THIS
NOTE
HAS
NOT BEEN
REGISTERED
UNDER THE
SECURITIES
ACT OF
1933, AS
AMENDED
(THE
“ACT”),
OR APPLICABLE
STATE SECURITIES
LAWS,
AND MAY
NOT BE
SOLD, TRANSFERRED,
OR OTHERWISE
DISPOSED
OF IN THE
ABSENCE
OF SUCH
REGISTRATION
OR RECEIPT
BY THE
COMPANY
OF AN
OPINION
OF COUNSEL
IN THE
FORM, SUBSTANCE
AND SCOPE
REASONABLY
SATISFACTORY
TO THE
COMPANY
THAT
THIS
NOTE
MAY
BE SOLD,
TRANSFERRED,
OR OTHERWISE
DISPOSED
OF, UNDER
AN EXEMPTION
FROM
REGISTRATION
UNDER THE
ACT
AND SUCH
STATE SECURITIES
LAWS.


 


SOLARIS
POWER CELLS, INC.


 


10%
OID Convertible
Promissory
due March 31, 2019 (the “Note”)


 


	Original
    Issue
    Date:
    As of May 15, 2016	Principal
    Amount: USD $6,000,000
	 	Purchase
    Amount: USD $5,000,000


 


For
value received,
Solaris Power Cells, Inc., a
Nevada corporation
(the
“Company”),
hereby promises
to pay
to the
order
of Pixel Holdings, Inc., a Delaware corporation
(together
with
its
successors,
representatives,
and permitted
assigns,
the
“Holder”),
in accordance
with the
terms
hereinafter
provided,
up to an aggregate
of $6,000,000 (the
“Principal
Amount”).
The Principal Amount outstanding,
together with all accrued interest thereon and any other amounts due pursuant to the terms of this Note,
shall be due
and payable
on March 31, 2019 (the
“Maturity
Date”).


 


All
payments
under or
pursuant
to this
Note
refer
to and
shall
be made
in United
States
Dollars
in immediately
available
funds
to the
Holder
at the
address
of the
Holder
set forth
in the Purchase Agreement or
at such other
place
as the Holder
may
designate
from time
to time
in writing
to the
Company
or by wire
transfer
of funds
to the Holder’s
account,
instructions
for
which
are attached
hereto
as Exhibit
A.


 


ARTICLE
I


 


PURCHASE
AGREEEMENT


 


Section
1.1 Purchase
Agreement.
This Note
has been executed
and delivered
pursuant
to that certain
Securities
Purchase
Agreement
dated
as of
April 30, 2016 (the
“Purchase
Agreement”)
by and among the
Company,
the Holder,
Pixel Mags, Inc. and the Company Majority Voting Stockholder (as defined in the Purchase Agreement). Capitalized
terms
used and
not otherwise
defined herein
shall
have the
meanings
set forth
for such
terms
in the
Purchase Agreement.


 


Section
1.2 Interest.
Subject to the requirements of Section 3.6 below, the Company may repay this Note at any time on or before 90 days from the Issuance
Date. If the Company repays the Principal Amount on or before 90 days from the Issuance Date, the interest rate on that payment
will be zero percent. If the Company does not repay the Principal Amount on or before 90 days from the Issuance Date, a one-time
interest charge of 8% shall be applied to the entire Principal Amount and shall be due and payable by the Company on the Maturity
Date. Interest shall be paid in cash or
restricted
shares
of the Company’s
common
stock, par
value
$0.0001 per
share
(the
“Common
Stock”)
at the
option
of the
Holder.
Any interest payable is in addition to the original issue discount.


 




    	 



    	 



    

 


Section
1.3 Payment
on Non-Business
Days.
Whenever any
payment
to be
made shall
be due
on a Saturday,
Sunday or a public
holiday
under the
laws of the
State of New York, such payment
may be
due on the
next succeeding
business
day and
such next
succeeding
day shall
be included
in the
calculation
of the
amount of
accrued
interest
payable
on such date.


 


Section
1.4 Transfer.
This Note
may be
transferred
or sold,
subject
to the
provisions
of Section
4.8 of this
Note, or
pledged, hypothecated
or otherwise
granted
as security
by the Holder.


 


Section
1.5 Replacement.
Upon receipt
of a duly
executed, notarized
and unsecured
written
statement
from the
Holder
with
respect
to the
loss,
theft
or destruction
of this
Note
(or any replacement
hereof),
and without
requiring
an indemnity
bond or other
security,
or, in
the case
of a mutilation
of this
Note,
upon surrender
and cancellation
of such
Note,
the Company
shall
issue
a new Note, of
like
tenor and
amount,
in lieu
of such
lost,
stolen,
destroyed
or mutilated
Note.


 


ARTICLE
II


 


EVENTS
OF DEFAULT;
REMEDIES


 


Section
2.1 Events
of Default.
The occurrence
of any
of the
following
events shall
be an “Event
of Default”
under this
Note:


 


(a) the
Company
shall fail
to make
the payment
of any Principal
Amount outstanding
on the date
such payment
is due hereunder;


 


(b) the
Company
shall
fail
to make
any payment
of interest
on the date such payment is due hereunder, provided, however, that if the payment of interest
is made in shares of the Company’s Common Stock, it shall be an Event of Default if the Common Stock is not delivered to
the Holder with 3 days
after
the date
such interest
is due;


 


(c) the
Company’s Common Stock is suspended from listing or fails to be quoted or
listed
on at
least
one of
the
OTC
Markets, OTC
Bulletin
Board,
Nasdaq
Capital Market,
NYSE MKT or
The New York
Stock Exchange, Inc.
for a
period
of 5 consecutive
Trading
Days;


 


(d) the
Company fails to file any reports in a timely fashion (past the filing of NT 10-Q or NT 10-K, which is a 15 day extension), causing
their listing to become Delinquent;


 


(e) the
Company shall be a party to any Change of Control;


 


(f) the
Company’s
notice to
the Holder,
including
by way of public
announcement,
at any time,
of its
inability
to comply,
or its
intention
not to comply,
with
proper
requests
from the Holder for
conversion
of this
Note into
shares
of Common
Stock;


 


(g) the
Company
shall fail
to (i)
timely
deliver
the
shares
of Common
Stock upon conversion
of the
Note or
any accrued
and unpaid
interest,
or (ii)
make
the payment
of any fees
and/or liquidated
damages
under this
Note
or the Purchase
Agreement,
which failure
in the
case
of items
(i) and
(ii)
of this
Section 2.1(e)
is not
remedied
within
3 business
days after
the incurrence
thereof;


 


(h) default
shall
be made
in the
performance
or observance
of (i)
any material
covenant,
condition
or agreement
contained
in this
Note
(other
than
as set
forth
in clause
(e) of
this
Section
2.1) and such
default
is not
fully
cured within
5 business
days after
the occurrence
thereof
or (ii)
any material
covenant,
condition
or agreement
contained
in the
Purchase
Agreement
or any other
Transaction
Documents which
is not
covered
by any other provisions
of this
Section
2.1 and such
default
is not
fully
cured within
5 business
days after
the occurrence
thereof;


 




    	 



    	 



    

 


(i) any
material
representation
or warranty
made by
the Company
herein
or in
the
Purchase Agreement
or any other
Transaction
Documents
shall
prove
to have
been false
or incorrect
or breached
in a material
respect
on the date
as of which
made;


 


(j) the
Company
shall (A)
default
in any
payment
of any amount
or amounts
of the principal
or interest
on any indebtedness
(other
than
the indebtedness
hereunder)
the aggregate
principal
amount of
which
Indebtedness
is in
excess of
$20,000 or
(B)
default
in the
observance
or performance
of any other
agreement
or condition
relating
to any indebtedness
or contained
in any instrument
or agreement
evidencing,
securing
or relating
thereto,
or any other event
shall occur
or condition
exist,
the effect
of which
default
or other
event or
condition
is to
cause, or
to permit
the Holder
or beneficiary
or beneficiaries
of such Indebtedness
to cause, with
the giving
of notice if
required,
such Indebtedness
to become due
prior
to its
stated
maturity;


 


(k) the
Company
shall
(i)
apply
for or
consent to
the
appointment
of,
or the
taking
of possession
by, a
receiver,
custodian,
trustee
or liquidator
of itself
or of
all or
a substantial
part of
its property
or assets,
(ii)
make
a general
assignment
for the
benefit
of its
creditors,
(iii)
commence
a voluntary
case under
the United
States
Bankruptcy
Code (as
now or
hereafter
in effect)
or under
the comparable
laws of
any jurisdiction
(foreign
or domestic),
(iv)
file
a petition
seeking
to take
advantage
of any bankruptcy,
insolvency,
moratorium,
reorganization
or other
similar
law affecting
the enforcement
of creditors’
rights
generally,
(v)
acquiesce
in writing
to any petition
filed
against
it in
an involuntary
case under United
States
Bankruptcy
Code (as
now or
hereafter
in effect)
or under
the
comparable
laws of any jurisdiction
(foreign
or domestic),
(vi)
issue
a notice
of bankruptcy
or winding
down of
its operations
or issue
a press
release
regarding
same,
or (vii)
take
any action
under the
laws of
any jurisdiction
(foreign
or domestic)
analogous
to any of
the foregoing;


