Exhibit 10.4


 


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. THIS SECURITY AND THE SECURITIES
ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
SUCH SECURITIES.


 


Original Issue Date: May 19, 2015


Fixed Conversion Price (subject to adjustment
herein): $1.42


 


$510,000


 


 


10%
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE


DUE
May 19, 2016


 


THIS 10% SENIOR SECURED
CONVERTIBLE PROMISSORY NOTE is one of a series of duly authorized and validly issued 10% Convertible Notes of CannaVest Corp.,
a Delaware corporation, (the “Company”), having its principal place of business at 2688 South Rainbow Boulevard,
Suite B Las Vegas, Nevada 89146, designated as its 10% Senior Secured Convertible Promissory Note due May 19, 2016 (this Note,
the “Note” and, collectively with the other Notes of such series, the “Notes”).


 


FOR VALUE
RECEIVED, the Company promises to pay to Redwood Management LLC or its registered assigns (the
“Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $510,000 on May 19,
2016 (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, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined herein
shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:


 






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


 


“Alternate
Conversion Price” means 60% of the lowest traded price in the thirty (30) days prior to the Conversion Date.


 


“Amortization
Conversion Rate” means 70% of the lowest VWAP for the fifteen (15) consecutive Trading Days ending on the Trading Day
that is immediately prior to the applicable Conversion Date; provided, that the Fixed Conversion Price shall apply in the event
that the Holder fails to meet its funding requirements as set forth in the Purchase Agreement, within ten (10) calendar days (unless
waived by the Company). In the event that on any date that the Company desires to make a payment of interest and/or principal,
the average daily dollar volume of the Company’s common stock for the previous twenty (20) trading days is between $30,001
and $49,999, the Amortization Conversion Rate shall be equal to the Alternate Conversion Price.


 


“Amortization
Payment” shall have the meaning set forth in Section 2(e).


 


“Bankruptcy
Event” means any of the following events: (a) the Company or any Subsidiary (as such term is defined in Rule 1-02(w)
of Regulation S-X) 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 60 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 60 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(d).


 


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


 






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“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 33% of the voting securities of the Company (other than by means of conversion or exercise of the Notes and the Securities
issued together with the Notes), (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 stockholders of the Company immediately prior to
such transaction own less than 66% 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 and the stockholders of the Company immediately
prior to such transaction own less than 66% of the aggregate voting power of the acquiring entity immediately after the transaction,
(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 (e) 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.


 


“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
Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.


 


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


 


“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).


 


“DTC”
means the Depository Trust Company.


 


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


 


“DWAC
Eligible” means that (a) the Common Stock is eligible at DTC for full services pursuant to DTC’s Operational Arrangements,
including without limitation transfer through DTC’s DWAC system, (b) the Company has been approved (without revocation) by
the DTC’s underwriting department, (c) the Transfer Agent is approved as an agent in the DTC/FAST Program, (d) the Conversion
Shares are otherwise eligible for delivery via DWAC, and (e) the Transfer Agent does not have a policy prohibiting or limiting
delivery of the Conversion Shares via DWAC.


 






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“Equity
Conditions” means, during the period in question, (a) no Event of Default shall have occurred, (b) the Company has timely
filed (or obtain extensions in respect thereof and file within the applicable grace period) all reports other than Form 8-K reports
required to be filed by the Company after the date hereof pursuant to the Exchange Act, (c) on any date that the Company desires
to make a payment of interest and/or principal, the average daily dollar volume of the Company’s common stock for the previous
twenty (20) trading days must be greater than $30,000, provided that if the average daily dollar volume of the Company’s
common stock for the previous twenty (20) trading days is less than $50,000, the Amortization Conversion Rate shall be equal to
the Alternate Conversion Price, (d) the Company shares of common stock must be DWAC Eligible and not subject to a “DTC chill”,
(e) the Conversion Shares must be delivered via an “Automatic Conversion” of principal and/or interest, and (f) on
any date that the Company desires to make a payment of interest and/or principal, the conversion price for such payment will be
the lower of the Fixed Conversion Price or 70% of the lowest daily volume weighted average price (“VWAP”) in
the fifteen (15) trading days prior to such date of payment; provided, that the Fixed Conversion Price shall apply in the event
that the Holder fails to timely meet its funding requirements as set forth in the Purchase Agreement (unless waived by the Company).


 


“Event
of Default” shall have the meaning set forth in Section 6(a).


 


“Fixed
Conversion Price” shall have the meaning set forth in Section 4(b).


 


“Fundamental
Transaction” shall have the meaning set forth in Section 5(e).


