Exhibit 4.1


 


NEITHER THIS SECURITY NOR THE
SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.


 


Original Issue Date: October 15, 2021


 


$825,000 Original Principal Amount


$750,000 Purchase Price


$75,000 Original Issue Discount


 


ORIGINAL ISSUE DISCOUNT


SENIOR CONVERTIBLE PROMISSORY NOTE


 


THIS ORIGINAL ISSUE DISCOUNT SENIOR
CONVERTIBLE PROMISSORY NOTE is duly authorized and validly issued at an original issue discount by C-Bond Systems, Inc., a
Colorado corporation (the “Company”) (the “Note”).


 


FOR
VALUE RECEIVED, the Company promises to pay to Mercer Street Global Opportunity Fund, LLC, a Delaware limited liability
company, or its permitted assigns (the “Holder”), the principal sum of $825,000 on the date that is the 12
month anniversary of the Original Issue Date, or October 15, 2022 (the “Maturity Date”) or such earlier date as
this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof. This Note is subject to the
following additional provisions:


 


Section
1. Definitions. For the purposes hereof, (a) capitalized terms not otherwise defined herein shall have the meanings set forth
in the Purchase Agreement and (b) the following words and phrases shall have the following meanings:


 


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


 


“Bankruptcy
Event” means any of the following events: (a) the Company or any Subsidiary thereof commences a case or other proceeding under
any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction relating to the Company or any Subsidiary thereof, (b) there is commenced against the Company or any
Subsidiary thereof any such case or proceeding that is not dismissed within 30 days after commencement, (c) the Company or any
Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding
is entered, (d) the Company or any Subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property that is not discharged or stayed within 30 calendar days after
such appointment, (e) the Company or any Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company
or any Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of
its debts or (g) the Company or any Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval
of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the
foregoing.


 


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


 




     


     


    

 


“Beneficial Ownership Limitation” shall have
the meaning set forth in Section 4(e).


 


“Black
Scholes Value” means the value of the outstanding principal amount of this Note, plus all accrued and unpaid interest hereon based
on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg L.P. (“Bloomberg”)
determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the
applicable Fundamental Transaction and the Maturity Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility
obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental
Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash,
if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option
time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Maturity Date.


 


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


 


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


 


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


 


“Conversion” shall have the meaning ascribed
to such term in Section 4. “Conversion Date” shall have the meaning set forth in Section 4(a). “Conversion Price”
shall have the meaning set forth in Section 4(b).


 


“Conversion Shares”
means, collectively, the shares of Common Stock issuable upon conversion of this Note in accordance with the terms hereof.


 


“Default Interest Rate”
shall have the meaning set forth in Section 2(a). “Dilutive Issuance” shall have the meaning set forth in Section 5(b). “Dilutive
Issuance Notice” shall have the meaning set forth in Section 5(b).


 


“DWAC” means the Deposit or Withdrawal
at Custodian system at The Depository Trust Company.


 




    2


     


    

 


“Equity
Conditions” means, during the period in question, (a) the Company shall have duly honored all conversions and redemptions scheduled
to occur or occurring by virtue of one or more Notices of Conversion of the Holder, if any, (b) the Company shall have paid all liquidated
damages and other amounts owing to the Holder in respect of this Note, (c)(i) there is an effective Registration Statement pursuant to
which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares of Shares and Warrant Shares issuable pursuant
to the Transaction Documents (and the Company believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable
future) or (ii) all of the Conversion Shares issuable pursuant to the Transaction Documents (and shares issuable in lieu of cash payments
of interest) may be resold pursuant to Rule 144 without volume or manner- of-sale restrictions or current public information requirements
as determined by the counsel to the Company as set forth in a written opinion letter to such effect, addressed and acceptable to the Transfer
Agent and the Holder, (d) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents
are listed or quoted for trading on such Trading Market (and the Company believes, in good faith, that trading of the Common Stock on
a Trading Market will continue uninterrupted for the foreseeable future), (e) there is a sufficient number of authorized but unissued
and otherwise unreserved shares of Common Stock for the issuance of all of the shares then issuable pursuant to the Transaction Documents,
(f) there has been no Event of Default and no event which, with the passage of time or the giving of notice, would constitute an Event
of Default, (g) there has been no public announcement of a pending or proposed Fundamental Transaction or Change of Control Transaction
that has not been consummated, and (h) the applicable Holder is not in possession of any information provided by the Company, any of its
Subsidiaries, or any of their officers, directors, employees, agents or Affiliates, that constitutes, or may constitute, material non-public
information.


 


“Event of Default” shall have the meaning set
forth in Section 7(a).


 


“Exchange Act” means the
Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder.


 


“Exempt Issuance” shall have the meaning
set forth in the Purchase Agreement. “Fundamental Transaction” shall have the meaning set forth in Section 5(e). “Indebtedness”
shall have the meaning set forth in the Purchase Agreement. “Interest Conversion Rate” means the Conversion Price.


 


“Interest
Conversion Shares” shall mean, as to an applicable Interest Payment Date, a number of shares of Common Stock to be applied against
any applicable Interest Share Amount equal to the quotient of (x) the applicable Interest Share Amount divided by the Interest Conversion
Rate.


 


“Interest Notice Period”
shall have the meaning set forth in Section 2(a). “Interest Payment Date” shall have the meaning set forth in Section 2(a).
“Interest Share Amount” shall have the meaning set forth in Section 2(a). “Liens” shall have the meaning set forth
in the Purchase Agreement.


