FORM OF SENIOR CONVERTIBLE NOTE


 


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 TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE
TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE 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. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE
TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 17(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY,
THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii)
OF THIS NOTE.


 


Axion
Power International, Inc.


 


Senior
Convertible Note


 


	Issuance Date:  [●] 2013	Original Principal Amount: U.S. $[●]


 


FOR VALUE RECEIVED,
Axion Power International, Inc., a Delaware corporation (the “Company”), hereby promises to pay to the order
of [BUYER] or its registered assigns (“Holder”) the amount set out above as the Original Principal Amount (as
reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”) when
due, whether upon the Maturity Date, on any Installment Date with respect to the Installment Amount due on such Installment Date
(each as defined below), or upon acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to
pay interest (“Interest”) on any outstanding Principal at the applicable Interest Rate (as defined below) from
the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable,
whether upon the Maturity Date, on any Installment Date with respect to the Installment Amount due on such Installment Date, or
upon acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). This Senior Convertible
Note (including all Senior Convertible Notes issued in exchange, transfer or replacement hereof, this “Note”)
is one of an issue of Senior Convertible Notes issued pursuant to the Securities Purchase Agreement (as defined below) on the Closing
Date (as defined below) (collectively, the “Notes”, and such other Senior Convertible Notes, the “Other
Notes”). Certain capitalized terms used herein are defined in Section 29.


 




    	 



    	 



    

 


1.            PAYMENTS
OF PRINCIPAL. On each Installment Date, the Company shall pay to the Holder an amount equal to the Installment Amount due on
such Installment Date in accordance with Section 8. On the Maturity Date, the Company shall pay to the Holder an amount in cash
(excluding any amounts paid in shares of Common Stock on the Maturity Date in accordance with Section 8) representing all outstanding
Principal, accrued and unpaid Interest and accrued and unpaid Late Charges (as defined in Section 23(b)) on such Principal and
Interest. Other than as specifically permitted by this Note, the Company may not prepay any portion of the outstanding Principal,
accrued and unpaid Interest or accrued and unpaid Late Charges on Principal and Interest, if any.


 


2.            INTEREST;
INTEREST RATE.


 


(a)          Interest
on this Note shall commence accruing on the Issuance Date and shall be computed on the basis of a 360-day year and twelve 30-day
months and shall be payable in arrears on each Installment Date (each, an “Interest Date”) and shall
compound each month and shall be payable in accordance with the terms of this Note. Interest shall be payable on each Interest
Date prior to the initial Installment Date in cash and, thereafter, Interest shall be paid on each Installment Date occurring on
an Interest Date in accordance with Section 8 as part of the applicable Installment Amount due on the applicable Interest Date.


 


(b)          Prior
to the payment of Interest on an Interest Date, Interest on this Note shall accrue at the Interest Rate and be payable by
way of inclusion of the Interest in the Conversion Amount on each Conversion Date in accordance with Section 3(b)(i)
or upon any redemption in accordance with Section 11. From and after the occurrence and during the continuance of any Event of
Default, the Interest Rate shall automatically be increased to eighteen percent (18.0%) per annum. In the event that such Event
of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the calendar
day immediately following the date of such cure; provided that the Interest as calculated and unpaid at such increased rate during
the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such
Event of Default through and including the date of such cure of such Event of Default.


 


3.            CONVERSION
OF NOTES. This Note shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock (as defined
below), on the terms and conditions set forth in this Section 3.


 


(a)          Conversion
Right. Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date, the Holder shall be entitled
to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into validly issued, fully paid and non-assessable
shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company shall not issue
any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share
of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall
pay any and all transfer, stamp, issuance and similar taxes that may be payable with respect to the issuance and delivery of Common
Stock upon conversion of any Conversion Amount.


 




    	2



    	 



    

 


(b)          Conversion
Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall
be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion Rate”).


 


(i)          “Conversion
Amount” means the sum of (x) portion of the Principal to be converted, redeemed or otherwise with respect to which this
determination is being made, (y) all accrued and unpaid Interest with respect to such portion of the
Principal amount and accrued and unpaid Late Charges with respect to such portion of such Principal and such Interest and (z) the
applicable Make-Whole Amount.


 


(ii)         “Conversion
Price” means, as of any Conversion Date or other date of determination, $0.264, subject to adjustment as provided herein.


 


(c)          Mechanics
of Conversion.


 


(i)          Optional
Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion Date”),
the Holder shall deliver (whether via facsimile or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date,
a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”)
to the Company. If required by Section 3(c)(iii), within three (3) Trading Days following a conversion of this Note as aforesaid,
the Holder shall surrender this Note to a nationally recognized overnight delivery service for delivery to the Company (or an indemnification
undertaking with respect to this Note in the case of its loss, theft or destruction as contemplated by Section 17(b)). On or before
the first (1st) Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile an acknowledgment
of confirmation, in the form attached hereto as Exhibit II, of receipt of such Conversion Notice to the Holder and the Company’s
transfer agent (the “Transfer Agent”) . On or before the third (3rd) Trading Day following the date of receipt
of a Conversion Notice, the Company shall (1) provided that the Transfer Agent is participating in The Depository Trust Company’s
(“DTC”) Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to
which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal
at Custodian system or (2) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue
and deliver (via reputable overnight courier) to the address as specified in the Conversion Notice, a certificate, registered in
the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled. If this
Note is physically surrendered for conversion pursuant to Section 3(c)(iii) and the outstanding Principal of this Note is greater
than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event
later than five (5) Business Days after receipt of this Note and at its own expense, issue and deliver to the Holder (or its designee)
a new Note (in accordance with Section 17(d)) representing the outstanding Principal not converted. The Person or Persons entitled
to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder
or holders of such shares of Common Stock on the Conversion Date. In the event of a partial conversion of this Note pursuant hereto,
the Principal amount converted shall be deducted from the Installment Amount(s) relating to the Installment Date(s) as set forth
in the applicable Conversion Notice.


 




    	3



    	 



    

 


(ii)         Company’s
Failure to Timely Convert. If the Company shall fail, for any reason or for no reason, to issue to the Holder within three
(3) Trading Days after the Company’s receipt of a Conversion Notice (whether via facsimile or otherwise) (the “Share
Delivery Deadline”), a certificate for the number of shares of Common Stock to which the Holder is entitled and register
such shares of Common Stock on the Company’s share register or to credit the Holder’s or its designee’s balance
account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion of
any Conversion Amount (as the case may be) (a “Conversion Failure”) then, in addition to all other remedies
available to the Holder, (1) the Company shall pay in cash to the Holder on each day after such Share Delivery Deadline that the
issuance of such shares of Common Stock is not timely effected an amount equal to 1% per month of the product of (A) the sum of
the number of shares of Common Stock not issued to the Holder on a timely basis and to which the Holder is entitled multiplied
by (B) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the last possible date which the Company
could have issued such shares of Common Stock to the Holder without violating Section 3(c)(i) and (2) the Holder, upon written
notice to the Company, may void its Conversion Notice with respect to, and retain or have returned (as the case may be) any portion
of this Note that has not been converted pursuant to such Conversion Notice, provided that the voiding of a Conversion Notice shall
not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to
this Section 3(c)(ii) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Deadline, the Company shall
fail to issue and deliver a certificate to the Holder and register such shares of Common Stock on the Company’s share register
or credit the Holder’s or its designee’s balance account with DTC for the number of shares of Common Stock to which
the Holder is entitled upon the Holder’s conversion hereunder (as the case may be), and if on or after such Share Delivery
Deadline the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of
a sale by the Holder of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock
equal to all or any portion of the number of shares of Common Stock, issuable upon such conversion that the Holder so anticipated
receiving from the Company, then, in addition to all other remedies available to the Holder, the Company shall, within three (3)
Business Days after receipt of the Holder’s written request and in the Holder’s discretion, either: (i) pay cash to
the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out-of-pocket
expenses, if any) for the shares of Common Stock so purchased (including, without limitation, by any other Person in respect, or
on behalf, of the Holder) (the “Buy-In Price”), at which point the Company’s obligation to so issue and
deliver such certificate or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which
the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) (and to issue such shares of Common Stock)
shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing
such shares of Common Stock or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which
the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) and pay cash to the Holder in an amount
equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock multiplied by (B)
the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date of the applicable
Conversion Notice and ending on the date of such issuance and payment under this clause (ii).


 




    	4



    	 



    

 


(iii)        Registration;
Book-Entry. The Company shall maintain a register (the “Register”) for the recordation of the names and
addresses of the holders of each Note and the principal amount of the Notes and Restricted Principal held by such holders held
by such holders (the “Registered Notes”). The entries in the Register shall be conclusive and binding for all
purposes absent manifest error. The Company and the holders of the Notes shall treat each Person whose name is recorded in the
Register as the owner of a Note for all purposes (including, without limitation, the right to receive payments of Principal and
Interest hereunder) notwithstanding notice to the contrary. A Registered Note may be assigned, transferred or sold in whole or
in part only by registration of such assignment or sale on the Register. Upon its receipt of a written request to assign, transfer
or sell all or part of any Registered Note by the holder thereof, the Company shall record the information contained therein in
the Register and issue one or more new Registered Notes in the same aggregate principal amount as the principal amount of the surrendered
Registered Note to the designated assignee or transferee pursuant to Section 17, provided that if the Company does not so
record an assignment, transfer or sale (as the case may be) of all or part of any Registered Note within two (2) Business Days
of its receipt of such a request, then the Register shall be automatically updated to reflect such assignment, transfer or sale
(as the case may be). Notwithstanding anything to the contrary set forth in this Section 3, following conversion of any portion
of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company
unless (A) the full Conversion Amount represented by this Note is being converted (in which event this Note shall be delivered
to the Company following conversion thereof as contemplated by Section 3(c)(i)) or (B) the Holder has provided the Company with
prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender
of this Note. The Holder and the Company shall maintain records showing the Principal, Interest and Late Charges converted and/or
paid (as the case may be) or Restricted Principal becoming unrestricted and the dates of such conversions, Control Account Release
(as defined below) and/or payments (as the case may be) or shall use such other method, reasonably satisfactory to the Holder and
the Company, so as not to require physical surrender of this Note upon conversion. If the Company does not update the Register
to record such Principal, Interest and Late Charges converted and/or paid (as the case may be) or Restricted Principal becoming
unrestricted] and the dates of such conversions, Control Account Release and/or payments (as the case may be) within two (2) Business
Days of such occurrence, then the Register shall be automatically updated to reflect such occurrence.


 




    	5



    	 



    

 


(iv)         Pro
Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of Notes for
the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes submitted for conversion,
the Company, subject to Section 3(d), shall convert from each holder of Notes electing to have Notes converted on such date a pro
rata amount of such holder’s portion of its Notes submitted for conversion based on the principal amount of Notes submitted
for conversion on such date by such holder relative to the aggregate principal amount of all Notes submitted for conversion on
such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion
of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute
in accordance with Section 22.


 


(d)          Limitations
on Conversions. Notwithstanding anything to the contrary contained in this Note, this Note shall not be convertible by the
Holder hereof, and the Company shall not effect any conversion of this Note or otherwise issue any shares of Common Stock pursuant
hereto, to the extent (but only to the extent) that after giving effect to such conversion or other share issuance hereunder the
Holder (together with its affiliates) would beneficially own in excess of 4.99% (the “Maximum Percentage”) of
the Common Stock. To the extent the above limitation applies, the determination of whether this Note shall be convertible
(vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of
which such securities shall be convertible, exercisable or exchangeable (as among all such securities owned by the Holder and its
affiliates) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company
for conversion, exercise or exchange (as the case may be). No prior inability to convert this Note, or to issue shares of Common
Stock, pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to
any subsequent determination of convertibility. For purposes of this paragraph, beneficial ownership and all determinations and
calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance
with Section 13(d) of the 1934 Act (as defined in the Securities Purchase Agreement) and the rules and regulations promulgated
thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms
of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum
Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly
give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder
of this Note. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company may not waive this
paragraph without the consent of holders of a majority of its Common Stock. For any reason at any time, upon the written or oral
request of the Holder, the Company shall within two (2) Business Days confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable
securities into Common Stock, including, without limitation, pursuant to this Note or securities issued pursuant to the Securities
Purchase Agreement. By written notice to the Company, at any time the Holder may increase or decrease the Maximum Percentage to
any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not be effective
until the 61st day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the
Holder sending such notice and not to any other holder of Notes.