 


“Late
Fees” shall have the meaning set forth in Section 2(c).


 


“Mandatory
Default Amount” means the payment of 130% of the outstanding principal amount of this Note and accrued and unpaid interest
hereon, in addition to the payment of all other amounts, costs, expenses and liquidated damages due in respect of this Note.


 


“New
York Courts” shall have the meaning set forth in Section 7(d).


 


“Note
Register” shall have the meaning set forth in Section 2(b).


 


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


 


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


 


“Original
Issue Discount” means $10,000.


 






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“Purchase
Agreement” means the Securities Purchase Agreement, dated as of May 19, 2015 among the Company and the original Holder,
as amended, modified or supplemented from time to time in accordance with its terms.


 


“Registration
Rights Agreement” means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, among the
Company and the original Holders, in the form of Exhibit B attached to the Purchase Agreement.


 


“Registration
Statement” means a registration statement covering the resale of the Underlying Shares by each Holder.


 


“Securities
Act” means the Securities Act of 1933, as amended, 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).


 


Section 2.     Amortization
and Interest.


 


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 (less the Original Issue Discount) at the rate of 10% per annum, half of which interest
amount shall be guaranteed and the total amount of interest due on the Note for a period of six (6) months shall be deemed earned
as of the Original Issue Date. All interest payments hereunder will be payable in cash, or subject to the Equity Conditions, in
cash or Common Stock in the Company’s discretion. Accrued and unpaid interest shall be due on payable on each Conversion
Date and on the Maturity Date, or as otherwise set forth herein.


 


b)            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. 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”).


 


c)            Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal
to the lesser of 18% per annum or the maximum rate permitted by applicable law (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.


 






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d)            Prepayment. At any time upon ten (10) days written notice to the Holder, but subject to the Holder’s conversion rights
set forth herein, the Company may prepay any portion of the principal amount of this Note and any accrued and unpaid interest.
If the Company exercises its right to prepay the Note, the Company shall make payment to the Holder of an amount in cash equal
to the sum of the then outstanding principal amount of this Note and interest multiplied by 130%. The Holder may continue to convert
the Note from the date notice of the prepayment is given until the date of the prepayment.


 


e)            Amortization and Installment Payments. At the earlier of the five (5) month anniversary of the Closing Date or the Effective
Date, the Company shall redeem this Note and any accrued but unpaid interest in accordance with the Amortization Schedule attached
as Schedule 2 (each, an “Amortization Payment”).  Each Amortization Payment shall, at the option of the
Company, be made in cash or, subject to the Equity Conditions, in Common Stock pursuant to the Amortization Conversion Rate. Notwithstanding
any provision in this Note to the contrary, the Company will not be required to make any Amortization Payment to the extent any
such Amortization Payment would result in the Company making aggregate Amortization Payments in an amount greater than the balance
of the Note. Any outstanding unpaid principal and accrued interest (as of the Maturity Date) on this Note will be due and payable
on the Maturity Date and may be paid in cash (subject to a 30% premium), or, in the Company’s discretion (subject to the
Equity Conditions) in Common Stock. For example, if the Amortization Payments commence on the fifth (5th) anniversary
date from the Original Issue Date, the Company shall begin to make equal bi-weekly amortization payments of 1/15th the
total principal and interest due on this Note, in cash or, subject to the Equity Conditions, Common Stock (at the Company’s
option).


 


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 will be payable for such registration of transfer
or exchange.


 


b)            Investment 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.


 






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Section 4.     Conversion.


 


a)            Voluntary Conversion. At any time after the Original Issue Date until this Note is no longer outstanding, this Note shall
be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time
(subject to the conversion limitations set forth in Section 4(d) hereof). 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, 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 a Conversion Schedule showing the principal amount(s) converted and the
date of such conversion(s). The Company may deliver an objection to any Notice of Conversion within one (1) Business Day 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.


 


b)            Conversion Price. The conversion price in effect on any Conversion Date shall be equal to the lowest daily VWAP in the
fifteen (15) trading days prior to May 19, 2015 (the “Fixed Conversion Price”). Notwithstanding anything herein
to the contrary, at any time after the occurrence of any Event of Default the Holder may require the Company to, at such Holder’s
option and otherwise in accordance with the provisions for conversion herein, convert all or any part of this Note into Common
Stock at the Alternative Conversion Price. All such foregoing determinations will be appropriately adjusted for any stock dividend,
stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common
Stock during such measuring period. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event
of Default pursuant to Section 6 hereof and the Holder shall have the right to pursue all remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of
any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable
law. Notwithstanding anything to the contrary contained herein, in the event of any partial conversion, such partial conversion
shall be made in increments of at least $250,000.


