Exhibit 4.1


 


 


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


 


	Principal Amount: $	Issue Date:                    
	Purchase Price: $	 


 


 


5% ORIGINAL ISSUE DISCOUNT CONVERTIBLE
PROMISSORY NOTE


DUE               


 


THIS 5% ORIGINAL ISSUE
DISCOUNT CONVERTIBLE PROMISSORY NOTE is one of a series of duly authorized and validly issued 5% Original Issue Discount Convertible
Promissory Notes of Electronic Cigarettes International Group, Ltd., a Nevada corporation, (the “Company”),
having its principal place of business at principal place of business at 14200 Ironwood Drive, Grand Rapids, Michigan 49534, designated
as its 5% Original Issue Discount Convertible Promissory Note due           
(this Note, the “Note” and, collectively with the other Notes of such series, the “Notes”).


 


FOR VALUE RECEIVED,
the Company promises to pay to                or its registered
assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $          
on             (the “Maturity Date”) or such earlier
date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof. This Note is subject to
the following additional provisions:


 


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


 


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


 






    	1



    	 



    

  


“Alternate
Conversion Price” means 55% of the lowest VWAP during the 30 Trading Day-period immediately prior to the applicable Conversion
Date. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification
or similar transaction that proportionately decreases or increases the Common Stock during such measuring period.


 


“Bankruptcy
Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule
1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or
any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case
or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is
adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the
Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part
of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant
Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company
or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence
in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.


 


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


 


“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to
close.


 


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


 


“Change of
Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by
an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective
control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess
of 33% of the voting securities of the Company (other than by means of conversion or exercise of the Notes and the Securities issued
together with the Notes), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates
with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction
own less than 66% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company sells
or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to
such transaction own less than 66% of the aggregate voting power of the acquiring entity immediately after the transaction, (d)
a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which is
not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by those
individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved
by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by the Company
of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (a)
through (d) above.


 






    	2



    	 



    

 


 


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


 


“Conversion”
shall have the meaning ascribed to such term in Section 4.


 


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


 


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


 


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


 


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


 


“DTC”
means the Depository Trust Company.


 


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


 


“DWAC”
means Deposit Withdrawal at Custodian as defined by the DTC.


 


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


 


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


 


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


 


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


 






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“Make-Whole
Amount” means, with respect to the applicable date of determination, an amount in cash equal to all of the interest that,
but for the applicable conversion or default payment, would have accrued pursuant to Section 2 with respect to the applicable principal
amount being so converted or redeemed for the period commencing on the applicable redemption date or Conversion Date or default
payment date and ending on             .


 


“Mandatory
Default Amount” means the payment of 125% of the outstanding principal amount of this Note and accrued and unpaid interest
hereon, in addition to the payment of (a) all other amounts, costs, expenses and liquidated damages due in respect of this Note
and (b) the Make-Whole Amount.


 


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


 


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


 


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


 


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


 


“Permitted
Indebtedness” means the indebtedness evidenced by the Notes.


 


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


 


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


 


“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.


 


“Share Delivery
Date” shall have the meaning set forth in Section 4(d)(ii).


 






    	4



    	 



    

 


 


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


 


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


 


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


 


“Variable
Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock either (A)
at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices
of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities or (B)
with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of
such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business
of the Company or the market for the Common Stock or (ii) enters into any agreement, including, but not limited to, an equity line
of credit, whereby the Company may issue securities at a future determined price. The Holder shall be entitled to obtain injunctive
relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages.


 


“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed
or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding
date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading
Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTC Bulletin Board is not a Trading
Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common
Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in
all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith
by the Holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees
and expenses of which shall be paid by the Company.


 


Section
2.          Interest.


 


a)                 
Payment of Interest in Cash or Kind. The Company shall pay interest to the Holder on the aggregate unconverted and then
outstanding principal amount of this Note at the rate of 12% per annum, payable on each Conversion Date and on the Maturity Date
in cash or, at the Company’s option, in duly authorized, validly issued, fully paid and non-assessable shares of Common Stock
or a combination thereof.


 






    	5



    	 



    

 


 


b)                 
Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day
periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together
with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Payment
of interest in shares of Common Stock shall otherwise occur pursuant to Section 4(d)(ii) herein. Interest hereunder will be paid
to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this
Note (the “Note Register”).


 


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


 


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


 


Section 3.           Registration
of Transfers and Exchanges.


 


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


 


b)                 
Investment Representations. This Note has been issued subject to certain investment representations of the original Holder
set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable
federal and state securities laws and regulations. The holding period for the Conversion Shares pursuant to Rule 144 will be satisfied
on           .


 


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


 


Section 4.          Conversion.


 






    	6



    	 



    

 


 


a)                 
Voluntary Conversion. At any time after the Original Issue Date until this Note is no longer outstanding, this Note shall
be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time
(subject to the conversion limitations set forth in Section 4(e) hereof). The Holder shall effect conversions by delivering
to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”),
specifying therein the principal amount of this Note to be converted and the date on which such conversion shall be effected (such
date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date
shall be the date that such Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall be required,
nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required.
To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to the Company unless the
entire principal amount of this Note, plus all accrued and unpaid interest thereon, has been so converted. Conversions hereunder
shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion.
The Holder and the Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s).
The Company may deliver an objection to any Notice of Conversion within one (1) Business Day of delivery of such Notice of Conversion.
In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of
manifest error. The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions
of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may
be less than the amount stated on the face hereof.


 


b)                 
Conversion Price. The fixed conversion price in effect on any Conversion Date shall be equal $     per
share (the “Conversion Price”). Notwithstanding anything herein to the contrary, at any time after the occurrence
of any Event of Default the Holder may require the Company to, at such Holder’s option and otherwise in accordance with the
provisions for conversion herein, convert all or any part of this Note into Common Stock at the Alternate Conversion Price. Nothing
herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 6 hereof
and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking
to enforce damages pursuant to any other Section hereof or under applicable law.


 


c)                 
[Intentionally Omitted].


 


d)                
Mechanics of Conversion


 






 


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


 






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ii.                      
 Delivery of Certificate Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the
“Share Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) a
certificate or certificates representing the Conversion Shares which, on or after the six month anniversary of the Original
Issue Date, shall be free of restrictive legends and trading restrictions (other than those which may then be required by
this Note) representing the number of Conversion Shares being acquired upon the conversion of this Note, (B) a bank check in
the amount of accrued and unpaid interest (if the Company has elected or is required to pay accrued interest in cash) and (C)
a bank check in the amount of the Make-Whole Amount. All certificate or certificates required to be delivered by the Company
under this Section 4(d) shall be delivered electronically through the Depository Trust Company or another established
clearing corporation performing similar functions. If the Conversion Date is prior to the six month anniversary of the
Original Issue Date, then the Conversion Shares shall bear a restrictive legend in the following form, as appropriate:


 


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


 


               
iii.                       Failure
to Deliver Certificates. If, in the case of any Notice of Conversion, such certificate or certificates are not delivered to
or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to
the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event
the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly return
to the Company the Common Stock certificates issued to such Holder pursuant to the rescinded Conversion Notice.


 



    	8



    	 



    




 


 


               
iv.                       
Obligation Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion
Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any
action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the
recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company
or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance
which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion
Shares; provided, however, that such delivery shall not operate as a waiver by the Company of any such action
the Company may have against the Holder. In the event the Holder of this Note shall elect to convert any or all of the
outstanding principal amount hereof, the Company may not refuse conversion based on any claim that the Holder or anyone
associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless
an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Note shall
have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the
outstanding principal amount of this Note, which is subject to the injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to the Holder to
the extent it obtains judgment. In the absence of such injunction, the Company shall issue Conversion Shares or, if
applicable, cash, upon a properly noticed conversion. If the Company fails for any reason to deliver to the Holder
such certificate or certificates pursuant to Section 4(d)(ii) by the Share Delivery Date, the Company shall pay to the
Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal amount being converted, $10 per
Trading Day (increasing to $20 per Trading Day on the fifth (5th) Trading Day after such liquidated damages begin
to accrue) for each Trading Day after such Share Delivery Date until such certificates are delivered or Holder rescinds such
conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default
pursuant to Section 6 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein
and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the
Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.


 


                 
v.                       
Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights
available to the Holder, if the Company fails for any reason to deliver to the Holder such certificate or certificates by the
Share Delivery Date pursuant to Section 4(d)(ii), and if after such Share Delivery Date the Holder is required by its
brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the
Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then
the Company shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the
amount, if any, by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common
Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled
to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such
purchase obligation was executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue
(if surrendered) this Note in a principal amount equal to the principal amount of the attempted conversion (in which case
such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been
issued if the Company had timely complied with its delivery requirements under Section 4(d)(ii). For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of
this Note with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving
rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company
shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.
Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon conversion of this Note as required pursuant
to the terms hereof. In addition, if the Company fails to timely (within three (3) Business Days), deliver the Conversion
Shares per the instructions of the Holder, free and clear of all legends in legal free trading form, the Company shall allow
the Holder to add two (2) days to the look-back (the mechanism used to obtain the Conversion Price along with the discount)
for each Business Day the Company fails to timely (within three (3) Business Days) deliver the Conversion Shares, on the next
Conversion.


 






    	9



    	 



    

 


 


               
vi.                       
 Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available
out of its authorized and unissued shares of Common Stock a number of shares of Common Stock at least equal to 200% of the Required
Minimum for the sole purpose of issuance upon conversion of this Note and payment of interest on this Note, each as herein provided,
free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders
of the Notes), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions
set forth in any transaction document issued in connection with this Note) be issuable (taking into account the adjustments and
restrictions of Section 5) upon the conversion of the then outstanding principal amount of this Note and payment of interest hereunder.
The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly
issued, fully paid and nonassessable. If, on the first Closing Date, the number of shares of Common Stock available for issuance
upon conversion of this Note and payment of interest on this Note is less than 200% of the Required Minimum on such date, then
the Board of Directors shall use commercially reasonable efforts to cause the Company to file a Form 14A with the Commission to
increase the number of authorized but unissued shares of Common Stock so that at least 200% of the Required Minimum shares of Common
Stock are available for issuance upon conversion of this Note and payment of interest on this Note at such time, as soon as possible
and in any event not later than the 60th day after such date.


 


             
  vii.                        Fractional
Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note. As
to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at
its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by
the Conversion Price or round up to the next whole share.


 


 


 


    



viii.                      Transfer Taxes and Expenses. The issuance of certificates for shares of the Common Stock on conversion of this Note shall
be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the
Holder of this Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the
Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid. The Company shall pay all Transfer Agent fees required for same-day
processing of any Notice of Conversion.


 






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


 






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Section 5.           Certain Adjustments.


 


a)                 
Stock Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend
or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock
Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion
of, or payment of interest on, the Notes), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii)
combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv)
issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the
Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding
any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall
become effective immediately after the effective date in the case of a subdivision, combination or re-classification.


 


b)                 
[Intentionally omitted].


 


c)                 
Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 5(a) above, if at any time the Company grants,
issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the
record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired
if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to
any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as
of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder
exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such
extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase
Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in
the Holder exceeding the Beneficial Ownership Limitation).


 


 


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


 






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e)                 
Fundamental Transaction. If, at any time while this Note is outstanding, (i) the Company, directly or indirectly, in one
or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company,
directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the
outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other
business combination) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Note,
the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately
prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 4(e) on the conversion of
this Note), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving
corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such
Fundamental Transaction by a holder of the number of shares of Common Stock for which this Note is convertible immediately prior
to such Fundamental Transaction (without regard to any limitation in Section 4(e) on the conversion of this Note). For purposes
of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction,
and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities,
cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this Note following such Fundamental Transaction. The Company shall cause any
successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”)
to assume in writing all of the obligations of the Company under this Note and the other transaction documents entered into contemporaneous
with this Note and in accordance with the provisions of this Section 5(e) pursuant to written agreements in form and substance
reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction
and shall, at the option of the holder of this Note, deliver to the Holder in exchange for this Note a security of the Successor
Entity evidenced by a written instrument substantially similar in form and substance to this Note which is convertible for a corresponding
number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable
and receivable upon conversion of this Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental
Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking
into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares
of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic
value of this Note immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory
in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed
to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note and the
other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise
every right and power of the Company and shall assume all of the obligations of the Company under this Note and the other Transaction
Documents with the same effect as if such Successor Entity had been named as the Company herein.


 






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


 


g)                 
Notice to the Holder.


 


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


 


                 
ii.                       
Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in
whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the
Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company
is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed
at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder
at its last address as it shall appear upon the Note Register, at least twenty (20) calendar days prior to the applicable record
or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange
their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation,
merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery
thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any
notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries,
the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall
remain entitled to convert this Note during the 20-day period commencing on the date of such notice through the effective date
of the event triggering such notice except as may otherwise be expressly set forth herein.



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Section 6.         Events
of Default.


 


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


 


                   
i.                       
any default in the payment of (A) the principal amount of any Note or (B) interest, liquidated damages and other amounts
owing to a Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity
Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B)
above, is not cured within 3 Trading Days;


 


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


 


               
 iii.                       
a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument)
shall occur under (A) any of the Transaction Documents or (B) any other material agreement, lease, document or instrument to which
the Company or any Subsidiary is obligated (and not covered by clause (vi) below);


 


               
 iv.                       
any representation or warranty made in this Note, any other Transaction Documents, any written statement pursuant hereto
or thereto or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be
untrue or incorrect in any material respect as of the date when made or deemed made;


 


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


 


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


 



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  vii.                       
(a) the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible
to resume listing or quotation for trading thereon within five Trading Days, (b) the transfer of shares of Common Stock through
the Depository Trust Company System is no longer available or “chilled” or (c) the Common Stock is suspended from listing,
without subsequent listing on any one of the Trading Markets, for a period of five consecutive Trading Days;


 


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


 


                
ix.                        
the Company shall fail for any reason to deliver certificates via DWAC to a Holder prior to the third Trading Day after
a Conversion Date pursuant to Section 4(d) or the Company shall provide at any time notice to the Holder, including by way of
public announcement, of the Company’s intention to not honor requests for conversions of any Notes in accordance with the
terms hereof;


 


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


 


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


 


             
   xii.                       
if any order, judgment or decree shall be entered, without the application, approval or consent of the Company or any Significant
Subsidiary, by any court of competent jurisdiction, approving a petition seeking liquidation or reorganization of the Company or
any Subsidiary, or appointing a receiver, trustee, custodian or liquidator of the Company or any Subsidiary, or of all or any substantial
part of its assets, and such order, judgment or decree shall continue unstayed and in effect for any period of sixty (60) days;


 



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     xiii.                       the
occurrence of any levy upon or seizure or attachment of, or any uninsured loss of or damage to, any property of the Company or
any Subsidiary having an aggregate fair value or repair cost (as the case may be) in excess of $100,000 individually or in the
aggregate, and any such levy, seizure or attachment shall not be set aside, bonded or discharged within thirty (30) days after
the date thereof;


 


                
xiv.                       the
Company shall fail to maintain sufficient reserved shares pursuant to this Note; or


 


             
   xv.                       
any monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any
of their respective property or other assets for more than $50,000, and such judgment, writ or similar final process shall remain
unvacated, unbonded or unstayed for a period of 45 calendar days.


 


b)                 
Remedies Upon Event of Default. If any Event of Default occurs, then all or any portion of the outstanding principal amount
of this Note, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof, shall become, at
the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. After the occurrence of any Event
of Default, the interest rate on this Note shall accrue at an additional interest rate equal to the lesser of 2% per month (24%
per annum) or the maximum rate permitted under applicable law. Upon the payment in full of the Mandatory Default Amount, the Holder
shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the
Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder
may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment
hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment
pursuant to this Section 6(b), including, without limitation, the right to convert any portion of this Note pursuant to Section
4. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.


 


Section 7.Miscellaneous.


 


a)                 
Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized
overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number or address
as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 7(a). Any and all
notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally,
by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or
address of the Holder appearing on the books of the Company, or if no such facsimile number or address appears on the books of
the Company, at the principal place of business of such Holder, as set forth in the Purchase Agreement. Any notice or other communication
or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading
Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing,
if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is
required to be given.


 






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b)                 Absolute
Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this
Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the
Company. This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.


 


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


 


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


 






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


 


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


 


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


 






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


 


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


 


(Signature Pages Follow)


 






    	20



    	 



    

 


 


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


 





 


	 	ELECTRONIC CIGARETTES
	 	INTERNATIONAL GROUP, LTD.


 


	 	 	 
	 	 	 
	 	By:	 
	 	Name:	 
	 	Title:	 


 


 


	 	Facsimile No. for delivery of Notices:	 
	 	 	 







 


 


 









    	



    	 



    




 


ANNEX
A


 


NOTICE OF CONVERSION





 


The undersigned hereby
elects to convert principal under the 5% Original Issue Discount Convertible Promissory Note due           
of Electronic Cigarettes International Group, Ltd., a Nevada corporation (the “Company”), into shares of common
stock (the “Common Stock”), of the Company according to the conditions hereof, as of the date written below.
If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company
in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.


 


By the delivery of
this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not
exceed the amounts specified under Section 4 of this Note, as determined in accordance with Section 13(d) of the Exchange Act.


 


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


 


Conversion calculations:


Date to Effect Conversion:


 


Principal Amount of Note to be Converted:


 


Number of shares of Common Stock to be issued:


 


 


Signature:


 


Name:


 


DWAC Instructions:


 


Broker No: ____________


Account No:___________


 




 


 






    	



    	 



    





Schedule 1


 


CONVERSION SCHEDULE


 


This 5% Original Issue Discount Convertible
Promissory Note due on             in the original principal amount of $         
is issued by Electronic Cigarettes International Group, Ltd., a Nevada corporation. This Conversion Schedule reflects conversions
made under Section 4 of the above referenced Note.


 


Dated:


 


 


 





 


 


	
         

         

         

         

         

        Date of Conversion (or for first entry,
        Original Issue Date)
	
         

         

         

         

         

         

        Amount of Conversion
	
         

        Aggregate
        Principal Amount Remaining Subsequent to Conversion (or original Principal Amount)
	
         

         

         

         

         

         

        Company Attest