 


(l) a
proceeding
or case shall
be commenced
in respect
of the
Company,
without its
application
or consent,
in any court
of competent
jurisdiction,
seeking
(i)
the liquidation,
reorganization,
moratorium,
dissolution,
winding
up, or composition
or readjustment
of its
debts, (ii)
the appointment
of a trustee,
receiver,
custodian,
liquidator
or the
like
of it or
of all
or any
substantial
part
of its
assets
in connection
with the
liquidation
or dissolution
of the
Company
or (iii)
similar
relief
in respect
of it
under any
law providing
for
the relief
of debtors,
and such
proceeding
or case
described
in clause
(i), (ii)
or (iii)
shall
continue
undismissed,
or unstayed
and in effect,
for a period
of 60 days
or any order
for relief
shall
be entered
in an
involuntary
case under
United
States
Bankruptcy
Code (as
now or hereafter
in effect)
or under
the comparable
laws of any jurisdiction
(foreign
or domestic)
against the
Company or action
under the
laws of
any jurisdiction
(foreign
or domestic)
analogous
to any
of the
foregoing
shall
be taken
with
respect
to the
Company
and shall
continue
undismissed,
or unstayed
and in effect
for
a period
of 60
days; or


 


(m) the
failure
of the
Company
to instruct
its
transfer
agent to
remove
any legends
from shares
of Common
Stock eligible
to be
sold under
Rule 144 of
the Securities
Act
and issue such
unlegended certificates
to the
Holder
within
5 business
days of
the Holder’s
request
so long as the
Holder
has provided
reasonable
assurances
and opinions
of counsel
to the
Company that
such shares
of Common
Stock can be resold
pursuant
to Rule
144; or


 


(n) the
failure
of the
Company
to pay
any amounts
due to
the Holder
herein
within
3 business
days of receipt
of notice
to the
Company.


 




    	 



    	 



    

 


Section
2.2 Remedies
Upon An
Event of
Default.
If an
Event of
Default
shall
have occurred
and
shall
be continuing,
the Holder
of this Note
may at any time
at its
option,
(a) declare
the entire
unpaid
Principal
Amount of this
Note,
together
with
all interest
accrued
hereon,
due and payable
in cash, and thereupon,
the
same
shall
be accelerated
and so due and payable,
without
presentment,
demand, protest,
or notice,
all of
which are
hereby expressly
unconditionally
and irrevocably
waived
by the Company,
(b) subject
to Section
3.1(c) hereof, demand
that the Principal
Amount
of this
Note then
outstanding
shall be converted
into
shares of
Common
Stock at a Conversion
Price (as
defined
in Section
3.2 below) per share calculated
pursuant
to Section
3.1(b) below, assuming
that the date
that the
Event of Default
occurs
is the
Conversion
Date,
and demand
that
all
accrued
and unpaid
interest
under this
Note shall
be converted
into
shares of
Common
Stock in
accordance
with
Section
3.2 hereof,
or (c)
exercise
or otherwise
enforce
any one or more
of the Holder’s
rights,
powers, privileges,
remedies
and interests
under this
Note, the
Purchase
Agreement,
other
Transaction
Documents
or applicable
law.
No course of delay
on the part
of the
Holder
shall
operate
as a waiver
thereof
or otherwise
prejudice
the right
of the
Holder.
No remedy
conferred
hereby
shall be exclusive
of any other
remedy referred
to herein
or now or
hereafter
available
at law, in
equity,
by statute
or otherwise.


 


Section
2.3 Default Interest. Furthermore,
upon the
occurrence
of an Event
of Default,
then
to the
extent
permitted
by law and in addition to the remedies set forth in Section 2.2 above,
the Company
will
pay interest
to the
Holder,
payable
on demand,
on all amounts due under
the
Note
from
the date
of the
Event of
Default
until
such Event
of Default
is cured,
at the
rate
of the
lesser
of 15%
and the
maximum
applicable
legal
rate
per annum.


 


ARTICLE
III


CONVERSION;
ANTIDILUTION;
PREPAYMENT


 


Section
3.1 Conversion.


 


(a) Manner
of Conversion. At any
time
after
the 90th day following the Issuance
Date,
this
Note
shall
be convertible
(in
whole
or in part),
at the
option
of the
Holder
(the
“Conversion
Option”),
into
fully
paid and
non-assessable
shares
of the Company’s Common Stock
on the
date on
which
the Holder
faxes a notice
of conversion
(the “Conversion
Notice”),
duly executed,
to the Company
(the “Conversion Date”),
provided,
however,
that
the Conversion
Price shall
be subject
to adjustment
as described
in Section
3.5 below. The
Holder
shall
deliver
this
Note
to the Company
at the address
designated
in the
Purchase
Agreement
at such time
that this
Note is
fully
converted.
With
respect
to partial
conversions
of this
Note, the
Company
shall keep
written
records
of the amount of
this Note
converted
as of each
Conversion
Date.


 


(b) Calculation
of Number of Shares to be Issued. On any
Conversion Date,
the Holder
may cause
any outstanding
Principal
Amount
of this
Note
plus all
accrued
and unpaid interest
to convert
into
a number
of fully
paid and non-assessable
shares
of Common
Stock equal
to the
quotient
of the
elected
outstanding
Principal
Amount of this
Note
plus all
interest
accrued thereon as of the
Conversion Date
divided
by the
Conversion
Price
as computed in accordance with Section
3.2 below.


 




    	 



    	 



    

 


(c)
Conversion
Limitations;
Holder’s
Restriction
on Conversion.
The
Company
shall
not effect
any conversion
of this
Note,
and the
Holder
shall
not have
the
right
to convert
any portion
of this
Note,
to the extent
that
after
giving
effect
to such conversion,
the Holder
(together
with the
Holder’s
affiliates),
as set
forth
on the
applicable
Conversion
Notice,
would
beneficially
own in
excess of
4.99%
of the number
of shares
of the Company’s Common
Stock outstanding
immediately
after giving
effect to such
conversion.
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
the
determination
is being
made, but
shall
exclude the
number of shares
of Common Stock
which would
be issuable
upon (A) conversion
of the remaining,
non-converted
portion
of this
Note
beneficially
owned by the
Holder
or any
of its
affiliates
and (B)
exercise
or conversion
of the
unexercised
or non-converted
portion
of any other
securities
of the
Company
(including,
without
limitation,
any other notes
or the
Warrants)
subject
to a limitation
on conversion
or exercise
analogous
to the limitation
contained
herein beneficially
owned by the Holder
or any of its affiliates.
Except as
set forth
in the
preceding
sentence,
for
purposes
of this Section,
beneficial
ownership
shall be calculated
in accordance
with Section
13(d)
of the Exchange
Act. To the
extent that
the limitation
contained
in this
Section
applies,
the determination
of whether
this
Note
is convertible
(in relation
to other
securities
owned by the Holder)
and of which a portion
of this
Note is
convertible
shall be
in the
sole
discretion
of such
Holder.
To ensure
compliance
with
this
restriction,
the Holder
will be deemed
to represent
to the
Company each
time
it delivers
a Conversion
Notice
that such Conversion
Notice
has not violated
the restrictions
set forth
in this
Section and the Company
shall have
no obligation
to verify
or confirm
the accuracy
of such determination.
For purposes of
this
Section,
in determining
the number
of outstanding
shares of Common
Stock,
the Holder
may rely
on the
number of outstanding
shares of Common
Stock as reflected
in (x) the
Company’s
most recent
Form
10-Q or Form 10-K
(or such
related
form),
as the
case may
be, (y)
a more
recent public
announcement by the
Company
or (z) any other
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 the 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
provisions
of this
Section
may be waived
by the Holder
upon, at the election
of the Holder,
not less than
61 days’ prior
notice
to the Company,
and the provisions
of this
Section shall
continue
to apply
until such
61st day (or
such later
date, as
determined
by the Holder,
as may
be specified
in such notice
of waiver).


 


 Section
3.2 Conversion
Price.
The term
“Conversion
Price”
shall
mean the lower of (i) One Cent ($0.01) per share or 70% (30% discount) of the
average of the 3 lowest reported sale prices for the Common Stock for the 10 Trading Days immediately prior to the Issuance Date
or (ii) 70% (30% discount) of the average of the 3 lowest reported sale prices for the 10 Trading Days immediately
prior
to the
Conversion
Date.


 


 Section
3.3 Mechanics
of Conversion.