 






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c)            Mechanics
of Conversion.


 


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
and any accrued and unpaid interest to be converted by (y) the Fixed Conversion Price.


 


ii.         Delivery of Certificate Upon Conversion. Not later than two (2) Trading Days after each Conversion Date (the “Share
Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates
representing the Conversion Shares which, on or after the date on which such Conversion Shares are eligible to be sold under Rule
144 without the need for current public information and the Company has received an opinion of counsel to such effect reasonably
acceptable to the Company (which opinion the Company will be responsible for obtaining at the cost of the Holder) shall be free
of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement) representing
the number of Conversion Shares being acquired upon the conversion of this Note, and (B) a bank check in the amount of accrued
and unpaid interest (if the Company has elected to pay accrued interest in cash). All certificate or certificates required to be
delivered by the Company under this Section 4(d) shall be delivered electronically through the Depository Trust Company or another
established clearing corporation performing similar functions. If the Conversion Date is prior to the date on which such Conversion
Shares are eligible to be sold under Rule 144 without the need for current public information the Conversion Shares shall bear
a restrictive legend 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.”


 






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Notwithstanding the foregoing,
commencing on such date that the Conversion Shares are eligible for sale under Rule 144 subject to current public information
requirements, the Company, upon request and at the expense of the Holder, shall obtain a legal opinion to allow for such sales
under Rule 144.


 


iii.        Failure to Deliver Certificates. If, in the case of any Notice of Conversion, such certificate or certificates 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 certificate or certificates, to rescind such Conversion, in
which event the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly
return to the Company the Common Stock certificates issued to such Holder pursuant to the rescinded Conversion Notice.


 


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; provided, however, that such delivery
shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the event the Holder
of this Note shall elect to convert any or all of the outstanding principal or interest 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. If the injunction is not granted, the Company shall promptly comply
with all conversion obligations herein. If the injunction is obtained, the Company must post a surety bond for the benefit of
the Holder in the amount of 150% of the outstanding principal amount of this Note, which is subject to the injunction, which bond
shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall
be payable to the Holder to the extent it obtains judgment. In the absence of seeking such injunction, the Company shall issue
Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails for any reason to deliver
to the Holder such certificate or certificates pursuant to Section 4(c)(ii) by the Share Delivery Date, the Company shall pay
to the Holder, in cash, as liquidated damages and not as a penalty, $1,000 per Trading Day for each Trading Day after such Share
Delivery Date until such certificates are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s
right to pursue actual damages or declare an Event of Default pursuant to Section 6 hereof for the Company’s failure to
deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available
to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.
The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof
or under applicable law.


 






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v.         Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder,
if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant
to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open
market transaction or otherwise), or 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 (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 the Company had timely complied with its delivery requirements under Section 4(c)(ii).
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,
the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In and, upon request of the Company, 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 the Company’s failure to timely
deliver certificates representing shares of Common Stock upon conversion of this Note as required pursuant to the terms hereof.


 


vi.        Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available
out of its authorized and unissued shares of Common Stock a number of shares of Common Stock at least equal to 300% of the Required
Minimum for the sole purpose of issuance upon conversion of this Note
and payment of interest on this Note, each as herein provided, free from preemptive rights or any other actual contingent purchase
rights of Persons other than the Holder (and the other holders of the Notes), not less than such aggregate number of shares of
the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account
the adjustments and restrictions of Section 5) upon the conversion of the then outstanding principal amount of this Note and payment
of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly
authorized, validly issued, fully paid and nonassessable, and, at such times as a Registration Statement covering such shares
is then effective under the Securities Act, will be registered for public resale in accordance with such Registration Statement.


 


vii.       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 Fixed Conversion Price or round up to the next whole share.


 






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viii.      Transfer Taxes and Expenses. The issuance of certificates for shares of the Common Stock 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, provided that, the Company shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the
Holder of this Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the
Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid. The Company shall pay all Transfer Agent fees required for same-day
processing of any Notice of Conversion.


 


d)            Holder’s
Conversion Limitations. The Company shall not effect any conversion of principal and/or interest of this Note, and a Holder
shall not have the right to convert any principal and/or interest 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) beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding
sentence, for purposes of this Section 4(e), 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 paragraph 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(e), 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 Commission, 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 or decrease the Beneficial Ownership Limitation provisions
of this Section 4(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note
held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4(e) 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
Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 4(d) to correct this paragraph (or any portion hereof) 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 paragraph shall apply to a successor
holder of this Note.


