trading market for such
security, the closing bid price of such security on the principal securities
exchange or trading market where such security is listed or traded or, if no
closing bid price of such security is available in any of the foregoing manners,
the average of the closing bid prices of any market makers for such security
that are listed in the “pink sheets” by the National Quotation Bureau, Inc. To
the extent the Conversion Price of the Borrower’s Common Stock closes below the
par value per share, the Borrower will take all steps necessary to solicit the
consent of the stockholders to reduce the par value to the lowest value possible
under law. The Borrower agrees to honor all conversions submitted pending this
adjustment. Furthermore, the Conversion Price may be adjusted downward if,
within three (3) business days of the transmittal of the Notice of Conversion to
the Borrower or Borrower’s transfer agent, the Common Stock has a closing bid
which is 5% or lower than that set forth in the Notice of Conversion. If the
shares of the Borrower’s Common Stock have not been delivered within three (3)
business days to the Borrower or Borrower’s transfer agent, the Notice of
Conversion may be rescinded. At any time after the Closing Date, if in the case
that the Borrower’s Common Stock is not deliverable by DWAC (including if the
Borrower’s transfer agent has a policy prohibiting or limiting delivery of
shares of the Borrower’s Common Stock specified in a Notice of Conversion), an
additional 10% discount will apply for all future conversions under all Notes.
If in the case that the Borrower’s Common Stock is “chilled” for deposit into
the DTC system and only eligible for clearing deposit, an additional 15%
discount shall apply with respect to the Variable Conversion Price for all
future conversions under all Note. If in the case of both of the above, an
additional cumulative 25% discount shall apply. Additionally, if the Borrower
ceases to be a reporting company pursuant to the 1934 Act or if the Note cannot
be converted into free trading shares after one hundred eighty-one (181) days
from the Issue Date, an additional 15% discount will be attributed to the
Conversion Price. If the Trading Price cannot be calculated for such security on
such date in the manner provided above, the Trading Price shall be the fair
market value as mutually determined by the Borrower and the holders of a
majority in interest of the Notes being converted for which the calculation of
the Trading Price is required in order to determine the Conversion Price of such
Notes. “Trading Day” shall mean any day on which the Common Stock is tradable
for any period on the OTC Pink, OTCQB or on the principal securities exchange or
other securities market on which the Common Stock is then being traded. The
Borrower shall be responsible for the fees of its transfer agent and all DTC
fees associated with any such issuance. Holder shall be entitled to deduct
$750.00 from the conversion amount in each Notice of Conversion to cover
Holder’s deposit fees associated with each Notice of Conversion. If the Borrower
fails to effectuate a reverse stock split with respect to the Common Stock prior
to the 179th calendar day after the Issue Date, an additional 20% discount shall
apply with respect to the Variable Conversion Price for all future conversions
under all Note (resulting in a discount of 60% assuming no other additional
discounts under this Note have been triggered).
 

 3
 
 

 
While this Note is outstanding, each time any 3rd party has the right to convert
monies owed to that 3rd party (or receive shares pursuant to a settlement or
otherwise), including but not limited to under Section 3(a)(9) and Section
3(a)(10), at a discount to market greater than the Conversion Price in effect at
that time (prior to all other applicable adjustments in the Note), then the
H1older, in Holder’s sole discretion, may utilize such greater discount
percentage (prior to all applicable adjustments in this Note) until this Note is
no longer outstanding. While this Note is outstanding, each time any 3rd party
has a look back period greater than the look back period in effect under the
Note at that time, including but not limited to under Section 3(a)(9) and
Section 3(a)(10), then the Holder, in Holder’s sole discretion, may utilize such
greater number of look back days until this Note is no longer outstanding. The
Borrower shall give written notice to the Holder within one (1) business day of
becoming aware of any event that could permit the Holder to make any adjustment
described in the two immediately preceding sentences.
 
(a)
Conversion Price During Major Announcements
. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the
event the Borrower (i) makes a public announcement that it intends to
consolidate or merge with any other corporation (other than a merger in which
the Borrower is the surviving or continuing corporation and its capital stock is
unchanged) or sell or transfer all or substantially all of the assets of the
Borrower or (ii) any person, group or entity (including the Borrower) publicly
announces a tender offer to purchase 50% or more of the Borrower’s Common Stock
(or any other takeover scheme) (the date of the announcement referred to in
clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then
the Conversion Price shall, effective upon the Announcement Date and continuing
through the Adjusted Conversion Price Termination Date (as defined below), be
equal to the lower of (x) the Conversion Price which would have been applicable
for a Conversion occurring on the Announcement Date and (y) the Conversion Price
that would otherwise be in effect. From and after the Adjusted Conversion Price
Termination Date, the Conversion Price shall be Termination Date” shall mean,
with respect to any proposed transaction or tender offer (or takeover scheme)
for which a public announcement as contemplated by this Section 1.2(b) has been
made, the date upon which the Borrower (in the case of clause (i) above) or the
person, group or entity (in the case of clause (ii) above) consummates or
publicly announces the termination or abandonment of the proposed transaction or
tender offer (or takeover scheme) which caused this Section 1.2(b) to become
operative.

 4
 
 

 
(b)
Pro Rata Conversion; Disputes
. In the event of a dispute as to the number of shares of Common Stock issuable
to the Holder in connection with a conversion of this Note, the Borrower shall
issue to the Holder the number of shares of Common Stock not in dispute and
resolve such dispute in accordance with Section 4.13.
 
(c) If at any time the Conversion Price as determined hereunder for any
conversion would be less than the par value of the Common Stock, then the
Conversion Price hereunder shall equal such par value for such conversion and
the Conversion Amount for such conversion shall be increased to include
Additional Principal, where “Additional Principal” means such additional amount
to be added to the Conversion Amount to the extent necessary to cause the number
of conversion shares issuable upon such conversion to equal the same number of
conversion shares as would have been issued had the Conversion Price not been
subject to the minimum price set forth in this Section 1.2(c).
 
1.3
Authorized Shares
. The Borrower covenants that during the period the conversion right exists, the
Borrower will reserve from its authorized and unissued Common Stock a sufficient
number of shares, free from preemptive rights, to provide for the issuance of
Common Stock upon the full conversion of this Note issued pursuant to the
Purchase Agreement. The Borrower is required at all times to have authorized and
reserved seven times the number of shares that is actually issuable upon full
conversion of the Note (based on the Conversion Price of the Notes in effect
from time to time) (the “Reserved Amount”). The Reserved Amount shall be
increased from time to time in accordance with the Borrower’s obligations
pursuant to Section 3(d) of the Purchase Agreement. The Borrower represents that
upon issuance, such shares will be duly and validly issued, fully paid and
non-assessable. In addition, if the Borrower shall issue any securities or make
any change to its capital structure which would change the number of shares of
Common Stock into which the Notes shall be convertible at the then current
Conversion Price, the Borrower shall at the same time make proper provision so
that thereafter there shall be a sufficient number of shares of Common Stock
authorized and reserved, free from preemptive rights, for conversion of the
outstanding Notes. The Borrower (i) acknowledges that it has irrevocably
instructed its transfer agent to issue certificates for the Common Stock
issuable upon conversion of this Note, and (ii) agrees that its issuance of this
Note shall constitute full authority to its officers and agents who are charged
with the duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock in accordance with the terms and
conditions of this Note. Notwithstanding the foregoing, in no event shall the
Reserved Amount be lower than the initial Reserved Amount, regardless of any
prior conversions.
 

