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: $5,000.00	 	 	Issue Date: September 22, 2016
	Purchase Price: $5,000.00 	 	 	 



 


CONVERTIBLE PROMISSORY NOTE


FOR VALUE RECEIVED, GREY
CLOAK TECH INC. a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of
WAYNE COLESON a Colorado resident, or registered assigns (the “Holder”) the sum of $5,000.00 together
with any interest as set forth herein, on December 31, 2016 (the “Maturity Date”), and to pay interest on the
unpaid principal balance hereof at the rate of twelve (12%) (the “Interest Rate”) per annum from the date hereof (the
“Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or
otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal
or interest on this Note which is not paid when due shall bear interest at the rate of twenty-two (22%) per annum from the due
date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that the
Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments
due hereunder (to the extent not converted into common stock, no par value per share (the “Common Stock”) in accordance
with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address
as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever
any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead
be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on
which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than
a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive
order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in
that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase
Agreement”).




    1 


     


    

This Note
is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.


The following
terms shall apply to this Note:


ARTICLE
I. CONVERSION RIGHTS


1.1.              
Conversion Right. The Holder shall have the right from time to time, and at any time
during the period beginning on the date which is one hundred eighty one (181) days following the date of this Note and ending on
the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to
Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any
part of the outstanding and unpaid principal amount of 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 9.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso The number of shares
of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined
below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached
hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower 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 6:00 p.m., New York, New York time on such conversion date (the “Conversion
Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal
amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid
interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3)
at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or
(2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g)
hereof.


1.2.              
Conversion Price.


 




    2 


     


    

a)                 
Calculation of Conversion Price. The conversion price (the “Conversion Price”)
shall equal the lesser of $0.20 or the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock
splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any
subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The
"Variable Conversion Price" shall mean 50% multiplied by the Market Price (as defined herein) (representing a discount
rate of 50%). “Market Price” means the lowest Trading Price (as defined below) for the Common Stock during the
twenty (20) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price”
means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board, or applicable trading market
(the “OTCQB”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder
(i.e. Bloomberg) or, if the OTCQB is not the principal trading market for such security, the closing bid price of such security
on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such
security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security
that are listed in the “pink sheets” by the National Quotation Bureau, Inc. If the Trading Price cannot be calculated
for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined
by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading
Price is required in order to determine the Conversion Price of such Notes. Provided, however, that
if the closing bid price for the common stock on the Clearing Date (defined below) is lower than the Closing Bid Price, then the
Conversion Price shall be adjusted such that the discount rate shall be taken from the closing bid price on the Clearing Date,
and the Company shall issue additional shares to the Holder to reflect such adjusted Conversion Price; and provided further, that
if the Company’s common stock becomes chilled by Deposit Trust Corporation (DTC) at the time that any portion of the principal
and interest of this Note is converted by Holder, than the Variable Conversion Price shall be forty percent (representing a discount
of 60%) for so long as the Common Stock is chilled. For purposes of this Agreement, the Clearing Date shall be on the date in which
the Conversion Shares are deposited into the Holder’s brokerage account and Holder’s broker has confirmed with Holder
that the Holder may execute trades of the Conversion Shares without restriction. If such notice is received from the broker by
the Holder after 12:00 PM Eastern Standard Time, the notice shall be deemed to have been received on the next Trading Day. “Trading
Day” shall mean any day on which the Common Stock is tradable for any period on the OTCQB, or on the principal securities
exchange or other securities market on which the Common Stock is then being traded. The Company shall be responsible for
the full cost and expense in connection with the issuance and delivery (expedited) of shares to the Borrower holder, including,
but not limited to the cost and issuance fees that may be charged by the Company’s transfer agent to the holder upon each
Conversion Notice. In the event the transfer agent assess a cash charge to the Borrower upon any conversion, the Borrower may at
its election deduct the entire cost from the principal amount being converted. 


b)                 
Holder’s Right of Alternative Conversion Price. If the Company in any manner
issues or sells or enters into any agreement to issue or sell, any Common Stock or Convertible Securities (any such securities,
“Variable Price Securities”) after the Closing Date that are issuable pursuant to such agreement or convertible into
or exchangeable or exercisable for shares of Common Stock pursuant to such Options or Convertible Securities, as applicable, at




    3 


     


    

a price which varies or may vary
with the market price of the shares of Common Stock, including by way of one or more reset(s) to a fixed price, but exclusive of
such formulations reflecting customary anti-dilution provisions (such as share splits, share combinations, share dividends and
similar transactions) (each of the formulations for such variable price being herein referred to as, the “Other Variable
Price”), and the Other Variable Price is greater than the Variable Conversion Price then in effect under this Note, the Company
shall provide written notice thereof via facsimile and overnight courier to the Buyer on the date of such agreement and/or the
issuance of such Convertible Securities or Options, as applicable. From and after the date the Company enters into such agreement
or issues any such Variable Price Securities, the Buyer shall have the right, but not the obligation, in its sole discretion to
substitute the Other Variable Price for the Conversion Price upon conversion of this Note by designating in the Conversion Notice
delivered upon any conversion of this Note that solely for purposes of such conversion the Buyer is relying on the Other Variable
Price rather than the Conversion Price then in effect. The Buyer’s election to rely on the Other Variable Price for a particular
conversion of this Note shall not obligate the Holder to rely on the Other Variable Price for any future conversion of this Note.


c)                 
Conversion Price During Major Announcements. Notwithstanding anything contained in
Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public announcement that it intends to consolidate or merge
with any other corporation (other than a merger in which the Borrower is the surviving or continuing corporation and its capital
stock is unchanged) or sell or transfer all or substantially all of the assets of the Borrower or (ii) any person, group or entity
(including the Borrower) publicly announces a tender offer to purchase 50% or more of the Borrower’s Common Stock (or any
other takeover scheme) (the date of the announcement referred to in clause (i) or (ii) is hereinafter referred to as the “Announcement
Date”), then the Conversion Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion
Price Termination Date (as defined below), be equal to the lower of (x) the Conversion Price which would have been applicable for
a Conversion occurring on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From and after
the Adjusted Conversion Price Termination Date, the Conversion Price shall be determined as set forth in this Section 1.2(a). For
purposes hereof, “Adjusted Conversion Price Termination Date” shall mean, with respect to any proposed transaction
or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section 1.2(b) has been made, the
date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above)
consummates or publicly announces the termination or abandonment of the proposed transaction or tender offer (or takeover scheme)
which caused this Section 1.2(b) to become operative.


1.3.              
Authorized Shares. The Borrower shall at all times have authorized, and reserved for
the purpose of issuance, a sufficient number of shares of Common Stock to provide for the full conversion or exercise of the outstanding
Note and issuance of the Conversion Shares in connection therewith (based on the Conversion Price of the Note in effect from time
to time) and as otherwise required by the Note. The Borrower shall not reduce the number of shares of Common Stock reserved for
issuance upon conversion of Note without the consent of the Buyer. The Borrower shall at all times maintain the number of shares
of Common Stock so reserved for issuance at an amount (“Reserved Amount”) equal to three times
the number that is then actually issuable upon full conversion of the Note and any additional Notes (based on the Conversion




    4 


     


    

Price of the Note in effect from
time to time). If at any time the number of shares of Common Stock authorized and reserved for issuance (“Authorized and
Reserved Shares”) is below the Reserved Amount, the Company will promptly, but in no event later than thirty days following
a Share Reserve failure, take all corporate action necessary to authorize and reserve a sufficient number of shares, including,
without limitation, calling a special meeting of shareholders to authorize additional shares to meet the Company’s obligations
under this Section 1.3, in the case of an insufficient number of authorized shares, obtain shareholder approval of an increase
in such authorized number of shares, and voting the management shares of the Borrower in favor of an increase in the authorized
shares of the Borrower to ensure that the number of authorized shares is sufficient to meet the Reserved Amount. If the Borrower
fails to obtain such shareholder approval within thirty (30) days following the date on which the number of Reserved Amount exceeds
the Authorized and Reserved Shares, it will be considered an Event of default under the Note. In the event the Borrower fails to
increase the Reserved Amount within sixty days of a Share Reserve failure and a Conversion Notice has been submitted to the Borrower,
Borrower shall be liable to pay the daily $2,000 cash penalty for failure to deliver shares. Such penalty shall continue to accrue
until such date as the Borrower increases the holders Share Reserve. 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.


1.4.              
Method of Conversion.


a)                 
Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the
Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion
(by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York,
New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.


b)                 
Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth
herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender
this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall
maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably
satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In
the event of any dispute or discrepancy, such records of the Borrower shall, prima facie, be controlling
and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as
aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon
the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon
payment by




    5 


     


    

the Holder of any applicable
transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any
assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion
of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the
amount stated on the face hereof.


c)                 
Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion
of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver
any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian
in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid
to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been
paid.


d)                 
Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the
Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the
requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered
to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days
after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof,
surrender of this Note) in accordance with the terms hereof and the Purchase Agreement.


e)                 
Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a duly
and properly executed Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable
upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced
to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect
to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other
securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion
as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and
unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect
to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay
in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other
circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The
Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received
by the Borrower before 6:00 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




    6 


     


    

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 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 of this Note is not delivered by the Deadline (including a failure due to
the circumstances described in Section 1.3 above) the Borrower shall pay to the Holder $2,000 per day in cash, for each day
beyond the Deadline that the Borrower fails to deliver such Common Stock through willful acts designed to hinder the delivery of
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 (by written notice to the Borrower by the first day of the month following
the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon
in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance
with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting
from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly
the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.


h)                 
Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion.
In addition to any other rights available to the Holder, if Borrower fails for any reason to deliver to the Holder such certificate
or certificates by the Deadline, and if and if after such Deadline the Holder is required by its brokerage firm to purchase (in
an open market transaction or otherwise), or the Holder or 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 Deadline (a “Buy-In”), then Borrower shall (A) pay in cash to the Holder (in addition
to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total purchase
price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number
of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale
price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B)
at the option of the Holder, either reissue (if surrendered) this Note in a principal amount equal to the principal amount of the
attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of
Common Stock that would have been issued if Borrower had timely complied with its delivery requirements. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this
Note with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to
such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, Borrower shall be required
to pay the Holder $1,000. The Holder shall provide Borrower written notice indicating the amounts payable to the Holder in




    7 


     


    

respect of the Buy-In and, upon
request of Borrower, evidence of the amount of such loss. Nothing herein 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 Borrower’s failure to timely deliver certificates representing shares of Common Stock upon
conversion of this Note as required pursuant to the terms hereof.


1.5.              
Concerning the Shares. The shares of Common Stock issuable upon conversion of this
Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act
or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred
may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant
to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate”
(as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section
1.5 and who is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement
(and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion
of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the
number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable
upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant
to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in
the following form, as appropriate: 


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




    8 


     


    

The legend set forth above shall be
removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower
or its transfer agent shall have received an opinion of counsel 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 accepted by  the  Company  so  that  the  sale  or  transfer  is 
or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder
under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can then be immediately sold. In the event that the Company does not
accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration,
such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note


 


1.6.              
Effect of Certain Events.


a)                 
Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance
or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or
series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation,
merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower
is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower
shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default
Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual,
corporation, limited liability company, partnership, association, trust or other entity or organization.


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




    9 


     


    

written notice (but in any event
at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there
is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or
other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting
successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above
provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.


c)                 
Adjustment Due to Distribution. If the Borrower shall declare or make any distribution
of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of
capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights
to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this
Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such
Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common
Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such Distribution.


d)                 
Adjustment Due to Dilutive Issuance. If, at any time when the Note or any Conversion
Shares issuable upon conversion of the note, is issued and outstanding, the Borrower issues or sells, or in accordance with this
Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration
per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith)
less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive
Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration
per share received by the Borrower in such Dilutive Issuance, but in no event shall the Conversion Price be above the original
Conversion Price.


The Borrower shall be deemed
to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not
including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or
other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights
and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price
per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect,
then the Conversion Price shall be equal to such price per share. In the event Conversion Shares our outstanding and in the holder’s
brokerage account, the Company shall issue an amount of additional shares such that the effective price shall equal the lower issuance
price. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise
of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration
for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable
to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of
such Options, the minimum aggregate amount of additional




    10 


     


    

consideration payable upon the
conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum
total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible
Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common
Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of
such Options.


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


e)                 
Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower
issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”)
pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had
held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on
conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase
Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.


f)                  
Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the
Conversion Price as a result of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute
such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request
at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the
Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities
or property which at the time would be received upon conversion of the Note.


1.7.              
Trading Market Limitations. Unless permitted by the applicable rules and regulations
of the principal securities market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon
conversion of or otherwise pursuant to this




    11 


     


    

Note and the other Notes issued
pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that the Borrower can issue pursuant
to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share
Amount”), which shall be 9.99% of the total shares outstanding on the Closing Date (as defined in the Purchase Agreement),
subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and
similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share Amount has been issued, if
the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower’s
ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note,
this will be considered an Event of Default under Section 3.3 of the Note.


1.8.              
Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the
shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s
allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii)
the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right
to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in
equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing,
if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration
of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects
to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of
this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted
Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not
been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right
to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any
subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined
in accordance with Section 1.3) for the Borrower’s failure to convert this Note.


1.9.              
Prepayment. Notwithstanding anything to the contrary contained in this Note, at any
time during the period beginning on the Issue Date the Borrower shall have the right, exercisable on not less than three (3) Trading
Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in
accordance with this Section 1.9. 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 three (3) 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




    12 


     


    

shall make payment to the Holder
of an amount in cash (the “Optional Prepayment Amount”) equal to the Applicable Premium (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 1.2
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 1.9.


 


	
         

        PREPAY DATE
	 	APPLICABLE PREMIUM
	< 30 days	 	115% of principal plus accrued interest
	31- 60 days	 	121% of principal plus accrued interest
	61-90 days	 	127% of principal plus accrued interest
	91-120 days	 	133% of principal plus accrued interest
	121-150 days	 	139% of principal plus accrued interest
	151-180 days	 	140% of principal plus accrued interest


 


After the expiration of one hundred
eighty (180) following the date of the Note, the Borrower shall have no right of prepayment.


ARTICLE
II. CERTAIN COVENANTS


2.1.              
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.


2.2.              
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. 


2.3.              
Prohibition on Equity Line of Credit. Without prior written approval from Holder, from
the date hereof until the Note is no longer outstanding, the Company will not, without the consent of the Holder, enter into any
Equity Line of Credit or similar agreement, nor exercise of any of its rights under any Equity Line of Credit entered into as of
the Closing Date other than an Equity Line of Credit entered into with the Borrower or its affiliates, (an “Equity Line of
Credit”). For purposes hereof, “Equity Line of Credit” shall include any transaction involving a written agreement
between the Company and an investor or underwriter whereby the Company has the right to “put” its securities to the
investor or underwriter over an agreed period




    13 


     


    

of time and at an agreed price
or price formula, whether entered into prior to or after the Closing Date.


ARTICLE
III. EVENTS OF DEFAULT


If any
of the following events of default (each, an “Event of Default”) shall occur:


3.1.              
Failure to Pay Principal or Interest. The Borrower fails to pay the principal
hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.


3.2.              
Conversion and the Shares. The Borrower fails to issue shares of Common Stock
to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder
of the conversion rights of the Holder in accordance with the terms of this Note, 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 three (3) 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. Any funds advanced to the Borrowers transfer agent may be added to the principal balance of
the Note at the option of the Borrower.


3.3.              
Breach of Covenants. The Borrower breaches any material covenant or other material
term or condition contained in this Note including but not limited to the Purchase Agreement and such breach continues for a period
of ten (10) days after written notice thereof to the Borrower from the Holder.


3.4.              
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




    14 


     


    

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, and shall remain unvacated,
unbonded or unstayed for a period of ten (10) days unless otherwise consented to by the Holder, which consent will not be unreasonably
withheld


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 OTCQB or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market,
the New York Stock Exchange, or the American Stock Exchange or there shall be no bid price for the Common Stock for a period of
one business day or the DTC places a chill on new deposits of Common Stock and such chill is note removed within ten (10) trading
days. 


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. Borrower shall become delinquent in its filing requirements as a fully-reporting issuer registered with the
SEC or shall fail to timely file all required quarterly and annual reports and any other filings that are necessary to enable Buyer
to sell Conversion Shares pursuant to Rule 144.


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 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.




    15 


     


    

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.          
Equity Line of Credit. The Borrower enters into an Equity Line of Credit arrangement.



3.17.          
Delisting. From and after the initial trading, listing or quotation of the Common Stock
on a Principal Market, an event resulting in the Common Stock no longer being traded, listed or quoted on a Trading Market; failure
to comply with the requirements for continued quotation on a Trading Market; or notification from a Trading Market that the Borrower
is not in compliance with the conditions for such continued quotation and such non-compliance continues for seven (7) trading days
following such notification.


3.18.          
Cross-Default. Notwithstanding anything to the contrary contained in this Note or the
other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained
in any of the Other Agreements, 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. 


3.19.          
Consecutive Late Filings. If the Company files a late notification (NT 10-Q or NT 10-K)
for any quarterly or annual report for any two (2) consecutive periods.


3.20.          
Share Reserve. Borrower shall fail to maintain the Share Reserve as required under
the Purchase Agreement or fail take all action necessary to increase such Share Reserve upon request by Holder.


3.21.          
Borrower shall fail to maintain a fully paid account balance with its transfer agent. 


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




    16 


     


    

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, 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 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 which shall be so that the Variable
Conversion Price equals 40% (discount of 60%)


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.




    17 


     


    

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, 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, with accurate confirmation
generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be: If to the Borrower, to: [ENTER NAME ADDRESS] With
a copy by fax only to (which copy shall not constitute notice): If to the Holder: With a copy by fax only to (which copy shall
not constitute notice):


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.


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 California 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
California or in the federal courts located in Los Angeles County.  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




    18 


     


    

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 any 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.


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.              
Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by
the applicable terms of the Purchase Agreement.


4.10.          
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




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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.


4.11.          
Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly,
the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees,
in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled,
in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof,
without the necessity of showing economic loss and without any bond or other security being required.


4.12.          
Unconditional Obligation; No Offset. Borrower
acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction
or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors
and assigns, and agrees to make the payments or conversions called for herein in accordance with the terms of this Note.


4.13.          
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 shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall automatically
be lowered to equal the maximum permitted rate of interest. The Borrower 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 Borrower 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 indenture, and the Borrower (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 impeded 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




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IN WITNESS WHEREOF, Borrower
has caused this Note to be signed in its name by its duly authorized officer this day of September 22, 2016.


 


 


	
         

        GREY CLOAK TECH INC.

	 By:	/s/
    William Bossung
	 Name	 William Bossung
	 Title	Chief Financial Officer 


 


 


 


 


 


 



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