 


(a) Delivery
of Common Stock. Not later
than 3 Trading
Days
after
any Conversion
Date,
the
Company
or its designated
transfer
agent,
as applicable,
shall
issue
and deliver
to the
Depository
Trust Company
(“DTC”)
account
on the Holder’s
behalf
via the
Deposit
Withdrawal
Agent
Commission
System (“DWAC”)
as specified
in the Conversion
Notice,
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.
In the
alternative,
not later
than 3
Trading
Days
after
any Conversion
Date,
the Company
shall
deliver
to the
Holder
by express
courier
a certificate
or certificates
which
shall
be free
of restrictive
legends
and trading
restrictions
(other
than those
required
by Section
4 of the Purchase
Agreement)
representing
the
number of shares
of Common
Stock being acquired
upon the
conversion
of this
Note
(the “Delivery
Date”).
Notwithstanding
the foregoing
to the contrary,
the Company
or its transfer
agent shall
only be obligated
to issue
and deliver
the shares
to DTC
on the Holder’s
behalf
via
DWAC (or certificates
free
of restrictive
legends)
if such
conversion
is in
connection
with
a sale
and the
Holder
has complied
with the
applicable
requirements
of federal and state securities laws. If in
the case of any Conversion
Notice
such certificate
or certificates
are not
delivered
to or as
directed
by the Holder
by the Delivery
Date,
the Holder
shall
be entitled
by written
notice
to the
Company
at any time
on or before
its receipt
of such certificate
or certificates
thereafter,
to rescind
such conversion,
in which
event the
Company shall
immediately
return
this Note
if tendered
for conversion,
whereupon
the Company
and the Holder
shall each be restored
to their
respective
positions
immediately
prior
to the
delivery
of such notice
of revocation,
except that
any amounts described
in Sections
3.3(b) and (c)
shall be payable
through
the date notice
of rescission
is given
to the
Company.


 




    	 



    	 



    

 


(b) Penalty
for Failure to Deliver Common Stock. The Company
understands
that
a delay
in the
delivery
of the
shares
of Common
Stock upon conversion
of this
Note
beyond
the
Delivery
Date
could result
in economic
loss to the
Holder.
If the
Company
fails
to deliver
to the
Holder
such shares
via
DWAC or
a certificate
or certificates
pursuant
to Section
3.3(a) above by
the Delivery
Date, the
Company shall
pay to the Holder,
in cash,
an amount
per Trading
Day for each Trading
Day until such
shares
are delivered
via DWAC
or certificates
are delivered,
together
with interest
on such amount
at a rate
of 10%
per annum,
accruing
until such amount
and any accrued interest
thereon
is paid
in full,
equal to (i)
1% of the aggregate
principal
amount of
the Note
requested
to be
converted
for
the
first
5 Trading Days
after the
Delivery
Date
and (ii)
2% of
the
aggregate
principal
amount of
the Note
requested
to be
converted
for each
Trading
Day thereafter.
Nothing
herein
shall
limit
a Holder’s
right
to pursue
actual
damages
for the
Company’s
failure
to deliver
certificates
representing
shares of
Common
Stock upon conversion
within
the period
specified
herein
and the Holder shall
have the
right to
pursue all remedies
available
to it at
law or
in equity
(including,
without
limitation,
a decree
of specific
performance
and/or
injunctive
relief).
Notwithstanding
anything
to the
contrary
contained
herein,
the Holder
shall be
entitled
to withdraw
a Conversion
Notice,
and upon such
withdrawal
the Company
shall only
be obligated
to pay the liquidated
damages
accrued in
accordance
with this
Section
3.3(b)
through
the date
the
Conversion
Notice
is withdrawn.


 


(c) Penalty
in the Event of a Buy-In. In addition
to any
other
rights
available
to the
Holder,
if the
Company
fails
to cause its
transfer
agent to
transmit
to the
Holder
a certificate
or certificates
representing
the shares
of Common
Stock issuable
upon conversion
of this
Note
on or before
the Delivery
Date, and if
after
such date
the Holder
is required
by its broker
to purchase
(in
an open market
transaction
or otherwise)
shares
of Common
Stock to deliver
in satisfaction
of a sale
by the Holder
of the shares
of Common
Stock issuable
upon full or partial conversion
of this
Note (a “Buy-
In”), then
the Company
shall (1) pay in
cash to the
Holder the
amount by which
(x) the Holder’s
total
purchase
price
(including
brokerage
commissions,
if any)
for the
shares
of Common
Stock so purchased
exceeds (y)
the
amount obtained
by multiplying
(A)
the number
of shares
of Common
Stock issuable
upon conversion
of this
Note
that the
Company was
required
to deliver
to the
Holder
in connection
with the conversion
at issue
times
(B) the
price at which
the sell
order giving
rise to such
purchase
obligation
was executed,
and (2) at
the option
of the Holder,
either
reinstate
the portion
of the
Note and
equivalent
number of shares
of Common
Stock for
which such
conversion
was not
honored or deliver
to the Holder
the number of
shares
of Common
Stock that
would have
been issued
had the Company
timely
complied with
its conversion
and delivery
obligations
hereunder.
For example,
if the
Holder
purchases
20,000 shares of Common
Stock having
a total
purchase price
of $11,000 (or $0.55 per share) to
cover a Buy-In
with respect
to an attempted
conversion
of shares of Common
Stock with
an aggregate
sale price
giving
rise to such
purchase
obligation
of $10,000 (or $0.50 per share), under
clause (1)
of the immediately
preceding
sentence,
the Company
shall be
required
to pay the
Holder
$1,000. The Holder
shall provide
written notice to the Company
indicating
the amounts
payable to
the Holder
in respect
of the Buy-In,
together
with applicable
confirmations
and other evidence
reasonably
requested
by the
Company.
Nothing
in this Note 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.


 




    	 



    	 



    

 


 Section
3.4 Right of Company to Pay in Cash. Subject to Section 3.6 below, within
72 hours from delivery by the Holder of the Holder’s first Conversion Notice to the Company, the Company may pre-pay in
cash the entire Principal Amount, all accrued interest thereon and any other amounts due and owing under the Note. If the Company
fails to pay the Principal Amount, all accrued interest thereon and any other amounts due and owing under the Note in cash within
72 hours from receipt of the Holder’s first Conversion Notice, upon receipt of any subsequent Conversion Notice from the
Holder, the Company must issue the Common Stock in accordance with the requirements of this Section 3 and will not be entitled
to pay all or any portion of the Note in cash prior to issuing the Common Stock, unless the Holder, in its sole and absolute discretion,
agrees to accept such payment.


 


Section
3.5 Adjustment
of Conversion
Price.


 


 (a) The
Conversion
Price
shall
be subject
to adjustment
from
time to
time as
follows:


 


(i) Adjustments
for
Stock Splits
and Combinations.
If the
Company shall
at any time
or from
time to
time
after the
Issuance
Date,
effect
a stock
split
of the
outstanding
Common
Stock,
the
applicable
Conversion
Price
in effect
immediately
prior
to the
stock
split
shall
be proportionately
decreased.
If the
Company
shall at
any time
or from
time
to time
after the
Issuance
Date,
combine the
outstanding
shares
of Common
Stock,
the
applicable
Conversion
Price
in effect
immediately
prior
to the
combination
shall
be proportionately
increased.
Any adjustments
under this
Section
3.5(a)(i)
shall
be effective
at the
close of
business
on the
date
the stock
split or
combination
occurs.


 


(ii) Adjustments
for Certain
Dividends
and Distributions.
If the
Company shall
at any time
or from time
to time
after the
Issuance
Date,
make
or issue
or set
a record
date
for the
determination
of holders
of Common
Stock entitled
to receive
a dividend
or other
distribution
payable
in shares
of Common
Stock,
then, and
in each
event,
the applicable
Conversion
Price
in effect
immediately
prior
to such
event shall
be decreased
as of the
time
of such
issuance
or,
in the
event such
record
date shall
have
been fixed, as of
the close
of business
on such
record
date,
by multiplying,
the
applicable
Conversion
Price
then in
effect
by a fraction:


 


(1) the
numerator
of which
shall
be the total
number of shares
of Common
Stock issued
and outstanding
immediately
prior
to the
time
of such
issuance
or the
close of
business
on such record
date;
and


 


(2) the
denominator
of which
shall
be the
total
number of
shares
of Common
Stock issued
and outstanding
immediately
prior
to the
time
of such
issuance
or the
close of
business
on such record
date plus
the number
of shares
of Common
Stock issuable
in payment
of such dividend
or distribution.


 


(iii) Adjustment
for Other
Dividends
and Distributions.
If the
Company shall
at any time
or from
time
to time
after
the Issuance
Date,
make
or issue
or set
a record
date for
the determination
of holders
of Common
Stock entitled
to receive
a dividend
or other
distribution
payable
in other
than shares
of Common
Stock,
then, and
in each
event, an
appropriate
revision
to the
applicable
Conversion
Price
shall
be made and
provision
shall
be made
(by adjustments
of the Conversion
Price
or otherwise)
so that
the Holder
of this
Note
shall
receive
upon conversions
thereof,
in addition
to the
number of
shares
of Common
Stock receivable
thereon,
the number
of securities
of the
Company which
the Holder would
have received
had this
Note
been
converted
into
Common
Stock on
the date
of such
event and had
thereafter,
during
the period
from the
date
of such
event to
and including
the Conversion
Date,
retained
such securities
(together
with any
distributions
payable
thereon
during
such period),
giving
application
to all
adjustments
called
for
during such
period
under this
Section
3.5(a)(iii)
with
respect
to the
rights
of the
Holder
of this
Note; provided,
however,
that if
such record
date
shall
have been fixed
and such
dividend
is not
fully
paid or if
such distribution
is not
fully
made on
the date
fixed therefor,
the Conversion
Price shall
be adjusted
pursuant
to this
paragraph
as of the time
of actual
payment
of such dividends
or distributions.


 




    	 



    	 



    

 


(iv) Adjustments
for Reclassification,
Exchange
or Substitution.
If the Common
Stock issuable
upon conversion
of this
Note at
any time
or from
time
to time
after
the
Issuance
Date shall
be changed
to the
same
or different
number of shares
of any class
or classes
of stock,
whether
by reclassification,
exchange,
substitution
or otherwise
(other
than by
way of
a stock
split
or combination
of shares
or stock
dividends
provided
for in
Sections
3.5(a)(i),
(ii)
and (iii),
or a reorganization,
merger,
consolidation,
or sale
of assets
provided
for in
Section
3.5(a)(v)),
then,
and in each event,
an appropriate
revision
to the
Conversion
Price
shall
be made
and provisions
shall
be made
(by adjustments
of the
Conversion
Price
or otherwise)
so that
the Holder
shall
have the
right
thereafter
to convert
this
Note
into
the kind
and amount of
shares
of stock
and other
securities
receivable
upon such reclassification,
exchange,
substitution
or other
change, all
subject
to further
adjustment
as provided
herein.


 


(v) Adjustments
for Reorganization,
Merger,
Consolidation
or Sales
of Assets.
If at
any time
or from time
to time
after
the
Issuance
Date
there
shall
be a
capital
reorganization
of the
Company (other
than
by way of a
stock split
or combination
of shares or
stock dividends
or distributions
provided
for
in Section
3.5(a)(i),
(ii)
and (iii),
or a reclassification,
exchange
or substitution
of shares
provided
for in Section
3.5(a)(iv)),
or a merger
or consolidation
of the
Company
with
or into
another
corporation
where
the holders
of outstanding
voting securities
prior to
such merger
or consolidation
do not own
over 50%
of the
outstanding
voting securities
of the
merged
or consolidated
entity,
immediately
after
such merger
or consolidation,
or the
sale of
all or substantially
all of
the
Company’s
properties
or assets
to any other
person (an
“Organic
Change”),
then as
a part
of such
Organic
Change
an appropriate
revision
to the Conversion
Price
shall
be made
and provision
shall
be made
(by adjustments
of the
Conversion
Price
or otherwise)
so that
the Holder
shall
have the
right thereafter
to convert
such Note
into
the kind
and amount
of shares
of stock
and other
securities
or property
of the
Company
or any
successor
corporation
resulting
from such Organic
Change. In any
such case, appropriate
adjustment
shall
be made
in the
application
of the
provisions
of this
Section
3.5(a)(v)
with respect
to the
rights
of the
Holder
after
the
Organic
Change
to the
end that
the provisions
of this
Section
3.5(a)(v)
(including
any adjustment
in the
applicable
Conversion
Price
then in
effect
and the number
of shares
of stock
or other
securities
deliverable
upon conversion
of this
Note)
shall
be applied
after
that event
in as
nearly
an equivalent
manner as
may be practicable.


 


(vi) Issuance
of Common Stock and Common
Stock Equivalents.
If the Company at any time while this Note is outstanding, shall issue shares of Common Stock or Common Stock Equivalents (as
defined in the Purchase Agreement) entitling any person to acquire shares of Common Stock at a fixed price per share less than
the applicable Conversion Price (if the holder of the Common Stock or Common Stock Equivalent so issued shall at any time, whether
by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares
of Common Stock at a price per share which is less than the applicable Conversion Price, such issuance shall be deemed to have
occurred for less than the applicable Conversion Price), then, at the sole option of the Holder, the Conversion Price shall be
adjusted to mirror the conversion, exchange or purchase price for such Common Stock or Common Stock Equivalents (including any
reset provisions thereof) at issue. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued.
The Company shall notify the Holder in writing, no later than 1 business day following the issuance of any Common Stock or Common
Stock Equivalent subject to this Section, indicating therein the applicable issuance price, or of applicable reset price, exchange
price, conversion price and other pricing terms.


 




    	 



    	 



    

 


(vii) Consideration
for Stock.
In case
any shares
of Common
Stock or
any Common
Stock Equivalents
shall
be issued
or sold:


 


(1) in
connection
with
any merger
or consolidation
in which
the Company
is the
surviving
corporation
(other
than
any consolidation
or merger
in which
the
previously
outstanding
shares
of Common
Stock of the
Company
shall be
changed
to or
exchanged
for
the stock
or other
securities
of another
corporation),
the
amount of consideration
therefor
shall be
deemed to
be the
fair
value,
as determined
reasonably
and in
good faith
by the Board
of Directors
of the
Company,
of such portion
of the
assets
and business
of the
non-surviving
corporation
as such
Board
may determine
to be
attributable
to such shares
of Common
Stock,
Convertible
Securities,
rights
or warrants
or options,
as the
case may
be; or


 


(2) in
the
event of
any consolidation
or merger
of the
Company
in which
the
Company is
not the
surviving
corporation
or in
which the
previously
outstanding
shares
of Common
Stock of the
Company
shall be
changed into
or exchanged
for the
stock
or other
securities
of another
corporation,
or in
the event
of any sale
of all or
substantially
all of
the
assets
of the
Company
for stock or
other
securities
of any
corporation,
the
Company
shall
be deemed
to have
issued
a number
of shares
of its
Common
Stock for
stock or
securities
or other
property
of the
other
corporation
computed
on the basis
of the
actual
exchange
ratio
on which
the transaction
was predicated,
and for
a consideration
equal to the
fair
market
value on the
date
of such transaction
of all such
stock
or securities
or other
property
of the
other
corporation.


 


If
any such calculation
results
in adjustment
of (i) the
applicable
Conversion
Price
or (ii) the number
of shares
of Common
Stock issuable
upon conversion
of the
Note,
the determination
of the
applicable
Conversion
Price
or the
number of
shares
of Common
Stock issuable
upon conversion
of the
Note
immediately
prior
to such merger,
consolidation
or sale,
shall
be made
after
giving
effect to such
adjustment
of the number of shares
of Common Stock
issuable
upon conversion
of the
Note.
In the
event Common
Stock is
issued
with other
shares
or securities
and/or other
assets
of the Company
for consideration,
the consideration
computed as provided
in this
Section
3.5(vii)
shall be allocated
among
such securities
and assets
as determined
in good
faith
by the Board
of Directors
of the
Company.


 


(b) Record
Date. In
case the Company
shall take
record
of the
holders
of its Common
Stock for
the purpose
of entitling
them to
subscribe
for or
purchase
Common
Stock or Convertible
Securities,
then
the date
of the
issue
or sale
of the
shares
of Common
Stock shall
be deemed
to be such
record
date.


 


(c) Certain
Issues
Excepted.
Anything
herein
to the
contrary
notwithstanding,
the Company
shall not
be required
to make
any adjustment
to the
Conversion
Price
in connection
with
(i) securities
issued
(other
than
for
cash)
in connection
with a
merger,
acquisition,
or consolidation,
(ii) securities
issued
pursuant
to a
bona fide
firm
underwritten
public
offering
of the
Company’s
securities,
(iii)
securities
issued
pursuant
to the conversion
or exercise
of convertible
or exercisable
securities
issued
or outstanding
on or prior
to the
date
hereof or issued
pursuant
to the
Purchase
Agreement,
(iv)
the shares
of Common
Stock issuable
upon the exercise
of the Warrants,
(v)
securities
issued in
connection
with strategic
license
agreements
or other
partnering
arrangements
so long as
such issuances
are not
for the
purpose
of raising
capital,
(vi)
Common
Stock issued
or options
to purchase
Common
Stock granted
or issued
pursuant
to the Company’s
stock
option
plans and
employee
stock
purchase
plans
as they now exist
and (vii)
the payment
of any accrued
interest
in shares
of Common
Stock pursuant
to this
Note.


 


(d) No
Impairment.
The Company
shall not,
by amendment
of its
Articles of
Incorporation
or through
any reorganization,
transfer
of assets,
consolidation,
merger,
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
to be
observed
or performed
hereunder
by the
Company,
but will
at all
times
in good
faith,
assist
in the
carrying
out of all
the provisions
of this
Section
3.5 and in
the taking
of all such
action
as may
be necessary
or appropriate
in order
to protect
the Conversion
Rights
of the
Holder
against
impairment.
In the event
the Holder
shall elect
to convert
the Note as
provided
herein,
the Company
cannot refuse
conversion
based
on any claim
that the Holder
or any one associated
or affiliated
with
the Holder
has been engaged
in any violation
of law, violation
of an agreement
to which
the Holder is
a party or for
any reason
whatsoever,
unless
an injunction
from a court,
or notice,
restraining
and or adjoining
conversion
of all
or of part of the Note
shall
have issued
and the Company
posts a
surety
bond for
the benefit
of the Holder
in an amount
equal to 130%
of the
amount of
the Note
the Holder
has elected
to convert,
which
bond shall
remain
in effect
until
the completion
of arbitration/litigation
of the
dispute
and the
proceeds
of which
shall be
payable
to such
Holder
in the
event it
obtains
judgment.