 5
 
 

 
If, at any time the Borrower does not maintain or replenish the Reserved Amount
within three (3) business days of the request of the Holder, the principal
amount of the Note shall increase by Five Thousand and No/100 United States
Dollars ($5,000) (under Holder’s and Borrower’s expectation that any principal
amount increase will tack back to the Issue Date) per occurrence.
 
1.4
Method of Conversion
.
 
(a)
Mechanics of Conversion
. Subject to Section 1.1, this Note may be converted by the Holder in whole or
in part at any time from time to time after the Issue Date, by (A) submitting to
the Borrower or Borrower’s transfer agent a Notice of Conversion (by facsimile,
e-mail or other reasonable means of communication dispatched on the Conversion
Date prior to 11:59 p.m., New York, New York time) and (B) subject to Section
1.4(b), surrendering this Note at the principal office of the Borrower.
 
(b)
Surrender of Note Upon Conversion
. Notwithstanding anything to the contrary set forth herein, upon conversion of
this Note in accordance with the terms hereof, the Holder shall not be required
to physically surrender this Note to the Borrower unless the entire unpaid
principal amount of this Note is so converted. The Holder and the Borrower shall
maintain records showing the principal amount so converted and the dates of such
conversions or shall use such other method, reasonably satisfactory to the
Holder and the Borrower, so as not to require physical surrender of this Note
upon each such conversion. In the event of any dispute or discrepancy, such
records of the Borrower shall,
prima facie,
be controlling and determinative in the absence of manifest error.
Notwithstanding the foregoing, if any portion of this Note is converted as
aforesaid, the Holder may not transfer this Note unless the Holder first
physically surrenders this Note to the Borrower, whereupon the Borrower will
forthwith issue and deliver upon the order of the Holder a new Note of like
tenor, registered as the Holder (upon payment by the Holder of any applicable
transfer taxes) may request, representing in the aggregate the remaining unpaid
principal amount of this Note. The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of this Note, the unpaid and
unconverted principal amount of this Note represented by this Note may be less
than the amount stated on the face hereof.
 
(c)
Payment of Taxes
. The Borrower shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of shares of Common
Stock or other securities or property on conversion of this Note in a name other
than that of the Holder (or in street name), and the Borrower shall not be
required to issue or deliver any such shares or other securities or property
unless and until the person or persons (other than the Holder or the custodian
in whose street name such shares are to be held for the Holder’s account)
requesting the issuance thereof shall have paid to the Borrower the amount of
any such tax or shall have established to the satisfaction of the Borrower that
such tax has been paid.
 
(d)
Delivery of Common Stock Upon Conversion
. Upon receipt by the Borrower from the Holder of a facsimile transmission or
e-mail (or other reasonable means of communication) of a Notice of Conversion
meeting the requirements for conversion as provided in this Section 1.4, the
Borrower shall issue and deliver or cause to be issued and delivered to or upon
the order of the Holder certificates for the Common Stock issuable upon such
conversion within three (3) business days after such receipt (the “Deadline”)
(and, solely in the case of conversion of the entire unpaid principal amount
hereof, surrender of this Note) in accordance with the terms hereof and the
Purchase Agreement.
 

 6
 
 

 
(e)
Obligation of Borrower to Deliver Common Stock
. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be
deemed to be the holder of record of the Common Stock issuable upon such
conversion, the outstanding principal amount and the amount of accrued and
unpaid interest on this Note shall be reduced to reflect such conversion, and,
unless the Borrower defaults on its obligations under this Article I, all rights
with respect to the portion of this Note being so converted shall forthwith
terminate except the right to receive the Common Stock or other securities, cash
or other assets, as herein provided, on such conversion. If the Holder shall
have given a Notice of Conversion as provided herein, the Borrower’s obligation
to issue and deliver the certificates for Common Stock shall be absolute and
unconditional, irrespective of the absence of any action by the Holder to
enforce the same, any waiver or consent with respect to any provision thereof,
the recovery of any judgment against any person or any action to enforce the
same, any failure or delay in the enforcement of any other obligation of the
Borrower to the holder of record, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder of any
obligation to the Borrower, and irrespective of any other circumstance which
might otherwise limit such obligation of the Borrower to the Holder in
connection with such conversion. The Conversion Date specified in the Notice of
Conversion shall be the Conversion Date so long as the Notice of Conversion is
received by the Borrower before 11:59 p.m., New York, New York time, on such
date.
 
(f)
Delivery of Common Stock by Electronic Transfer
. In lieu of delivering physical certificates representing the Common Stock
issuable upon conversion, provided the Borrower is participating in the
Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”)
program, upon request of the Holder and its compliance with the provisions
contained in Section 1.1 and in this Section 1.4, the Borrower shall use its
commercially reasonable best efforts to cause its transfer agent to
electronically transmit the Common Stock issuable upon conversion to the Holder
by crediting the account of Holder’s Prime Broker with DTC through its Deposit
Withdrawal At Custodian (“DWAC”) system.
 
(g)
DTC Eligibility & Market Loss
. If the Borrower fails to maintain its status as “DTC Eligible” for any reason,
or, if the Conversion Price is less than $0.10 at any time after the 30th
calendar day after the Issue Date, the principal amount of the Note shall
increase by Fifteen Thousand and No/100 United States Dollars ($15,000) (under
Holder’s and Borrower’s expectation that any principal amount increase will tack
back to the Issue Date) and the Variable Conversion Price shall be redefined to
mean thirty percent (30%) multiplied by the Market Price, subject to adjustment
as provided in this Note.
 

 7
 
 

 
(h)
Failure to Deliver Common Stock Prior to Delivery Deadline
. Without in any way limiting the Holder’s right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree that if
delivery of the Common Stock issuable upon conversion of this Note is not
delivered by the Deadline (other than a failure due to the circumstances
described in Section 1.3 above, which failure shall be governed by such Section)
the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond
the Deadline that the Borrower fails to deliver such Common Stock until the
Borrower issues and delivers a certificate to the Holder or credit the Holder's
balance account with OTC for the number of shares of Common Stock to which the
Holder is entitled upon such Holder's conversion of any Conversion Amount (under
Holder's and Borrower's expectation that any damages will tack back to the Issue
Date).. Such cash amount shall be paid to Holder by the fifth day of the month
following the month in which it has accrued or, at the option of the Holder (by
written notice to the Borrower by the first day of the month following the month
in which it has accrued), shall be added to the principal amount of this Note,
in which event interest shall accrue thereon in accordance with the terms of
this Note and such additional principal amount shall be convertible into Common
Stock in accordance with the terms of this Note. The Borrower agrees that the
right to convert is a valuable right to the Holder. The damages resulting from a
failure, attempt to frustrate, interference with such conversion right are
difficult if not impossible to qualify. Accordingly the parties acknowledge that
the liquidated damages provision contained in this Section 1.4(h) are justified.
 
(i)
Rescindment of a Notice of Conversion
. If (i) the Borrower fails to respond to Holder within one (1) business day
from the Conversion Date confirming the details of Notice of Conversion, (ii)
the Borrower fails to provide any of the shares of the Borrower’s Common Stock
requested in the Notice of Conversion within three (3) business days from the
date of receipt of the Note of Conversion, (iii) the Holder is unable to procure
a legal opinion required to have the shares of the Borrower’s Common Stock
issued unrestricted and/or deposited to sell for any reason related to the
Borrower’s standing, (iv) the Holder is unable to deposit the shares of the
Borrower’s Common Stock requested in the Notice of Conversion for any reason
related to the Borrower’s standing, (v) at any time after a missed Deadline, at
the Holder’s sole discretion, or (vi) if OTC Markets changes the Borrower's
designation to ‘Limited Information’ (Yield), ‘No Information’ (Stop Sign),
‘Caveat Emptor’ (Skull & Crossbones), ‘OTC’, ‘Other OTC’ or ‘Grey Market’
(Exclamation Mark Sign) or other trading restriction on the day of or any day
after the Conversion Date, the Holder maintains the option and sole discretion
to rescind the Notice of Conversion (“Rescindment”) with a “Notice of
Rescindment.”
 