 




    	6



    	 



    

 


4.            RIGHTS
UPON EVENT OF DEFAULT.


 


(a)          Event
of Default. Each of the following events shall constitute an “Event of Default”:


 


(i)          the
failure of the applicable Registration Statement (as defined in the Registration Rights Agreement) to be filed with the SEC on
or prior to the date that is ten (10) days after the applicable Filing Deadline (as defined in the Registration Rights Agreement)
or the failure of the applicable Registration Statement to be declared effective by the SEC on or prior to the date that is ten
(10) days after the applicable Effectiveness Deadline (as defined in the Registration Rights Agreement);


 


(ii)         while
the applicable Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement,
the effectiveness of the applicable Registration Statement lapses for any reason (including, without limitation, the issuance of
a stop order) or such Registration Statement (or the prospectus contained therein) is unavailable to any holder of Registrable
Securities (as defined in the Registration Rights Agreement) for sale of all of such holder’s Registrable Securities in accordance
with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of ten (10) consecutive
days or for more than an aggregate of twenty (20) days in any 365-day period (excluding days during an Allowable Grace Period (as
defined in the Registration Rights Agreement));


 


(iii)        the
suspension (or threatened suspension) from trading or the failure (or threatened failure) of the Common Stock to be trading or
listed (as applicable) on an Eligible Market for a period of five (5) consecutive Business Days or for more than an aggregate of
ten (10) Business Days in any 365-day period;


 




    	7



    	 



    

 


(iv)        the
Company’s (A) failure to cure a Conversion Failure or a Delivery Failure (as defined in the Warrants) by delivery of the
required number of shares of Common Stock within eight (8) Trading Days after the applicable Conversion Date or exercise date (as
the case may be) or (B) notice, written or oral, to any holder of the Notes or Warrants, including, without limitation, by way
of public announcement or through any of its agents, at any time, of its intention not to comply, as required, with a request for
conversion of any Notes into shares of Common Stock that is requested in accordance with the provisions of the Notes, other than
pursuant to Section 3(d), or a request for exercise of any Warrants for Warrant Shares in accordance with the provisions of the
Warrants;


 


(v)         except
to the extent the Company is in compliance with Section 10(b) below, at any time following the tenth (10th) consecutive
day that the Holder’s Authorized Share Allocation is less than the number of shares of Common Stock that the Holder would
be entitled to receive upon a conversion of the full Conversion Amount of this Note (without regard to any limitations on conversion
set forth in Section 3(d) or otherwise);


 


(vi)        the
Company’s or any Subsidiary’s (as defined in the Securities Purchase Agreement) failure to pay to the Holder any amount
of Principal, Interest, Late Charges or other amounts when and as due under this Note (including, without limitation, the Company’s
or any Subsidiary’s failure to pay any redemption payments or amounts hereunder) or any other Transaction Document (as defined
in the Securities Purchase Agreement) or any other agreement, document, certificate or other instrument delivered in connection
with the transactions contemplated hereby and thereby, except, in the case of a failure to pay Interest and Late Charges when and
as due, in which case only if such failure remains uncured for a period of at least five (5) days;


 


(vii)       the
Company fails to remove any restrictive legend on any certificate or any shares of Common Stock issued to the Holder upon conversion
or exercise (as the case may be) of any Securities acquired by the Holder under the Securities Purchase Agreement (including this
Note) as and when required by such Securities or the Securities Purchase Agreement, unless otherwise then prohibited by applicable
federal securities laws, and any such failure remains uncured for at least five (5) Trading Days;


 


(viii)      the
occurrence of any default under, redemption of or acceleration prior to maturity of an aggregate of at least $250,000 of Indebtedness
(as defined in the Securities Purchase Agreement) of the Company or any of its Subsidiaries, other than with respect to any Other
Notes;


 


(ix)        bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted by or
against the Company or any Subsidiary and, if instituted against the Company or any Subsidiary by a third party, shall not be dismissed
within forty-five (45) days of their initiation;


 




    	8



    	 



    

 


(x)          the
commencement by the Company or any Subsidiary of a voluntary case or proceeding under any applicable federal, state or foreign
bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Company or
any Subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization
or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the
consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property,
or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence
of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts
generally as they become due, the taking of corporate action by the Company or any Subsidiary in furtherance of any such action
or the taking of any action by any Person to commence a Uniform Commercial Code foreclosure sale or any other similar action under
federal, state or foreign law;


 


(xi)         the
entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company or any Subsidiary of a voluntary
or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other
similar law or (ii) a decree, order, judgment or other similar document adjudging the Company or any Subsidiary as bankrupt or
insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition
of or in respect of the Company or any Subsidiary under any applicable federal, state or foreign law or (iii) a decree, order,
judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or any Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such other decree, order,
judgment or other similar document unstayed and in effect for a period of forty-five (45) consecutive days;


 


(xii)        a
final judgment or judgments for the payment of money aggregating in excess of $250,000 are rendered against the Company and/or
any of its Subsidiaries and which judgments are not, within forty-five (45) days after the entry thereof, bonded, discharged or
stayed pending appeal, or are not discharged within thirty (30) days after the expiration of such stay; provided, however, any
judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $250,000
amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which
written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an
indemnity and the Company or such Subsidiary (as the case may be) will receive the proceeds of such insurance or indemnity within
forty-five (45) days of the issuance of such judgment;


 




    	9



    	 



    

 


(xiii)       the
Company and/or any Subsidiary, individually or in the aggregate, either (i) fails to pay, when due, or within any applicable grace
period, any payment with respect to any Indebtedness in excess of $250,000 due to any third party (other than, with respect to
unsecured Indebtedness only, payments contested by the Company and/or such Subsidiary (as the case may be) in good faith by proper
proceedings and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP) or
is otherwise in breach or violation of any agreement for monies owed or owing in an amount in excess of $250,000, which breach
or violation permits the other party thereto to declare a default or otherwise accelerate amounts due thereunder, or (ii) suffer
to exist any other circumstance or event that would, with or without the passage of time or the giving of notice, result in a default
or event of default under any agreement binding the Company or any Subsidiary, which default or event of default would or is likely
to have a material adverse effect on the business, assets, operations (including results thereof), liabilities, properties, condition
(including financial condition) or prospects of the Company or any of its Subsidiaries, individually or in the aggregate;


 


(xiv)      other
than as specifically set forth in another clause of this Section 4(a), the Company or any
Subsidiary breaches any representation, warranty, covenant or other term or condition of any Transaction Document, except, in the
case of a breach of a covenant or other term or condition that is curable, only if such breach remains uncured for a period of
five (5) consecutive Trading Days;


 


(xv)       a
false or inaccurate certification (including a false or inaccurate deemed certification) by the Company that the Equity Conditions
are satisfied, that there has been no Equity Conditions Failure or as to whether any Event of Default has occurred;


 


(xvi)      any
breach or failure in any respect by the Company or any Subsidiary to comply with any provision of Section 13 of this Note;


 


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


 


(xviii)    each
Account Control Agreement shall for any reason fail or cease to create a separate valid and perfected and, except to the extent
permitted by the terms hereof or thereof, first priority Lien on the Collateral (as defined below) in favor of the Holder or any
material provision of any Control Agreement shall at any time for any reason cease to be valid and binding on or enforceable against
the Company or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced
by the Company or any governmental authority having jurisdiction over the Company, seeking to establish the invalidity or unenforceability
thereof;


 




    	10



    	 



    

 


(xix)       any
Material Adverse Effect (as defined in the Securities Purchase Agreement) occurs; or


 


(xx)        any
Event of Default (as defined in the Other Notes) occurs with respect to any Other Notes.


 


(b)          Notice
of an Event of Default; Redemption Right. Upon the occurrence of an Event of Default with respect to this Note or any Other
Note, the Company shall within one (1) Business Day deliver written notice thereof via facsimile and overnight courier (with next
day delivery specified) (an “Event of Default Notice”) to the Holder. At any time after the earlier of the Holder’s
receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require the Company
to redeem (regardless of whether such Event of Default has been cured) all or any portion of this Note by delivering written notice
thereof (the “Event of Default Redemption Notice”) to the Company, which Event of Default Redemption Notice
shall indicate the portion of this Note the Holder is electing to redeem. Each portion of this Note subject to redemption by the
Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to the greater of (i) the product of (A)
the Conversion Amount to be redeemed multiplied by (B) the Redemption Premium and (ii) the product of (X) the Conversion Rate with
respect to the Conversion Amount in effect at such time as the Holder delivers an Event of Default Redemption Notice multiplied
by (Y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date immediately
preceding such Event of Default and ending on the date the Company makes the entire payment required to be made under this Section
4(b) (the “Event of Default Redemption Price”). Redemptions required by this Section 4(b) shall be made
in accordance with the provisions of Section 11. To the extent redemptions required by this Section 4(b) are deemed or determined
by a court of competent jurisdiction to be prepayments of this Note by the Company, such redemptions shall be deemed to be voluntary
prepayments. Notwithstanding anything to the contrary in this Section 4, but subject to Section 3(d), until the Event of Default
Redemption Price (together with any Late Charges thereon) is paid in full, the Conversion Amount submitted for redemption under
this Section 4(b) (together with any Late Charges thereon) may be converted, in whole or in part, by the Holder into Common Stock
pursuant to the terms of this Note. In the event of a partial redemption of this Note pursuant hereto, the Principal amount redeemed
shall be deducted from the Installment Amount(s) relating to the applicable Installment Date(s) as set forth in the Event of Default
Redemption Notice. In the event of the Company’s redemption of any portion of this Note under this Section 4(b), the Holder’s
damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and
the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption
premium due under this Section 4(b) is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s
actual loss of its investment opportunity and not as a penalty.


 




    	11



    	 



    

 


5.            RIGHTS
UPON FUNDAMENTAL TRANSACTION.


 


(a)          Assumption.
The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing
all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of
this Section 5(a) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holder prior
to such Fundamental Transaction, including agreements to deliver to each holder of Notes in exchange for such Notes a security
of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including,
without limitation, having a principal amount and interest rate equal to the principal amounts then outstanding and the interest
rates of the Notes held by such holder, having similar conversion rights as the Notes and having similar ranking to the Notes,
and satisfactory to the Holder and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation
whose common stock is quoted on or listed for trading on an Eligible Market. Upon the occurrence of any 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. Upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there
shall be issued upon conversion or redemption of this Note at any time after the consummation of such Fundamental Transaction,
in lieu of the shares of the Company’s Common Stock (or other securities, cash, assets or other property (except such items
still issuable under Sections 6 and 14, which shall continue to be receivable thereafter) issuable upon the conversion or redemption
of the Notes prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the
Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of such
Fundamental Transaction had this Note been converted immediately prior to such Fundamental Transaction (without regard to any limitations
on the conversion of this Note), as adjusted in accordance with the provisions of this Note. Notwithstanding the foregoing, the
Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 5(a) to permit the Fundamental
Transaction without the assumption of this Note. The provisions of this Section 5 shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Note.