 






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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
(which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment
of interest on, the Notes), (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 Fixed 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 shall become effective immediately
after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision, combination or re-classification.


 


b)            Subsequent
Equity Sales. If, at any time while this Note is 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 then Fixed Conversion Price (such lower price, the
“Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the
holder of the Common Stock or Common Stock Equivalents so issued 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 Fixed Conversion Price, such issuance shall be deemed to have occurred for less than the Fixed Conversion
Price on such date of the Dilutive Issuance), then the Fixed Conversion Price shall be reduced to equal the Base Conversion Price.
Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing,
no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance. 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.


 






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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 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 exercise 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)            Intentionally
Omitted.


 


e)            Fundamental
Transaction. 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 in Section 4(e) 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 in Section 4(d) on the conversion of this Note). For purposes
of any such conversion, the determination of the Fixed Conversion Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Fixed 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 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
(as defined in the Purchase Agreement) 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 of this Note, 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.


 






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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.


 


g)            Notice to the Holder.


 


i.          Adjustment to Fixed Conversion Price. Whenever the Fixed 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 Fixed 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 the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Company shall authorize the granting to all holders of the 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 stockholders of the Company shall
be required in connection with any reclassification of the 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
the 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 twenty (20) 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
the 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 the 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,
the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall
remain entitled to convert this Note during the 20-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.


 






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Section 6.     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) the principal amount of any Note or (B) interest, liquidated damages and other amounts
owing to a Holder on any 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 an interest payment or other default under clause (B)
above, is not cured within 3 Trading Days;


 


ii.         the Company shall fail to observe or perform any other material covenant or agreement contained in the Notes (and other
than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach
is addressed in clause (ix) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) 5 Trading
Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) 10 Trading Days after the Company
has become or should have become aware of such failure;


 


iii.        a material default or material 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 clause (vi) below);


 


iv.        any representation or warranty made in this Note, any other Transaction Documents, 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;


 






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v.         the Company or any Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy
Event;


 


vi.        the Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured
or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves
an obligation greater than $50,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such
indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;


 


vii.       the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible
to resume listing or quotation for trading thereon within five Trading Days or the transfer of shares of Common Stock through
the Depository Trust Company System is no longer available or “chilled”;


 


viii.      the Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or
dispose of all or in excess of 33% of its assets in one transaction or a series of related transactions (whether or not such sale
would constitute a Change of Control Transaction);


 


ix.         the Company does not meet the current public information requirements under Rule 144 in respect of the Registrable Securities
(as defined in the Registration Rights Agreement);


 


x.          if, during the Effectiveness Period (as defined in the Registration Rights Agreement), either (a) the effectiveness of
the Registration Statement lapses for any reason or (b) the Holder shall not be permitted to resell Registrable Securities (as
defined in the Registration Rights Agreement) under the Registration Statement for a period of more than 20 consecutive Trading
Days or 30 non-consecutive Trading Days during any 12 month period; provided, however, that if the Company is negotiating
a merger, consolidation, acquisition or sale of all or substantially all of its assets or a similar transaction and, in the written
opinion of counsel to the Company, the Registration Statement would be required to be amended to include information concerning
such pending transaction(s) or the parties thereto which information is not available or may not be publicly disclosed at the
time, the Company shall be permitted an additional 10 consecutive Trading Days during any 12 month period pursuant to this Section
6(a)(x);


 


xi.         the Company shall fail for any reason to deliver certificates to a Holder prior to the third Trading Day after a Conversion
Date pursuant to Section 4(c) 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 any Notes in accordance with the terms hereof;


 






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xii.        the Company fails to file with the Commission any required reports under Section 13 or 15(d) of the Exchange Act such that
it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable);


 


xiii.       the Company or any Subsidiary shall: (i) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator
of it or any of its properties, (ii) admit in writing its inability to pay its debts as they mature, (iii) make a general assignment
for the benefit of creditors, (iv) be adjudicated a 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 (v) 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 (vi) take or permit to be taken any action in furtherance of or for the purpose of
effecting any of the foregoing;


 


xiv.       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 sixty (60) days;


 


xv.        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 thirty (30)
days after the date thereof;


 


xvi.       the Company shall fail to maintain sufficient reserved shares pursuant to Section 4.10 of the Purchase Agreement; or


 


xvii.      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 $50,000, and such judgment, writ or similar final process shall remain
unvacated, unbonded or unstayed for a period of 45 calendar days;


 






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b)            Remedies Upon Event of Default. Subject to the Beneficial Ownership Limitation as set forth in Section 4(d), if any Event
of Default occurs, then the outstanding principal amount of this Note, plus accrued but unpaid interest, 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. After the occurrence of any Event of Default that results in the eventual
acceleration of this Note, the interest rate on this Note shall accrue at an additional interest rate equal to the lesser of 2%
per month (24% per annum) or the maximum rate permitted under applicable law. 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 6(b). No such rescission or annulment shall affect any subsequent Event of Default
or impair any right consequent thereon.