1.5
Concerning the Shares
. The shares of Common Stock issuable upon conversion of this Note may not be
sold or transferred unless (i) such shares are sold pursuant to an effective
registration statement under the Act or (ii) the Borrower or its transfer agent
shall have been furnished with an opinion of counsel (which opinion shall be in
form, substance and scope customary for opinions of counsel in comparable
transactions) to the effect that the shares to be sold or transferred may be
sold or transferred pursuant to an exemption from such registration or (iii)
such shares are sold or transferred pursuant to Rule 144 under the Act (or a
successor rule) (“Rule 144”) or other applicable exemption or (iv) such shares
are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who
agrees to sell or otherwise transfer the shares only in accordance with this
Section 1.5 and who is an Accredited Investor (as defined in the Purchase
Agreement). Except as otherwise provided in the Purchase Agreement (and subject
to the removal provisions set forth below), until such time as the shares of
Common Stock issuable upon conversion of this Note have been registered under
the Act or otherwise may be sold pursuant to Rule 144 or other applicable
exemption without any restriction as to the number of securities as of a
particular date that can then be immediately sold, each certificate for shares
of Common Stock issuable upon conversion of this Note that has not been so
included in an effective registration statement or that has not been sold
pursuant to an effective registration statement or an exemption that permits
removal of the legend, shall bear a legend substantially in the following form,
as appropriate:
 

 8
 
 

 
 
“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT OR OTHER APPLICABLE
EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.”
 

 
The legend set forth above shall be removed and the Borrower shall issue to the
Holder a new certificate therefore free of any transfer legend if (i) the
Borrower or its transfer agent shall have received an opinion of counsel, in
form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Common Stock
may be made without registration under the Act, which opinion shall be
reasonably accepted by the Borrower so that the sale or transfer is effected or
(ii) in the case of the Common Stock issuable upon conversion of this Note, such
security is registered for sale by the Holder under an effective registration
statement filed under the Act or otherwise may be sold pursuant to Rule 144 or
other applicable exemption without any restriction as to the number of
securities as of a particular date that can then be immediately sold. In the
event that the Borrower does not accept the opinion of counsel provided by the
Buyer with respect to the transfer of Securities pursuant to an exemption from
registration, such as Rule 144 or Regulation S, at the Deadline, it will be
considered an Event of Default pursuant to Section 3.2 of the Note.
 
1.6
Effect of Certain Events
.
 
(a)
Effect of Merger, Consolidation, Etc
. At the option of the Holder, the sale, conveyance or disposition of all or
substantially all of the assets of the Borrower, the effectuation by the
Borrower of a transaction or series of related transactions in which more than
50% of the voting power of the Borrower is disposed of, or the consolidation,
merger or other business combination of the Borrower with or into any other
Person (as defined below) or Persons when the Borrower is not the survivor shall
either: (i) be deemed to be an Event of Default (as defined in Article III)
pursuant to which the Borrower shall be required to pay to the Holder upon the
consummation of and as a condition to such transaction an amount equal to the
Default Amount (as defined in Article III) or (ii) be treated pursuant to
Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited
liability company, partnership, association, trust or other entity or
organization.
 

 9
 
 

 
(b)
Adjustment Due to Merger, Consolidation, Etc
. If, at any time when this Note is issued and outstanding and prior to
conversion of all of the Notes, there shall be any merger, consolidation,
exchange of shares, recapitalization, reorganization, or other similar event, as
a result of which shares of Common Stock of the Borrower shall be changed into
the same or a different number of shares of another class or classes of stock or
securities of the Borrower or another entity, or in case of any sale or
conveyance of all or substantially all of the assets of the Borrower other than
in connection with a plan of complete liquidation of the Borrower, then the
Holder of this Note shall thereafter have the right to receive upon conversion
of this Note, upon the basis and upon the terms and conditions specified herein
and in lieu of the shares of Common Stock immediately theretofore issuable upon
conversion, such stock, securities or assets which the Holder would have been
entitled to receive in such transaction had this Note been converted in full
immediately prior to such transaction (without regard to any limitations on
conversion set forth herein), and in any such case appropriate provisions shall
be made with respect to the rights and interests of the Holder of this Note to
the end that the provisions hereof (including, without limitation, provisions
for adjustment of the Conversion Price and of the number of shares issuable upon
conversion of the Note) shall thereafter be applicable, as nearly as may be
practicable in relation to any securities or assets thereafter deliverable upon
the conversion hereof. The Borrower shall not affect any transaction described
in this Section 1.6(b) unless (a) it first gives, to the extent practicable,
thirty (30) days prior written notice (but in any event at least fifteen (15)
days prior written notice) of the record date of the special meeting of
shareholders to approve, or if there is no such record date, the consummation
of, such merger, consolidation, exchange of shares, recapitalization,
reorganization or other similar event or sale of assets (during which time the
Holder shall be entitled to convert this Note) and (b) the resulting successor
or acquiring entity (if not the Borrower) assumes by written instrument the
obligations of this Section 1.6(b). The above provisions shall similarly apply
to successive consolidations, mergers, sales, transfers or share exchanges.
 
(c)
Adjustment Due to Distribution
. If the Borrower shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of Common Stock as a dividend, stock
repurchase, by way of return of capital or otherwise (including any dividend or
distribution to the Borrower’s shareholders in cash or shares (or rights to
acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a
“Distribution”), then the Holder of this Note shall be entitled, upon any
conversion of this Note after the date of record for determining shareholders
entitled to such Distribution, to receive the amount of such assets which would
have been payable to the Holder with respect to the shares of Common Stock
issuable upon such conversion had such Holder been the holder of such shares of
Common Stock on the record date for the determination of shareholders entitled
to such Distribution.
 
(d)
Adjustment Due to Dilutive Issuance
. If, at any time when any Notes are issued and outstanding, the Borrower issues
or sells, or in accordance with this Section 1.6(d) hereof is deemed to have
issued or sold, except for shares of Common Stock issued directly to vendors or
suppliers of the Borrower in satisfaction of amounts owed to such vendors or
suppliers (provided, however, that such vendors or suppliers shall not have an
arrangement to transfer, sell or assign such shares of Common Stock prior to the
issuance of such shares), any shares of Common Stock for no consideration or for
a consideration per share (before deduction of reasonable expenses or
commissions or underwriting discounts or allowances in connection therewith)
less than the Conversion Price in effect on the date of such issuance (or deemed
issuance) of such shares of Common Stock (a “Dilutive Issuance”), then
immediately upon the Dilutive Issuance, the Conversion Price will be reduced to
the amount of the consideration per share received by the Borrower in such
Dilutive Issuance.
 

 10
 
 

 
The Borrower shall be deemed to have issued or sold shares of Common Stock if
the Borrower in any manner issues or grants any warrants, rights or options (not
including employee stock option plans), whether or not immediately exercisable,
to subscribe for or to purchase Common Stock or other securities convertible
into or exchangeable for Common Stock (“Convertible Securities”) (such warrants,
rights and options to purchase Common Stock or Convertible Securities are
hereinafter referred to as “Options”) and the price per share for which Common
Stock is issuable upon the exercise of such Options is less than the Conversion
Price then in effect, then the Conversion Price shall be equal to such price per
share. For purposes of the preceding sentence, the “price per share for which
Common Stock is issuable upon the exercise of such Options” is determined by
dividing (i) the total amount, if any, received or receivable by the Borrower as
consideration for the issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Borrower
upon the exercise of all such Options, plus, in the case of Convertible
Securities issuable upon the exercise of such Options, the minimum aggregate
amount of additional consideration payable upon the conversion or exchange
thereof at the time such Convertible Securities first become convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to the Conversion
Price will be made upon the actual issuance of such Common Stock upon the
exercise of such Options or upon the conversion or exchange of Convertible
Securities issuable upon exercise of such Options.
 
Additionally, the Borrower shall be deemed to have issued or sold shares of
Common Stock if the Borrower in any manner issues or sells any Convertible
Securities, whether or not immediately convertible (other than where the same
are issuable upon the exercise of Options), and the price per share for which
Common Stock is issuable upon such conversion or exchange is less than the
Conversion Price then in effect, then the Conversion Price shall be equal to
such price per share. For the purposes of the preceding sentence, the “price per
share for which Common Stock is issuable upon such conversion or exchange” is
determined by dividing (i) the total amount, if any, received or receivable by
the Borrower as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Borrower upon the conversion or exchange thereof at the time
such Convertible Securities first become convertible or exchangeable, by (ii)
the maximum total number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment to the
Conversion Price will be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
 

 11
 
 

 
(e)
Purchase Rights
. If, at any time when any Notes are issued and outstanding, the Borrower issues
any convertible securities or rights to purchase stock, warrants, securities or
other property (the “Purchase Rights”) pro rata to the record holders of any
class of Common Stock, then the Holder of this Note will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such Holder could have acquired if such Holder had held the number of
shares of Common Stock acquirable upon complete conversion of this Note (without
regard to any limitations on conversion contained herein) immediately before the
date on which a record is taken for the grant, issuance or sale of such Purchase
Rights or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
 
(f)
Notice of Adjustments
. Upon the occurrence of each adjustment or readjustment of the Conversion Price
as a result of the events described in this Section 1.6, the Borrower, at its
expense, shall promptly compute such adjustment or readjustment and prepare and
furnish to the Holder a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Borrower shall, upon the written request at any time
of the Holder, furnish to such Holder a like certificate setting forth (i) such
adjustment or readjustment, (ii) the Conversion Price at the time in effect and
(iii) the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon conversion of
the Note.
 
1.7 [
Intentionally Omitted
].
 
1.8
Status as Shareholder
. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered
thereby (other than the shares, if any, which cannot be issued because their
issuance would exceed such Holder’s allocated portion of the Reserved Amount or
Maximum Share Amount) shall be deemed converted into shares of Common Stock and
(ii) the Holder’s rights as a Holder of such converted portion of this Note
shall cease and terminate, excepting only the right to receive certificates for
such shares of Common Stock and to any remedies provided herein or otherwise
available at law or in equity to such Holder because of a failure by the
Borrower to comply with the terms of this Note. Notwithstanding the foregoing,
if a Holder has not received certificates for all shares of Common Stock prior
to the tenth (10th) business day after the expiration of the Deadline with
respect to a conversion of any portion of this Note for any reason, then (unless
the Holder otherwise elects to retain its status as a holder of Common Stock by
so notifying the Borrower) the Holder shall regain the rights of a Holder of
this Note with respect to such unconverted portions of this Note and the
Borrower shall, as soon as practicable, return such unconverted Note to the
Holder or, if the Note has not been surrendered, adjust its records to reflect
that such portion of this Note has not been converted. In all cases, the Holder
shall retain all of its rights and remedies (including, without limitation, (i)
the right to receive Conversion Default Payments pursuant to Section 1.3 to the
extent required thereby for such Conversion Default and any subsequent
Conversion Default and (ii) the right to have the Conversion Price with respect
to subsequent conversions determined in accordance with Section 1.3) for the
Borrower’s failure to convert this Note.
 
1.9
Prepayment
. Provided that an Event of Default has not occurred under this Note and the
Holder provides written consent to the Borrower with respect to the Borrower’s
prepayment of this Note at the time of such prepayment, the Borrower may prepay
the amounts outstanding hereunder pursuant to the following terms and conditions
and subject to the terms of this Note:

  

 12
 
 

  
(a) At any time during the period beginning on the Issue Date and ending on the
date which is ninety (90) calendar days following the Issue Date, the Borrower
shall have the right, exercisable on not less than three (3) Trading Days prior
written notice to the Holder of the Note and subject to the Holder’s written
consent at the time of such prepayment, to prepay the outstanding Note
(principal and accrued interest), in full by making a payment to the Holder of
an amount in cash equal to 125%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note
plus
(x) accrued and unpaid interest on the unpaid principal amount of this Note
plus
(y) Default Interest, if any.
 
(b) At any time during the period beginning the day which is ninety one (91)
calendar days following the Issue Date and ending on the date which is one
hundred eighty (180) calendar days following the Issue Date, the Borrower shall
have the right, exercisable on not less than three (3) Trading Days prior
written notice to the Holder of the Note and subject to the Holder’s written
consent at the time of such prepayment, to prepay the outstanding Note
(principal and accrued interest), in full by making a payment to the Holder of
an amount in cash equal to 135%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note
plus
(x) accrued and unpaid interest on the unpaid principal amount of this Note
plus
(y) Default Interest, if any.
 
1.10 Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall
be delivered to the Holder of the Note at its registered addresses by physical
mail and shall state: (1) that the Borrower is requesting to prepay the Note,
and (2) the date of the requested prepayment which shall be not more than three
(3) Trading Days from the date of the Optional Prepayment Notice. If the Holder
provides written consent of such prepayment, then on the date fixed for
prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of
the applicable prepayment amount to or upon the order of the Holder as specified
by the Holder in writing to the Borrower. If the Borrower delivers an Optional
Prepayment Notice which has been consented to in writing by the Holder, and
Borrower fails to pay the applicable prepayment amount due to the Holder of the
Note within two (2) business days following the Optional Prepayment Date, the
Borrower shall forever forfeit its right to request a prepayment pursuant to
Section 1.9.
 
ARTICLE II. CERTAIN COVENANTS
 
2.1
Distributions on Capital Stock
. So long as the Borrower shall have any obligation under this Note, the
Borrower shall not without the Holder’s written consent (a) pay, declare or set
apart for such payment, any dividend or other distribution (whether in cash,
property or other securities) on shares of capital stock other than dividends on
shares of Common Stock solely in the form of additional shares of Common Stock
or (b) directly or indirectly or through any subsidiary make any other payment
or distribution in respect of its capital stock except for distributions
pursuant to any shareholders’ rights plan which is approved by a majority of the
Borrower’s disinterested directors.
 

 13
 
 

 
2.2
Restriction on Stock Repurchases
. So long as the Borrower shall have any obligation under this Note, the
Borrower shall not without the Holder’s written consent redeem, repurchase or
otherwise acquire (whether for cash or in exchange for property or other
securities or otherwise) in any one transaction or series of related
transactions any shares of capital stock of the Borrower or any warrants, rights
or options to purchase or acquire any such shares.
 
2.3
Borrowings
. So long as the Borrower shall have any obligation under this Note, the
Borrower shall not, without the Holder’s written consent, create, incur, assume
guarantee, endorse, contingently agree to purchase or otherwise become liable
upon the obligation of any person, firm, partnership, joint venture or
corporation, except by the endorsement of negotiable instruments for deposit or
collection, or suffer to exist any liability for borrowed money, except (a)
borrowings in existence or committed on the date hereof and of which the
Borrower has informed Holder in writing prior to the date hereof, (b)
indebtedness to trade creditors financial institutions or other lenders incurred
in the ordinary course of business or (c) borrowings, the proceeds of which
shall be used to repay this Note.
 
2.4
Sale of Assets
. So long as the Borrower shall have any obligation under this Note, the
Borrower shall not, without the Holder’s written consent, sell, lease or
otherwise dispose of any significant portion of its assets outside the ordinary
course of business. Any consent to the disposition of any assets shall be
conditioned on a specified use of the proceeds towards the repayment of this
Note.
 
2.5
Advances and Loans
. So long as the Borrower shall have any obligation under this Note, the
Borrower shall not, without the Holder’s written consent, lend money, give
credit or make advances to any person, firm, joint venture or corporation,
including, without limitation, officers, directors, employees, subsidiaries and
affiliates of the Borrower, except loans, credits or advances (a) in existence
or committed on the date hereof and which the Borrower has informed Holder in
writing prior to the date hereof, (b) made in the ordinary course of business or
(c) not in excess of $100,000.
 
2.6
Section 3(a)(9) or 3(a)(10) Transaction
. So long as this Note is outstanding, the Borrower shall not enter into any
transaction or arrangement structured in accordance with, based upon, or related
or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities
Act (a “3(a)(9) Transaction”) or Section 3(a)(l0) of the Securities Act (a
“3(a)(l0) Transaction”). In the event that the Borrower does enter into, or
makes any issuance of Common Stock related to a 3(a)(9) Transaction or a
3(a)(l0) Transaction while this note is outstanding, a liquidated damages charge
of 25% of the outstanding principal balance of this Note, but not less than
Fifteen Thousand Dollars $15,000, will be assessed and will become immediately
due and payable to the Holder at its election in the form of cash payment or
addition to the balance of this Note.
 
2.7
Preservation of Existence, etc.
The Borrower shall maintain and preserve, and cause each of its Subsidiaries to
maintain and preserve, its existence, rights and privileges, and become or
remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that
have no or minimum assets) to become or remain, duly qualified and in good
standing in each jurisdiction in which the character of the properties owned or
leased by it or in which the transaction of its business makes such
qualification necessary.
 

 14
 
 

 
2.8
Non-circumvention
. The Borrower hereby covenants and agrees that the Borrower will not, by
amendment of its Certificate or Articles of Incorporation or Bylaws, or through
any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Note, and will at all times in good faith carry out all the provisions
of this Note and take all action as may be required to protect the rights of the
Holder.
 
2.9
Repayment from Proceeds
. While any portion of this Note is outstanding, if the Company receives cash
proceeds from any source or series of related or unrelated sources, including
but not limited to, from payments from customers, the issuance of equity or
debt, the conversion of outstanding warrants of the Borrower, the issuance of
securities pursuant to an equity line of credit of the Borrower or the sale of
assets, the Borrower shall, within one (1) business day of Borrower’s receipt of
such proceeds, inform the Holder of such receipt, following which the Holder
shall have the right in its sole discretion to require the Borrower to
immediately apply all or any portion of such proceeds to repay all or any
portion of the outstanding amounts owed under this Note. Failure of the Borrower
to comply with this provision shall constitute an Event of Default. In the event
that such proceeds are received by the Holder prior to the Maturity Date, the
required prepayment shall be subject to the terms of Section 1.9 herein.
 
ARTICLE III. EVENTS OF DEFAULT
 
If any of the following events of default (each, an “Event of Default”) shall
occur:
 
3.1
Failure to Pay Principal or Interest
. The Borrower fails to pay the principal hereof or interest thereon when due on
this Note, whether at maturity, upon acceleration or otherwise.
 
3.2
Conversion and the Shares
. The Borrower (i) fails to issue shares of Common Stock to the Holder (or
announces or threatens in writing that it will not honor its obligation to do
so) upon exercise by the Holder of the conversion rights of the Holder in
accordance with the terms of this Note, (ii) fails to transfer or cause its
transfer agent to transfer (issue) (electronically or in certificated form) any
certificate for shares of Common Stock issued to the Holder upon conversion of
or otherwise pursuant to this Note as and when required by this Note, (iii)
directs its transfer agent not to transfer or delays, impairs, and/or hinders
its transfer agent in transferring (or issuing) (electronically or in
certificated form) any certificate for shares of Common Stock to be issued to
the Holder upon conversion of or otherwise pursuant to this Note as and when
required by this Note, (iv) 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 shares of Common Stock issued to the Holder
upon conversion of or otherwise pursuant to this Note as and when required by
this Note (or makes any written announcement, statement or threat that it does
not intend to honor the obligations described in this paragraph) and any such
failure shall continue uncured (or any written announcement, statement or threat
not to honor its obligations shall not be rescinded in writing) for three (3)
business days after the Holder shall have delivered a Notice of Conversion, (v)
fails to remain current in its obligations to its transfer agent, (vi) causes a
conversion of this Note is delayed, hindered or frustrated due to a balance owed
by the Borrower to its transfer agent, (vii) fails to repay Holder, within forty
eight (48) hours of a demand from the Holder, any amount of funds advanced by
Holder to Borrower’s transfer agent in order to process a conversion, (viii)
fails to reserve sufficient amount of shares of common stock to satisfy the
Reserved Amount at all times, (ix) fails to provide a Rule 144 opinion letter
from the Borrower’s legal counsel to the Holder, covering the Holder’s resale
into the public market of the respective conversion shares under this Note,
within two (2) business days of the Holder’s submission of a Notice of
Conversion to the Borrower (provided that the Holder must request the opinion
from the Borrower at the time that Holder submits the respective Notice of
Conversion and the date of the respective Notice of Conversion must be on or
after the date which is six (6) months after the date that the Holder funded the
Purchase Price under this Note), and/or (x) an exemption under Rule 144 is
unavailable for the Holder’s deposit into Holder’s brokerage account and resale
into the public market of any of the conversion shares under this Note at any
time after the date which is six (6) months after the date that the Holder
funded the Purchase Price under this Note.
 

 15
 
 

 
3.3
Failure to Deliver Transaction Expense Amount
. The Borrower fails to deliver the Transaction Expense Amount (as defined in
the Purchase Agreement) to the Holder within three (3) business days of the date
such amount is due.
 
3.4
Breach of Covenants
. The Borrower breaches any material covenant or other material term or
condition contained in this Note and any collateral documents including but not
limited to the Purchase Agreement and such breach continues for a period of ten
(10) days after written notice thereof to the Borrower from the Holder.
 
3.5
Breach of Representations and Warranties
. Any representation or warranty of the Borrower made herein or in any
agreement, statement or certificate given in writing pursuant hereto or in
connection herewith (including, without limitation, the Purchase Agreement),
shall be false or misleading in any material respect when made and the breach of
which has (or with the passage of time will have) a material adverse effect on
the rights of the Holder with respect to this Note or the Purchase Agreement.
 
3.6
Receiver or Trustee
. The Borrower or any subsidiary of the Borrower shall make an assignment for
the benefit of creditors or commence proceedings for its dissolution, or apply
for or consent to the appointment of a receiver or trustee for it or for a
substantial part of its property or business, or such a receiver or trustee
shall otherwise be appointed for the Borrower or for a substantial part of its
property or business without its consent and shall not be discharged within
sixty (60) days after such appointment.
 
3.7
Judgments
. Any money judgment, writ or similar process shall be entered or filed against
the Borrower or any subsidiary of the Borrower or any of its property or other
assets for more than $50,000, and shall remain unvacated, unbonded or unstayed
for a period of twenty (20) days unless otherwise consented to by the Holder,
which consent will not be unreasonably withheld.
 

 16
 
 

 
3.8
Bankruptcy
. Bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings, voluntary or involuntary, for relief under any bankruptcy law or
any law for the relief of debtors shall be instituted by or against the Borrower
or any subsidiary of the Borrower, or the Borrower admits in writing its
inability to pay its debts generally as they mature, or have filed against it an
involuntary petition for bankruptcy relief, all under federal or state laws as
applicable or the Borrower admits in writing its inability to pay its debts
generally as they mature, or have filed against it an involuntary petition for
bankruptcy relief, all under international, federal or state laws as applicable.
 
3.9
Delisting of Common Stock
. The Borrower shall fail to maintain the listing of the Common Stock on at
least one of the OTC Pink, OTCQB, Nasdaq National Market, Nasdaq Small Cap
Market, New York Stock Exchange, NYSE MKT, or an equivalent replacement exchange
 
3.10
Failure to Comply with the Exchange Act
. The Borrower shall fail to comply with the reporting requirements of the
Exchange Act (including but not limited to becoming delinquent in its filings);
and/or the Borrower shall cease to be subject to the reporting requirements of
the Exchange Act.
 
3.11
Liquidation
. Any dissolution, liquidation, or winding up of Borrower or any substantial
portion of its business.
 
3.12
Cessation of Operations
. Any cessation of operations by Borrower or Borrower admits it is otherwise
generally unable to pay its debts as such debts become due, provided, however,
that any disclosure of the Borrower’s ability to continue as a “going concern”
shall not be an admission that the Borrower cannot pay its debts as they become
due.
 
3.13
Maintenance of Assets
. The failure by Borrower to maintain any material intellectual property rights,
personal, real property or other assets which are necessary to conduct its
business (whether now or in the future), or any disposition or conveyance of any
material asset of the Borrower.
 
3.14
Financial Statement Restatement
. The restatement of any financial statements filed by the Borrower with the SEC
for any date or period from two years prior to the Issue Date of this Note and
until this Note is no longer outstanding, if the result of such restatement
would, by comparison to the unrestated financial statement, have constituted a
material adverse effect on the rights of the Holder with respect to this Note or
the Purchase Agreement.
 
3.15
Reverse Splits
. The Borrower effectuates a reverse split of its Common Stock without twenty
(20) days prior written notice to the Holder.
 

 17
 
 

 
3.16
Replacement of Transfer Agent
. In the event that the Borrower proposes to replace its transfer agent, the
Borrower fails to provide, prior to the effective date of such replacement, a
fully executed Irrevocable Transfer Agent Instructions in a form as initially
delivered pursuant to the Purchase Agreement (including but not limited to the
provision to irrevocably reserve shares of Common Stock in the Reserved Amount)
signed by the successor transfer agent to Borrower and the Borrower.
 
3.17
Cessation of Trading
. Any cessation of trading of the Common Stock on at least one of the OTC Pink,
OTCQB, Nasdaq National Market, Nasdaq Small Cap Market, New York Stock Exchange,
NYSE MKT, or an equivalent replacement exchange, and such cessation of trading
shall continue for a period of five consecutive (5) Trading Days.
 
3.18
Cross-Default
. Notwithstanding anything to the contrary contained in this Note or the other
related or companion documents, a breach or default by the Borrower of any
covenant or other term or condition contained in any of the Other Agreements (as
defined herein), after the passage of all applicable notice and cure or grace
periods, shall, at the option of the Holder, be considered a default under this
Note and the Other Agreements, 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 and the Other Agreements by reason of a default under said
Other Agreement or hereunder. “Other Agreements” means, collectively, all
agreements and instruments between, among or by: (1) the Borrower, and, or for
the benefit of, (2) the Holder (and any affiliate of the Holder) or any other
third party, including, without limitation, promissory notes; provided, however,
the term “Other Agreements” shall not include the agreements and instruments
defined as the Documents. Each of the loan transactions will be cross-defaulted
with each other loan transaction and with all other existing and future debt of
Borrower to the Holder.
 
3.19
Bid Price
. The Borrower shall lose the “bid” price for its Common Stock ($0.0001 on the
“Ask” with zero market makers on the “Bid” per Level 2) and/or a market
(including the OTC Pink, OTCQB or an equivalent replacement exchange).
 
3.20
OTC Markets Designation
. OTC Markets changes the Borrower’s designation to ‘No Information’ (Stop
Sign), ‘Caveat Emptor’ (Skull and Crossbones), or ‘OTC’, ‘Other OTC’ or ‘Grey
Market’ (Exclamation Mark Sign).
 
3.21
Inside Information
. Any attempt by the Borrower or its officers, directors, and/or affiliates to
transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure
by the Borrower or its officers, directors, and/or affiliates of, material
non-public information concerning the Borrower, to the Holder or its successors
and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K
pursuant to Regulation FD on that same date.
 
3.22
Unavailability of Rule 144
. If, at any time on or after the date which is six (6) months after the Issue
Date, the Holder is unable to (i) obtain a standard “144 legal opinion letter”
from an attorney reasonably acceptable to the Holder, the Holder’s brokerage
firm (and respective clearing firm), and the Borrower’s transfer agent in order
to facilitate the Holder’s conversion of any portion of the Note into free
trading shares of the Borrower’s Common Stock pursuant to Rule 144, and (ii)
thereupon deposit such shares into the Holder’s brokerage account.
 

 18
 
 

 
3.23
Delisting or Suspension of Trading of Common Stock
. If, at any time on or after the Issue Date, the Borrower’s Common Stock (i) is
suspended from trading, (ii) halted from trading, and/or (iii) fails to be
quoted or listed (as applicable) on any level of the OTC Markets, any tier of
the NASDAQ Stock Market, the New York Stock Exchange, or the NYSE American.
 
UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2 AND/OR 3.22
OF THIS NOTE, THE NOTE SHALL BECOME IMMEDIATELY AND AUTOMATICALLY DUE AND
PAYABLE WITHOUT DEMAND, PRESENTMENT, OR NOTICE AND THE BORROWER SHALL PAY TO THE
HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO:
(Y) THE DEFAULT SUM (AS DEFINED HEREIN) MULTIPLIED BY (Z) TWO (2). Upon the
occurrence of any Event of Default specified in Sections 3.1, 3.3, 3.4, 3.5,
3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15, 3.16. 3.17, 3.18, 3.19,
3.20, 3.21, and/or 3.23, the Note shall become immediately and automatically due
and payable without demand, presentment or notice and the Borrower shall pay to
the Holder, in full satisfaction of its obligations hereunder, an amount equal
to (i) 150%
times
the
sum
of (w) the then outstanding principal amount of this Note
plus
(x) accrued and unpaid interest on the unpaid principal amount of this Note to
the date of payment (the “Mandatory Prepayment Date”)
plus
(y) Default Interest, if any, on the amounts referred to in clauses (w) and/or
(x)
plus
(z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof
(the then outstanding principal amount of this Note to the date of payment
plus
the amounts referred to in clauses (x), (y) and (z) shall collectively be known
as the “Default Sum”) or (ii) at the option of the Holder, the “parity value” of
the Default Sum to be prepaid, where parity value means (a) the highest number
of shares of Common Stock issuable upon conversion of or otherwise pursuant to
such Default Sum in accordance with Article I, treating the Trading Day
immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for
purposes of determining the lowest applicable Conversion Price, unless the
Default Event arises as a result of a breach in respect of a specific Conversion
Date in which case such Conversion Date shall be the Conversion Date),
multiplied by
(b) the highest Trading Price for the Common Stock during the period beginning
on the date of first occurrence of the Event of Default and ending one day prior
to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts
payable hereunder shall immediately become due and payable, all without demand,
presentment or notice, all of which hereby are expressly waived, together with
all costs, including, without limitation, legal fees and expenses, of
collection, and the Holder shall be entitled to exercise all other rights and
remedies available at law or in equity. Further, if a breach of Sections 3.9,
3.10 and/or 3.19 occurs or is continuing after the six (6) month anniversary of
this Note, then the principal amount of the Note shall increase by Fifteen
Thousand and No/100 United States Dollars ($15,000) (under Holder’s and
Borrower’s expectation that any principal amount increase will tack back to the
Issue Date) and the Holder shall be entitled to use the lowest Trading Price
during the delinquency period as a base price for the conversion with the
Variable Conversion Price shall be redefined to mean forty percent (40%)
multiplied by the Market Price, subject to adjustment as provided in this Note.
For example, if the lowest Trading Price during the delinquency period is $0.50
per share and the conversion discount is 50%, then the Holder may elect to
convert future conversions at $0.25 per share. If this Note is not paid at
Maturity Date, then the outstanding principal due under this Note shall increase
by Fifteen Thousand and No/100 United States Dollars ($15,000).
 

 19
 
 

 
The Holder shall have the right at any time after an Event of Default occurs
under this Note to require the Borrower, to immediately issue, in lieu of the
Default Amount and/or Default Sum, the number of shares of Common Stock of the
Borrower equal to the Default Amount and/or Default Sum divided by the
Conversion Price then in effect, pursuant to the terms of this Note (including
but not limited to any beneficial ownership limitations contained herein). This
requirement by the Borrower shall automatically apply upon the occurrence of an
Event of Default without the need for any party to give any notice or take any
other action.
 
If the Holder shall commence an action or proceeding to enforce any provisions
of this Note, including, without limitation, engaging an attorney, then if the
Holder prevails in such action, the Holder shall be reimbursed by the Borrower
for its attorneys' fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or proceeding.
 
ARTICLE IV. MISCELLANEOUS
 
4.1
Failure or Indulgence Not Waiver
. No failure or delay on the part of the Holder in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privileges. All
rights and remedies existing hereunder are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
 
4.2
Notices
. All notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, electronic mail, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by electronic mail or facsimile, with accurate confirmation
generated by the transmitting facsimile machine, at the address or number
designated below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
 

 20
 
 

 
If to the Borrower, to:
 
Right On Brands, Inc.
3235 Skyline Dr., Suite 127
Carrollton, TX 75006
Attn: Jerry Grisaffi
E-mail: david@adylaw.com
 
If to the Holder:
 
Auctus Fund, LLC
545 Boylston Street, 2nd Floor
Boston, MA 02116
Attn: Lou Posner
Facsimile: (617) 532-6420
 
With a copy to (which copy shall not constitute notice):
 
Chad Friend, Esq., LL.M.
Anthony L.G., PLLC
625 N. Flagler Drive, Suite 600
West Palm Beach, FL 33401
E-mail: CFriend@AnthonyPLLC.com
 
4.3
Amendments
. This Note and any provision hereof may only be amended by an instrument in
writing signed by the Borrower and the Holder. The term “Note” and all reference
thereto, as used throughout this instrument, shall mean this instrument (and the
other Notes issued pursuant to the Purchase Agreement) as originally executed,
or if later amended or supplemented, then as so amended or supplemented.
 
4.4
Assignability
. This Note shall be binding upon the Borrower and its successors and assigns,
and shall inure to be the benefit of the Holder and its successors and assigns.
Neither the Borrower nor the Holder shall assign this Note or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, the Holder may assign its rights hereunder to any
“accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private
transaction from the Holder or to any of its “affiliates”, as that term is
defined under the 1934 Act, without the consent of the Borrower. Notwithstanding
anything in this Note to the contrary, this Note may be pledged as collateral in
connection with a
bona fide
margin account or other lending arrangement. The Holder and any assignee, by
acceptance of this Note, acknowledge and agree that following conversion of a
portion of this Note, the unpaid and unconverted principal amount of this Note
represented by this Note may be less than the amount stated on the face hereof.
 
4.5
Cost of Collection
. If default is made in the payment of this Note, the Borrower shall pay the
Holder hereof reasonable costs of collection, including reasonable attorneys’
fees.
 

 21
 
 

 
4.6
Governing Law
. This Note shall be governed by and construed in accordance with the laws of
the State of Nevada without regard to principles of conflicts of laws. Any
action brought by either party against the other concerning the transactions
contemplated by this Note shall be brought only in the state courts located in
the Commonwealth of Massachusetts or federal courts located in the Commonwealth
of Massachusetts. The parties to this Note hereby irrevocably waive any
objection to jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or based upon
forum non conveniens
.
THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE 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
. The prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Note or any other agreement delivered in connection herewith 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 any agreement.
Each party hereby irrevocably waives personal service of process and consents to
process being served in any suit, action or proceeding in connection with this
Agreement or any other Transaction Document by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any other manner permitted by law.
 
4.7
Certain Amounts
. Whenever pursuant to this Note the Borrower is required to pay an amount in
excess of the outstanding principal amount (or the portion thereof required to
be paid at that time) plus accrued and unpaid interest plus Default Interest on
such interest, the Borrower and the Holder agree that the actual damages to the
Holder from the receipt of cash payment on this Note may be difficult to
determine and the amount to be so paid by the Borrower represents stipulated
damages and not a penalty and is intended to compensate the Holder in part for
loss of the opportunity to convert this Note and to earn a return from the sale
of shares of Common Stock acquired upon conversion of this Note at a price in
excess of the price paid for such shares pursuant to this Note. The Borrower and
the Holder hereby agree that such amount of stipulated damages is not plainly
disproportionate to the possible loss to the Holder from the receipt of a cash
payment without the opportunity to convert this Note into shares of Common
Stock.
 
4.8
Purchase Agreement
. By its acceptance of this Note, each party agrees to be bound by the
applicable terms of the Purchase Agreement.
 

 22
 
 

 
4.9
Notice of Corporate Events
. Except as otherwise provided below, the Holder of this Note shall have no
rights as a Holder of Common Stock unless and only to the extent that it
converts this Note into Common Stock. The Borrower shall provide the Holder with
prior notification of any meeting of the Borrower’s shareholders (and copies of
proxy materials and other information sent to shareholders). In the event of any
taking by the Borrower of a record of its shareholders for the purpose of
determining shareholders who are entitled to receive payment of any dividend or
other distribution, any right to subscribe for, purchase or otherwise acquire
(including by way of merger, consolidation, reclassification or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed sale, lease or conveyance
of all or substantially all of the assets of the Borrower or any proposed
liquidation, dissolution or winding up of the Borrower, the Borrower shall mail
a notice to the Holder, at least twenty (20) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the
transaction or event, whichever is earlier), of the date on which any such
record is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
The Borrower shall make a public announcement of any event requiring
notification to the Holder hereunder substantially simultaneously with the
notification to the Holder in accordance with the terms of this Section 4.9
including, but not limited to, name changes, recapitalizations, etc. as soon as
possible under law.
 
4.10
Usury
. If it shall be found that any interest or other amount deemed interest due
hereunder violates the applicable law governing usury, the applicable provision
shall automatically be revised to equal the maximum rate of interest or other
amount deemed interest permitted under applicable law. The Borrower covenants
(to the extent that it may lawfully do so) that it will not seek to claim or
take advantage of any law that would prohibit or forgive the Borrower from
paying all or a portion of the principal or interest on this Note.
 
4.11
Remedies
. The Borrower acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to the Holder, by vitiating the intent and purpose
of the transaction contemplated hereby. Accordingly, the Borrower acknowledges
that the remedy at law for a breach of its obligations under this Note will be
inadequate and agrees, in the event of a breach or threatened breach by the
Borrower of the provisions of this Note, that the Holder shall be entitled, in
addition to all other available remedies at law or in equity, and in addition to
the penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Note and to enforce specifically the
terms and provisions thereof, without the necessity of showing economic loss and
without any bond or other security being required. No provision of this Note
shall alter or impair the obligation of the Borrower, which is absolute and
unconditional, to pay the principal of, and interest on, this Note at the time,
place, and rate, and in the form, herein prescribed.
 
4.12
Severability
. 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 provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
 

 23
 
 

 
4.13
Dispute Resolution
. In the case of a dispute as to the determination of the Conversion Price,
Conversion Amount, any prepayment amount or Default Amount, Default Sum, Closing
or Maturity Date, the closing bid price, or fair market value (as the case may
be) or the arithmetic calculation of the Conversion Price or the applicable
prepayment amount(s) (as the case may be), the Borrower or the Holder shall
submit the disputed determinations or arithmetic calculations via facsimile (i)
within two (2) Business Days after receipt of the applicable notice giving rise
to such dispute to the Borrower or the Holder 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. If the Holder and the Borrower are unable to agree upon
such determination or calculation within two (2) Business Days of such disputed
determination or arithmetic calculation (as the case may be) being submitted to
the Borrower or the Holder, then the Borrower shall, within two (2) Business
Days, submit via facsimile (a) the disputed determination of the Conversion
Price, the closing bid price, the or fair market value (as the case may be) to
an independent, reputable investment bank selected by the Borrower and approved
by the Holder or (b) the disputed arithmetic calculation of the Conversion
Price, Conversion Amount, any prepayment amount or Default Amount, Default Sum
to an independent, outside accountant selected by the Holder that is reasonably
acceptable to the Borrower. The Borrower shall cause at its expense the
investment bank or the accountant to perform the determinations or calculations
and notify the Borrower and the Holder of the results no later than ten (10)
Business Days from the time it receives such disputed determinations or
calculations. Such investment bank’s or accountant’s determination or
calculation shall be binding upon all parties absent demonstrable error.
 
4.14
Terms of Future Financings.
So long as this Note is outstanding, upon any issuance by the Borrower or any of
its subsidiaries of any security with any term more favorable to the holder of
such security or with a term in favor of the holder of such security that was
not similarly provided to the Holder in this Note, then the Borrower shall
notify the Holder of such additional or more favorable term and such term, at
Holder’s option, shall become a part of the transaction documents with the
Holder. The types of terms contained in another security that may be more
favorable to the holder of such security include, but are not limited to, terms
addressing conversion discounts, prepayment rate, conversion lookback periods,
interest rates, original issue discounts, stock sale price, private placement
price per share, and warrant coverage.
 
4.15
Piggyback Registration
Rights. The Borrower shall include on each registration statement that the
Borrower files with SEC all shares issuable upon conversion of this Note. The
Borrower’s failure to comply with this Section 4.15 shall result in liquidated
damages of 25% of the outstanding principal balance of this Note, but not less
than Fifteen Thousand and No/100 United States Dollars ($15,000), being
immediately due and payable to the Holder at its election in the form of cash
payment or addition to the balance of this Note.
 
4.16
Future Raises; Repayment from Proceeds
. The Borrower shall not consummate any capital raising transactions (including
but not limited to from the issuance of debt and/or equity securities) during
the initial sixty (60) days after the Issue Date. Until the Note is satisfied in
full, if the Borrower receives cash proceeds from any source or series of
related or unrelated sources, including but not limited to, from the issuance of
equity and/or debt securities, the conversion of outstanding warrants of the
Borrower, the issuance of securities pursuant to an equity line of credit of the
Borrower or the sale of assets, the Borrower shall, within one (1) business day
of Borrower’s receipt of such proceeds, inform the Holder of such receipt,
following which the Holder shall have the right in its sole discretion to
require the Borrower to immediately apply all or any portion of such proceeds to
repay all or any portion of this Note. Failure of the Borrower to comply with
this provision shall constitute an Event of Default under Section 3.4 of the
Note. In the event that such proceeds are received by the Holder prior to the
Maturity Date, the required prepayment shall be subject to the terms of Section
1.9 herein.
 
[signature page follows]
 

 24
 
 

  
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by
its duly authorized officer as of the date first above written.
 

 
RIGHT ON BRANDS, INC.
    By:
/s/ Jerry Grisaffi
 
Name:
Jerry Grisaffi  
Title:
Chief Executive Officer 

 

 25
 
 

 
EXHIBIT A
NOTICE OF CONVERSION
 
The undersigned hereby elects to convert $_____________ of the Note (defined
below) together with $____________ principal amount of accrued and unpaid
interest thereto, totaling $_____________ into that number of shares of Common
Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as
set forth below, of Right On Brands, Inc., a Nevada corporation (the
“Borrower”), according to the conditions of the convertible note of the Borrower
dated as of February 13, 2020 (the “Note”), as of the date written below. No fee
will be charged to the Holder for any conversion, except for transfer taxes, if
any.
 
Box Checked as to applicable instructions:
 

 

¨ The Borrower shall electronically transmit the Common Stock issuable pursuant
to this Notice of Conversion to the account of the undersigned or its nominee
with DTC through its Deposit Withdrawal At Custodian system (“DWAC Transfer”).

 

 

 

 

 

Name of DTC Prime Broker: 

 

 

Account Number: 

 

 

 

 

¨

The undersigned hereby requests that the Borrower issue a certificate or
certificates for the number of shares of Common Stock set forth below (which
numbers are based on the Holder’s calculation attached hereto) in the name(s)
specified immediately below or, if additional space is necessary, on an
attachment hereto: 

 

 
 
Name: [NAME]  
 
 
 
 
 
Address: [ADDRESS]
 
 
 
 
 
 
 
 
 
 
 
Date of Conversion: 
 
 
 
 
 
Applicable Conversion Price: 
$ 
 
 
 
Number of Shares of Common Stock to be Issued Pursuant to Conversion of the
Notes:
 
 
 
 
 
Amount of Principal Balance Due remaining Under the Note after this conversion:
 
 
 
 
 
Accrued and unpaid interest remaining:
 
 
 
 
 
 
 
 
 
 
 
[HOLDER] 
 
 
 
 
 
 
 
 
 
 
 
By: ____________________________________ 
 
 
 
 
 
Name: [NAME] 
 
 
 
 
 
Title: [TITLE] 
 
 
 
 
 
Date: [DATE]