 




    	12



    	 



    

 


(b)          Notice
of a Change of Control; Redemption Right. No sooner than twenty (20) Trading Days nor later than ten (10) Trading Days prior
to the consummation of a Change of Control (the “Change of Control Date”), but not prior to the public announcement
of such Change of Control, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a
“Change of Control Notice”). At any time during the period beginning after the Holder’s receipt
of a Change of Control Notice or the Holder becoming aware of a Change of Control if a Change of Control Notice is not delivered
to the Holder in accordance with the immediately preceding sentence (as applicable) and ending on the later of twenty (20) Trading
Days after (A) consummation of such Change of Control or (B) the date of receipt of such Change of Control Notice, the Holder may
require the Company to redeem all or any portion of this Note by delivering written notice thereof (“Change of Control
Redemption Notice”) to the Company, which Change of Control Redemption Notice shall indicate the Conversion Amount the
Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section 5 shall be redeemed by the
Company in cash at a price equal to the greatest of (i) the product of (w) the Change of Control Redemption Premium multiplied
by (y) the Conversion Amount being redeemed, (ii) the product of (x) the Change of Control Redemption Premium multiplied by (y)
the product of (A) the Conversion Amount being redeemed multiplied by (B) the quotient determined by dividing (I) the greatest
Closing Sale Price of the shares of Common Stock during the period beginning on the date immediately preceding the earlier to occur
of (1) the consummation of the applicable Change of Control and (2) the public announcement of such Change of Control and ending
on the date the Holder delivers the Change of Control Redemption Notice by (II) the Conversion
Price then in effect and (iii) the product of (y) the Change of Control Redemption
Premium multiplied by (z) the product of (A) the Conversion Amount being redeemed multiplied by (B) the quotient of (I) the aggregate
cash consideration and the aggregate cash value of any non-cash consideration per share of Common Stock to be paid to the holders
of the shares of Common Stock upon consummation of such Change of Control (any such non-cash consideration constituting publicly-traded
securities shall be valued at the highest of the Closing Sale Price of such securities as of the Trading Day immediately prior
to the consummation of such Change of Control, the Closing Sale Price of such securities on the Trading Day immediately following
the public announcement of such proposed Change of Control and the Closing Sale Price of such securities on the Trading Day immediately
prior to the public announcement of such proposed Change of Control) divided by (II) the Conversion Price then in effect (the “Change
of Control Redemption Price”). Redemptions required by this Section 5 shall be made in accordance with the provisions
of Section 11 and shall have priority to payments to stockholders in connection with such Change of Control. To the extent redemptions
required by this Section 5(b) are deemed or determined by a court of competent jurisdiction to be prepayments of this Note by the
Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this Section
5, but subject to Section 3(d), until the Change of Control Redemption Price (together with any Late Charges thereon) is paid in
full, the Conversion Amount submitted for redemption under this Section 5(b) (together with any Late Charges thereon) may be converted,
in whole or in part, by the Holder into Common Stock pursuant to Section 3. In the event of a partial redemption of this Note pursuant
hereto, the Principal amount redeemed shall be deducted from the Installment Amount(s) relating to the applicable Installment Date(s)
as set forth in the Change of Control Redemption Notice. In the event of the Company’s redemption of any portion of this
Note under this Section 5(b), the Holder’s damages would be uncertain and difficult to estimate because of the parties’
inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity
for the Holder. Accordingly, any redemption premium due under this Section 5(b) is intended by the parties to be, and shall be
deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity and not as a penalty.


 




    	13



    	 



    

 


6.            RIGHTS
UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.


 


(a)          Purchase
Rights. In addition to any adjustments pursuant to Section 7 below, if at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders
of any class 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 taking into account any limitations
or restrictions on the convertibility of this Note) 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 (provided, however, to the extent that the Holder’s right
to participate in any such Purchase Right would result in the Holder exceeding the Maximum Percentage, 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 Maximum Percentage).


 


(b)          Other
Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision
to insure that the Holder will thereafter have the right to receive upon a conversion of this Note (i) in addition to the shares
of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with
respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate
Event (without taking into account any limitations or restrictions on the convertibility of this Note) or (ii) in lieu of the shares
of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of
Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled
to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares
of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to
the preceding sentence shall be in a form and substance satisfactory to the Holder. The provisions of this Section 6 shall apply
similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or
redemption of this Note.


 




    	14



    	 



    

 


7.            RIGHTS
UPON ISSUANCE OF OTHER SECURITIES.


 


(a)          Adjustment
of Conversion Price upon Issuance of Common Stock. If and whenever on or after the Subscription Date the Company issues or
sells, or in accordance with this Section 7(a) is deemed to have issued or sold, any shares of Common
Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account
of the Company, but excluding any Excluded Securities issued or sold or deemed to have been issued or sold) for a consideration
per share (the “New Issuance Price”) less than a price equal to the Conversion Price in effect immediately prior
to such issue or sale or deemed issuance or sale (such Conversion Price then in effect is referred to herein as the “Applicable
Price”) (the foregoing a “Dilutive Issuance”), then, immediately after such Dilutive Issuance, the
Conversion Price then in effect shall be reduced to an amount equal to the lesser of (x) the Conversion Price then in effect and
(y) the New Issuance Price. For all purposes of the foregoing (including, without limitation, determining the adjusted Conversion
Price and consideration per share under this Section 7(a)), the following shall be applicable:


 


(i)          Issuance
of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to
be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price
per share. For purposes of this Section 7(a)(i), the “lowest price per share for which one share of Common Stock is issuable
upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise
of any such Option” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received
or receivable by the Company with respect to any one share of Common Stock upon the granting or sale of such Option, upon exercise
of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option and
(y) the lowest exercise price set forth in such Option for which one share of Common Stock is issuable upon the exercise of any
such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option,
minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or sale of
such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise
of such Option plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such
Option (or any other Person). Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the
actual issuance of such share of Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual
issuance of such share of Common Stock upon conversion, exercise or exchange of such Convertible Securities.


 




    	15



    	 



    

 


(ii)         Issuance
of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per
share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the
time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 7(a)(ii),
the “lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof”
shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company
with respect to one share of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or
exchange of such Convertible Security and (y) the lowest conversion price set forth in such Convertible Security for which one
share of Common Stock is issuable upon conversion, exercise or exchange thereof minus (2) the sum of all amounts paid or payable
to the holder of such Convertible Security (or any other Person) upon the issuance or sale of such Convertible Security plus the
value of any other consideration received or receivable by, or benefit conferred on, the holder of such Convertible Security (or
any other Person). Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the actual issuance
of such share of Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale
of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price has been or is
to be made pursuant to other provisions of this Section 7(a), except as contemplated below, no further adjustment of the Conversion
Price shall be made by reason of such issue or sale.


 


(iii)        Change
in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration,
if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time, the
Conversion Price in effect at the time of such increase or decrease shall be adjusted to the Conversion Price which would have
been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price,
additional consideration or increased or decreased conversion rate (as the case may be) at the time initially granted, issued or
sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the
Subscription Date are increased or decreased in the manner described in the immediately preceding sentence, then such Option or
Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed
to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 7(a) shall be made if such
adjustment would result in an increase of the Conversion Price then in effect.


 




    	16



    	 



    

 


(iv)         Calculation
of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with the
issuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary
Security”, and such Option and/or Convertible Security and/or Adjustment Right, the “Secondary Securities”),
together comprising one integrated transaction, the consideration per share of Common Stock with respect to such Primary Security
shall be deemed to be equal to the difference of (x) the lowest price per share for which one share of Common Stock was issued
in such integrated transaction (or was deemed to be issued pursuant to Section 7(a)(i) or 7(a)(ii) above, as applicable) solely
with respect to such Primary Security, minus (y) with respect to such Secondary Securities, the sum of (I) the Black Scholes Consideration
Value of each such Option, if any, (II) the fair market value (as determined by the Holder) or the Black Scholes Consideration
Value, as applicable, of such Adjustment Right, if any, and (III) the fair market value (as determined by the Holder) of such Convertible
Security, if any, in each case, as determined on a per share basis in accordance with this Section 2(b)(iv). If any shares of Common
Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received
therefor (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not
for the purpose of the calculation of the Black Scholes Consideration Value) will be deemed to be the net amount of consideration
received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but
not for the purpose of the calculation of the Black Scholes Consideration Value), the amount of such consideration received by
the Company will be the fair value of such consideration, except where such consideration consists of publicly traded securities,
in which case the amount of consideration received by the Company for such securities will be the average VWAP of such security
for the five (5) Trading Day period immediately preceding the date of receipt. If any shares of Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving
entity (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not for
the purpose of the calculation of the Black Scholes Consideration Value), the amount of consideration therefor will be deemed to
be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares
of Common Stock, Options or Convertible Securities (as the case may be). The fair value of any consideration other than cash or
publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair
value of such consideration will be determined within five (5) Trading Days after the tenth (10th) day following such
Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder. The determination of such
appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be
borne by the Company.


 


(v)          Record
Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive
a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for
or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).


 




    	17



    	 



    

 


(b)          Adjustment
of Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision of Section 5 or Section
7(a), if the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, stock combination,
recapitalization or other similar transaction) one or more classes of its outstanding shares of Common Stock into a greater number
of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting
any provision of Section 5 or Section 7(a), if the Company at any time on or after the Subscription Date combines (by
any stock split, stock dividend, stock combination, recapitalization or other similar transaction) one or more classes of its outstanding
shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will
be proportionately increased. Any adjustment pursuant to this Section 7(b) shall become effective immediately after the effective
date of such subdivision or combination. If any event requiring an adjustment under this Section 7(b) occurs during the period
that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately
to reflect such event.


 


(c)          Holder’s
Right of Alternative Conversion Price. Subject to Section 4(n) of the Securities Purchase Agreement, in addition to and not
in limitation of the other provisions of this Section 7, if the Company in any manner issues or sells or enters into any agreement
to issue or sell, any Common Stock, Options or Convertible Securities (any such securities, “Variable Price Securities”)
after the Subscription 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 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 “Variable Price”),
the Company shall provide written notice thereof via facsimile and overnight courier to the Holder on the date of such agreement
and/or the issuance of such Convertible Securities or Options, as applicable. Subject to Section 4(n) of the Securities Purchase
Agreement, from and after the date the Company enters into such agreement or issues any such Variable Price Securities, the Holder
shall have the right, but not the obligation, in its sole discretion to substitute the 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 Holder is relying on the Variable Price rather than the Conversion Price then in effect. The Holder’s
election to rely on a Variable Price for a particular conversion of this Note shall not obligate the Holder to rely on a Variable
Price for any future conversion of this Note.


 


(d)          Other
Events. In the event that the Company (or any Subsidiary) shall take any action to which the provisions hereof are not strictly
applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated
by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting
of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s board of directors
shall in good faith determine and implement an appropriate adjustment in the Conversion Price so as to protect the rights of the
Holder, provided that no such adjustment pursuant to this Section 7(d) will increase the Conversion Price as otherwise determined
pursuant to this Section 7, provided further that if the Holder does not accept such adjustments as appropriately protecting its
interests hereunder against such dilution, then the Company’s board of directors and the Holder shall agree, in good faith,
upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination
shall be final and binding and whose fees and expenses shall be borne by the Company.


 




    	18



    	 



    

 


(e)          Calculations.
All calculations under this Section 7 shall be made by rounding to the nearest cent or the nearest 1/100th of a
share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held
by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.


 


8.            COMPANY
INSTALLMENT CONVERSION OR REDEMPTION.


 


(a)  General.
On each applicable Installment Date, the Company shall pay to the Holder of this Note the applicable Installment Amount due on
such date by converting such Installment Amount in accordance with this Section 8 (a “Company Conversion”);
provided further that the Company shall not be entitled to effect a Company Conversion with respect to any portion of such Installment
Amount and shall be required to pay the entire amount of such Installment Amount in cash (a “Company Redemption”)
if on the applicable Installment Notice Due Date or on the applicable Installment Date (as the case may be) there is an Equity
Conditions Failure, except that a Company Conversion may still occur on the applicable Installment Date in accordance with Section
8(b) with the written consent of the Holder. On the date which is the twenty-three (23rd) Trading Day prior to each
Installment Date (each, an “Installment Notice Due Date”), the Company shall deliver written notice (each, a
“Company Installment Notice” and the date all of the holders receive such notice is referred to as to the “Company
Installment Notice Date”), to each holder of Notes and such Company Installment Notice shall (i) either (A) confirm that
the applicable Installment Amount of such holder’s Note shall be converted in whole pursuant to a Company Conversion or (B)
(1) state that the Company is required to redeem, in accordance with the provisions of the Notes, in whole or in part, the applicable
Installment Amount pursuant to a Company Redemption and (2) specify the portion of the applicable Installment Amount which the
Company is required to redeem, pursuant to a Company Redemption (such amount to be redeemed in cash, the “Company Redemption
Amount”) and the portion of the applicable Installment Amount, if any, with respect to which the Company will, and is
permitted to, effect a Company Conversion (such amount of the applicable Installment Amount so specified to be so converted pursuant
to this Section 8 is referred to herein as the “Company Conversion Amount”), which amounts when added together,
must equal the entire applicable Installment Amount and (ii) if the applicable Installment Amount is to be paid, in whole or in
part, pursuant to a Company Conversion, certify that there is not then an Equity Conditions Failure as of the date of the Company
Installment Notice. Each Company Installment Notice shall be irrevocable and may not be revoked by the Company. If the Company
does not timely deliver a Company Installment Notice in accordance with this Section 8 with respect to a particular Installment
Date, then the Company shall be deemed to have delivered an irrevocable Company Installment Notice confirming a Company Conversion
of the entire Installment Amount payable on such Installment Date and shall be deemed to have certified that there is not then
an Equity Conditions Failure in connection with such Company Conversion. No later than two (2) Trading Days after delivery or deemed
delivery (as applicable) of the applicable Company Installment Notice setting forth a Company Conversion Amount, the Company shall
deliver to the Holder’s account with DTC such number of shares of Common Stock (the “Pre-Installment Conversion
Shares”) equal to the quotient of (x) such Company Conversion Amount divided by (y) the Pre-Installment Conversion Price,
and as to which the Holder shall be the owner thereof as of such time of delivery or deemed delivery (as the case may be) of such
Company Installment Notice. Except as expressly provided in this Section 8(a), the Company shall convert and/or redeem the applicable
Installment Amount of this Note pursuant to this Section 8 and the corresponding Installment Amounts of the Other Notes pursuant
to the corresponding provisions of the Other Notes in the same ratio of the applicable Installment Amount being converted and/or
redeemed hereunder. The applicable Company Conversion Amount (whether set forth in the applicable Company Installment Notice or
by operation of this Section 8) shall be converted in accordance with Section 8(b) and the applicable Company Redemption Amount
shall be redeemed in accordance with Section 8(c).


 




    	19



    	 



    

 


(b)  Mechanics
of Company Conversion. Subject to Section 3(d), if the Company delivers a Company Installment Notice or is deemed to have delivered
a Company Installment Notice certifying that such Installment Amount is being paid, in whole or in part, in a Company Conversion
in accordance with Section 8(a), then the remainder of this Section 8(b) shall apply. The applicable Company Conversion Amount,
if any, shall be converted on the applicable Installment Date at the applicable Company Conversion Price and the Company shall,
on such Installment Date, deliver to the Holder’s account with DTC such shares of Common Stock issued upon such conversion
(subject to the reduction contemplated by the immediately following sentence and, if applicable, the penultimate sentence of this
Section 8(b)), provided that the Equity Conditions are then satisfied (or waived in writing by the Holder) on such Installment
Date and a Company Conversion is not otherwise prohibited under any other provision of this Note. The number of shares of Common
Stock to be delivered upon such Company Conversion shall be reduced by the number of any Pre-Installment Conversion Shares delivered
in connection with such Installment Date. If an Event of Default occurs during any applicable Equity Conditions Measuring Period,
then, at the option of the Holder designated in writing to the Company, either (i) the Holder shall return to the Company all,
or any part, of such Pre-Installment Conversion Shares delivered in connection with the applicable Installment Date or (ii) the
Conversion Amount used to calculate the Event of Default Redemption Price shall be reduced by the product of (x) the Company Conversion
Amount applicable to such Installment Date (as adjusted downward proportionally with respect to any Pre-Installment Conversion
Shares returned to the Company pursuant to clause (i) above) multiplied by (y) the Conversion Share Ratio (as defined below). If
any of the Equity Conditions are not satisfied (or waived in writing by the Holder) on such Installment Date or a Company Conversion
is not otherwise permitted under any other provision of this Note, then, at the option of the Holder designated in writing to the
Company, the Holder may require the Company to do any one or more of the following: (i) the Company shall redeem all or any part
designated by the Holder of the unconverted Company Conversion Amount (such designated amount is referred to as the “Designated
Redemption Amount”) and the Company shall pay to the Holder within three (3) days of such Installment Date, by wire transfer
of immediately available funds, an amount in cash equal to 125% of such Designated Redemption Amount, and/or (ii) the Company Conversion
shall be null and void with respect to all or any part designated by the Holder of the unconverted Company Conversion Amount and
the Holder shall be entitled to all the rights of a holder of this Note with respect to such designated part of the Company Conversion
Amount; provided, however, the Conversion Price for such designated part of such unconverted Company Conversion Amount shall thereafter
be adjusted to equal the lesser of (A) the Company Conversion Price as in effect on the date on which the Holder voided the Company
Conversion and (B) the Company Conversion Price that would be in effect on the date on which the Holder delivers a Conversion Notice
relating thereto as if such date was an Installment Date. In addition, if any of the Equity Conditions are not satisfied (or waived
in writing by the Holder) on such Installment Date or a Company Conversion is not otherwise permitted under any other provision
of this Note, then, at the Holder’s option, either (I) the Holder shall return any Pre-Installment Conversion Shares delivered
in connection with the applicable Installment Date or (II) the applicable Designated Redemption Amount shall be reduced by the
product of (X) the Company Conversion Amount applicable to such Installment Date multiplied by (Y) the Conversion Share Ratio.
If the Company fails to redeem any Designated Redemption Amount by the third (3rd) day following the applicable Installment
Date by payment of such amount by such date, then the Holder shall have the rights set forth in Section 11(a) as if the Company
failed to pay the applicable Company Installment Redemption Price (as defined below) and all other rights under this Note (including,
without limitation, such failure constituting an Event of Default described in Section 4(a)(vi)). Notwithstanding anything to the
contrary in this Section 8(b), but subject to 3(d), until the Company delivers Common Stock representing the Company Conversion
Amount to the Holder, the Company Conversion Amount may be converted by the Holder into Common Stock pursuant to Section 3. In
the event that the Holder elects to convert the Company Conversion Amount prior to the applicable Installment Date as set forth
in the immediately preceding sentence, the Company Conversion Amount so converted shall be deducted from the Installment Amount(s)
relating to the applicable Installment Date(s) as set forth in the applicable Conversion Notice. If, with respect to an Installment
Date, the number of Pre-Installment Conversion Shares delivered to the Holder exceeds the number of Post-Installment Conversion
Shares with respect to such Installment Date, then the number of shares of Common Stock equal to such excess shall constitute a
credit against the number of shares of Common Stock to be issued to such Holder pursuant to Section 8(a) hereof, at the option
of the Holder, either (x) against any conversion of this Note pursuant to Section 3(c)(i) as selected by the Holder or (y) on the
Maturity Date, or, if earlier, the last Installment Date, reducing the number of shares of Common Stock required to be actually
issued by the Company to the Holder on such date by the amount of such excess on a share-for-share basis. The Company shall pay
any and all taxes that may be payable with respect to the issuance and delivery of any shares of Common Stock in any Company Conversion
hereunder.


 




    	20



    	 



    

 


(c)  Mechanics
of Company Redemption. If the Company is required to effect a Company Redemption, in whole or in part, in accordance with Section
8(a), then the Company Redemption Amount, if any, shall be redeemed by the Company in cash on the applicable Installment Date by
wire transfer to the Holder of immediately available funds in an amount equal to the applicable Company Redemption Amount (the
“Company Installment Redemption Price”). If the Company fails to redeem such Company Redemption Amount on such
Installment Date by payment of the Company Installment Redemption Price, then, at the option of the Holder designated in writing
to the Company (any such designation shall be a “Conversion Notice” for purposes of this Note), the Holder may
require the Company to convert all or any part of the Company Redemption Amount at the Company Conversion Price (determined as
of the date of such designation as if such date were an Installment Date). Conversions required by this Section 8(c) shall be made
in accordance with the provisions of Section 3(c). Notwithstanding anything to the contrary in this Section 8(c), but subject to
Section 3(d), until the Company Installment Redemption Price (together with any Late Charges thereon) is paid in full, the Company
Redemption Amount (together with any Late Charges thereon) may be converted, in whole or in part, by the Holder into Common Stock
pursuant to Section 3. In the event the Holder elects to convert all or any portion of the Company Redemption Amount prior to the
applicable Installment Date as set forth in the immediately preceding sentence, the Company Redemption Amount so converted shall
be deducted from the Installment Amounts relating to the applicable Installment Date(s) as set forth in the applicable Conversion
Notice. Redemptions required by this Section 8(c) shall be made in accordance with the provisions of Section 11.


 


(d)  Deferred
Installment Amount. Notwithstanding any provision of this Section 8(d) to the contrary, the Holder may, at its option and in
its sole discretion, deliver a written notice to the Company no later than the Trading Day immediately prior to the applicable
Installment Date electing to have the payment of all or any portion of an Installment Amount payable on such Installment Date deferred
(such amount deferred, the “Deferral Amount”) until any subsequent Installment Date
selected by the Holder, in its sole discretion, in which case, the Deferral Amount shall be added to, and become part of, such
subsequent Installment Amount and such Deferral Amount shall continue to accrue Interest hereunder. Any notice delivered by the
Holder pursuant to this Section 8(d) shall set forth (i) the Deferral Amount and (ii) the date that such Deferral Amount shall
now be payable. Notwithstanding anything herein to the contrary, with respect to any Installment Dates occurring during the period
commencing on the Effective Date (as defined in the Registration Rights Agreement) and ending on September 30, 2013, if any, if
the Company is not eligible to consummate a Company Conversion pursuant to this Section 8 with respect to such Installment Dates
due to an Equity Conditions Failure (and the Holder has not waived such Equity Conditions Failure), the applicable Deferral Amount
shall be deferred until any subsequent Installment Date selected in writing by the Holder, in its sole discretion, in which case,
the Deferral Amount shall be added to, and become part of, such subsequent Installment Amount (or, in absence of any such election
prior to the immediately subsequent Installment Date, such Deferral Amount shall be allocated pro rata, and become part of, such
remaining Installment Dates) and such Deferral Amount shall continue to accrue Interest hereunder.


 




    	21



    	 



    

 


(e)  Conversion
of Installment Amounts. Notwithstanding anything herein to the contrary, during the period commencing on an Installment Date
(a “Current Installment Date”) and ending on the Trading Day immediately prior to the next Installment Date
(each, an “Installment Period”), at the option of the Holder, at one or more times, the Holder may convert other
Installment Amounts (an “Installment Amount Conversion”), in whole or in part, at the Company Conversion Price
of such Current Installment Date in accordance with the conversion procedures set forth in Section 3 hereunder, mutatis mutandis.
Notwithstanding the foregoing, with respect to any given Installment Period, the Holder may not elect to effect any Installment
Amount Conversion during such Installment Period if either (x) in the aggregate, all the Installment Amount Conversions in such
Installment Period exceeds the sum of two (2) other Installment Amounts (or, if the Company has effected a Company Conversion with
respect to the entire Installment Amount of such Installment Date, one (1) other Installment Amount), (y) more than five (5) separate
Installment Amount Conversions have been consummated in such Installment Period or (z) the Holder has effected Installment Amount
Conversions in at least six (6) prior Installment Periods.


 


9.            NONCIRCUMVENTION.
The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined
in the Securities Purchase Agreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith
carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this
Note. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of
Common Stock receivable upon conversion of this Note above the Conversion Price then in effect, (ii) shall take all such actions
as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares
of Common Stock upon the conversion of this Note, and (iii) shall, so long as any of the Notes are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting
the conversion of the Notes, the maximum number of shares of Common Stock as shall from time to time be necessary to effect the
conversion of the Notes then outstanding (without regard to any limitations on conversion).


 




    	22



    	 



    

 


10.          RESERVATION
OF AUTHORIZED SHARES.


 


(a)          Reservation.
The Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock for each
of the Notes equal to 125% of the entire Conversion Rate with respect to the entire Conversion Amount of each such Note as of the
Issuance Date. So long as any of the Notes are outstanding, the Company shall take all action necessary to reserve and keep
available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Notes, 125%
of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Notes then
outstanding, provided that at no time shall the number of shares of Common Stock so reserved be less than the number of shares
required to be reserved by the previous sentence (without regard to any limitations on conversions) (the “Required Reserve
Amount”). The initial number of shares of Common Stock reserved for conversions of the Notes and each increase in the
number of shares so reserved shall be allocated pro rata among the holders of the Notes based on the original principal amount
of the Notes held by each holder on the Closing Date or increase in the number of reserved shares (as the case may be) (the “Authorized
Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s Notes, each
transferee shall be allocated a pro rata portion of such holder’s Authorization Share Allocation. Any shares of Common Stock
reserved and allocated to any Person which ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata
based on the principal amount of the Notes then held by such holders.


 


(b)          Insufficient
Authorized Shares. If, notwithstanding Section 10(a), and not in limitation thereof, at any time while any of the Notes remain
outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation
to reserve for issuance upon conversion of the Notes at least a number of shares of Common Stock equal to the Required Reserve
Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase
the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve
Amount for the Notes then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after
the date of the occurrence of an Authorized Share Failure, but in no event later than ninety (90) days after the occurrence of
such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number
of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy
statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common
Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the event that the
Company is prohibited from issuing shares of Common Stock upon any conversion due to the failure by the Company to have sufficient
shares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of
Common Stock, the “Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to
the Holder, the Company shall pay cash in exchange for the redemption of such portion of the Conversion Amount convertible into
such Authorized Failure Shares at a price equal to the sum of (i) the product of (x) such number of Authorization Failure Shares
and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date the Holder
delivers the applicable Conversion Notice with respect to such Authorization Failure Shares to the Company and ending on the date
of such issuance and payment under this Section 10(a) and (ii) to the extent the Holder purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any brokerage
commissions and other out-of-pocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in Section
10(a) or this Section 10(b) shall limit any obligations of the Company under any provision of the Securities Purchase Agreement.


 




    	23



    	 



    

 


11.          REDEMPTIONS.


 


(a)          Mechanics.
The Company shall deliver the applicable Event of Default Redemption Price to the Holder in cash within five (5) Business Days
after the Company’s receipt of the Holder’s Event of Default Redemption Notice. If the Holder has submitted a Change
of Control Redemption Notice in accordance with Section 5(b), the Company shall deliver the applicable Change of Control Redemption
Price to the Holder in cash concurrently with the consummation of such Fundamental Transaction if such notice is received prior
to the consummation of such Fundamental Transaction and within five (5) Business Days after the Company’s receipt of such
notice otherwise. The Company shall deliver the applicable Company Installment Redemption Price to the Holder in cash on the applicable
Installment Date. Notwithstanding anything herein to the contrary, in connection with any redemption hereunder at a time the Holder
is entitled to receive a cash payment under any of the other Transaction Documents, at the option of the Holder delivered in writing
to the Company, the applicable Redemption Price hereunder shall be increased by the amount of such cash payment owed to the Holder
under such other Transaction Document and, upon payment in full or conversion in accordance herewith, shall satisfy the Company’s
payment obligation under such other Transaction Document. In the event of a redemption of less than all of the Conversion Amount
of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section
17(d)) representing the outstanding Principal which has not been redeemed. In the event that the Company does not pay the applicable
Redemption Price to the Holder within the time period required, at any time thereafter and until the Company pays such unpaid Redemption
Price in full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder
all or any portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable
Redemption Price (together with any Late Charges thereon) has not been paid. Upon the Company’s receipt of such notice, (x)
the applicable Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately
return this Note, or issue a new Note (in accordance with Section 17(d)), to the Holder, and in each case the principal amount
of this Note or such new Note (as the case may be) shall be increased by an amount equal to the difference between (1) the applicable
Event of Default Redemption Price, Change of Control Redemption Price or Company Installment Redemption Price (as the case may
be, and as adjusted pursuant to this Section 11, if applicable) minus (2) the Principal portion of the Conversion Amount submitted
for redemption and (z) the Conversion Price of this Note or such new Notes (as the case may be) shall be automatically adjusted
with respect to each conversion effected thereafter by the Holder to the lowest of (A) the Conversion Price as in effect on the
date on which the applicable Redemption Notice is voided, (B) 85% of the lowest Closing Bid Price of the Common Stock during the
period beginning on and including the date on which the applicable Redemption Notice is delivered to the Company and ending on
and including the date on which the applicable Redemption Notice is voided and (C) 85% of the VWAP of the Common Stock for the
five (5) Trading Day period immediately preceding the Conversion Date of the applicable conversion. The Holder’s delivery
of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect the Company’s obligations
to make any payments of Late Charges which have accrued prior to the date of such notice with respect to the Conversion Amount
subject to such notice.


 




    	24



    	 



    

 


(b)          Redemption
by Other Holders. Upon the Company’s receipt of notice from any of the holders of the Other Notes for redemption or repayment
as a result of an event or occurrence substantially similar to the events or occurrences described in Section 4(b) or Section 5(b)
(each, an “Other Redemption Notice”), the Company shall immediately, but no later than one (1) Business Day
of its receipt thereof, forward to the Holder by facsimile a copy of such notice. If the Company receives a Redemption Notice and
one or more Other Redemption Notices, during the seven (7) Business Day period beginning on and including the date which is three
(3) Business Days prior to the Company’s receipt of the Holder’s applicable Redemption Notice and ending on and including
the date which is three (3) Business Days after the Company’s receipt of the Holder’s applicable Redemption Notice
and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice and such Other
Redemption Notices received during such seven (7) Business Day period, then the Company shall redeem a pro rata amount from each
holder of the Notes (including the Holder) based on the principal amount of the Notes submitted for redemption pursuant to such
Redemption Notice and such Other Redemption Notices received by the Company during such seven (7) Business Day period.


 


12.          VOTING
RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law (including, without limitation,
the Delaware Business Corporation Act) and as expressly provided in this Note.


 


13.          COVENANTS.
Until all of the Notes have been converted, redeemed or otherwise satisfied in accordance with their terms:


 


(a)          Rank.
All payments due under this Note (a) shall rank pari passu with all Other Notes and (b) shall be senior to all other Indebtedness
of the Company and its Subsidiaries.


 


(b)          Incurrence
of Indebtedness. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly,
incur or guarantee, assume or suffer to exist any Indebtedness other than (i) the Indebtedness evidenced by this Note and the Other
Notes and (ii) other Permitted Indebtedness.


 


(c)          Existence
of Liens. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, allow
or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”)
other than Permitted Liens.


 




    	25



    	 



    

 


(d)          Restricted
Payments. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem,
defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part,
whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness,
whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness if at the time such
payment is due or is otherwise made or, after giving effect to such payment, (i) an event constituting an Event of Default has
occurred and is continuing or (ii) an event that with the passage of time and without being cured would constitute an Event of
Default has occurred and is continuing.


 


(e)          Restriction
on Redemption and Cash Dividends. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly
or indirectly, redeem, repurchase or declare or pay any cash dividend or distribution on any of its capital stock.


 


(a)          Restriction
on Transfer of Assets. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly,
sell, lease, license, assign, transfer, spin-off, split-off, close, convey or otherwise dispose of any assets or rights of the
Company or any Subsidiary owned or hereafter acquired whether in a single transaction or a series of related transactions, other
than (i) sales, leases, licenses, assignments, transfers, conveyances and other dispositions of such assets or rights by the Company
and its Subsidiaries in the ordinary course of business and (ii) sales of inventory and product in the ordinary course of business.


 


(f)           Maturity
of Indebtedness. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly,
permit any Indebtedness of the Company or any of the Subsidiaries to mature or accelerate prior to the Maturity Date.


 


(g)          Change
in Nature of Business. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or
indirectly, engage in any material line of business substantially different from those lines of business conducted by the Company
and each of its Subsidiaries on the Issuance Date or any business substantially related or incidental thereto. The Company shall
not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, modify its or their corporate structure
or purpose.


 


(h)          Preservation
of Existence, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its
existence, rights and privileges, and become or remain, and cause each of its Subsidiaries to become or remain, duly qualified
and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction
of its business makes such qualification necessary.


 


(i)           Maintenance
of Properties, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all
of its properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary
wear and tear excepted, and comply, and cause each of its Subsidiaries to comply, at all times with the provisions of all leases
to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.


 




    	26



    	 



    

 


(j)           Maintenance
of Intellectual Property. The Company will, and will cause each of its Subsidiaries to, take all action necessary or advisable
to maintain all of the Intellectual Property Rights of the Company and/or any of its Subsidiaries that are necessary or material
to the conduct of its business in full force and effect.


 


(k)          Maintenance
of Insurance. The Company shall maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business
interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such
amounts and covering such risks as is required by any governmental authority having jurisdiction with respect thereto or as is
carried generally in accordance with sound business practice by companies in similar businesses similarly situated.


 


(l)           Transactions
with Affiliates. The Company shall not, nor shall it permit any of its Subsidiaries to, enter into, renew, extend or be a party
to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange
of property or assets of any kind or the rendering of services of any kind) with any affiliate, except in the ordinary course of
business in a manner and to an extent consistent with past practice and necessary or desirable for the prudent operation of its
business, for fair consideration and on terms no less favorable to it or its Subsidiaries than would be obtainable in a comparable
arm’s length transaction with a Person that is not an affiliate thereof.


 


(m)          Restricted
Issuances. The Company shall not, directly or indirectly, without the prior written consent of the holders of a majority in
aggregate principal amount of the Notes then outstanding, (i) issue any Notes (other than as contemplated by the Securities Purchase
Agreement and the Notes) or (ii) issue any other securities that would cause a breach or default under the Notes or the Warrants.


 


(n)          Controlled
Accounts; Control Account Release; Collateral.


 


(i)          The
Company shall establish and maintain a bank account for each holder of Notes (collectively, the “Master Restricted Accounts”,
with the Master Restricted Account attributable the Holder as defined in Section 29(z) below) at a bank or a financial institution
satisfactory to such holder of Notes (each, as applicable, a “Controlled Account Bank”), which Master Restricted
Account applicable to a holder of Notes shall be subject to deposit account control agreement in form and substance reasonably
acceptable to such holder of Notes (the “Controlled Account Agreement”). Each Controlled Account Agreement shall
provide, among other things, that (A) the applicable Controlled Account Bank will comply with any and all instructions originated
by such holder of Notes directing the disposition of the funds in the Controlled Accounts without further consent by the Company
or any such Subsidiaries, (B) such Controlled Account Bank waives, subordinates or agrees not to exercise any rights of setoff
or recoupment or any other claim against the applicable Master Restricted Account other than for payment of its service fees and
other charges directly related to the administration of such Master Restricted Account and for returned checks or other items of
payment, and (C) such Controlled Account Bank shall not comply with any instructions, directions or orders of any form with respect
to such Master Restricted Account other than instructions, directions or orders originated by the applicable Holder of Notes. On
the Issuance Date, the Company shall have directed the initial Buyers to deposit an aggregate of $6 million of the Purchase Price
(as defined in the Securities Purchase Agreement) into the Master Restricted Account.


 




    	27



    	 



    

 


(ii)         Upon
the occurrence of any Control Account Release Event, the Holder shall, as soon as commercially practicable, but in no event later
than two (2) Trading Days thereafter, cause a cash amount equal to such applicable Restricted Principal to be released from the
Master Restricted Account attributable to the Holder and deposited into an bank account specified in writing by the Company on
or prior to such date (each a “Control Account Release”); provided, that if the Company fails to select a bank
account in a writing delivered to the Holder on or prior to such second Trading Day, the Holder shall effect such Control Account
Release as soon as commercially practicable after receipt of such bank account election from the Company.


 


(iii)        The
Company hereby grants and pledges to the Holder a continuing security interest in any cash or other assets, from time to time,
in the Master Restricted Account attributable to the Restricted Principal hereunder (the “Collateral”) to secure
prompt repayment of any and all amounts outstanding hereunder from time to time and to secure prompt performance by the Company
of each of its covenants and duties under the Transaction Documents (as defined in the Securities Purchase). Such security interest
constitutes a valid, first priority security interest in the presently existing Collateral, and will constitute a valid, first
priority security interest in later-acquired Collateral. Notwithstanding any filings undertaken related to Holder’s rights
under the Delaware Uniform Commercial Code, the Holder’s Lien (as defined in the Notes) on the Collateral shall remain in
effect for so long as any Restricted Principal remains outstanding. Notwithstanding the foregoing, upon any Control Account Release,
but solely with respect to such portion of the Restricted Principal hereunder subject to such Control Account Release (each, a
“Control Account Release Amount”), the Holder hereby automatically releases any lien hereunder on such Control
Account Release Amount.