 




    	 



    	 



    

 


(e) Certificates
as to
Adjustments.
Upon occurrence
of each adjustment
or readjustment
of the
Conversion
Price
or number
of shares
of Common
Stock issuable
upon conversion
of this Note
pursuant
to this
Section 3.5,
the Company
at its
expense shall
promptly
compute
such adjustment
or readjustment
in accordance
with
the terms
hereof and
furnish
to the
Holder
a certificate
setting
forth
such adjustment
and readjustment,
showing in
detail
the facts
upon which such adjustment
or readjustment
is based.
The Company
shall, upon written
request of
the Holder,
at any time, furnish
or cause to
be furnished
to the
Holder
a like
certificate
setting
forth
such adjustments
and readjustments,
the applicable
Conversion
Price
in effect
at the
time, and the
number of
shares
of Common
Stock and the amount,
if any,
of other
securities
or property
which
at the time
would be received
upon the conversion
of this
Note. Notwithstanding
the foregoing,
the Company
shall not be obligated
to deliver
a certificate
unless
such certificate
would reflect
an increase
or decrease
of at
least 1%
of such adjusted
amount.


 


(f) Issue
Taxes.
The Company
shall pay any and all
issue
and other
taxes, excluding
federal,
state
or local
income
taxes, that
may be
payable in
respect
of any
issue
or delivery
of shares
of Common
Stock on conversion
of this
Note
pursuant
thereto;
provided,
however,
that the
Company
shall not
be obligated
to pay
any transfer
taxes resulting
from any
transfer
requested
by the Holder
in connection
with any
such conversion.


 


(g) Fractional
Shares.
No fractional
shares
of Common
Stock shall
be issued
upon conversion
of this
Note. In
lieu of
any fractional
shares
to which
the Holder
would
otherwise
be entitled,
the Company
shall pay
cash equal
to the
product
of such
fraction
multiplied
by the average
of the
closing
bid
prices
of the Common
Stock for the
5 consecutive
Trading
Days
immediately
preceding
the Conversion
Date.


 


(h) Reservation
of Common
Stock. The
Company
shall at
all
times
when this
Note shall
be outstanding,
reserve
and keep
available
out of
its
authorized
but unissued
Common
Stock, such
number of
shares
of Common
Stock as
shall from
time
to time
be sufficient
to effect
the conversion
of this
Note
and all
interest
accrued thereon;
provided
that the
number
of shares
of Common
Stock so reserved
shall at no time
be less than
300% of the number
of shares of Common
Stock for which
this Note
and all interest
accrued
thereon
are at any time
convertible
(the “Reserved Amount”). The
Company
shall, from
time to
time
in accordance
with
Florida corporate
law, increase
the
authorized
number of
shares
of Common
Stock if
at any time
the unissued
number of
authorized
shares
shall
not be sufficient
to satisfy
the Company’s
obligations
under this
Section
3.5(h).
The Company acknowledges that (i) it has irrevocably instructed its transfer agent to issue certificates for the Common Stock
issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers
and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares
of Common Stock in accordance with the terms and conditions of this Note. If, at any time the Company does not maintain the Reserved
Amount it will be considered an Event of Default under Section 2.1 of this Note.


 




    	 



    	 



    

 


(i) Regulatory
Compliance.
If any
shares
of Common
Stock
to be
reserved
for
the purpose
of conversion
of this
Note
or any interest
accrued
thereon
require
registration
or listing
with
or approval
of any
governmental
authority,
stock exchange
or other
regulatory
body under any
federal
or state
law or
regulation
or otherwise
before
such shares
may be validly
issued
or delivered
upon conversion,
the Company
shall, at its
sole cost
and expense, in
good faith
and as expeditiously
as possible,
endeavor
to secure
such registration,
listing
or approval,
as the
case may
be.


 


Section
3.6 Prepayment.


 


(a) Prepayment
by the Company. Notwithstanding
anything
to the
contrary
contained
herein,
during the 180 days following the Issuance Date (the “Prepayment Period”)
the Company shall
have the
right,
at the Company’s option,
to prepay
in cash all
or any portion of this
Note as follows: (i) during the first 90 days of the Prepayment Period, the amount
to prepay the Note shall equal 125% of
the
Principal
Amount of
the
Note
being prepaid plus
all
accrued
and unpaid
interest
applicable
at the
time
of such
request;
(ii) during the next 45 days of the Prepayment Period, the amount to prepay the Note shall equal
135% of the
principal
amount of
the
Note
being prepaid plus
all
accrued
and unpaid
interest
applicable
at the
time
of such
request;
and (iii) during the final 45 days of the Prepayment Period, the amount to prepay the Note shall equal
145% of the
principal
amount of
the
Note
being prepaid plus
all
accrued
and unpaid
interest
applicable
at the
time
of such
request.


 


(b) Prepayment
Upon an
Event of
Default.
Notwithstanding
anything
to the
contrary
contained
herein,
upon the occurrence
of an
Event of
Default
described
in Sections
2.1(a)-(m)
hereof,
the Holder
shall
have the
right,
at such
Holder’s
option,
to require
the Company
to prepay
in cash all
or a
portion
of this
Note
at a price
equal to
150% of
the
aggregate principal
amount of
this
Note
and all
accrued
and unpaid
interest
applicable
at the time
of such
request
(the “Event
of Default
Prepayment
Price”).
Nothing
in this
Section
3.6(b)
shall
limit
the
Holder’s
rights
under Section
2.2 hereof.


 


(c) Prepayment
Option Upon
Major
Transaction.
In addition
to all
other
rights
of the
Holder
contained
herein,
simultaneous
with
the occurrence
of a
Major
Transaction
(as
defined
in Section
3.6(e)
hereof),
the Holder
shall
have the
right,
at the
Holder’s
option,
to require
the Company
to prepay
all or
a portion
of the
Holder’s
Note
at a
price
equal to
150% of
the aggregate
principal
amount of this
Note plus
all accrued
and unpaid interest
(the “Major
Transaction
Prepayment
Price”).


 


(d) Prepayment
Option
Upon
Triggering
Event. In
addition
to all
other
rights
of the Holder
contained
herein,
after
a Triggering
Event (as
defined below),
the Holder
shall
have
the right,
at the
Holder’s
option,
to require
the Company
to prepay
all or
a portion
of this
Note in
cash at
a price
equal to
the sum
of (i)
the
greater
of (A)
150%
of the
aggregate
principal
amount of this
Note
plus all
accrued
and unpaid
interest
and (B)
in the
event at
such time
the Holder
is unable
to obtain
the benefit
of its
conversion
rights
through
the conversion
of this
Note
and resale
of the shares
of Common
Stock issuable
upon conversion
hereof in
accordance
with
the
terms
of this
Note
and the
other Transaction
Documents,
the
aggregate
principal
amount of this
Note
plus
all
accrued
but unpaid
interest
hereon,
divided
by the Conversion
Price
on (x) the
date the
Prepayment
Price (as
defined
below)
is demanded
or otherwise
due or
(y) the
date
the Prepayment
Price is
paid
in full,
whichever
is less,
multiplied
by the VWAP
on (x)
the date
the Prepayment
Price is
demanded or
otherwise
due, and (y)
the date
the
Prepayment
Price is
paid in
full,
whichever
is greater,
and (ii)
all other
amounts,
costs, expenses
and liquidated
damages
due in respect
of this
Note
and the
other
Transaction
Documents
(the “Triggering
Event Prepayment
Price,”
and, collectively
with
the “Major
Transaction
Prepayment
Price,”
the “Prepayment
Price”).


 




    	 



    	 



    

 


(e) Major
Transaction.
A “Major
Transaction”
shall
be deemed to
have occurred
at such time
as any of
the following
events:


 


(i) a
Change of Control;


 


(ii) the
consolidation,
merger
or other
business
combination
of the Company
with or
into another
Person
(other
than (A)
pursuant
to a migratory
merger
effected
solely
for the
purpose
of changing
the jurisdiction
of incorporation
of the Company
or (B)
a consolidation,
merger
or other
business
combination
in which
holders
of the
Company’s
voting
power
immediately
prior
to the
transaction
continue
after
the transaction
to hold,
directly
or indirectly,
the voting
power of
the surviving
entity or
entities
necessary
to elect
a majority
of the members
of the board
of directors
(or their
equivalent
if other
than a
corporation)
of such entity
or entities);
or


 


(ii) the
sale
or transfer
of more
than 50%
of the
Company’s
assets
(based
on the fair
market
value
as determined
in good
faith
by the Company’s
Board of
Directors)
other
than inventory
in the
ordinary
course
of business
in one or
a related
series
of transactions;
or


 


(iii) closing
of a purchase,
tender
or exchange
offer
made to
the holders
of more
than 50%
of the
outstanding
shares of
Common
Stock in
which
more
than 50%
of the
outstanding
shares of
Common
Stock were
tendered
and accepted.


 


(f)
Triggering
Event. A
“Triggering
Event”
shall
be deemed
to have
occurred
at such
time as any
of the
following
events:


 


(i) the
suspension
from listing,
without
subsequent
listing
on any one
of,
or the failure
of the Common
Stock to
be listed
on at least
one of the OTCQB,
OTC Bulletin
Board,
Nasdaq
Capital Market,
NYSE MKT or
The New York
Stock Exchange, Inc.
for a period
of 5
consecutive
Trading
Days;


 


(ii) the
Company’s
notice
to the
Holder of
this Note,
including
by way
of public
announcement,
at any
time,
of its
inability
to comply
(including
for any
of the
reasons
described
in Section
3.8) or
its intention
not to comply
with
proper
requests
for conversion
of any Note
into shares
of Common
Stock;
or


 


(iii) the
Company’s
failure
to comply
with
a Conversion
Notice
tendered
in accordance
with
the provisions
of this
Note
within
10 business
days after
the receipt
by the Company
of the Conversion
Notice;
or


 


(iv) the
Company
deregisters
its
shares
of Common
Stock and
as a result
such shares
of Common
Stock are
no longer
publicly
traded;
or


 


(v) the
Company
consummates
a “going
private”
transaction
and as
a result
the Common
Stock is
no longer
registered
under Sections
12(b)
or 12(g)
of the Exchange
Act.


 


(g)
Mechanics
of Prepayment
at Option
of Holder
Upon
Major
Transaction.
No sooner
than
15 days
nor later
than ten
(10) days
prior
to the
consummation
of a Major
Transaction,
but not
prior
to the
public announcement
of such
Major
Transaction,
the Company
shall deliver
written
notice
thereof
via
facsimile
and overnight
courier
(“Notice
of Major
Transaction”)
to the
Holder
of this
Note.
At any
time
after
receipt
of a
Notice
of Major
Transaction
(or,
in the
event a
Notice
of Major
Transaction
is not delivered
at least 10
days prior
to a Major
Transaction,
at any time
within
10 days
prior
to a
Major
Transaction),
the Holder of
the Note
then outstanding
may require
the Company
to prepay,
effective
immediately
prior to
the consummation
of such Major
Transaction,
all of the
Note then
outstanding
by delivering
written
notice
thereof via
facsimile
and overnight
courier
(“Notice
of Prepayment
at Option
of Holder
Upon Major
Transaction”)
to the
Company,
which Notice
of Prepayment
at Option
of Holder
Upon Major
Transaction
shall
indicate
(i)
the
Note that
the Holder
is electing
to have prepaid and (ii)
the applicable
Major
Transaction
Prepayment
Price, as calculated
pursuant
to Section
3.6(c)
above.


 




    	 



    	 



    

 


(h) Mechanics
of Prepayment
at Option
of Holder
Upon Triggering
Event. Within
one business
day after
the occurrence
of a Triggering
Event,
the Company
shall deliver
written
notice
thereof
via
facsimile
and overnight
courier
(“Notice
of Triggering
Event”)
to the Holder
of the
Note. At any time
after
the earlier
of the Holder’s
receipt
of a
Notice
of Triggering
Event and
the Holder
becoming
aware of a
Triggering
Event,
the Holder of
this
Note
may require
the Company
to prepay
the Note
by delivering
written
notice
thereof
via
facsimile
and overnight
courier
(“Notice
of Prepayment
at Option
of Holder
Upon Triggering
Event”)
to the
Company,
which Notice
of Prepayment
at Option
of Holder
Upon Triggering
Event shall
indicate
(i)
the amount
of the
Note
that the Holder
is electing
to have
prepaid
and (ii)
the
applicable
Triggering
Event Prepayment
Price,
as calculated
pursuant
to Section
3.6(d) above.
The Holder shall
only be permitted
to require
the Company
to prepay the
Note pursuant
to Section
3.6 hereof
for the
greater
of a
period
of 10
days after
receipt
by the Holder
of a Notice
of Triggering
Event or
for so
long as
such Triggering
Event is
continuing.


 


(i) Payment
of Prepayment
Price.
Upon the
Company’s
receipt
of a Notice(s)
of Prepayment
at Option
of Holder
Upon Triggering
Event or
a Notice(s)
of Prepayment
at Option
of Holder
Upon Major
Transaction
from the Holder
of the Note,
the Company
shall immediately
notify
the Holder
of the
Note
by facsimile
of the
Company’s
receipt
of such
Notice(s)
of Prepayment
at Option
of Holder
Upon Triggering
Event or
Notice(s)
of Prepayment
at Option of
Holder
Upon Major
Transaction
and the Holder
shall
promptly
submit
to the
Company
the Holder’s
Note
which
the Holder
has elected
to have
prepaid.
The Company
shall deliver
the applicable
Triggering
Event Prepayment
Price, in
the case
of a
prepayment
pursuant
to Section
3.6(d),
to the Holder
within
5 business
days after
the Company’s
receipt
of a Notice
of Prepayment
at Option
of Holder
Upon Triggering
Event and,
in the
case
of a prepayment
pursuant
to Section
3.(e),
the Company
shall deliver
the
applicable
Major
Transaction
Prepayment
Price immediately
prior
to the consummation
of the Major
Transaction.
If the
Company
shall fail
to prepay
the Note
(other
than
pursuant
to a dispute
as to
the arithmetic
calculation
of the Prepayment
Price),
in addition
to any remedy
the Holder of the
Note
may have under
this Note
and the
Purchase
Agreement,
the applicable
Prepayment
Price payable
in respect
of the Note
not prepaid
shall bear
interest
at the rate
of 2%
per month
(prorated
for
partial
months)
until
paid
in full.
Until
the Company
pays such unpaid
applicable
Prepayment
Price in full
to the Holder,
the Holder
shall
have the
option
(the
“Void
Optional
Prepayment
Option”)
to, in lieu
of prepayment,
require
the Company
to promptly
return
to the
Holder
the Note
that
was submitted
for
prepayment
under this
Section
3.6 and for
which
the applicable
Prepayment
Price has
not been
paid,
by sending
written
notice
thereof
to the
Company
via
facsimile
(the “Void
Optional
Prepayment
Notice”).
Upon the
Company’s
receipt
of such Void
Optional
Prepayment
Notice(s)
and prior
to payment
of the
full
applicable
Prepayment
Price to
the Holder,
(i)
the
Notice
of Prepayment
at Option
of Holder
Upon Triggering
Event or
the Notice
of Prepayment
at Option
of Holder
Upon Major
Transaction,
as the case
may be, shall
be null
and void
with
respect
to the
Note
submitted for
prepayment
and for
which
the applicable
Prepayment
Price has
not been
paid,
(ii)
the Company
shall immediately
return
the Note
submitted
to the
Company
by the Holder
for prepayment
under this
Section
3.6(i)
and for
which
the applicable
Prepayment
Price has
not been paid
and (iii)
the Conversion
Price
of such
returned
Note
shall
be adjusted
to the
lesser
of (A)
the Conversion
Price as
in effect
on the
date
on which
the Void
Optional
Prepayment
Notice
is delivered
to the
Company and
(B) the
lowest
Closing Bid
Price during
the period
beginning
on the date on which
the Notice
of Prepayment
of Option
of Holder
Upon Major
Transaction
or the
Notice(s)
of Prepayment
at Option
of Holder
Upon Triggering
Event, as the
case may be, is
delivered
to the Company
and ending on the date
on which
the Void
Optional
Prepayment
Notice
is delivered
to the
Company;
provided
that
no adjustment
shall
be made
if such
adjustment
would
result
in an
increase
of the
Conversion
Price
then in effect.
The Holder’s
delivery
of a Void
Optional
Prepayment
Notice
and exercise
of its
rights
following
such notice
shall
not effect
the Company’s
obligations
to make
any payments
which
have accrued
prior
to the
date
of such
notice.
Payments
provided
for in
this
Section
3.6 shall
have priority
to payments
to other
stockholders
in connection
with a
Major
Transaction.


 




    	 



    	 



    

 


(j) Company
Prepayment
Option
upon Major Transaction.
Upon the
consummation
of a Major
Transaction,
the
Company
may prepay
in cash
all
or any portion
of the
outstanding
principal
amount of
this
Note
together
with
all accrued
and unpaid
interest
thereon
upon at least
30 days prior
written
notice
to the
Holder
(the
“Company’s
Prepayment
Notice”)
at a price
equal to
150% of
the aggregate principal
amount of
this
Note plus
any accrued
but unpaid
interest
(the “Company’s
Prepayment
Price”);
provided,
however,
that
if the Holder
has delivered
a Conversion
Notice
to the
Company
or delivers
a Conversion
Notice
within
such 30
day period
following
delivery
of the
Company’s
Prepayment
Notice,
the principal
amount of
the Note
plus any
accrued
but unpaid interest
designated
to be
converted
may not be prepaid
by the Company
and shall
be converted
in accordance
with Section
3.3 hereof;
provided
further
that if during
the period
between
delivery
of the Company’s
Prepayment
Notice
and the Company’s
Prepayment
Date
(as defined
below),
the Holder
shall become
entitled
and elects
to deliver
a Notice
of Prepayment
at Option
of Holder
Upon Major
Transaction
or Notice
of Prepayment
at Option
of Holder
upon Triggering
Event,
then such
rights
of the
Holder
shall
take
precedence
over the
previously
delivered
Company
Prepayment
Notice
if the
Holder
so elects.
The Company’s
Prepayment
Notice
shall
state
the date
of prepayment
which
date shall
be the date
of the
consummation
of the Major
Transaction
(the “Company’s
Prepayment
Date”),
the
Company’s
Prepayment
Price
and the principal
amount of
Note
plus
any accrued
but unpaid
interest
to be prepaid
by the Company.
The Company
shall deliver
the Company’s
Prepayment
Price
on the Company’s
Prepayment
Date,
provided,
that
if the
Holder
delivers
a Conversion
Notice
before
the Company’s
Prepayment
Date, then
the portion
of the Company’s
Prepayment
Price which
would be
paid to
prepay
the Note
covered
by such Conversion
Notice
shall
be returned
to the
Company
upon delivery
of the Common
Stock issuable
in connection
with
such Conversion
Notice
to the
Holder.
On the
Company’s
Prepayment
Date, the
Company
shall pay the
Company’s
Prepayment
Price, subject
to any adjustment
pursuant
to the
immediately
preceding
sentence,
to the
Holder. If the
Company
fails to
pay the Company’s
Prepayment
Price
by the 3rd
business
day after
the
Company’s
Prepayment Date,
the prepayment
will
be declared
null
and void
and the Company
shall
lose its
right
to serve
a Company’s
Prepayment
Notice
pursuant
to this
Section
3.6(j)
in the
future. Notwithstanding
the foregoing
to the
contrary,
the Company
may effect
a prepayment
pursuant
to this
Section
3.6(j) only
if trading
in the
Common
Stock shall
not have
been suspended
by the Securities
and Exchange Commission
or the Nasdaq
Capital Market (or
other exchange
or market
on which the
Common
Stock is trading),
and the
Company
is in material
compliance
with the
terms
and conditions
of this
Note
and the
other
Transaction
Documents.


 


Section
3.7 Inability
to Fully
Convert.


 


(a) Holder’
s Option
if Company
Cannot Fully
Convert.
If,
upon the
Company’s
receipt
of a Conversion
Notice,
the
Company
cannot issue
shares
of Common
Stock for
any reason, including,
without
limitation,
because the
Company
(w)
does not
have a sufficient
number of
shares
of Common
Stock authorized
and available,
or (x) is
otherwise
prohibited
by applicable
law or by
the
rules or regulations
of any stock
exchange, interdealer
quotation
system or other
self-regulatory
organization
with
jurisdiction
over the
Company or
any of its securities
from
issuing
all of the
Common
Stock which
is to
be issued
to the
Holder
pursuant to
a Conversion
Notice,
then the
Company
shall
issue as many
shares of Common
Stock as it is
able to issue
in accordance
with
the Holder’s
Conversion
Notice
and, with respect
to the
unconverted
portion
of this
Note, the
Holder, solely
at Holder’s
option,
can elect
to:


 




    	 



    	 



    

 


(i) require
the Company
to prepay
that
portion
of this
Note
for which
the Company
is unable
to issue
Common
Stock in
accordance
with the
Holder’s
Conversion
Notice
(the
“Mandatory
Prepayment”)
at a price
per share
equal to
the Conversion Price
as of
such Conversion
Date
(the
“Mandatory
Prepayment
Price”);
or


 


(ii) void
its Conversion
Notice
and retain
or have
returned,
as the
case may
be, this
Note
(provided
that
the Holder’s
voiding
its Conversion
Notice
shall
not effect
the Company’s
obligations
to make
any payments
which have
accrued prior
to the date
of such
notice).


 


In
the event
the Holder
shall
elect
to convert
any portion
of the
Note
as provided
herein,
the
Company cannot
refuse
conversion
based
on any claim
that the
Holder
or any one
associated
or affiliated
with
the Holder
has been engaged
in any violation
of law, violation
of an agreement
to which
the Holder is
a party
or for
any reason
whatsoever,
unless,
an injunction
from
a court,
on notice,
restraining
and or adjoining
conversion
of all
or part of the Note
shall
have been issued
and the Company
posts a surety
bond for the benefit
of the Holder
in an amount equal
to 130% of the principal
amount of the
Note,
which bond shall
remain
in effect
until
the completion
of arbitration/litigation
of the dispute
and the
proceeds
of which shall
be payable
to such
Holder
in the event
it obtains
judgment.


 


(b) Mechanics
of Fulfilling
Holder’s
Election.
The
Company
shall immediately
send via
facsimile
to the
Holder,
upon receipt
of a
facsimile
copy of a
Conversion
Notice
from the
Holder
which
cannot be
fully
satisfied
as described
in Section
3.7(a) above,
a notice
of the Company’s
inability
to fully
satisfy
the Conversion
Notice
(the “Inability
to Fully Convert
Notice”).
Such Inability
to Fully Convert
Notice
shall
indicate
(i) the
reason why the
Company is
unable to
fully
satisfy
the Holder’s
Conversion
Notice,
(ii)
the
amount of this
Note
which
cannot be
converted
and (iii)
the
applicable
Mandatory
Prepayment
Price. The
Holder shall
notify
the Company
of its election
pursuant
to Section
3.7(a)
above by delivering
written
notice
via
facsimile
to the
Company (“Notice
in Response
to Inability
to Convert”).


 


(c) Payment
of Prepayment
Price.
If the
Holder
shall
elect
to have
the Note
prepaid
pursuant
to Section
3.7(a)(i)
above,
the
Company
shall
pay the
Mandatory
Prepayment
Price
to the
Holder
within
30 days
of the
Company’s
receipt
of the
Holder’s
Notice
in Response
to Inability
to Convert,
provided
that prior
to the
Company’s
receipt
of the Holder’s
Notice
in Response
to Inability
to Convert
the Company
has not delivered
a notice to
the Holder
stating,
to the satisfaction
of the Holder,
that
the
event or
condition
resulting
in the
Mandatory
Prepayment
has been
cured
and all
Conversion
Shares issuable
to the
Holder
can and will
be delivered
to the Holder
in accordance
with the
terms
of this Note.
If the Company
shall fail
to pay the applicable
Mandatory
Prepayment Price
to the
Holder
on a timely
basis as
described
in this
Section
3.7(c)
(other
than pursuant
to a dispute
as to
the
determination
of the
arithmetic
calculation
of the
Prepayment
Price),
in addition
to any remedy
the Holder
may have
under this
Note and the
Purchase
Agreement,
such unpaid
amount
shall
bear interest
at the rate
of 2% per
month (prorated
for partial
months)
until
paid in
full.
Until
the full
Mandatory
Prepayment
Price
is paid
in full
to the
Holder,
the Holder
may (i)
void
the Mandatory
Prepayment
with
respect
to that
portion
of the
Note
for
which
the full
Mandatory
Prepayment
Price has
not been
paid, (ii)
receive
back such Note,
and (iii)
require
that the Conversion
Price
of such returned
Note
be adjusted
to the lesser
of (A)
the Conversion
Price
as in
effect
on the
date on which
the Holder
voided
the Mandatory
Prepayment
and (B)
the lowest
closing
bid
price
during the
period
beginning
on the
Conversion
Date
and ending
on the date
the Holder
voided
the Mandatory
Prepayment.


 


Section
3.8 No Rights
as Shareholder.
Nothing
contained
in this
Note shall
be construed
as conferring
upon the
Holder,
prior
to the
conversion
of this
Note,
the right
to vote
or to receive
dividends
or to consent
or to
receive
notice
as a shareholder
in respect
of any meeting
of shareholders
for
the
election
of directors
of the
Company
or of any
other
matter,
or any other
rights
as a shareholder
of the
Company.


 




    	 



    	 



    

 


ARTICLE
IV


MISCELLANEOUS


 


Section
4.1 Notices.
Any notice,
demand, request,
waiver
or other
communication
required
or permitted
to be
given
hereunder
shall
be in
writing
and shall
be effective
(a) upon
hand delivery
by telex
(with
correct
answer
back received),
telecopy
or facsimile
at the
address
or number
designated
in the Purchase
Agreement
(if delivered
on a business
day during
normal
business
hours where
such notice
is to
be received),
or the
first
business
day following
such delivery
(if delivered
other
than
on a business
day during normal
business
hours where
such notice
is to be received)
or (b)
on the second
business
day following
the date
of mailing
by express
courier
service,
fully
prepaid,
addressed
to such
address,
or upon actual receipt
of such mailing,
whichever
shall first
occur. The
Company will
give
written
notice
to the Holder
at least
10 days prior
to the date
on which
the Company
takes a record
(x) with
respect
to any dividend
or distribution
upon the Common
Stock,
(y)
with
respect
to any pro
rata
subscription
offer
to holders
of Common
Stock or (z)
for determining
rights
to vote
with
respect
to any
Organic
Change,
dissolution,
liquidation
or winding-up
and in
no event
shall
such
notice
be provided
to the Holder
prior to
such information
being made
known to the
public.
The Company will
also give
written
notice
to the
Holder
at least
10 days
prior
to the date
on which
any Organic
Change,
dissolution,
liquidation
or winding-up
will
take place
and in no event
shall
such notice
be provided
to the
Holder
prior
to such
information
being
made known
to the public.


 


Section
4.2 Governing
Law. This
Note shall
be governed
by and construed
in accordance
with
the internal
laws of
the State
of New
York, without
giving
effect to
any of the
conflicts
of law
principles
which
would
result
in the
application
of the
substantive
law of
another
jurisdiction.
This
Note
shall
not be interpreted
or construed
with any presumption
against
the party
causing this
Note to
be drafted.


 


Section
4.3 Headings.
Article
and section
headings
in this
Note
are
included
herein
for purposes
of convenience
of reference
only and
shall
not constitute
a part
of this
Note
for any other
purpose.


 


Section
4.4 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,
at law
or in equity
(including,
without
limitation,
a decree
of specific
performance
and/or
other injunctive
relief),
no remedy
contained
herein
shall be
deemed a
waiver
of compliance
with
the provisions
giving
rise to
such remedy
and nothing
herein
shall
limit
the Holder’s
right
to pursue
actual
damages
for any failure
by the Company
to comply
with
the terms
of this
Note.
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
and material
harm to
the Holder
and that
the remedy
at law for
any such
breach
may be inadequate.
Therefore
the
Company agrees
that,
in the
event of any such
breach
or threatened
breach,
the Holder
shall
be entitled,
in addition
to all
other available
rights
and remedies,
at law
or in equity,
to seek and
obtain
such equitable
relief,
including
but not limited
to an injunction
restraining
any such breach
or threatened
breach, without
the necessity
of showing
economic
loss
and without
any bond or
other security
being required.


 


Section
4.5 Enforcement
Expenses. The
Company agrees
to pay all costs
and expenses
of enforcement
of this
Note,
including,
without
limitation,
reasonable
attorneys’
fees and
expenses.


 




    	 



    	 



    

 


Section
4.6 Binding
Effect.
The obligations
of the
Company
and the
Holder
set forth
herein
shall
be binding
upon the
successors
and assigns
of each such
party,
whether
or not such
successors
or assigns
are permitted
by the
terms
hereof.


 


Section
4.7 Amendments.
This Note
may not be modified
or amended in
any manner except
in writing
executed by the
Company
and the Holder.


 


Section
4.8 Compliance
with Securities
Laws. The
Holder
of this
Note acknowledges
that
this
Note
is being
acquired
solely
for the
Holder’s
own account
and not
as a nominee
for any
other party,
and for
investment,
and that
the Holder
shall
not offer,
sell
or otherwise
dispose
of this
Note. This
Note and any Note
issued
in substitution
or replacement
therefor
shall be stamped
or imprinted
with
a legend
in substantially
the following
form:


 


“THIS
NOTE
HAS
NOT BEEN
REGISTERED
UNDER
THE SECURITIES
ACT OF
1933, AS
AMENDED
(THE
“ACT”), OR
APPLICABLE
STATE SECURITIES
LAWS, AND
MAY NOT
BE SOLD OR
TRANSFERRED
IN THE
ABSENCE
OF SUCH
REGISTRATION
OR RECEIPT
BY THE
COMPANY
OF AN
OPINION
OF COUNSEL
IN THE
FORM,
SUBSTANCE
AND SCOPE
REASONABLY
SATISFACTORY
TO THE
COMPANY
THAT
THIS
NOTE
MAY BE SOLD,
TRANSFERRED,
HYPOTHECATED
OR OTHERWISE
DISPOSED OF,
UNDER AN EXEMPTION
FROM
REGISTRATION
UNDER THE
ACT AND
SUCH STATE
SECURITIES LAWS.”


 


Section
4.9 Consent
to Jurisdiction.
Each of
the Company
and the
Holder
(i)
hereby irrevocably
submits
to the
exclusive
jurisdiction
of the
State of
New York for
the purposes
of any
suit, action
or proceeding
arising
out of
or relating
to this
Note
and (ii)
hereby waives,
and agrees
not to
assert
in any such
suit,
action
or proceeding,
any claim
that it
is not
personally
subject
to the
jurisdiction
of such
court,
that
the
suit,
action
or proceeding
is brought
in an
inconvenient
forum
or that
the venue
of the
suit,
action
or proceeding
is improper.
Each of the
Company
and the Holder
consents
to process
being served
in any such
suit,
action
or proceeding
by mailing
a copy
thereof
to such
party
at the
address
in effect
for
notices
to it
under
the
Purchase
Agreement
and agrees
that
such service
shall constitute
good and sufficient
service
of process
and notice
thereof.
Nothing
in this
Section 4.9 shall
affect
or limit
any right to
serve
process
in any other
manner
permitted
by law. Each
of the
Company
and the Holder
hereby
agree
that the
prevailing
party
in any
suit,
action
or proceeding
arising
out of or
relating
to this
Note
shall
be entitled
to reimbursement
for reasonable
legal
fees from
the non-prevailing
party.


 


Section
4.10 Parties
in Interest.
This
Note
shall
be binding
upon, inure
to the
benefit
of and
be enforceable
by the
Company,
the Holder
and their
respective
successors
and permitted
assigns.


 


Section
4.11 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.


 


Section
4.12 Company
Waivers.
Except as
otherwise
specifically
provided
herein,
the Company
and all
others
that
may become
liable
for
all
or any part
of the
obligations
evidenced
by this
Note,
hereby waive
presentment,
demand, notice
of nonpayment,
protest
and all other
demands’
and notices
in connection
with the
delivery,
acceptance,
performance
and enforcement
of this
Note,
and do hereby
consent
to any number
of renewals
of extensions
of the
time or
payment
hereof
and agree
that
any such
renewals
or extensions
may be
made without
notice
to any
such persons
and without
affecting
their
liability
herein
and do
further
consent
to the
release
of any
person liable
hereon, all
without
affecting
the liability
of the
other persons,
firms
or Company
liable for
the
payment
of this
Note,
AND DO
HEREBY
WAIVE TRIAL
BY JURY.


 


(a) No
delay or
omission
on the
part of
the
Holder
in exercising
its rights
under this
Note, or
course
of conduct
relating
hereto,
shall
operate as a
waiver
of such
rights
or any other
right
of the
Holder,
nor shall
any waiver
by the Holder
of any
such right
or rights
on any one
occasion
be deemed
a waiver
of the
same right
or rights
on any future
occasion.


 


(b) THE
COMPANY ACKNOWLEDGES
THAT THE
TRANSACTION
OF WHICH
THIS
NOTE
IS A
PART IS
A COMMERCIAL
TRANSACTION,
AND
TO THE
EXTENT
ALLOWED BY
APPLICABLE
LAW, HEREBY
WAIVES
ITS
RIGHT
TO NOTICE
AND HEARING
WITH RESPECT
TO ANY PREJUDGMENT
REMEDY WHICH
THE
HOLDER
OR ITS
SUCCESSORS
OR ASSIGNS
MAY DESIRE
TO USE.


 


Balance
of page left blank – signature page follows


 




    	 



    	 



    

 


IN
WITNESS WHEREOF, Solaris Power Cells, Inc. has duly executed this Note which has been duly authorized by its board of directors
and holders of a majority of its outstanding capital stock, effective as of the date and year first above written.


 


	 	SOLARIS
    POWER CELLS, INC.
	 	 	 
	 	By:	/s/
    Leonard Caprino
	 	 	Leonard
    Caprino,
	 	 	Chief
    Executive Officer


 




    	 



    	 



    

 


EXHIBIT
A to NOTE


 


WIRE
INSTRUCTIONS


 


BANK:


 


ADDRESS:


 


ABA#


 


SWIFT
CODE:


 


BENEFICIARY:


 


ACCOUNT#:


 




    	 



    	 



    

 


EXHIBIT
B to NOTE


 


FORM
OF NOTICE OF CONVERSION



 


(To
be Executed
by the
Registered
Holder in
order
to Convert
the Note)


 


The
undersigned hereby irrevocably
elects to convert
$__________of the the principal
amount of
the above Note into shares
of Common
Stock of Pocket
Games, Inc. according to the
conditions hereof, as of
the date written
below.


 


	Date
    of Conversion:
    	 	 
	 	 	 
	Applicable
    Conversion
    Price:
    	 	 


 


	Number
    of shares
    of Common
    Stock beneficially
    owned or deemed beneficially
    owned by the Holder on the
    Date of Conversion: ___________________________________________________________


 


	Signature:		 
	 	 	 
	Print
    Name:		 
	 	 	 
	Address: