Blueprint





 







Exhibit 10.2

 


 

 



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. 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: $83,500.00


	
 Issue
Date: December 19, 2017







 



   12%
CONVERTIBLE NOTE

 


FOR VALUE RECEIVED, SINCERITY APPLIED MATERIALS
HOLDINGS CORP a Nevada corporation (“Borrower”
or “Company”), hereby promises to pay to the order
of
EMA FINANCIAL, LLC, a
Delaware limited liability company, or its registered assigns (the
“Holder”), on December 19, 2018, (subject to extension
as set forth below, the “Maturity Date”), the sum of
$83,500.00 as set forth herein, together with interest on the
unpaid principal balance hereof at the rate of twelve (12%) per
annum (the “Interest Rate”) from the date of issuance
hereof until this Note plus any and all amounts due hereunder are
paid in full, and any additional amounts set forth herein,
including without limitation any Additional Principal (as defined
herein). Interest shall be computed on the basis of a 365-day year
and the actual number of days elapsed. Any amount of principal or
interest on this Note which is not paid when due shall bear
interest at the rate of twenty-four (24%) per annum from the due
date thereof until the same is paid (“Default
Interest”). All payments due hereunder 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 entered into
by and between the Company and Holder dated on or about the date
hereof, pursuant to which this Note was originally issued (the
“Purchase Agreement”). The Holder may, by written
notice to the Borrower at least five (5) days before the Maturity
Date (as may have been previously extended), extend the Maturity
Date to up to one (1) year following the date of the original
Maturity Date hereunder.

 




 

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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 apply to this Note:

 


ARTICLE
I. CONVERSION RIGHTS

 

1.1. Conversion
Right. The Holder shall have the right, in its sole and
absolute discretion, at any time from time to time, to convert all
or any part of the outstanding amount due 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 (the “Conversion Price”) 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 4.9% 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 Regulation 13D-G
thereunder, except as otherwise provided in clause (1) of such
proviso, provided, further, however, that the limitations
on conversion may be waived by the Holder upon, at the election of
the Holder, not less than 61 days’ prior notice to the
Borrower, and the provisions of the conversion limitation shall
continue to apply until such 61st day (or such later date, as
determined by the Holder, as may be specified in such notice of
waiver). The number of shares of Common Stock to be issued upon
each Conversion of this Note (“Conversion Shares”)
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 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 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) accrued and
unpaid interest, if any, on such principal amount being converted
at the interest rates provided in this Note to the Conversion Date,
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) any
Additional Principal for such Conversion, plus (5) at the
Holder’s option, any amounts owed to the Holder pursuant to
Sections 1.2(c) and 1.4(g) hereof.

 




 

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1.2. Conversion
Price.


 

a) Calculation of Conversion
Price. The conversion price hereunder (the
“Conversion Price”) shall equal the lower of: (i) the
closing sale price of the Common Stock on the Principal Market on
the Trading Day immediately preceding the Closing Date, and (ii)
50% of either the lowest sale price for the Common Stock on the
Principal Market during the twenty five (25) consecutive Trading
Days including and immediately preceding the Conversion Date, or
the closing bid price, whichever is lower, provided, however, if the
Company’s share price at any time loses the bid (ex: 0.0001
on the ask with zero market makers on the bid on level 2), then the
Conversion Price may, in the Holder’s sole and absolute
discretion, be reduced to a fixed conversion price of 0.00001 (if
lower than the conversion price otherwise), and provided, that if on the date of
delivery of the Conversion Shares to the Holder, or any date
thereafter while Conversion Shares are held by the Holder, the
closing bid price per share of Common Stock on the Principal Market
on the Trading Day on which the Common Shares are traded is less
than the sale price per share of Common Stock on the Principal
Market on the Trading Day used to calculate the Conversion Price
hereunder, then such Conversion Price shall be automatically
reduced such that the Conversion Price shall be recalculated using
the new low closing bid price (“Adjusted Conversion
Price”) and shall replace the Conversion Price above, and
Holder shall be issued a number of additional shares such that the
aggregate number of shares Holder receives is based upon the
Adjusted Conversion Price, and provided, further, that the Conversion
Price shall be subject to Section 1.2(b) below. For the purpose of
clarity, any shares required to be issued as a result of an
Adjusted Conversion Price shall be deemed to be “Conversion
Shares” under this Note. If an
Event of Default under Section 3.9 of the Note has occurred,
Holder, in its sole discretion, may elect to use a Conversion Price
which shall equal the lower of: (i) the closing sale price of the
Common Stock on the Principal Market on the Trading Day immediately
preceding the Closing Date; (ii) 50% of either the lowest sale
price or the closing bid price, whichever is lower
for the Common Stock on the Principal
Market during any Trading Day in which the Event of Default has not
been cured. If such Common Stock is not traded on the OTCBB,
OTCQB, OTC Pink, NASDAQ or NYSE, then such sale price shall be the
sale price of such security on the principal securities exchange or
trading market where such security is listed or traded or, if no
sale 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. If such sale price cannot be
calculated for such security on such date in the manner provided
above, such price shall be the fair market value as mutually
determined by the Borrower and the Holder. If the Borrower’s
Common stock is chilled for deposit at DTC, becomes chilled at any
point while this Note remains outstanding or deposit or other
additional fees are payable due to a Yield Sign, Stop Sign or other
trading restrictions, or if the closing sale price at any time
falls below $1.00 (as appropriately and equitably adjusted for
stock splits, stock dividends, stock contributions and similar
events), then such 50% figure specified in clause 1.2(a)(ii) above
shall be reduced to 35%. In the event that the shares of the
Borrower’s Common Stock are not deliverable via DWAC
following the conversion of any amount hereunder, an additional 5%
discount will be attributed to the Conversion Price. Additionally,
the Borrower acknowledges that it will
take all reasonable steps necessary or appropriate, including
providing a board of directors resolution authorizing the issuance
of common stock to Holder. So long as the requested sale may be
made pursuant to Rule 144, the Company agrees to accept an opinion
of counsel to the Holder confirming the rights of the Holder to
sell shares of Common Stock issuable or issued to Holder on
conversion of this Note pursuant to Rule 144 as promulgated by the
SEC (“Rule 144”), as such Rule 144 may be in effect
from time to time, which opinion will be issued at the
Company’s expense and the conversion dollar amount will be
reduced by $750.00 to cover the cost of such legal opinion.
“Trading Day” shall mean any day on which the Common
Stock is tradable for any period on the OTC Pink, or on the
principal securities exchange or other securities market on which
the Common Stock is then being traded. Additionally, if the Company
ceases to be a reporting company pursuant to the 1934 Act or if the
Note cannot be converted into free trading shares after 181 days
from the issuance date, an additional 15% discount will be
attributed to the Conversion Price for any and all Conversions
submitted thereafter.

 




 

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b) 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(b).

 

c) 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 free trading shares of Common Stock
issuable upon conversion of this Note is not delivered by the
Deadline (as defined below) the Borrower shall pay to the Holder
$1,000.00 per day in cash, for each day beyond the Deadline that
the Borrower fails to deliver such Common Stock. 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,
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 this Note is a valuable
right to the Holder. The damages resulting from a failure, attempt
to frustrate, or interference with such conversion right are
difficult if not impossible to quantify. Accordingly the parties
acknowledge that the liquidated damages provision contained in this
Section are justified.

 

1.3. Authorized
Shares. The Borrower covenants that the Borrower will at all
times while this Note is outstanding 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 or adjustment of this Note. The Borrower is
required at all times to have authorized and reserved ten (10)
times the number of shares that is actually issuable upon full
conversion or adjustment of this Note (based on the Conversion
Price of the Notes in effect from time to time)(the “Reserved
Amount”). Initially, the Company will instruct the Transfer
Agent to reserve eight hundred thirty-five thousand (835,000)
shares of common stock in the name of the Holder for issuance upon
conversion hereof. 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 this Note
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 this Note in full. 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.

 


If, at
any time the Borrower does not maintain the Reserved Amount it will
be considered an Event of Default under Section 3.2 of the
Note.

 




 

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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 and from time to time after the Issue
Date, by submitting to the Borrower 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).

 

b) Book Entry 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 or upon
an event triggering the calculation of an Adjusted Conversion
Price, 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 or such an event (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.

 




 

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e) Obligation of Borrower to Deliver
Common Stock. Upon receipt by the Borrower of a duly and
properly executed Notice of Conversion or upon an event triggering
the calculation of an Adjusted Conversion Price, the Holder shall
be deemed to be the holder of record of the Common Stock issuable
upon such conversion or as a result of an Adjusted Conversion
Price, the outstanding principal amount and the amount of accrued
and unpaid interest on this Note shall be reduced to reflect such
conversion or adjustment, 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 or upon an event triggering the calculation of an Adjusted
Conversion Price, 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 best efforts to cause its
transfer agent to electronically transmit the Common Stock issuable
upon conversion or upon an event triggering the calculation of an
Adjusted Conversion Price to the Holder by crediting the account of
Holder’s Prime Broker with DTC through its Deposit Withdrawal
Agent Commission (“DWAC”) system.

 

g) Failure to Deliver Common Stock Prior
to 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 or adjustment of this
Note is not delivered by the Deadline, the Borrower shall pay to
the Holder $1,000.00 per day in cash, for each day beyond the
Deadline that the Borrower fails to deliver such Common Stock to
the Holder. 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, 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 and/or receive shares in the event of an
adjustment is a valuable right to the Holder. The damages resulting
from a failure, attempt to frustrate, or interference with such
conversion or adjustment right are difficult if not impossible to
qualify. Accordingly the parties acknowledge that the liquidated
damages provision contained in this Section 1.4(g) are
justified.


 




 

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h) The
Borrower acknowledges that it will take all reasonable steps
necessary or appropriate, including accepting an opinion of counsel
to Holder confirming the rights of Holder to sell shares of Common
Stock issued to Holder on conversion or adjustment of the Note
pursuant to Rule 144 as promulgated by the SEC (“Rule 144"),
as such Rule may be in effect from time to time. So long as the
requested sale may be made pursuant to Rule 144 the Borrower agrees
to accept an opinion of counsel to the Holder which opinion will be
issued at the Borrower’s expense.

 

i) Charges and
Expenses. Issuance of
Common Stock to Holder, or any of its assignees, upon the
conversion of this Note shall be made without charge to the Holder
for any issuance fee, transfer tax, legal opinion and related
charges, postage/mailing charge or any other expense with respect
to the issuance of such Common Stock. Company shall pay all
Transfer Agent fees incurred from the issuance of the Common Stock
to Holder, as well as any and all other fees and charges required
by the Transfer Agent as a condition to effectuate such
issuance. That notwithstanding, the Holder may in the interest
of securing issuance and/or delivery of Common Stock before the
Deadline, at any time from time to time, in its sole discretion
elect to pay any such fees or charges upfront, and Company
agrees that any such fees or charges as noted in this Section that
are paid by the Holder (whether from the Company’s delays,
outright refusal to pay, Holder’s interest in securing
issuance and/or delivery of Common Stock before the
Deadline, or otherwise), will be at Company’s
expense, and the conversion amount will automatically be
reduced by that dollar amount to cover the cost of the fees or
charges as noted in this Section.  

 

1.5. Restricted
Securities. The shares of Common Stock issuable upon
conversion or adjustment 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
(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). Any legend set forth on any stock certificate
evidencing any Conversion Shares 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
  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 acceptable to the  Company,
or (ii) in the case of the Common Stock issued or 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 without any
restriction as to the number of securities as of a particular date
that can then be immediately sold.

 




 

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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.

 

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, for
clarification, the Holder shall be entitled to convert this Note)
and (b) the resulting successor or acquiring entity 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.

 




 

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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. Such
assets shall be held in escrow by the Company pending any such
conversion

 

d) 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.

 

e) Stock Dividends and Stock
Splits. If the Company, at any time while this Note is
outstanding: (A) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on
shares of Common Stock or any securities convertible into or
exercisable for Common Stock; (B) subdivides outstanding shares of
Common Stock into a larger number of shares; (C) combines
(including by way of a reverse stock split) outstanding shares of
Common Stock into a smaller number of shares; or (D) issues, in the
event of a reclassification of shares of the Common Stock, any
shares of capital stock of the Company, then the Conversion Price
(and each sale or bid price used in determining the Conversion
Price) shall be multiplied by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding
immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after
such event. Any adjustment made pursuant to this Section shall
become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.

 

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.

 




 

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1.7. Revocation.
If any Conversion Shares are not received by the Deadline, the
Holder may revoke the applicable Conversion pursuant to which such
Conversion Shares were issuable. This Note shall remain convertible
after the Maturity Date hereof until this Note is repaid or
converted in full.

 

1.8. Prepayment.
Notwithstanding anything to the contrary contained in this Note,
subject to the terms of this Section, at any time during the period
beginning on the Issue Date and ending on the date which is six (6)
months following the Issue Date (“Prepayment Termination
Date”), Borrower shall have the right, exercisable on not
less than five (5) Trading Days prior written notice to the Holder
of this Note, to prepay the outstanding balance on this Note
(principal and accrued interest), in full, in accordance with this
Section. Any notice of prepayment hereunder (an “Optional
Prepayment Notice”) shall be delivered to the Holder of the
Note at its registered addresses and shall state: (1) that the
Borrower is exercising its right to prepay the Note, and (2) the
date of prepayment which shall be not more than ten (10) Trading
Days from the date of the Optional Prepayment Notice. On the date
fixed for prepayment (the “Optional Prepayment Date”),
the Borrower shall make payment of the Optional Prepayment Amount
(as defined below) to or upon the order of the Holder as specified
by the Holder in writing to the Borrower at least one (1) business
day prior to the Optional Prepayment Date.  If the Borrower
exercises its right to prepay the Note, the Borrower shall make
payment to the Holder of an amount in cash (the “Optional
Prepayment Amount”) equal to the Prepayment Factor (as
defined below), 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 to the
Optional Prepayment Date plus (y) Default Interest,
if any, on the amounts referred to in clauses (w) and
(x) plus (z) any amounts owed to
the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the
Borrower delivers an Optional Prepayment Notice and fails to pay
the Optional 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 prepay the Note
pursuant to this Section. After the Prepayment Termination Date,
the Borrower shall have no right to prepay this Note. For purposes
hereof, the “Prepayment Factor” shall equal one hundred
and fifty percent (150%), provided that such Prepayment factor
shall equal one hundred and thirty five percent (135%) if the
Optional Prepayment Date occurs on or before the date which is
ninety (90) days following the Issue Date hereof.

 


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.

 




 

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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;
Liens. Notwithstanding section 4(l) of the Purchase
Agreement, so long as the Borrower shall have any obligation under
this Note, the Borrower shall not (i) 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, or (b)
indebtedness to trade creditors or financial institutions incurred
in the ordinary course of business, or (ii) enter into, create or
incur any liens, claims or encumbrances of any kind, on or with
respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits
therefrom, securing any indebtedness occurring after the date
hereof.

 

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 may be
conditioned on a specified use of the proceeds of
disposition.

 

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 in
existence or committed on the date hereof and which the Borrower
has informed Holder in writing prior to the date
hereof.

 

2.6. Charter.
So long as the Borrower shall have any obligations under this Note,
the Borrower shall not amend its charter documents, including
without limitation its certificate of incorporation and bylaws, in
any manner that materially and adversely affects any rights of the
Holder.

 

2.7. Transfer
Agent. The Borrower shall not change its transfer agent
without the prior written consent of the Holder. Any resignation by
the transfer agent without a replacement transfer agent consented
to by the Holder prior to such replacement taking effect shall
constitute an Event of Default hereunder.

 


ARTICLE
III. EVENTS OF DEFAULT

 


Any one
or more of the following events which shall occur and/or be
continuing shall constitute an event of default (each, an
“Event of Default”):

 




 

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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 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 at any time
following the execution hereof or) upon exercise by the Holder of
the conversion rights of the Holder in accordance with the terms of
this Note, 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, the Borrower 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, or 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 five
(5) business days after the Holder shall have delivered a Notice of
Conversion. It is an obligation of the Borrower to remain current
in its obligations to its transfer agent. It shall be an event of
default of this Note, if a conversion of this Note is delayed,
hindered or frustrated due to a balance owed by the Borrower to its
transfer agent. If at the option of the Holder, the Holder advances
any funds to the Borrower’s transfer agent in order to
process a conversion, such advanced funds shall be paid by the
Borrower to the Holder within forty eight (48) hours of a demand
from the Holder.

 

3.3. 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 three (3) days
after written notice (via email) thereof to the Borrower from the
Holder.

 

3.4. 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.

 

3.5. Receiver
or Trustee. The Borrower or any subsidiary of the Borrower
shall make an assignment for the benefit of creditors, 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.

 

3.6. 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 $50,000.00, 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.

 




 

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3.7. 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.

 

3.8. Delisting
of Common Stock. The Borrower shall fail to maintain the
listing of the Common Stock on at least one of the OTCBB, or OTCQB,
OTC Pink or an equivalent replacement exchange, NASDAQ, the NYSE or
AMEX.

 

3.9. Failure
to Comply with the Exchange Act. The Borrower shall fail to
comply in any material respect with the reporting requirements of
the Exchange Act; and/or the Borrower shall cease to be subject to
the reporting requirements of the Exchange Act.

 

3.10. Liquidation.  Any
dissolution, liquidation, or winding up of Borrower or any
substantial portion of its business.

 

3.11. 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.

 

3.12. Maintenance
of Assets.  The failure by Borrower, during the
term of this Note, 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).

 

3.13. 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.

 

3.14. Reverse
Splits. The Borrower effectuates a reverse split of its
Common Stock without twenty (20) days prior written notice to the
Holder.

 

3.15. 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.

 

3.16. 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, 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, including, without limitation, promissory
notes; provided, however, the term “Other Agreements”
shall not include the related or companion documents to this Note.
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.

 




 

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Upon
the occurrence and during the continuation of any Event of Default
specified in Section 3.1 (solely with respect to failure to pay the
principal hereof or interest thereon when due at the Maturity
Date), the Note shall become immediately due and payable and the
Borrower shall pay to the Holder, in full satisfaction of its
obligations hereunder, an amount equal to the Default Sum (as
defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF
ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL
BECOME IMMEDIATELY DUE AND PAYABLE 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 and during the
continuation of any Event of Default specified in Sections 3.1
(solely with respect to failure to pay the principal hereof or
interest thereon when due on this Note upon a Trading Market
Prepayment Event pursuant to Section 1.7 or upon acceleration),
3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, 3.17, 3.18 and/or
3. 15 exercisable through the delivery of written notice to the
Borrower by such Holders (the “Default Notice”), and
upon the occurrence of an Event of Default specified in the
remaining sections of Articles III (other than failure to pay the
principal hereof or interest thereon at the Maturity Date specified
in Section 3,1 hereof), the Note shall become immediately due and
payable and the Borrower shall pay to the Holder, in full
satisfaction of its obligations hereunder, an amount equal to the
greater of (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) 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 Closing 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.

 


If the
Borrower fails to pay the Default Amount within five (5) business
days of written notice that such amount is due and payable, then
the Holder shall have the right at any time, so long as the
Borrower remains in default (and so long and to the extent that
there are sufficient authorized shares), to require the Borrower,
upon written notice, to immediately issue, in lieu of the Default
Amount, the number of shares of Common Stock of the Borrower equal
to the Default Amount divided by the Conversion Price then in
effect. The Holder may still convert any amounts due hereunder,
including without limitation the Default Sum, until such time as
this Note has been repaid in full.

 




 

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3.17.
Inside Information.
The Borrower or its officers, directors, and/or affiliates attempt
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.

 


3.18
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).

 


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, email 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 facsimile or email,
with accurate confirmation generated by the transmitting facsimile
machine or computer, at the address, email or number designated in
the Purchase Agreement (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.

 

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. Each transferee of this Note must be an
“accredited investor” (as defined in Rule 501(a) of the
1933 Act). 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.

 




 

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4.5. Cost
of Collection. If default is made in the payment of this
Note, the Borrower shall pay the Holder hereof costs of collection,
including reasonable attorneys’ fees.

 

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 conflicts of laws principles that
would result in the application of the substantive laws of another
jurisdiction.  Any action brought by either party against
the other concerning the transactions contemplated by this
Agreement must be brought only in the civil or state courts of New
York or in the federal courts located in the State and county of
New York.  Both parties and the individual signing this
Agreement on behalf of the Borrower agree to submit to the
jurisdiction of such courts.  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 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 unenforceability 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 Borrower in any other
jurisdiction to collect on the Borrower’s obligations to
Holder, to realize on any collateral or any other security for such
obligations, or to enforce a judgment or other decision in favor of
the Holder.  This Note shall be
deemed an unconditional obligation of Borrower for the payment of
money and, without limitation to any other remedies of Holder, may
be enforced against Borrower by summary proceeding pursuant to New
York Civil Procedure Law and Rules Section 3213 or any similar rule
or statute in the jurisdiction where enforcement is
sought.  For purposes of such rule or statute, any other
document or agreement to which Holder and Borrower are parties or
which Borrower delivered to Holder, which may be convenient or
necessary to determine Holder’s rights hereunder or
Borrower’s obligations to Holder are deemed a part of this
Note, whether or not such other document or agreement was delivered
together herewith or was executed apart from this
Note.

 

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.

 




 

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4.8. 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.

 

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.

 

4.10. 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.

 

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

 




 

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


 

 



SINCERITY APPLIED MATERIALS HOLDINGS CORP

 


 


	

By:

	

 /s/
Zhang Yiwen

	
 


	
 

	

Name:
Zhang Yiwen

	
 


	
 

	

Title:
CEO

	
 







 

 


 

 


 

 


 




 








 






 


EXHIBIT
A


NOTICE
OF CONVERSION


 


The
undersigned hereby elects to convert principal under the 12%
Convertible Note of SINCERITY APPLIED MATERIALS HOLDINGS CORP., a
Nevada corporation (the Company”), into shares of
common stock (the “Common Stock”), of the
Company according to the conditions hereof, as of the date written
below. If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if
any.


By the
delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Common Stock
does not exceed the amounts specified under Section 1.1 of this
Note, as determined in accordance with Section 13(d) of the
Exchange Act.


The
undersigned agrees to comply with the prospectus delivery
requirements under the applicable securities laws in connection
with any transfer of the aforesaid shares of Common Stock pursuant
to any prospectus.


Conversion
calculations:


	
 

	


Issue
Date of Note: 


Date to
Effect Conversion: 


 


Conversion
Price: 


 


Principal Amount of
Note to be Converted: 


Less
applicable fees under the Note: 


Amount
of Note to be Converted: 


 


Interest Accrued on
Account


of
Conversion at Issue: 


 

Additional
Principal on Account of Conversion


Pursuant to Section
1.2(b) of the Note: 


 


Number
of shares of Common Stock
to be issued: 


Remaining Balance
of Note*: 


 


Signature:                                                                                     


 


Name: 


 


Address
for Delivery of Common Stock Certificates: 


 


 


 



Or


 


DWAC
Instructions:



Broker
No:     








Account
No:






 









*Sum
provided does not include accrued interest