 


Section 7.     Miscellaneous.


 


a)            Notices.
Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation,
any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service, addressed to the Company, at 591 Camino De La Reina, Suite 1200, San Diego, California 92108, or such other facsimile
number or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section
7(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the
facsimile number or address of the Holder appearing on the books of the Company, or if no such facsimile number or address appears
on the books of the Company, at the principal place of business of such Holder, as set forth in the Purchase Agreement. Any notice
or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto
prior to 12:00 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day
that is not a Trading Day or later than 12:00 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following
the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party
to whom such notice is required to be given.


 






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b)            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, 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. This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.


 


c)            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 such Note, and of the ownership hereof, reasonably satisfactory to the Company.


 


d)            Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by
and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of
conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense
of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting
in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for
such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence
of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this
Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of
this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees
and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.


 






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e)            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.


 


f)             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.


 


g)            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 may 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.


 






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


 


i)             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.


 


*********************


 


(Signature Pages
Follow)


 


 


 


 


 


 






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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.


 


 


CannaVest Corp.


 


By: /s/ Michael
Mona, Jr.


      Name:
Michael Mona, Jr.


      Title:
President and Chief Executive Officer


Facsimile No. for delivery of Notices: __________





 



 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 






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ANNEX
A


 


NOTICE OF CONVERSION


 


The undersigned hereby
elects to convert principal under the 10% Senior Secured Convertible Promissory Note due May 19, 2016 of CannaVest Corp., a Delaware
corporation (the “Company”), into shares of common stock (the “Common Stock”), of the Company
according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder
for any conversion, except for such transfer taxes, if any.


 


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


 


Payment of Interest in Common Stock
__ yes __ no


If yes, $_____ of Interest Accrued
on Account of Conversion at Issue.


 


Number of shares of Common Stock
to be issued:


 


Signature:


 


Name:


 


Delivery Instructions:


 






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Schedule 1


 


CONVERSION SCHEDULE


 


This 10% Senior Secured Convertible Promissory
Note due on May 19, 2016 in the original principal amount of $510,000 is issued by CannaVest Corp., a Delaware corporation. This
Conversion Schedule reflects conversions made under Section 4 of the above referenced Note.


 


Dated:


 


 


	
        Date of Conversion

        (or for first entry, Original Issue Date)
	
        Amount of Conversion
	
        Aggregate Principal Amount Remaining Subsequent to
Conversion

        (or original Principal Amount)
	
        Company Attest

	
         

         
	
         

         
	
         

         
	
         

         

	
         

         
	
         

         
	
         

         
	
         

         

	
         

         
	
         

         
	
         

         
	
         

         

	
         

         
	
         

         
	
         

         
	
         

         

	
         

         
	
         

         
	
         

         
	
         

         

	
         

         
	
         

         
	
         

         
	
         

         

	
         

         
	
         

         
	
         

         
	
         

         

	
         

         
	
         

         
	
         

         
	
         

         

	
         

         
	
         

         
	
         

         
	
         

         



 






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Schedule 2


 


AMORTIZATION SCHEDULE


 


	Amortization Payment	Amount	
        Date

         

	1	$34,000	
        October 19, 2015

         

	2	$34,000	
        10 Trading Days after prior Amortization Payment

         

	3	$34,000	
        10 Trading Days after prior Amortization Payment

         

	4	$34,000	
        10 Trading Days after prior Amortization Payment

         

	5	$34,000	
        10 Trading Days after prior Amortization Payment

         

	6	$34,000	
        10 Trading Days after prior Amortization Payment

         

	7	$34,000	
        10 Trading Days after prior Amortization Payment

         

	8	$34,000	
        10 Trading Days after prior Amortization Payment

         

	9	$34,000	
        10 Trading Days after prior Amortization Payment

         

	10	$34,000	
        10 Trading Days after prior Amortization Payment

         

	11	$34,000	
        10 Trading Days after prior Amortization Payment

         

	12	$34,000	
        10 Trading Days after prior Amortization Payment

         

	13	$34,000	
        10 Trading Days after prior Amortization Payment

         

	14	$34,000	
        10 Trading Days after prior Amortization Payment

         

	15	$34,000	
        Maturity Date

         



 






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