 


(iv)        Notwithstanding
anything herein to the contrary, at the option of the Holder, the Holder may satisfy all, or any part, of any redemption or other
cash payment obligation of the Company hereunder (each, a “Cash Payment Obligation”) from the Collateral in
the Master Restricted Account, including, without limitation, in connection with any Event of Default, Change of Control, Company
Installment Redemption or payment due at the Maturity Date.  In connection with any Cash Payment Obligation hereunder, the
Company hereby irrevocably consents to the Holder’s delivery of an instruction letter to the Controlled Account Bank to release
Collateral from the Master Restricted Account in an amount not to exceed such Cash Payment Obligation to the Holder.  Notwithstanding
the foregoing, in the absence of any such election by the Holder, the Company shall remain obligated to pay such Cash Payment Obligation
to the Holder without regard to any Collateral in the Master Restricted Account. Upon the occurrence of any event which could reasonably
be expected to result in a Cash Payment Obligation, the Holder may, at the Holder’s option, withdraw any Collateral in the
Master Restricted Account; provided that (x) such withdrawn amount shall not exceed such amount which the Holder reasonably believes
would be necessary to satisfy such Cash Payment Obligation, and (y) such withdrawal shall not constitute the delivery of a Redemption
Notice hereunder or payment hereunder unless the Holder specifies in writing to the Company that the Holder has applied such Collateral
in satisfaction of such Cash Payment Obligation.


 




    	28



    	 



    

 


(v)         If
the Controlled Account Bank breaches any covenant or other term or condition of any Account Control Agreement or otherwise fails
to promptly comply with the instructions of the Holder in connection with the Collateral, the Holder may, at its option, withdraw
the Collateral from the Controlled Account Bank and hold such Collateral until such time as (x) the Company and the Holder have
agreed upon a replacement Controlled Account Bank and (y) a Controlled Account Agreement with respect to such Collateral and a
new account shall have been duly executed by the Company, the Holder and the replacement Controlled Account Bank. Notwithstanding
anything herein to the contrary, if the Company or any of its Subsidiaries receives any of the Collateral in breach of any Account
Control Agreement (or receives notice from any holder of Notes that an amount was wired to the Company from a Master Restricted
Account attributable to such holder of Notes without the proper authorization of such holder of Notes), the Company shall promptly
cause such amounts to be returned to such applicable Master Restricted Account.


 


14.          PARTICIPATION.
In addition to any adjustments pursuant to Section 7, the Holder, as the holder of this Note, shall be entitled to receive such
dividends paid and distributions made to the holders of Common Stock to the same extent as if the Holder had converted this Note
into Common Stock (without regard to any limitations on conversion herein or elsewhere) and had held such shares of Common Stock
on the record date for such dividends and distributions. Payments under the preceding sentence shall be made concurrently with
the dividend or distribution to the holders of Common Stock (provided, however, to the extent that the Holder’s right to
participate in any such dividend or distribution would result in the Holder exceeding the Maximum Percentage, then the Holder shall
not be entitled to participate in such dividend or distribution to such extent (or the beneficial ownership of any such shares
of Common Stock as a result of such dividend or distribution to such extent) and such dividend or distribution to such extent shall
be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder
exceeding the Maximum Percentage).


 


15.          AMENDING
THE TERMS OF THIS NOTE. The prior written consent of the Holder shall be required for any change or amendment to this Note.


 


16.          TRANSFER.
This Note and any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned or transferred by the
Holder without the consent of the Company, subject only to the provisions of Section 2(g) of the Securities Purchase Agreement.


 




    	29



    	 



    

 


17.          REISSUANCE
OF THIS NOTE.


 


(a)          Transfer.
If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note (in accordance with Section 17(d)), registered as the Holder may request, representing
the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal is being transferred,
a new Note (in accordance with Section 17(d)) to the Holder representing the outstanding Principal not being transferred. The Holder
and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) following
conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal
stated on the face of this Note.


 


(b)          Lost,
Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note (as to which a written certification and the indemnification contemplated below shall suffice
as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company
in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall
execute and deliver to the Holder a new Note (in accordance with Section 17(d)) representing the outstanding Principal.


 


(c)          Note
Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Note or Notes (in accordance with Section 17(d) and in principal amounts of at least $1,000) representing
in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding
Principal as is designated by the Holder at the time of such surrender.


 


(d)          Issuance
of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall
be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding
(or in the case of a new Note being issued pursuant to Section 17(a) or Section 17(c), the Principal designated by the Holder which,
when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal
remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated
on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions
as this Note, and (v) shall represent accrued and unpaid Interest and Late Charges on the Principal and Interest of this Note,
from the Issuance Date.


 




    	30



    	 



    

 


18.          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 (including, without limitation, compliance with Section 7).


 


19.          PAYMENT
OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection or enforcement
or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this
Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company
or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay
the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization,
receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements. The Company expressly
acknowledges and agrees that no amounts due under this Note shall be affected, or limited, by the fact that the purchase price
paid for this Note was less than the original Principal amount hereof.


 


20.          CONSTRUCTION;
HEADINGS. This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against
any Person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect
the interpretation of, this Note. Terms used in this Note but defined in the other Transaction Documents shall have the meanings
ascribed to such terms on the Closing Date in such other Transaction Documents unless otherwise consented to in writing by the
Holder.


 


21.          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 privilege. No waiver shall be effective unless it is in writing and
signed by an authorized representative of the waiving party.


 




    	31



    	 



    

 


22.          DISPUTE
RESOLUTION. In the case of a dispute as to the determination of the Conversion Price, the Company Conversion Price, the Pre-Installment
Conversion Price, the Closing Bid Price, the Closing Sale Price or fair market value (as the case may be) or the arithmetic calculation
of the Conversion Rate, the Restricted Principal or the applicable Redemption Price (as the case may be), the Company or the Holder
(as the case may be) shall submit the disputed determinations or arithmetic calculations (as the case may be) via facsimile (i)
within two (2) Business Days after receipt of the applicable notice giving rise to such dispute to the Company or the Holder (as
the case may be) or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving
rise to such dispute. If the Holder and the Company are unable to agree upon such determination or calculation within two (2) Business
Days of such disputed determination or arithmetic calculation (as the case may be) being submitted to the Company or the Holder
(as the case may be), then the Company shall, within two (2) Business Days, submit via facsimile (a) the disputed determination
of the Conversion Price, the Company Conversion Price, the Pre-Installment Conversion Price, the Closing Bid Price, the Closing
Sale Price or fair market value (as the case may be) to an independent, reputable investment bank selected by the Holder that is
reasonably acceptable to the Company or (b) the disputed arithmetic calculation of the Conversion Rate, the Restricted Principal
or any Redemption Price (as the case may be) to an independent, outside accountant selected by the Holder that is reasonably acceptable
to the Company. The Company shall cause at its expense the investment bank or the accountant (as the case may be) to perform the
determinations or calculations (as the case may be) and notify the Company and the Holder of the results no later than ten (10)
Business Days from the time it receives such disputed determinations or calculations (as the case may be). Such investment bank’s
or accountant’s determination or calculation (as the case may be) shall be binding upon all parties absent demonstrable error.


 


23.          NOTICES;
CURRENCY; PAYMENTS.


 


(a)          Notices.
Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance
with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all
actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without
limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment
of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least
fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any grant, issuances, or sales of any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property to holders of shares of Common Stock or (C) for determining rights
to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall
be made known to the public prior to or in conjunction with such notice being provided to the Holder.


 


(b)          Currency.
All dollar amounts referred to in this Note are in United States Dollars (“U.S. Dollars”), and all amounts owing
under this Note shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be converted into the
U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “Exchange Rate”
means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Note, the U.S. Dollar exchange
rate as published in the Wall Street Journal on the relevant date of calculation (it being understood and agreed that where an
amount is calculated with reference to, or over, a period of time, the date of calculation shall be the final date of such period
of time).


 




    	32



    	 



    

 


(b)          Payments.
Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless otherwise expressly set forth
herein, such payment shall be made in lawful money of the United States of America by a certified check drawn on the account of
the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing
(which address, in the case of each of the Buyers, shall initially be as set forth on the Schedule of Buyers attached to the Securities
Purchase Agreement), provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available
funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions.
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. Any amount of Principal or other amounts due under the Transaction
Documents which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal
to interest on such amount at the rate of eighteen percent (18%) per annum from the date such amount was due until the same is
paid in full (“Late Charge”).


 


24.          CANCELLATION.
After all Principal, accrued Interest, Late Charges and other amounts at any time owed on this Note have been paid in full, this
Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.


 


25.          WAIVER
OF NOTICE. To the extent permitted by law, the Company hereby irrevocably waives demand, notice, presentment, protest and all
other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the
Securities Purchase Agreement.


 


26.          GOVERNING
LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication
of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, 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 any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue
of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. 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 enforceability of any other provision of this Note. Nothing contained herein shall be
deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction
to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations,
or to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING
OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.


 




    	33



    	 



    

 


27.          JUDGMENT
CURRENCY.


 


(a)          If
for the purpose of obtaining or enforcing judgment against the Company in any court in any jurisdiction it becomes necessary to
convert into any other currency (such other currency being hereinafter in this Section 27 referred to as the “Judgment
Currency”) an amount due in U.S. dollars under this Note, the conversion shall be made at the Exchange Rate prevailing
on the Trading Day immediately preceding:


 


(i)          the
date actual payment of the amount due, in the case of any proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or


 


(ii)         the
date on which the foreign court determines, in the case of any proceeding in the courts of any other jurisdiction (the date as
of which such conversion is made pursuant to this Section 27(a)(ii) being hereinafter referred to as the “Judgment Conversion
Date”).


 


(b)          If
in the case of any proceeding in the court of any jurisdiction referred to in Section 27(a)(ii) above, there is a change in the
Exchange Rate prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the applicable
party shall pay such adjusted amount as may be necessary to ensure that the amount paid in the Judgment Currency, when converted
at the Exchange Rate prevailing on the date of payment, will produce the amount of US dollars which could have been purchased with
the amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange Rate prevailing on the Judgment Conversion
Date.


 


(c)          Any
amount due from the Company under this provision shall be due as a separate debt and shall not be affected by judgment being obtained
for any other amounts due under or in respect of this Note.


 


28.          MAXIMUM
PAYMENTS. Without limiting Section 9(d) of the Securities Purchase Agreement, nothing contained herein shall be deemed to establish
or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event
that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments
in excess of such maximum shall be credited against amounts owed by the Company to the Holder and thus refunded to the Company.


 


29.          CERTAIN
DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:


 




    	34



    	 



    

 


(a)          
“Adjustment Right” means any right granted with respect to any securities issued in connection with, or with
respect to, any issuance or sale (or deemed issuance or sale in accordance with Section 7) of shares of Common Stock (other than
rights of the type described in Section 6(a) hereof) that could result in a decrease in the net consideration received by the Company
in connection with, or with respect to, such securities (including, without limitation, any cash settlement rights, cash adjustment
or other similar rights).


 


(b)          
“Approved Stock Plan” means any employee benefit plan which has been approved by the board of directors of the
Company prior to or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common
Stock may be issued to any employee, officer or director for services provided to the Company in their capacity as such.


 


(c)          
“Black Scholes Consideration Value” means the value of the applicable Option, Convertible Security or Adjustment
Right (as the case may be) as of the date of issuance thereof calculated using the Black Scholes Option Pricing Model obtained
from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the Closing Sale Price of
the Common Stock on the Trading Day immediately preceding the public announcement of the execution of definitive documents with
respect to the issuance of such Option, Convertible Security or Adjustment Right (as the case may be), (ii) a risk-free interest
rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of such Option, Convertible Security or Adjustment
Right (as the case may be) as of the date of issuance of such Option, Convertible Security or Adjustment Right (as the case may
be), (iii) a zero cost of borrow and (iv) an expected volatility equal to the greater of 100% and the 100 day volatility obtained
from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately
following the date of issuance of such Option, Convertible Security or Adjustment Right (as the case may be).