 


“Mandatory
Default Amount” means the sum of 125% of the aggregate of (i) the outstanding principal amount of this Note and the
accrued and unpaid interest thereon, including default interest, and (b) all other amounts, costs, expenses and liquidated damages due
in respect of this Note.


 


“Note Register”
shall have the meaning set forth in Section 3(c). “Notice of Conversion” shall have the meaning set forth in Section 4(a).


 






    3


     


    

 


“Option
Value” means the value of a Common Stock Equivalent based on the Black Scholes Option Pricing model obtained from the
“OV” function on Bloomberg determined as of (A) the Trading Day prior to the public announcement of the issuance of the
applicable Common Stock Equivalent, if the issuance of such Common Stock Equivalent is publicly announced or (B) the Trading Day
immediately following the issuance of the applicable Common Stock Equivalent if the issuance of such Common Stock Equivalent is not
publicly announced, for pricing purposes and reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a
period equal to the remaining term of the applicable Common Stock Equivalent as of the applicable date of determination, (ii) an
expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of
(A) the Trading Day immediately following the public announcement of the applicable Common
Stock Equivalent if the issuance of such Common Stock Equivalent is publicly announced or (B) the Trading Day immediately following
the issuance of the applicable Common Stock Equivalent if the issuance of such Common Stock Equivalent is not publicly announced,
(iii) the underlying price per share used in such calculation shall be the highest VWAP of the Common Stock during the period
beginning on the Trading Day prior to the execution of definitive documentation relating to the issuance of the applicable Common
Stock Equivalent and ending on (A) the Trading Day immediately following the public announcement of such issuance, if the issuance
of such Common Stock Equivalent is publicly announced or (B) the Trading Day immediately following the issuance of the applicable
Common Stock Equivalent if the issuance of such Common Stock Equivalent is not publicly announced, (iv) a zero cost of borrow and
(v) a 360 day annualization factor.


 


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


 


“Permitted
Indebtedness” means (a) the indebtedness evidenced by the Notes sold to purchasers on the date hereof, (b) capital lease obligations
and purchase money indebtedness incurred in connection with the acquisition of machinery and equipment as long as such capital leases
and indebtedness, (c) the Indebtedness set forth on Schedule 3.1(aa) to the Purchase Agreement), (d) indebtedness evidenced by Variable
Rate Transactions or Fixed Priced Debt Securities if such transaction is permitted pursuant to the terms of the Purchase Agreement, and
(e) all other indebtedness entered into after the Original Issue Date, so long as such indebtedness (i) is not convertible into Common
Stock at any time, (ii) is not secured by any assets of the Company, and (iii) the payment obligations under such other indebtedness are
junior to the Company’s payment obligations under the Notes.


 


“Permitted
Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges
or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate
proceedings for which adequate reserves (in the good faith judgment of the management of the Company) have been established in accordance
with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the Company’s business, such as carriers’,
warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course
of the Company’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property
or assets or materially impair the use thereof in the operation of the business of the Company and its consolidated Subsidiaries or (y)
are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future
the forfeiture or sale of the property or asset subject to such Lien, (c) Liens incurred in connection with Permitted Indebtedness under
clauses (a) through (c) thereunder, and Liens set forth on Schedule 3.1(aa) to the Purchase Agreement.


 


“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company,
joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.


 


“Prepayment
Amount” means (i) the sum of the outstanding principal amount of this Note, plus accrued and unpaid interest hereon, if the
Company prepays this Note within 90 calendar days of the Original Issue Date, (ii) the sum of 110% of the outstanding principal
amount of this Note, plus 110% of the accrued and unpaid interest hereon, if the Company prepays this Note between 91 calendar days
and 180 calendar days after the Original Issue Date, or (iii) the sum of 120% of the outstanding principal amount of this Note, plus
120% of the accrued and unpaid interest hereon, if the Company prepays this Note between 181 calendar days and the day immediately
preceding the Maturity Date.


 




    4


     


    

 


“Purchase
Agreement” means the Securities Purchase Agreement, dated as of October 15, 2021, among the Company and the original Holders, as
amended, modified or supplemented from time to time in accordance with its terms.


 


“SEC” means the Securities and Exchange Commission.


 


“Securities Act” means the Securities Act of
1933, and the rules and regulations promulgated thereunder. “Share Delivery Date” shall have the meaning set forth in Section
4(c)(ii).


 


“Successor Entity” shall have the meaning set
forth in Section 5(e).


 


“Trading Day” means a day on which the principal
Trading Market is open for trading.


 


“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in
question: the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the NYSE
American, or any market of the OTC Markets, Inc. (or any successors to any of the foregoing).


 


“Transaction Documents” has the meaning
ascribed to it in the Purchase Agreement. “VWAP” has the meaning ascribed to it in the Purchase Agreement.


 


Section 2. Interest/Repayment.


 


(a) Payment
of Interest in Cash or Kind. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal
amount of this Note at the rate of 4% per annum, on each Conversion Date (as to the principal amount then being redeemed) and on the Maturity
Date (each such date, an “Interest Payment Date”) (if any Interest Payment Date is not a Trading Day, then the applicable
payment shall be due on the next succeeding Trading Day), in cash or, at the Company’s option, in duly authorized, validly issued,
fully paid and non- assessable shares of Common Stock at the Interest Conversion Rate (the dollar amount to be paid in shares, the “Interest
Share Amount”) or a combination thereof; provided, however, that payment in shares of Common Stock may only occur if (i) all of
the Equity Conditions have been met during the 10 Trading Days immediately prior to the applicable Interest Payment Date (the “Interest
Notice Period”) and through and including the date such shares of Common Stock are actually issued to the Holder, (ii) the Company
shall have given the Holder notice in accordance with the notice requirements set forth below and (iii) as to such Interest Payment Date,
prior to such Interest Notice Period (but not more than five Trading Days prior to the commencement of such Interest Notice Period), the
Company shall have delivered to the Holder’s account with The Depository Trust Company a number of shares of Common Stock to be
applied against such Interest Share Amount equal to the quotient of the applicable Interest Share Amount divided by then Conversion Price
assuming for such purposes that the Interest Payment Date is the Trading Day immediately prior to the commencement of the Interest Notice
Period (the “Interest Conversion Shares”).


 


(b) Company’s
Election to Pay Interest in Cash or Kind. Subject to the terms and conditions herein, the decision whether to pay interest hereunder
in cash, shares of Common Stock or a combination thereof shall be at the sole discretion of the Company. Prior to the commencement of
any Interest Notice Period, the Company shall deliver to the Holder a written notice of its election to pay interest hereunder on the
applicable Interest Payment Date either in cash, shares of Common Stock or a combination thereof and the Interest Share Amount as to
the applicable Interest Payment Date, provided that the Company may indicate in such notice that the election contained in such notice
shall apply to future Interest Payment Dates until revised by a subsequent notice. During any Interest Notice Period, the Company’s
election (whether specific to an Interest Payment Date or continuous) shall be irrevocable as to such Interest Payment Date. Subject
to the aforementioned conditions, failure to timely deliver such written notice to the Holder shall be deemed an election by the Company
to pay the interest on such Interest Payment Date in cash. At any time, the Company delivers a notice to the Holder of its election to
pay the interest in shares of Common Stock, the Company shall timely file a prospectus supplement pursuant to Rule 424 disclosing such
election. The aggregate number of shares of Common Stock otherwise issuable to the Holder on an Interest Payment Date shall be reduced
by the number of Interest Conversion Shares previously issued to the Holder in connection with such Interest Payment Date.


 






    5


     


    

 


(c) Interest
Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall
accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid
interest, liquidated damages and other amounts which may become due hereunder, has been made. Payment of interest in shares of Common
Stock (other than the Interest Conversion Shares issued prior to an Interest Notice Period) shall otherwise occur pursuant to Section
4(c)(ii) herein and, solely for purposes of the payment of interest in shares, the Interest Payment Date shall be deemed the Conversion
Date. Interest shall cease to accrue with respect to any principal amount converted, provided that, the Company actually delivers the
Conversion Shares within the time period required by Section 4(c)(ii) herein. Interest hereunder will be paid to the Person in whose name
this Note is registered on the records of the Company regarding registration and transfers of this Note (the “Note Register”).
Except as otherwise provided herein, if at any time the Company pays interest partially in cash and partially in shares of Common Stock
to the Note Holder, then such payment of cash shall be distributed ratably among the holders of the then-outstanding Notes based on their
(or their predecessor’s) initial purchases of Notes pursuant to the Purchase Agreement.


 


(d) Late
Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to 18% per annum
(the “Late Fees”) which shall accrue daily from the date such interest is due hereunder through and including the date of
actual payment in full..


 


(e) Prepayment.
The Company shall have the option to prepay this Note in full (including all unpaid interest, liquidated damages and any other amounts
then owing to the Holder) at any time after the Original Issue Date and prior to the Maturity Date at an amount equal to the Prepayment
Amount; provided, however, that the Company shall provide written notice to the Holder at least 5 Trading Days prior to the date on which
the Note shall be prepaid (such payment date, the “Prepayment Date”). The Holder may convert, pursuant to Section 4(a), any
amounts due under this Note subject to a prepayment notice at any time prior to the date that the Prepayment Amount (for the avoidance
of doubt, inclusive of all accrued but unpaid interest, liquidated damages and any other amounts then owing to the Holder) is paid in
full.


 


Section 3. Registration of Transfers and Exchanges.


 


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


 


(b) Investor
Representations. This Note has been issued subject to certain investment representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities
laws and regulations.


 


(c) Reliance
on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may
treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment
as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.


 


Section 4. Conversion.


 


(a) Conversion.
Beginning on the six month anniversary of the Original Issuance Date until this Note is no longer outstanding, this Note shall be
convertible, in whole or in part, at any time, and from time to time, into Conversion Shares at the option of the Holder. The Holder
shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A
(each, a “Notice of Conversion”), specifying therein the principal amount of this Note to be converted and the date on
which such conversion shall be effected (such date, the “Conversion Date”). If no Conversion Date is specified in a
Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. No
ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization)
of any Notice of Conversion form be required. To effect conversions hereunder, the Holder shall not be required to physically
surrender this Note to the Company unless the entire principal amount of this Note, plus all accrued and unpaid interest thereon and
other charges, has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of
this Note in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the principal
amount(s) converted in each conversion, the date of each conversion, and the Conversion Price in effect at the time of each
conversion. The Company may deliver an objection to any Notice of Conversion within two Trading Days of delivery of such Notice of
Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the
absence of manifest error. The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this
Note may be less than the amount stated on the face hereof.


 






    6


     


    

 


(b) Conversion
Price. The “Conversion Price” shall be $0.025 per share, subject to any adjustments contained in this Note. If
the average Closing Price during any 10 consecutive Trading Day period beginning and ending during the 60 Day Effectiveness Period (the
“Average Closing Price”) is below the Conversion Price than the conversion price shall be reduced to such Average Closing
Price but in no event less than $0.0175. All such Conversion Price determinations are to be appropriately adjusted for any stock
dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common
Stock.


 


 (c) Mechanics of Conversion or Repayment.




 


(i) Conversion
Shares Issuable Upon Conversion of Principal Amount. The number of Conversion Shares issuable upon a conversion hereunder shall be
determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted by (y) the Conversion
Price in effect at the time of such conversion.


 


(ii) Delivery
of Certificate Upon Conversion. Not later than three Trading Days after each Conversion Date (the “Share Delivery Date”),
the Company shall deliver, or cause to be delivered, to the Holder (A) the Conversion Shares which, on or after the earlier of (i) the
six month anniversary of the Original Issue Date or (ii) the effective date of the Registration Statement, shall be free of restrictive
legends and trading restrictions (other than those which may then be required by the Purchase Agreement or those required by Rule 144(i))
representing the number of Conversion Shares being acquired upon the conversion of this Note (including, if the Company has given continuous
notice pursuant to Section 2(b) for payment of interest in shares of Common Stock at least 10 Trading Days prior to the date on which
the Notice of Conversion is delivered to the Company, shares of Common Stock representing the payment of accrued interest otherwise determined
pursuant to Section 2(a) but assuming that the Interest Notice Period is the 10 Trading Days period immediately prior to the date on which
the Notice of Conversion is delivered to the Company and excluding for such issuance the condition that the Company deliver Interest Conversion
Shares as to such interest payment prior to the commencement of the Interest Notice Period) and (B) a bank check or wire transfer in the
amount of accrued and unpaid interest (if the Company has elected or is required to pay accrued interest in cash). On or after the earlier
of (i) the six-month anniversary of the Original Issue Date or (ii) the effective date of the Registration Statement, the Company shall
deliver any Conversion Shares required to be delivered by the Company under this Section 4(c) electronically through the Depository Trust
Company or another established clearing corporation performing similar functions.


 


(iii) Failure
to Deliver Conversion Shares. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered to or as directed
by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Company at any time
on or before its receipt of such Conversion Shares, to rescind such conversion, in which event the Company shall promptly return to the
Holder any original Note delivered to the Company.


 


(iv) Obligation
Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion
of this Note in accordance with the terms hereof, are absolute and unconditional, irrespective of any action or inaction by the
Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or
alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by
the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of such Conversion Shares. In the event the Holder of this Note shall elect to
convert any or all of the outstanding principal amount hereof, the Company may not refuse conversion based on any claim that the
Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other
reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Note
shall have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder in accordance with Section
4.1(f) of the Purchase Agreement. The exercise of any such rights shall not prohibit the Holder from seeking to collect damages
under this Note, the Purchase Agreement or under applicable law.


 






    7


     


    

 


(v) Compensation
for Buy-In on Failure to Timely Deliver Conversion Shares Upon Conversion. In addition to any other rights available to the
Holder, (a) if the Company fails for any reason to deliver to the Holder such Conversion Shares on or before the date that is seven
(7) Trading Days after the respective Share Delivery Date, and (b) if after the respective Share Delivery Date, (i) the Holder was
required by its brokerage firm to purchase (in an open market transaction or otherwise) or (ii) the Holder’s brokerage firm
otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the
Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then, the Company
shall pay to such Holder, in cash, an amount equal to the excess of such Holder’s total purchase price (including brokerage
commissions and other reasonable out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including brokerage
commissions and other reasonable out-of-pocket expenses, if any) (the “Buy-In Price”) over the product of (A) such
number of shares of Common Stock that the Company was required to deliver to such Holder by the Share Delivery Date multiplied by
(B) the highest volume weighted average price of the Common Stock on any Trading Day during the period commencing on the respective
Share Delivery Date and ending on the date of the Company’s actual delivery of the shares of Common Stock that Holder was
entitled to receive upon conversion relating to such Share Delivery Date. Nothing herein or therein shall limit a Holder’s
right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver Conversion Shares upon
conversion of this Note as required pursuant to the terms hereof.


 


(vi) Fractional
Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note. As to any fraction
of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election, either pay
a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up
the fraction to the next whole share as long as it does not violate the Beneficial Ownership Limitation in which case the fractional share
shall be disregarded.to the next whole share.


 


(vii) Transfer
Taxes and Expenses. The issuance of Conversion Shares on conversion of this Note shall be made without charge to the Holder hereof
for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates. The Company shall
pay all Transfer Agent fees required for processing of any Notice of Conversion in accordance with the terms of the Note and all fees
to the Depository Trust Company (or another established clearing corporation performing similar functions) required for electronic delivery
of the Conversion Shares in accordance with the terms of the Note.


 


(viii) Attorneys’
Fees etc. The Company shall (A) pay up to $500 per opinion to the law firm of the Holder’s choice (not to exceed a total of
ten (10) opinions in the aggregate) in connection with the conversion of the Note, (B) cause its attorneys to promptly provide any reliance
opinion to the Transfer Agent, and (C) pay the Holder the sums required under Section 2(c)(iv).


 






    8


     


    

 


(d) Holder’s
Conversion Limitations. The Company shall not effect any conversion of this Note, and a Holder shall not have the right to
convert any portion of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of
Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder or
any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).
For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates
shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is
being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining,
unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion
of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise
analogous to the limitation contained herein (including, without limitation, any other Notes or the Warrants) beneficially owned by
the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4(d), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this Section 4(d) applies, the determination of whether this Note is
convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this
Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to
be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder
together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial
Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it
delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this Section 4(d) and
the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any
group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 4(d), in determining the number of outstanding shares of Common
Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i)
the Company’s most recent periodic or annual report filed with the SEC, as the case may be, (ii) a more recent public
announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s Transfer Agent setting
forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two
Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of
the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note
held by the Holder. The Holder, upon not less than 61 days’ prior notice to the Company, may increase the Beneficial Ownership
Limitation provisions of this Section 4(d) to 9.99% of the number of shares of Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder. In all events, the provisions of
this Section 4(d) shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such notice
is delivered to the Company. The Holder may also decrease the Beneficial Ownership Limitation provisions of this Section 4(d) solely
with respect to the Holder’s Note at any time, which decrease shall be effectively immediately upon delivery of notice to the
Company. The Beneficial Ownership Limitation provisions of this Section 4(d) shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 4(d) to correct any portion which may be defective or
inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The limitations contained in this Section 4(d) shall apply to a successor
holder of this Note.


 


Section 5. Certain Adjustments.


 


(a) Stock
Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes
a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents, (ii) subdivides
outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding
shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock,
any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be
the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of
which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant
to this Section 5(a) shall become effective immediately after the record date for the determination of shareholders 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.


 






    9


     


    

 


 (b) Subsequent Equity Sales.







 


(1) At
any time this Note or any amounts accrued and payable thereunder remain outstanding, the Company or any Subsidiary, as applicable, sells
or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant
or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of
Common Stock at an effective price per share that is lower than the Conversion Price then in effect (such lower price, the “Base
Conversion Price” and each such issuance or announcement a “Dilutive Issuance”), then the Conversion Price shall be
immediately reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued.


 


(2) If
any Common Stock Equivalent is amended or adjusted, and such price as so amended shall be less than the Conversion Price in effect at
the time of such amendment or adjustment, then the Conversion Price shall be adjusted upon each such issuance or amendment as provided
in this Section 5(b). In case any Common Stock Equivalent is issued in connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction, (x) the Common Stock Equivalents will be deemed to have been issued for the Option Value
of such Common Stock Equivalents and (y) the other securities issued or sold in such integrated transaction shall be deemed to have been
issued or sold for the difference of (I) the aggregate consideration received by the Company less any consideration paid or payable by
the Company pursuant to the terms of such other securities of the Company, less (II) the Option Value. If any shares of Common Stock or
Common Stock Equivalents are issued or sold or deemed to have been issued or sold for cash, the amount of such consideration received
by the Company will be deemed to be the net amount received by the Company therefor. If any shares of Common Stock or Common Stock Equivalents
are issued or sold for a consideration other than cash, the amount of such consideration received by the Company will be the fair value
of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration
received by the Company will be the average VWAP of such public traded securities for the ten days prior to the date of receipt. If any
shares of Common Stock or Common Stock Equivalents are issued to the owners of the non-surviving entity in connection with any merger
in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion
of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock or Common Stock Equivalents,
as the case may be.


 


(3) If
the holder of Common Stock or Common Stock Equivalents outstanding on the Original Issue Date or issued after the Original Issuance Date
(including but not limited to any Variable Rate Transaction) shall at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued
in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the
Conversion Price then in effect, such issuance shall be deemed to have occurred for less than the Conversion Price on such date that the
holder of Common Stock or Common Stock Equivalents is entitled to receive shares of Common Stock at an effective price per share that
is lower than the Conversion Price then in effect, and such issuance shall be deemed to be a Dilutive Issuance.


 


 (4) [Intentionally Omitted].




 


(5) The
Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents
subject to this Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion
price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not
the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder
is entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance,
regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.


 


(6) The
provisions of this Section 5(b) shall apply each time a Dilutive Issuance occurs after the Original Issue Date for so long as the Note
or any amounts accrued and payable thereunder remain outstanding, but any adjustment of the Conversion Price pursuant to this Section
5(b) shall be downward only.


 





 (7) The provisions of this Section 5(b) shall not apply to Exempt Issuances.




 






    10


     


    

 


(c) Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 5(a) above, if at any time the Company grants, issues or sells
any Common Stock, Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held
the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion
hereof, including without limitation, the Beneficial Ownership Limitation) 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 shares
of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent
that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such
shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance
for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).


 


(d) Pro
Rata Distributions. During such time as this Note is outstanding, if the Company shall declare or make any dividend or other distribution
of its assets or rights or warrants to acquire its assets, or subscribe for or purchase any security other than Common Stock, to holders
of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or
other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement
or other similar transaction) (a “Distribution”), at any time after the issuance of this Note, then, in each such case, the
Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the
Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations
on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is
taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to
be determined for the participation in such Distribution (provided, however, to the extent that the Holder's right to participate
in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation with respect to the Company or any other
publicly-traded corporation subject to Section 13(d) of the Exchange Act, then the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent)
and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto
would not result in the Holder exceeding the Beneficial Ownership Limitation with respect to the Company or any other publicly-traded
corporation subject to Section 13(d) of the Exchange Act).


 






    11


     


    

 


(e) Fundamental
Transaction. (1) If, at any time while this Note is outstanding, (i) the Company, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or
indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of
its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or
exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding
Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one or
more related transactions consummates a stock or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person
or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent
conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon
such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation on the
conversion of this Note), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is
the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of
such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Note is convertible immediately
prior to such Fundamental Transaction (without regard to any limitation on the conversion of this Note). For purposes of any such
conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based
on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the
Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value
of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities,
cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this Note following such Fundamental Transaction. The Company shall not effect a
Fundamental Transaction unless it gives the Holder at least 10 Trading Days prior notice together with sufficient details so the
Holder can make an informed decision as to whether it elects to accept the Alternative Consideration. If a public announcement of
the Fundamental Transaction has not been made, the notice to the Holder may not be given until the Company files a Form 8-K or other
report disclosing the Fundamental Transaction. (2) Notwithstanding anything to the contrary, provided that the Warrant Shares are
not registered under an effective registration statement in accordance with the Registration Rights Agreement, in the event of a
Fundamental Transaction that is (x) an all cash transaction, (y) a “Rule 13e-3 transaction” as defined in Rule 13e-3
under the Exchange Act, or (z) a Fundamental Transaction involving a person or entity not traded on a national securities exchange
or trading market (with such exchange or market including, without limitation, the Nasdaq Global Select Trading Market, the Nasdaq
Global Market, or the Nasdaq Capital Market, the New York Stock Exchange, Inc., the NYSE American or any market operated by the OTC
Markets, Inc.), the Company or any Successor Entity (as defined below) shall, at the Holder’s option, concurrently with the
consummation of the Fundamental Transaction, purchase this Note from the Holder by paying to the Holder the higher of (i) an amount
of cash equal to the Black Scholes Value of the outstanding principal of this Note on the date of the consummation of such
Fundamental Transaction, or (ii) the product of (a) the number of Conversion Shares issuable upon full conversion of this Note
(without regard to any limitation on conversion of this Note) and (b) the positive difference between the cash per share paid in
such Fundamental Transaction minus the then in effect Conversion Price. (3) If Section 5(e)(1) and (2) are not applicable, the
Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor
Entity”) to assume in writing all of the obligations of the Company under this Note and the other Transaction Documents in
accordance with the provisions of this Section 5(e) pursuant to written agreements in form and substance reasonably satisfactory to
the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of
the Holder, deliver to the Holder in exchange for this Note a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Note which is convertible for a corresponding number of shares of capital stock
of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion
of this Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental Transaction, and with a
conversion price which applies the Conversion Price hereunder to such shares of capital stock (but taking into account the relative
value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such
number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Note
immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance
to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted
for (so that from and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction
Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and
power of the Company and shall assume all of the obligations of the Company under this Note and the other Transaction Documents with
the same effect as if such Successor Entity had been named as the Company herein. Notwithstanding anything in this Section 5(e), an
Exempt Issuance (as defined in the Purchase Agreement) shall not be deemed a Fundamental Transaction.


 


(f) Calculations.
All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.


 






    12


     


    

 


 (g) Notice to the Holder.







 


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


 


(ii) Notice
to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on its Common
Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock, (C) the Company shall
authorize the granting to all holders of its Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock
of any class or of any rights, (D) the approval of any shareholders of the Company shall be required in connection with any reclassification
of its Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of
the assets of the Company, or any compulsory share exchange whereby its Common Stock is converted into other securities, cash or property
or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company,
then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note,
and shall cause to be delivered to the Holder at its last address as it shall appear upon the Note Register, at least 5 calendar days
prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which
the holders of its Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective
or close, and the date as of which it is expected that holders of its Common Stock of record shall be entitled to exchange their shares
of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer
or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect
the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes,
or contains, material, non-public information regarding the Company or any of the Subsidiaries (as determined in good faith by the Company),
the Company or its successor shall simultaneously file such notice with the SEC pursuant to a Current Report on Form 8-K. If the Company
does not simultaneously file the required Form 8-K, the Holder shall be entitled penalties in accordance with Section 4.6 of the Purchase
Agreement. The Holder shall remain entitled to convert this Note during the 5 calendar day period commencing on the date of such notice
through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.


 


Section 6. Negative Covenants.
As long as any portion of this Note remains outstanding, unless the holders of at least 75% in principal amount of the then outstanding
Notes shall have otherwise given prior written consent, the Company shall not, and shall not permit any of the Subsidiaries to, directly
or indirectly:


 


(a) other
than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any
kind, including, but not limited to, a guarantee, 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;


 


(b) other
than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property
or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;


 


(c) amend
its charter documents, including, without limitation, its articles of incorporation and bylaws, in any manner that materially and adversely
affects any rights of the Holder. Stock splits shall not be deemed to materially and adversely affects any rights of the Holder;


 


(d) purchase
or otherwise acquire more than a de minimis number of shares of its Common Stock or Common Stock Equivalents;


 


(e) repay,
or offer to repay, any Indebtedness other than the Note as provided in Section 2(b) or Permitted Indebtedness, as such terms Indebtedness
and Permitted Indebtedness are in effect as of the Original Issue Date or in effect as of the issue date of the respective Indebtedness
or Permitted Indebtedness if entered into in accordance with the Transaction Documents after the Original Issue Date, provided that such
payments other than on the Notes shall


not be permitted if, at such time,
or after giving effect to such payment, any Event of Default exists or occurs;


 




    13


     


    

 


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




 


(g) enter
into any transaction with any Affiliate of the Company which would be required to be disclosed in any public filing with the SEC assuming
that the Company is subject to the Securities Act or the Exchange Act, unless such transaction is made on an arm’s-length basis
and expressly approved by a majority of the disinterested directors of the Company (even if less than a quorum otherwise required for
board approval);


 


 (h) enter into any agreement with respect to any of the foregoing.




 


Section 7. Events of Default.


 


(a) “Event
of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event
shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order,
rule or regulation of any administrative or governmental body):


 


(i) any
default in the payment of (A) principal and interest payment under this Note or any other Indebtedness, or (B) Late Fees, liquidated damages
and other amounts owing to the Holder of this Note, as and when the same shall become due and payable (whether on a Conversion Date, or
the Maturity Date, or by acceleration or otherwise), which default, solely in the case of a default under clause (B) above, is not cured
within five Trading Days;


 


(ii) the
Company shall fail to observe or perform any other covenant or agreement contained in this Note (other than a breach by the Company of
its obligations to deliver Conversion Shares, which breach is addressed in clause (x) below) or any Transaction Document which failure
is not cured, if possible to cure, within the earlier to occur of 10 Trading Days after notice of such failure is sent by the Holder or
by any other Holder to the Company and


 (B) the Company has become aware of such failure;




 


(iii) except
for payment defaults covered under Section 7(a)(i), the Company shall breach, or a default or event of default (subject to any grace or
cure period provided in the applicable agreement, document or instrument) shall occur under, (A) any of the Transaction Documents or (B)
any other material agreement, lease, document or instrument to which the Company or any Subsidiary is obligated (and not covered by any
other clause of this Section 7) which default or event of default if not cured, if possible to cure, within the earlier to occur of (i)
five Trading Days after notice of such default sent by the Holder or by any other holder to the Company and (ii) the Company has become
aware of such default;


 


(iv) any
representation or warranty made in this Note, any other Transaction Document, any written statement pursuant hereto or thereto or any
other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or incorrect in any
material respect as of the date when made or deemed made, which failure is not cured, if possible to cure, within the earlier to occur
of 10 Trading Days after (A) notice of such failure is sent by the Holder or (B) by any other Holder to the Company;


 


 (v) the Company or any Subsidiary shall be subject to a Bankruptcy Event;




 


(vi) the
Company or any Subsidiary shall: (A) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of it or
any of its properties; (B) admit in writing its inability to pay its debts as they mature; (C) make a general assignment for the benefit
of creditors; (D) be adjudicated as bankrupt or insolvent or be the subject of an order for relief under Title 11 of the United States
Code or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute of any other jurisdiction
or foreign country; or (E) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law
or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or (F)
take or permit to be taken any action in furtherance of or for the purpose of effecting any of the foregoing including a composition with
creditors or similar action;


 






    14


     


    

 


(vii) if
any order, judgment or decree shall be entered, without the application, approval or consent of the Company or any Subsidiary, by
any court of competent jurisdiction, approving a petition seeking liquidation or reorganization of the Company or any Subsidiary, or
appointing a receiver, trustee, custodian or liquidator of the Company or any Subsidiary, or of all or any substantial part of its
assets, and such order, judgment or decree shall continue unstayed and in effect for any period of 10 days;


 


(viii) the
occurrence of any levy upon or seizure or attachment of, or any uninsured loss of or damage to, any property of the Company or any Subsidiary
having an aggregate fair value or repair cost (as the case may be) in excess of $100,000 individually or in the aggregate, and any such
levy, seizure or attachment shall not be set aside, bonded or discharged within 10 days after the date thereof;


 


(ix) any
monetary judgment, writ or similar final process shall be entered or filed against the Company, any Subsidiary or any of their respective
property or other assets for more than $100,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or
unstayed for a period of 10 days;


 


(x) any
Material Adverse Effect on the Company or any Subsidiary occurs or any other circumstance or event that could, with or without the passage
of time or the giving of notice, result in a default or event of default under any agreement binding upon the Company or any Subsidiary,
which default or event of default could or is reasonably likely to have a Material Adverse Effect on the Company or any Subsidiary;


 


(xi) any
provision of any Transaction Document shall at any time for any reason (other than pursuant to the express terms thereof) cease to be
valid and binding on or enforceable against the parties thereto, or the validity or enforceability thereof shall be contested by any party
thereto, or a proceeding shall be commenced by the Company or any Subsidiary or any governmental authority having jurisdiction over any
of them, seeking to establish the invalidity or unenforceability thereof, or the Company or any Subsidiary shall deny in writing that
it has any liability or obligation purported to be created under any Transaction Document;


 


(xii) the Company fails to use the proceeds
in the manner as described in Section 4.7 of the Purchase Agreement;


 


(xiii) the
SEC suspends the Common Stock from trading or the Company’s Common Stock is not listed or quoted for trading on a Trading Market
which failure is not cured, if possible to cure, within the earlier to occur of 10 Trading Days after notice of such failure is sent by
the Holder or by any other Holder to the Company or the transfer of shares of Common Stock through the Depository Trust Company System
is no longer available or is subject to a “chill” by the Depository Trust Company or any successor;


 


(xiv) the
Company shall be a party to any Change of Control Transaction or shall agree to sell or dispose of all or in excess of 50% of its assets
in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);


 


(xv)
the Company fails to have authorized and reserved the amount of shares designated in Section 4.9 of the Purchase Agreement (without
regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation);


 


(xvi) the
Company shall fail for any reason, except if caused by the action or inaction of the Holder to deliver Conversion Shares or the Warrant
Shares to the Holder by the third Trading Day after a Conversion Date pursuant to Section 4(c) or receipt of an exercise notice, or the
Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not
honor requests for conversions of this Note or exercise of Warrants in accordance with the terms hereof and thereof;


 


(xvii) the
Company fails to comply in any material respect with the reporting requirements of the Exchange Act (including but not limited to becoming
delinquent in the filing of any report required to be filed under the Exchange Act, with the understanding that the Company shall not
be delinquent if it files within any extension permitted by Rule 12b-25 under the Exchange Act) or ceases to be subject to the reporting
requirements of the Exchange Act. For avoidance of doubt, a failure to file an Exchange Act report within such time shall be deemed to
be a failure to comply in a material respect;


 






    15


     


    

 


 (xviii) the Transfer Agent is terminated without consent of the Holder;







 


 (xix) the Company incurs any Indebtedness other than Permitted Indebtedness;




 


(xxx) a false
or inaccurate certification (including a false or inaccurate deemed certification) by the Company as to whether any Event of Default has
occurred;


 


 (xxi) [Intentionally Omitted];




 


(xxii) a
Lien other than a Permitted Lien is imposed on the assets of the Company or any subsidiary and such Lien is not dissolved within 10 calendar
days;


 


(xxiii) the
Company fails to deliver the original Note and Warrants to the Purchasers within five Trading Days as of each Closing;


 


(xxiv) the
Company provides the Holder with material non-public information concerning the Company without the Holder’s prior written consent;


 


(xxv) the
Company restates any financial statements included in its reports or registration statements filed pursuant to the Securities Act or the
Exchange Act for any date or period from two years prior to the Original Issue Date of this Note and until this Note is or the Warrants
issued to the Holder are no longer outstanding, if following first public announcement or disclosure that a restatement will occur the
VWAP on the next Trading Day is 20% less than the VWAP on the prior Trading Day. For the purposes of this clause (xxv) the next Trading
Day if an announcement is made before 4:00 pm New York, NY time is either the day of the announcement or the following Trading Day;


 


(xxvi) the
Company or a Subsidiary enters into a Variable Rate Transaction prohibited under the Purchase Agreement, without the prior written consent
of the Holder.


 


(b) Remedies
Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Note, plus liquidated damages and
other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due
and payable in cash at the Mandatory Default Amount. Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly
surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide,
and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable
law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights
as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 7(b). No such rescission
or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.


 


(c) Interest
Rate Upon Event of Default. Commencing on the occurrence of any Event of Default and until such Event of Default is cured, this Note
shall accrue interest at an interest rate equal to the Default Interest Rate.


 


(d) Notice
of an Event of Default. Upon learning of an Event of Default with respect to this Note, the Company shall within two Trading Days
deliver written notice thereof via facsimile or electronic mail and overnight courier (with next day delivery specified) to the Holder


 


Section 8. Miscellaneous.


 


(a) No
Rights as Stockholder Until Conversion. This Note does not entitle the Holder to any voting rights, dividends or other rights as a
stockholder of the Company prior to the conversion hereof.


 






    16


     


    

 


(b) Notices.
All notices, offers, acceptance and any other acts under this Agreement (except payment) shall be in writing, and shall be sufficiently
given if delivered to the addressees in person, email, followed by FedEx or similar receipted next day delivery, as follows:


 


	If to the Company:	C-Bond Systems, Inc.
	 	6035 South Loop East Houston,
	 	TX 77033
	 	Attention: Scott Silverman
	 	Email: ssilverman @cbondsystem.scom
	 	 
	with a copy to:
	(which shall not constitute notice)
	 	 
	If to the Purchaser:	To the address listed on the Purchaser Signature
Page to the Securities Purchase Agreement.
	 	 




 


or to such other address as any of them, by notice
to the other may designate from time to time. Time shall be counted to, or from, as the case may be, the date of delivery.


 


(c) Absolute
Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest and Late Fees, as applicable, on this
Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company.


 


(d) Lost
or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange
and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note,
a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss,
theft or destruction of this Note, and of the ownership hereof, reasonably satisfactory to the Company.


 


(e) Exclusive
Jurisdiction; Governing Law; Prevailing Party Attorneys’ Fees. All questions concerning the construction, validity, enforcement
and interpretation of this Note and venue shall be governed by and construed and enforced in accordance with Section 5.8 of the Purchase
Agreement. If any party shall commence an Action or Proceeding to enforce or otherwise relating to this Note, then, in addition to the
other obligations of the Company elsewhere in this Note, the prevailing party in such action or proceeding shall be reimbursed by the
non-prevailing party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such Action or Proceeding.


 


(f) Waiver.
Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to
insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party
of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion. Any waiver
by the Company or the Holder must be in writing.


 


(g) Severability.
If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision
is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall
be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate
of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company
covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter
in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such
law has been enacted.


 






    17


     


    

 


(h) Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and
in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity
(including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right
to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. The Company
covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein.
Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be
the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of
the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach would be inadequate. The Company therefore agrees
that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available
remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss
and without any bond or other security being required. The Company shall provide all information and documentation to the Holder
that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this
Note.


 


(i) Senior
Obligation. So long as the Company shall have any obligation under this Note, the Company shall not incur or suffer to exist or guarantee
any unsecured Indebtedness that is senior to or pari passu with (in priority of payment and performance) the Company’s obligations
under this Note.


 


(i) Next
Trading Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Trading Day, such payment shall
be made on the next succeeding Trading Day.


 


(j) Headings.
The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect
any of the provisions hereof.


 




    18


     


    

 


IN WITNESS WHEREOF, the Company has caused
this Note to be duly executed by a duly authorized officer as of the date first above indicated.


 


	 	C-BOND SYSTEMS, INC.
	 	 	 
	 	By:	/s/ Scott R. Silverman
	 	Name: 	Scott R. Silverman
	 	Title:	Chief Executive Officer




 




    19


     


    

 


ANNEX A


NOTICE OF CONVERSION


 


The undersigned hereby elects to convert
principal under the Original Issue Discount Convertible Note due _________, 2022 of C-Bond Systems, Inc., a Colorado 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.


 


By the delivery
of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed
the amounts specified under Section 4(e) 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.


 


Conversion calculations:


 


	 	Date to Effect Conversion:
	 	Principal Amount of Note to be Converted:
	 	Number of shares of Common Stock to be issued:
	 	Signature:
	 	Name:
	 	DWAC Instructions:
	 	Broker No: ______________
	 	Account No: _____________


 


 


20