 


(d)          “Bloomberg”
means Bloomberg, L.P.


 


(e)          “Business
Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.


 


(f)          
“Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its,
direct or indirect, wholly-owned Subsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization
or reclassification of the shares of Common Stock in which holders of the Company’s voting power immediately prior to such
reorganization, recapitalization or reclassification continue after such reorganization, recapitalization or reclassification to
hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of
the surviving entity (or entities with the authority or voting power to elect the members of the board of directors (or their
equivalent if other than a corporation) of such entity or entities) after such reorganization, recapitalization or reclassification,
or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company
or any of its Subsidiaries.


 




    	35



    	 



    

 


(g)          “Change
of Control Redemption Premium” means 125%.


 


(h)          “Closing
Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price
and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal
Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as
the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time,
as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security,
the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid
price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security
by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported
in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing
Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by
the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved in accordance with the procedures in Section 21. All such determinations shall be appropriately
adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during such
period.


 


(i)           “Closing
Date” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially
issued Notes pursuant to the terms of the Securities Purchase Agreement.


 


(j)           “Common
Stock” means (i) the Company’s shares of common stock, $0.0001 par value per share, and (ii) any capital stock
into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.


 


(k)          “Company
Conversion Price” means, with respect to a particular date of determination, the lower of (i) 85% of the VWAP of the
Common Stock on the Trading Day immediately prior to the applicable Installment Date and (ii) the price which shall be computed
as 85% of the quotient of (I) the sum of the twenty (20) lowest VWAPs of the Common Stock of each Trading Day during the forty
(40) consecutive Trading Day period ending and including the Trading Day immediately prior to the applicable Installment Date,
divided by (II) twenty (20). All such determinations to be appropriately adjusted for any stock split, stock dividend, stock combination
or other similar transaction during any such measuring period.


 




    	36



    	 



    

 


(l)           “Control
Account Release Event” means, as applicable, (i) with respect to any Restricted Principal designated to be converted
in a Conversion Notice, the Company’s receipt of both (A) such Conversion Notice hereunder executed by the Holder in which
all, or any part, of the Principal to be converted includes any Restricted Principal and (B) written confirmation by the Holder
that the shares of Common Stock issued pursuant to such Conversion Notice have been properly delivered in accordance with Section
3(c) (in each case, as adjusted, if applicable, to reflect the withdrawal of any Conversion Notice, in whole or in part, by the
Holder, whether pursuant to Section 3(c)(ii) or otherwise), (ii) the Company’s receipt of a notice by the Holder electing
to effect a release of any Restricted Principal to the Company, (iii) the occurrence of each Installment Date on or prior to the
sixtieth (60th) calendar day after the Applicable Date (as defined in the Securities Purchase Agreement) with respect to such amount
of Restricted Principal equal to such portion of Restricted Principal included in the Conversion Amount, if any, in the applicable
Company Conversion (as adjusted for any Deferral Amount with respect thereto) and (iv) the occurrence of each Installment Date
subsequent to the sixtieth (60th) calendar day after the Applicable Date, so long as any Restricted Principal remains outstanding
hereunder as of such Installment Date, with respect to such amount of Restricted Principal equal to the lesser of (x) the Restricted
Principal then outstanding hereunder and (y) the greater of (A) the Holder Pro Rata Amount of $500,000 and (B) such portion of
Restricted Principal included in the Conversion Amount, if any, in the applicable Company Conversion (as adjusted for any Deferral
Amount with respect thereto); provided, in the case of clauses (iii) and (iv) above, as of such date of determination no Equity
Conditions Failure exists.


 


(m)        
“Conversion Share Ratio” means as to any applicable Installment Date, the quotient of (i) the number of Pre-Installment
Conversion Shares delivered in connection with such Installment Date divided by (ii) the number of Post-Installment Conversion
Shares applicable to such Installment Date.


 


(n)          “Convertible
Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly
or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any
shares of Common Stock.


 


(o)          “Eligible
Market” means The New York Stock Exchange, the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Select Market,
the Nasdaq Global Market or the Principal Market.


 




    	37



    	 



    

 


(p)          “Equity
Conditions” means: (i) on each day during the period beginning thirty calendar days prior to the applicable date of determination
and ending on and including the applicable date of determination (or, with respect to the initial Installment Date, during the
period beginning on the Installment Notice Due Date with respect to such initial Installment Date and ending on and including the
initial Installment Date) either (x) one or more Registration Statements filed pursuant to the Registration
Rights Agreement shall be effective and the prospectus contained therein shall be available for the resale as of such date of determination
of the maximum number of Registrable Securities (x) if such determination is being made pursuant to Section 8 above, to be issued
pursuant to Section 8 above, in the aggregate, on such date of determination in connection with such applicable Company Conversion
or (y) otherwise, issuable upon conversion of such portion of the Conversion Amount of this Note that is subject to such other
event in which this determination is being made, in each case, in accordance with the terms of the Registration Rights Agreement
and there shall not have been during such period any Grace Periods (as defined in the
Registration Rights Agreement) or (y) all Registrable Securities issuable upon conversion of this Note
shall be eligible for sale pursuant to Rule 144 without the need for registration under any applicable
federal or state securities laws (in each case, disregarding any limitation on conversion of the Notes, other issuance of securities
with respect to the Notes and exercise of the Warrants) and no Current Information Failure (as defined in the Registration
Rights Agreement) exists or is continuing; (ii) on each day during the period beginning thirty
calendar days prior to the applicable date of determination and ending on and including the applicable date of determination (the
“Equity Conditions Measuring Period”), the Common Stock (including all Registrable Securities)
is listed or designated for quotation (as applicable) on an Eligible Market and shall not have been suspended from trading on an
Eligible Market (other than suspensions of not more than five (5) days and occurring prior to the applicable date of determination
due to business announcements by the Company) nor shall delisting or suspension by an Eligible Market have been threatened (with
a reasonable prospect of delisting occurring) or pending either (A) in writing by such Eligible Market or (B) by falling below
the minimum listing maintenance requirements of the Eligible Market on which the Common Stock is then listed or designated for
quotation (as applicable); (iii) on each day during the Equity Conditions Measuring Period, the Company shall have delivered all
shares of Common Stock issuable upon conversion of this Note on a timely basis as set forth in Section 3 hereof and all other shares
of capital stock required to be delivered by the Company on a timely basis as set forth in the other Transaction Documents; (iv)
any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating
Section 3(d) hereof; (v) any shares of Common Stock to be issued in connection with the event requiring determination may be issued
in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated
for quotation (as applicable); (vi) on each day during the Equity Conditions Measuring Period, no public announcement of a pending,
proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (vii)
the Company shall have no knowledge of any fact that would reasonably be expected to cause (1) any Registration Statement required
to be filed pursuant to the Registration Rights Agreement to not be effective or the prospectus contained therein to not be available
for the resale as of such date of determination of the maximum number of Registrable Securities (x) if such determination is being
made pursuant to Section 8 above, to be issued pursuant to Section 8 above, in the aggregate, on such date of determination in
connection with such applicable Company Conversion or (y) otherwise, issuable upon conversion of such portion of the Conversion
Amount of this Note that is subject to such other event in which this determination is being made, in each case, in accordance
with the terms of the Registration Rights Agreement or (2) any Registrable Securities issuable upon conversion of this Note to
not be eligible for sale pursuant to Rule 144 without the need for registration under any applicable
federal or state securities laws (in each case, disregarding any limitation on conversion of the Notes, other issuance of securities
with respect to the Notes and exercise of the Warrants) and no Current Information Failure exists or is continuing;
(viii) the Holder shall not be in (and no other Buyer shall be in) possession of any material, non-public information provided
to any of them by the Company, any of its Subsidiaries or any of their respective affiliates, employees, officers, representatives,
agents or the like; (ix) on each day during the Equity Conditions Measuring Period, the Company otherwise shall have been
in compliance with each, and shall not have breached any provision, covenant, representation or warranty of any Transaction Document;
(x) there shall not have occurred any Volume Failure or Price Failure; and (xi) on each day during the Equity Conditions Measuring
Period, there shall not have occurred an Event of Default or an event that with the passage of time or giving of notice would constitute
an Event of Default.


 




    	38



    	 



    

 


(q)          “Equity
Conditions Failure” means that on any day during the period commencing (x) twenty (20) Trading Days prior to the applicable
Company Installment Notice Date through the later of the applicable Installment Date and the date on which the applicable shares
of Common Stock are actually delivered to the Holder or (y) twenty (20) Trading Days prior to the date of the applicable Controlled
Account Release Event through the date of the applicable Controlled Account Release Event, the Equity Conditions have not been
satisfied (or waived in writing by the Holder).


 


(r)           “Excluded
Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers
or employees of the Company in their capacity as such pursuant to an Approved Stock Plan (as defined below), provided that (A)
all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the date hereof
pursuant to this clause (i) do not, in the aggregate, exceed more than 5% of the Common Stock issued and outstanding immediately
prior to the date hereof and (B) the exercise price of any such options is not lowered, none of such options are amended to increase
the number of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed
in any manner that adversely affects any of the Buyers; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible
Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by
clause (i) above) issued prior to the date hereof, provided that the conversion price of any such Convertible Securities (other
than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above)
is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an
Approved Stock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and
none of the terms or conditions of any such Convertible Securities (other than standard options to purchase Common Stock issued
pursuant to an Approved Stock Plan that are covered by clause (i) above) are otherwise materially changed in any manner that adversely
affects any of the Buyers; (iii) the shares of Common Stock issuable upon conversion of the Notes or otherwise pursuant to the
terms of the Notes, and (iv) the shares of Common Stock issuable upon exercise of the Warrants.


 




    	39



    	 



    

 


(s)          “Fundamental
Transaction” means that (i) the Company or any of its Subsidiaries shall, directly or indirectly, in one or more related
transactions, (1) consolidate or merge with or into (whether or not the Company or any of its Subsidiaries is the surviving corporation)
any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its
respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer
that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares
of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making
or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other
Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including
any shares of Voting Stock of the Company 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), or (ii) any “person”
or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations
promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly
or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.


 


(t)           “GAAP”
means United States generally accepted accounting principles, consistently applied.


 


(u)          “Holder
Pro Rata Amount” means a fraction (i) the numerator of which is the original Principal amount of this Note on the Closing
Date and (ii) the denominator of which is the aggregate original principal amount of all Notes issued to the initial purchasers
pursuant to the Securities Purchase Agreement on the Closing Date.


 


(v)          “Installment
Amount” means (i) with respect to any Installment Date other than the Maturity Date, the lesser of (A) $[             ]1
and (B) the Principal amount then outstanding under this Note as of such Installment Date, and (ii) with respect to the Installment
Date that is the Maturity Date, the Principal amount then outstanding under this Note as of such Installment Date (in each case,
as any such Installment Amount may be reduced pursuant to the terms of this Note, whether upon conversion, redemption or otherwise)
together with, in each case of clauses (i) and (ii) above, the sum of any accrued and unpaid Interest as of such Installment Date
under this Note and accrued and unpaid Late Charges, if any, under this Note as of such Installment Date. In the event the Holder
shall sell or otherwise transfer any portion of this Note, the transferee shall be allocated a pro rata portion of the each unpaid
Installment Amount hereunder.


 








 



		1	Insert amount equal to 1/9th of initial principal
amount of this Note




 




    	40



    	 



    

 


(w)         “Governmental
Indebtedness” means the principal of (and premium, if any), interest on, and all fees and other amounts (including, without
limitation, any reasonable out-of-pocket costs, enforcement expenses (including reasonable out-of-pocket legal fees and disbursements),
collateral protection expenses and other reimbursement or indemnity obligations relating thereto) payable by Company and/or its
Subsidiaries, from time to time, under or in connection with any financing facility by any governmental or quasi-governmental agency
the purpose of which is to fund plant, property and equipment acquisitions by the Company or any of its Subsidiaries and which
will be secured solely by a first lien on the plant, property and equipment so acquired (each, a “Governmental Indebtedness
Lien”); provided, however, that the aggregate outstanding amount of the Governmental Indebtedness does not at any time
exceed $1,000,000.


 


(x)          “Installment
Date” means (i) the twenty-third (23rd) Trading Day after the earlier of (x) the Effective Date (as defined
in the Registration Rights Agreement) of the initial Registration Statement and (y) October 1, 2013, (ii) then, (x) if the first
Trading Day of the calendar month immediately following the initial Installment Date occurs less than twenty (20) Trading Days
after the initial Installment Date, the first Trading Day of the second calendar month immediately following the initial Installment
Date or (y) otherwise, the first Trading Day of the calendar month immediately following the initial Installment Date, (iii) thereafter,
the first Trading Day of the calendar month immediately following the previous Installment Date until the Maturity Date, and (iv)
the Maturity Date.


 


(y)          “Interest
Rate” means eight percent (8%) per annum, as may be adjusted from time to time in accordance with Section 2.


 


(z)           “Make-Whole
Amount” means, as of any given date, the amount of any Interest that, but for any conversion or redemption hereunder
on such given date, would have accrued with respect to the Conversion Amount being converted or redeemed under this Note at the
Interest Rate for the period from such given date through the Maturity Date.


 


(aa)        “Master
Restricted Account” means, solely with respect to the Holder, account number [                     ] at [                     ], or such other account as may
be directed by the Holder, from time to time, subject to a Controlled Account Agreement in favor of the Holder in a form reasonably
acceptable to the Holder.


 


(bb)        “Maturity
Date” shall mean February __, 2015; provided, however, the Maturity Date may be extended at the option of the Holder
(i) in the event that, and for so long as, an Event of Default shall have occurred and be continuing or any event shall have occurred
and be continuing that with the passage of time and the failure to cure would result in an Event of Default or (ii) through the
date that is twenty (20) Business Days after the consummation of a Fundamental Transaction in the event that a Fundamental Transaction
is publicly announced or a Fundamental Transaction Notice is delivered prior to the Maturity Date, provided further that if a Holder
elects to convert some or all of this Note pursuant to Section 3 hereof, and the Conversion Amount would be limited pursuant to
Section 3(d) hereunder, the Maturity Date shall automatically be extended until such time as such provision shall not limit the
conversion of this Note.


 




    	41



    	 



    

 


(cc)        “Options”
means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.


 


(dd)        “Parent
Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock
or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity,
the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.


 


(ee)        “Permitted
Indebtedness” means (i) Indebtedness evidenced by this Note and the Other Notes, (ii) Indebtedness set forth on Schedule
3(s) to the Securities Purchase Agreement, as in effect as of the Subscription Date, (iii) Governmental Indebtedness, (iv) Indebtedness
secured by Permitted Liens or unsecured but as described in clauses (iv) and (v) of the definition of Permitted Liens and (v) up
to $1 million of aggregate principal amount of Indebtedness incurred by the Company that is made expressly subordinate in right
of payment to the Indebtedness evidenced by this Note, as reflected in a written agreement acceptable to the Holder, and which
Indebtedness does not provide at any time for (1) except for Permitted Subordinated Debt Payments (as defined in the Subordination
Agreement (as defined in the Securities Purchase Agreement)), the payment, prepayment, repayment, repurchase or defeasance, directly
or indirectly, of any principal or premium, if any, thereon until at least ninety-one (91) days after the Maturity Date and (2)
total interest and fees at a rate in excess of eight percent (8%) per annum.


 


(ff)   
     “Permitted Liens” means (i) any Lien for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in
accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to
a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens,
mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that
is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (iv) Liens (A) upon or in
any equipment or inventory acquired or held by the Company or any of its Subsidiaries to secure the purchase price of such
equipment or inventory or indebtedness incurred solely for the purpose of financing the acquisition or lease of
such equipment or inventory, or (B) existing on such equipment or inventory at the time of its acquisition, provided that the
Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment or
inventory, in either case, with respect to indebtedness, (v) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in clause (iv) above, provided that any extension,
renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the
Indebtedness being extended, renewed or refinanced does not increase, (vi) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payments of custom duties in connection with the importation of goods, (vii)
Governmental Indebtedness Liens and (viii) Liens arising from judgments, decrees or
attachments in circumstances not constituting an Event of Default under Section 4(a)(xii) and (viii).


 




    	42



    	 



    

 


(gg)       
“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity or a government or any department or agency thereof.


 


(hh)        “Post-Installment
Conversion Shares” means that number of shares of Common Stock that would be required to be delivered pursuant to Section
8 on an applicable Installment Date without taking into account the delivery of any Pre-Installment Conversion Shares.


 


(ii)           “Pre-Installment
Conversion Price” means, with respect to a particular date of determination, the lower of (i) 85% of the VWAP of the
Common Stock on the Trading Day immediately preceding the delivery or deemed delivery of the applicable Company Installment Notice
and (ii) the price which shall be computed as 85% of the quotient of (I) the sum of the twenty (20) lowest VWAPs of the Common
Stock of each Trading Day during the forty (40) consecutive Trading Day period ending and including the Trading Day immediately
preceding the delivery or deemed delivery of the applicable Company Installment Notice, divided by (II) twenty (20). All such determinations
to be appropriately adjusted for any stock split, stock dividend, stock combination or other similar transaction during any such
measuring period.


 


(jj)          “Price
Failure” means, with respect to a particular date of determination, the VWAP of the Common Stock on any Trading Day during
the fifteen (15) consecutive Trading Day period ending on the Trading Day immediately preceding such date of determination (such
period, the “Price Failure Measuring Period”) fails to exceed $0.10 (as adjusted
for stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions). All such determinations
to be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions
during such Price Failure Measuring Period.


 


(kk)        “Principal
Market” means the OTCQB Market.


 


(ll)          “Redemption
Notices” means, collectively, the Event of Default Redemption Notices, the Company Installment Notices with respect to
any Company Redemption and the Change of Control Redemption Notices, and each of the foregoing, individually, a “Redemption
Notice.”


 


(mm)      “Redemption
Premium” means (i) in the case of the Events of Default described in Section 4(a) (other than Sections 4(a)(ix) through
4(a)(xi)), 125% or (ii) in the case of the Events of Default described in Sections 4(a)(ix) through 4(a)(xi), 100%.


 


(nn)        “Redemption
Prices” means, collectively, Event of Default Redemption Prices, the Change of Control Redemption Prices and the Company
Installment Redemption Prices, and each of the foregoing, individually, a “Redemption Price.”


 




    	43



    	 



    

 


(oo)        “Registration
Rights Agreement” means that certain registration rights agreement, dated as of the Closing Date, by and among the Company
and the initial holders of the Notes relating to, among other things, the registration of the resale of the Common Stock issuable
upon conversion of the Notes or otherwise pursuant to the terms of the Notes and exercise of the Warrants, as may be amended from
time to time.


 


(pp)        “Restricted
Principal” means, as of any given date, the difference of (x) the aggregate initial Principal hereunder, less (y) the
sum of all cash amounts attributed to this Note released from the Master Restricted Account to the Company (or at the Company’s
direction) on or prior to such date.


 


(qq)       
“SEC” means the United States Securities and Exchange Commission or the successor thereto.


 


(rr)         
“Securities Purchase Agreement” means that certain securities purchase agreement, dated as of the Subscription
Date, by and among the Company and the initial holders of the Notes pursuant to which the Company issued the Notes, as may be amended
from time to time.


 


(ss)        
“Subscription Date” means May __, 2013.


 


(tt)        
“Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting
from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such
Fundamental Transaction shall have been entered into.


 


(uu)        “Trading
Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common
Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time
of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise
designated as a Trading Day in writing by the Holder.


 


(vv)        “Volume
Failure” means, with respect to a particular date of determination, either (x) the quotient of (A) the sum of the aggregate
daily dollar trading volume (as reported on Bloomberg) of the Common Stock on each Trading Day over the fifteen (15) consecutive
Trading Day period ending on the Trading Day immediately preceding such date of determination (such period, the “Volume
Failure Measuring Period”), divided by (B) fifteen (15) is less than $60,000 (as adjusted for any stock splits, stock
dividends, stock combinations, recapitalizations or other similar transactions) or (y) the aggregate daily dollar trading volume
(as reported on Bloomberg) of the Common Stock on the Principal Market on more than three (3) Trading Days during the Volume Failure
Measuring Period is less than $40,000 (as adjusted for any stock splits, stock dividends, stock combinations, recapitalizations
or other similar transactions). All such determinations to be appropriately adjusted for any stock splits, stock dividends, stock
combinations, recapitalizations or other similar transactions during such Volume Failure Measuring Period.


 




    	44



    	 



    

 


(ww)       “Voting
Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have
the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers, trustees
or other similar governing body of such Person (irrespective of whether or not at the time capital stock of any other class or
classes shall have or might have voting power by reason of the happening of any contingency).


 


(xx)         “VWAP”
means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or,
if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities
market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00
p.m., New York time, as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not
apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board
for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported
by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average
of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in
the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated for such security
on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined
by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved in accordance with the procedures in Section 21. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.


 


(yy)        “Warrants”
has the meaning ascribed to such term in the Securities Purchase Agreement, and shall include all warrants issued in exchange therefor
or replacement thereof.


 


30.          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) Business 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. Nothing contained in this Section 30 shall limit any obligations of the Company, or any rights of the Holder,
under Section 4(i) of the Securities Purchase Agreement.


 


[signature page follows]


 




    	45



    	 



    

 


IN WITNESS WHEREOF,
the Company has caused this Note to be duly executed as of the Issuance Date set out above.


 


	 	Axion Power International, Inc.
	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:


 


Senior Convertible
Note - Signature Page


 




    	 



    	 



    

 


EXHIBIT
I


 


Axion
Power International, Inc.

CONVERSION NOTICE


 


Reference is made to
the Convertible Note (the “Note”) issued to the undersigned by Axion Power International, Inc., a Delaware corporation
(the “Company”). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion
Amount (as defined in the Note) of the Note indicated below into shares of Common Stock, $0.0001 par value per share (the “Common
Stock”), of the Company, as of the date specified below. Capitalized terms not defined herein shall have the meaning
as set forth in the Note.


 
















	Date of Conversion:	 
	 	 









	Aggregate Principal to be converted:	 	 
	 	 	 
	Aggregate accrued and unpaid Interest and accrued and unpaid Late Charges with respect to such portion of the Aggregate Principal and such Aggregate Interest to be converted:	 	 
	 	 	 
	AGGREGATE CONVERSION AMOUNT

 TO BE CONVERTED:	 	 







  


Please confirm the following information:


 





	Conversion Price:	 


 


	Number of shares of Common Stock to be issued:	 




 


Check here if all or any
portion of the aggregate Principal being converted includes any Restricted Principal:  ̈


 


Notwithstanding anything to the contrary
contained herein, this Conversion Notice shall constitute a representation by the Holder of the Note submitting this Conversion
Notice that (i) after giving effect to the conversion provided for in this Conversion Notice, such Holder (together with its affiliates)
will not have beneficial ownership (together with the beneficial ownership of such Person’s affiliates) of a number of shares
of Common Stock which exceeds the Maximum Percentage (as defined in the Note) of the total outstanding shares of Common Stock of
the Company as determined pursuant to the provisions of Section 3(d) of the Note and (ii) the representations
set forth in Section 4(d) of the Registration Rights Agreement with respect to the shares of Common Stock issuable in connection
herewith are true and correct in all respects.


 




    	 



    	 



    

 


Please issue the Common Stock into which
the Note is being converted in the following name and to the following address:


 





	Issue to:	 
	 	 
	 	 
	 	 
	 	 




 





	Facsimile Number:	 




 





	Holder:	 




 





	By:	 




 





	Title:	 




 





	Dated:	 




 





	Account Number:	 
	(if electronic book entry transfer)


 


	Transaction Code Number:	 
	(if electronic book entry transfer)




 


	Installment Amount(s) to be reduced (and corresponding Installment Date(s)) and amount of reduction:	 	 


 






    	 



    	 



    

 


ACKNOWLEDGMENT


 


The Company hereby
acknowledges this Conversion Notice and hereby directs _________________ to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated _____________, 20__ from the Company and acknowledged and agreed
to by ________________________.


 


	 	Axion Power International, Inc.
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title: