Blueprint





 







Exhibit 10.2

 



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

 


	


Original Issue Date: June 20, 2018

	


Principal Amount: $4,750,000


	
 

	


Purchase Price: $4,750,000







 



SENIOR SECURED



CONVERTIBLE PROMISSORY NOTE



DUE JUNE 20, 2019

 


THIS
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE is one of a series of
duly authorized and validly issued Senior Secured Convertible
Promissory Notes of New Age Beverages Corporation, a Washington
corporation (the “Company”), having its
principal place of business at 1700 E. 68th Avenue, Denver,
Colorado 80229, designated as its Senior Secured Convertible
Promissory Note due June 20, 2019 (this “Note”, or collectively
with the other Notes of such series, the “Notes”).

 


FOR
VALUE RECEIVED, the Company promises to pay to Dominion Capital LLC
or its registered assigns (the “Holder”), or shall have
paid pursuant to the terms hereunder, the principal sum of
$4,750,000 on June 20, 2019 (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. All payments due
under this Note shall rank pari
passu with all other Notes. Following the full conversion or
redemption of the Series B Notes (as defined in the Purchase
Agreement) on or prior to the fifteenth (15) Trading Day
immediately following the Closing Date, the Notes shall be senior
to all indebtedness for borrowed money of any kind (including all
Indebtedness (as defined in the Purchase Agreement)) of the Company
and its Subsidiaries (other than Permitted Indebtedness),
including, without limitation any guarantee, on or with respect to
any of their respective properties or assets owned or hereafter
acquired or any interest therein or any income or profits
therefrom.


 




 

1








 






 


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 (as defined below) and
(b) the following terms shall have the following
meanings:

 


“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.

 


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

 


“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 for purposes
of this definition) 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 sixty (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 sixty
(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(d).

 


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

 


“Change of
Control” means any
Fundamental Transaction other than (i) any merger of the Company or
any of its, direct or indirect, wholly-owned Subsidiaries with or
into any of the foregoing Persons, (ii) any reorganization,
recapitalization or reclassification of the shares of Common Stock
in which holders of the Company’s voting power immediately
prior to such reorganization, recapitalization or reclassification
continue after such reorganization, recapitalization or
reclassification to hold publicly traded securities and, directly
or indirectly, are, in all material respects, the holders of at
least 50.1% of the voting power of the surviving entity (or
entities with the authority or voting power to elect the
members of the board of directors (or their equivalent if other
than a corporation) of such entity or entities) after such
reorganization, recapitalization or reclassification, or (iii)
pursuant to a migratory merger effected solely for the purpose of
changing the jurisdiction of incorporation of the Company or any of
its Subsidiaries.

 




 

2








 






 


“Commission”
means the United States Securities and Exchange
Commission.

 


“Common
Stock” means the common
stock of the Company, par value $0.001 per share, and any other
class of securities into which such securities may hereafter be
reclassified or changed.

 


“Common Stock
Equivalents” means any
securities of the Company or any subsidiary which would entitle the
holder thereof to acquire at any time Common Stock, including,
without limitation, any debt, preferred stock, right, option,
warrant, unit, 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.

 


“Company Optional
Redemption” shall have
the meaning set forth in Section 7(a).

 


“Company Optional
Redemption Amount” means,
with respect to an Company Optional Redemption pursuant to Section
7(a) and (b) herein, the sum of: (a) (i) 105% of the principal
amount of this Note that is subject to such Company Optional
Redemption, if the applicable Company Optional Redemption Date for
such Company Optional Redemption occurs on or prior to the date
that is the 120th
calendar day immediately following the
Original Issue Date, (ii) 108% of the principal amount of this Note
that is subject to such Company Optional Redemption, if the
applicable Company Optional Redemption Date for such Company
Optional Redemption occurs on or after the date that is the
121st
calendar day immediately following the
Original Issue Date and prior to the date that is the
151st
calendar day immediately following the
Original Issue Date, (iii) 112% of the principal amount of this
Note that is subject to such Company Optional Redemption, if the
applicable Company Optional Redemption Date for such Company
Optional Redemption occurs on or after the date that is the
151st
calendar day immediately following the
Original Issue Date and prior to the date that is the
181st
calendar day immediately following the
Original Issue Date, or (iv) 116% of the principal amount of this
Note that is subject to such Company Optional Redemption, if the
applicable Company Optional Redemption Date for such Company
Optional Redemption occurs on or after the date that is the
181st
calendar day immediately following the
Original Issue Date, (b) 100% of the accrued and unpaid interest on
the principal amount of this Note that is subject to such Company
Optional Redemption and all Late Fees (if any) due hereunder with
respect thereto, (c) 100% of the Make-Whole Amount payable in
respect of the principal amount of this Note that is subject to
such Company Optional Redemption (as applicable), and (d) all
liquidated damages, costs of collection and other amounts payable
in respect of this Note as of the applicable Company Optional
Redemption Date for such Company Optional
Redemption.

 


“Company Optional
Redemption Date” shall
have the meaning set forth in Section 7(a).

 


“Company Optional
Redemption Notice” shall
have the meaning set forth in Section 7(a).

 


“Company Optional
Redemption Notice Date”
shall have the meaning set forth in Section
7(a).

 




 

3








 






 


“Conversion”
means any conversion of any Conversion Amount under this Note into
shares of Common Stock pursuant to Section 4
herein.

 


“Conversion
Amount” means, with
respect to a Conversion pursuant to Section 4 herein, the sum of:
(a) (i) 105% of the principal amount of this Note to be converted
in such Conversion, if the applicable Conversion Date for such
Conversion occurs on or prior to the date that is the
120th
calendar day immediately following the
Original Issue Date, (ii) 108% of the principal amount of this Note
to be converted in such Conversion, if the applicable Conversion
Date for such Conversion occurs on or after the date that is the
121st
calendar day immediately following the
Original Issue Date and prior to the date that is the
151st
calendar day immediately following the
Original Issue Date, (iii) 112% of the principal amount of this
Note to be converted in such Conversion, if the applicable
Conversion Date for such Conversion occurs on or after the date
that is the 151st
calendar day immediately following the
Original Issue Date and prior to the date that is the
181st
calendar day immediately following the
Original Issue Date, or (iv) 116% of the principal amount of this
Note to be converted in such Conversion, if the applicable
Conversion Date for such Conversion occurs on or after the date
that is the 181st
calendar day immediately following the
Original Issue Date, (b) 100% of the accrued and unpaid interest on
the principal amount of this Note to be converted in such
Conversion and all Late Fees (if any) due hereunder with respect
thereto, (c) 100% of the Make-Whole Amount payable in respect of
the principal amount of this Note to be converted in such
Conversion (as applicable), and (d) all liquidated damages, costs
of collection and other amounts payable in respect of this Note as
of the applicable Conversion Date for such
Conversion.

 


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

 


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

 


“Conversion
Shares” means,
collectively, the shares of Common Stock issuable upon Conversion
of this Note pursuant to Section 4 hereof in accordance with the
terms of this Note.

 


“DTC” means the Depository Trust
Company.

 


“Equity
Conditions” means: (i) on
each day during the period beginning twenty (20) Trading Days prior
to the applicable date of determination and ending on and including
the applicable date of determination (the
“Equity
Conditions Measuring Period”), all of the Conversion Shares issuable
upon conversion of all the Notes (assuming for purposes hereof that
the Notes are convertible at the applicable Conversion Price, and
disregarding any limitation on conversion of the Notes) shall be
eligible for sale pursuant to Rule 144 without the need for
registration under any applicable federal or state securities laws;
(ii) on each day during the Equity Conditions Measuring Period, the
Common Stock is listed or designated for quotation (as applicable)
on a Trading Market and shall not have been suspended from trading
on an Trading Market (other than suspensions of not more than two
(2) days and occurring prior to the applicable date of
determination due to business announcements by the Company) nor
shall delisting or suspension by an Trading Market have been
threatened (with a reasonable prospect of delisting occurring) or
pending either (A) in writing by such Trading Market or (B) by
falling below the minimum listing maintenance requirements of the
Trading Market on which the Common Stock is then listed or
designated for quotation (as applicable); (iii) on each day during
the Equity Conditions Measuring Period, the Company shall have
delivered all shares of Common Stock issuable upon conversion of
this Note on a timely basis as set forth in Section 4 hereof and
all other shares of capital stock required to be delivered by the
Company on a timely basis as set forth in the other Transaction
Documents; (iv) any shares of Common Stock to be issued in
connection with the event requiring determination may be issued in
full without violating Section 4(d) hereof; (v) any shares of
Common Stock to be issued in connection with the event requiring
determination may be issued in full without violating the rules or
regulations of the Trading Market on which the Common Stock is then
listed or designated for quotation (as applicable); (vi) on each
day during the Equity Conditions Measuring Period, no public
announcement of a pending, proposed or intended Fundamental
Transaction shall have occurred which has not been abandoned,
terminated or consummated; (vii) the Company shall have no
knowledge of any fact that would reasonably be expected to cause
any Conversion Shares to not be eligible for sale pursuant to Rule
144 without the need for registration under any applicable federal
or state securities laws; (viii) the Holder shall not be in
possession of any material, non-public information provided to any
of them by the Company, any of its Subsidiaries or any of their
respective affiliates, employees, officers, representatives, agents
or the like; (ix) on each day during the Equity Conditions
Measuring Period, the Company otherwise shall have been in
compliance with each, and shall not have breached any provision,
covenant, representation or warranty of any Transaction Document;
and (x) on each day during the Equity Conditions Measuring Period,
there shall not have occurred an Event of Default or an event that
with the passage of time or giving of notice would constitute an
Event of Default.

 




 

4








 






 


“Equity Conditions
Failure” means that on
any day during the period commencing ten (10) Trading Days prior to
the applicable Company Optional Redemption Notice Date through the
applicable Company Optional Redemption Date, the Equity Conditions
have not been satisfied (or waived in writing by the
Holder).

 


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

 


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

 


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

 


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

 


“Event of Default
Redemption Amount” means,
with respect to an Event of Default Redemption pursuant to Section
6(b) herein, the sum of: (a) (i) 105% of the principal amount of
this Note that is subject to such Event of Default Redemption, if
the applicable Event of Default Redemption Date for such Event of
Default Redemption occurs on or prior to the date that is the
120th
calendar day immediately following the
Original Issue Date, (ii) 108% of the principal amount of this Note
that is subject to such Event of Default Redemption, if the
applicable Event of Default Redemption Date for such Event of
Default Redemption occurs on or after the date that is the
121st
calendar day immediately following the
Original Issue Date and prior to the date that is the
151st
calendar day immediately following the
Original Issue Date, (iii) 112% of the principal amount of this
Note that is subject to such Event of Default Redemption, if the
applicable Event of Default Redemption Date for such Event of
Default Redemption occurs on or after the date that is the
151st
calendar day immediately following the
Original Issue Date and prior to the date that is the
181st
calendar day immediately following the
Original Issue Date, or (iv) 116% of the principal amount of this
Note that is subject to such Event of Default Redemption, if the
applicable Event of Default Redemption Date for such Event of
Default Redemption occurs on or after the date that is the
181st
calendar day immediately following the
Original Issue Date, (b) 100% of the accrued and unpaid interest on
the principal amount of this Note that is subject to such Event of
Default Redemption and all Late Fees (if any) due hereunder with
respect thereto, (c) 100% of the Make-Whole Amount payable in
respect of the principal amount of this Note that is subject to
such Event of Default Redemption (as applicable), and (d) all
liquidated damages, costs of collection and other amounts payable
in respect of this Note as of the applicable Event of Default
Redemption Date for such Event of Default
Redemption.

 


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

 


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

 


“Event of Default Redemption Notice
Date” shall have the
meaning set forth in Section 6(b).

 


“Event of Default
Redemption Price”
means, with respect to any portion of this Note subject to
redemption pursuant to an Event of Default Redemption under Section
6(b) herein, a price equal to the product of (i) the applicable
Event of Default Redemption Amount subject to such Event of Default
Redemption, multiplied by (ii) 110%.

 




 

5








 






 


“Exchange
Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

 


“Exempt Issuance” means
the issuance of the Securities (as defined in the Purchase
Agreement) by the Company pursuant to the terms and conditions of
the Purchase Agreement and upon conversion of the Notes in
accordance with the terms of the Notes, as applicable.

 


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

 


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

 


“Holder Optional
Redemption” shall have
the meaning set forth in Section 7(e).

 


“Holder Optional
Redemption Amount” means,
with respect to a Holder Optional Redemption pursuant to Section
7(e) and (f) herein, the sum of: (a) (i) 105% of the principal
amount of this Note that is subject to such Holder Optional
Redemption, if the applicable Holder Optional Redemption Date for
such Holder Optional Redemption occurs on or prior to the date that
is the 120th
calendar day immediately following the
Original Issue Date, (ii) 108% of the principal amount of this Note
that is subject to such Holder Optional Redemption, if the
applicable Holder Optional Redemption Date for such Holder Optional
Redemption occurs on or after the date that is the
121st
calendar day immediately following the
Original Issue Date and prior to the date that is the
151st
calendar day immediately following the
Original Issue Date, (iii) 112% of the principal amount of this
Note that is subject to such Holder Optional Redemption, if the
applicable Holder Optional Redemption Date for such Holder Optional
Redemption occurs on or after the date that is the
151st
calendar day immediately following the
Original Issue Date and prior to the date that is the
181st
calendar day immediately following the
Original Issue Date, or (iv) 116% of the principal amount of this
Note that is subject to such Holder Optional Redemption, if the
applicable Holder Optional Redemption Date for such Holder Optional
Redemption occurs on or after the date that is the
181st
calendar day immediately following the
Original Issue Date, (b) 100% of the accrued and unpaid interest on
the principal amount of this Note that is subject to such Holder
Optional Redemption and all Late Fees (if any) due hereunder with
respect thereto, (c) 100% of the Make-Whole Amount payable in
respect of the principal amount of this Note that is subject to
such Holder Optional Redemption (as applicable), and (d) all
liquidated damages, costs of collection and other amounts payable
in respect of this Note as of the applicable Holder Optional
Redemption Date for such Holder Optional
Redemption.

 


“Holder Optional
Redemption Date” shall
have the meaning set forth in Section 7(e).

 


“Holder Optional
Redemption Notice” shall
have the meaning set forth in Section 7(e).

 


“Holder Optional
Redemption Notice Date”
shall have the meaning set forth in Section
7(e).

 


“Holder Optional
Redemption Trigger Date”
shall have the meaning set forth in Section
7(e).

 


“Interest Payment
Date” shall have the
meaning set forth in Section 2(a).

 




 

6








 






 


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

 


“Make-Whole
Amount” shall have the
meaning set forth in Section 2(a).

 


“Make-Whole Trigger
Date” shall have the
meaning set forth in Section 2(a).

 


“Mandatory
Redemption” shall have
the meaning set forth in Section 7(c).

 


“Mandatory Redemption
Amount” means, with
respect to a Mandatory Redemption pursuant to Section 7(c) and (d)
herein, the sum of: (a) (i) 105% of the principal amount of this
Note that is subject to such Mandatory Redemption, if the
applicable Mandatory Redemption Date for such Mandatory Redemption
occurs on or prior to the date that is the 120th
calendar day immediately following the
Original Issue Date, (ii) 108% of the principal amount of this Note
that is subject to such Mandatory Redemption, if the applicable
Mandatory Redemption Date for such Mandatory Redemption occurs on
or after the date that is the 121st
calendar day immediately following the
Original Issue Date and prior to the date that is the
151st
calendar day immediately following the
Original Issue Date, (iii) 112% of the principal amount of this
Note that is subject to such Mandatory Redemption, if the
applicable Mandatory Redemption Date for such Mandatory Redemption
occurs on or after the date that is the 151st
calendar day immediately following the
Original Issue Date and prior to the date that is the
181st
calendar day immediately following the
Original Issue Date, or (iv) 116% of the principal amount of this
Note that is subject to such Mandatory Redemption, if the
applicable Mandatory Redemption Date for such Mandatory Redemption
occurs on or after the date that is the 181st
calendar day immediately following the
Original Issue Date, (b) 100% of the accrued and unpaid interest on
the principal amount of this Note that is subject to such Mandatory
Redemption and all Late Fees (if any) due hereunder with respect
thereto, (c) 100% of the Make-Whole Amount payable in respect of
the principal amount of this Note that is subject to such Mandatory
Redemption (as applicable), and (d) all liquidated damages, costs
of collection and other amounts payable in respect of this Note as
of the applicable Mandatory Redemption Date for such Mandatory
Redemption.

 


“Mandatory Redemption
Date” shall have the
meaning set forth in Section 7(c).

 


“Mandatory Redemption
Notice” shall have the
meaning set forth in Section 7(c).

 


“Maturity Date” shall mean
June 20, 2019; provided, however, the Maturity Date may be extended
at the option of the Holder (i) in the event that, and for so long
as, an Event of Default shall have occurred and be continuing or
any event shall have occurred and be continuing that with the
passage of time and the failure to cure would result in an Event of
Default or (ii) through the date that is twenty (20) Trading Days
after the consummation of a Fundamental Transaction in the event
that a Fundamental Transaction is publicly announced or a
Fundamental Transaction Notice is delivered prior to the Maturity
Date, provided further that if a Holder elects to convert some or
all of this Note pursuant to Section 4 hereof, and the Conversion
Amount would be limited pursuant to Section 4(d) hereunder, the
Maturity Date shall automatically be extended until such time as
such provision shall not limit the conversion of this
Note.

 


“New York
Courts” shall have the
meaning set forth in Section 8(d).

 




 

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

 


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

 


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

 


“Qualified Subsequent
Financing” means a
Subsequent Financing resulting in cash Qualified Subsequent
Financing Net Proceeds (excluding any amounts paid or payable for
any shares upon the exercise or conversion of any Common Stock
Equivalents issued in such Qualified Subsequent Financing) to the
Company in an amount equal to or greater than the minimum amount of
cash necessary for the Company to effect a Mandatory Redemption of
all, but not less than all, of the entire aggregate then
outstanding principal amount of the Notes, plus accrued but unpaid
interest thereon, Make-Whole Amount, Late Fees, liquidated damages
and other amounts owing in respect thereof through the Mandatory
Redemption Date under the Notes and the other Transaction
Documents, at a cash redemption price equal to the Mandatory
Redemption Amount on the Mandatory Redemption Date, such that all
of the Notes may be so redeemed in full by the Company in
accordance with their terms, including, without limitation, payment
in full of the Mandatory Redemption Amount to the holders of the
Notes.

 


“Qualified Subsequent Financing Net
Proceeds” means, with respect to any Qualified
Subsequent Financing, an amount equal to the difference of (A) the
aggregate gross cash proceeds to the Company from such Qualified
Subsequent Financing, (i) prior to deducting any underwriting
discounts or commissions, any placement agent or other fees and
commissions, and any other offering fees or expenses payable by the
Company in connection with such Qualified Subsequent Financing and
(ii) excluding any amounts paid or payable for any shares of Common
Stock that may be acquired pursuant to the exercise or conversion
of any Common Stock Equivalents sold to the investors in such
Qualified Subsequent Financing, minus (B) all underwriting
discounts and commissions, all placement agent and other fees and
commissions, and all other offering fees or expenses payable by the
Company in connection with such Qualified Subsequent Financing,
including, without limitation, all direct out-of-pocket actual and
estimated professional fees, disbursements and other costs or
expenses incurred by the Company in connection with such Qualified
Subsequent Financing.

 


“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.

 




 

8








 






 


“Person”
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any
kind.

 


“Pre-Notice”
shall have the meaning set forth in Section
7(c).

 


“Purchase
Agreement” means that
certain Securities Purchase Agreement, dated June 20, 2018 between
the Company and the Holder.

 


“Registration Rights
Agreement” means that
certain Registration Rights Agreement between the Company and the
Holder, dated June 20, 2018.

 


“Required Minimum” means,
as of any date, the maximum aggregate number of Conversion Shares
issuable upon Conversion in full of this Note, ignoring any
Conversion limits set forth in Section 4(d), and assuming that the
Fixed Conversion Price is at all times on and after the date of
determination 100% of the Fixed Conversion Price on the Trading Day
immediately prior to the date of determination.

 


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

 


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

 


“Subsequent
Financing” means any
issuance by the Company or any of its Subsidiaries of Common Stock
or Common Stock Equivalents for cash consideration, Indebtedness or
a combination of units thereof.

 


“Subsidiary” means any
subsidiary of the Company as set forth on Schedule 3.1 of the Purchase
Agreement and shall, where applicable, also include any direct or
indirect subsidiary of the Company formed or acquired after the
date hereof.

 


“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
American; the Nasdaq Capital Market; the Nasdaq Global Market; the
Nasdaq Global Select Market; the New York Stock Exchange; any level
of the OTC Markets operated by OTC Markets Group, Inc. or the OTC
Bulletin Board (or any successors to any of the
foregoing).

 




 

9








 






 

Section
2. Interest.

 

a) Payment of Interest in Cash.
The Company shall pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Note at
the rate of 8% per annum, payable monthly, beginning on the first
such date after the Original Issue Date, on each Conversion Date
(as to that principal amount then being converted), on each Company
Optional Redemption Date (as to that principal amount then being
redeemed), on each Holder Optional Redemption Date (as to that
principal amount then being redeemed), on each Event of Default
Redemption Date (as to that principal amount then being redeemed),
on each Mandatory Redemption Date (as to that principal amount then
being redeemed) and on the Maturity Date (each such date, an
“Interest Payment
Date”) (if any Interest Payment Date is not a Business
Day, then the applicable payment shall be due on the next
succeeding Business Day), in cash. If all or any portion of this
Note remains outstanding on or after October 18, 2018 (the
“Make-Whole Trigger
Date”), then, with respect to any principal amount of
this Note being converted or redeemed hereunder on any Conversion
Date, Company Optional Redemption Date, Holder Optional Redemption
Date, Event of Default Redemption Date or Mandatory Redemption Date
(as applicable) that occurs on or after the Make-Whole Trigger Date
and prior to the Maturity Date, and in addition to the amount of
interest payable to the Holder in accordance with the immediately
preceding sentence of this Section 2(a) on such Conversion Date,
Company Optional Redemption Date, Holder Optional Redemption Date,
Event of Default Redemption Date or Mandatory Redemption Date (as
applicable), the amount of interest that would have accrued with
respect to such principal amount of this Note being converted or
redeemed hereunder at the applicable interest rate hereunder for
the period from such applicable Conversion Date, Company Optional
Redemption Date, Holder Optional Redemption Date, Event of Default
Redemption Date or Mandatory Redemption Date through the earlier of
(i) the date that is the six (6) month anniversary of such
applicable Conversion Date, Company Optional Redemption Date,
Holder Optional Redemption Date, Event of Default Redemption Date
or Mandatory Redemption Date and (ii) the Maturity Date (such
additional interest amount, the “Make-Whole Amount”),
shall be guaranteed and shall be accelerated and payable to the
Holder in connection with the conversion or redemption of this Note
on such applicable Conversion Date, Company Optional Redemption
Date, Holder Optional Redemption Date, Event of Default Redemption
Date or Mandatory Redemption Date.

 

b) Interest Calculations. Interest
shall be calculated on the basis of a 360-day year, consisting of
twelve (12) thirty (30) calendar day periods, and shall accrue
daily commencing on the Original Issue Date until payment in full
of the outstanding principal, together with all accrued and unpaid
interest, liquidated damages and other amounts which may become due
hereunder, has been made. Interest hereunder will be paid to the
Person in whose name this Note is registered on the records of the
Company regarding registration and transfers of this Note (the
“Note
Register”).

 

c) Late Fee. All overdue accrued
and unpaid interest to be paid hereunder shall entail a late fee at
an interest rate equal to the lesser of eighteen percent (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.

 


 




 

10








 






 

Section
3. Registration of Transfers and
Exchanges.

 

a) Different Denominations. This
Note is exchangeable for an equal aggregate principal amount of
Note 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 and may be transferred or
exchanged only in compliance with applicable federal and state
securities laws and regulations.

 

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

 

Section
4. Conversion.

 

a) Voluntary
Conversion. At any time after the Original Issue Date until
this Note is no longer outstanding, this Note shall be convertible,
in whole or in part, into shares of Common Stock at the option of
the Holder, at any time and from time to time (subject to the
conversion limitations set forth in Section 4(d) hereof). The
Holder shall effect Conversions by delivering to the Company a
Notice of Conversion, the form of which is attached hereto as
Annex A (each, a
“Notice of
Conversion”), specifying therein the Conversion Amount
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, Late Fees (if
any), Make-Whole Amounts (as applicable) and other amounts payable
in respect of this Note, has been so converted. Conversions
hereunder shall have the effect of lowering the outstanding
principal amount of this Note in an amount equal to 100%
(irrespective of any higher percentage used in calculating the
Conversion Amount hereunder as set forth in the definition of
“Conversion Amount”) of the principal amount of this Note to be
converted in such Conversion. The Holder and the Company shall
maintain a Conversion Schedule showing the principal amount(s)
converted and the date of such Conversion(s). The Company may
deliver an objection to any Notice of Conversion within one (1)
Business Day of delivery of such Notice of Conversion. In the event
of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error.
The Holder, and any assignee by
acceptance of this Note, acknowledge and agree that, by reason of
the provisions of this paragraph, following conversion of a portion
of this Note, the unpaid and unconverted principal amount of this
Note may be less than the amount stated on the face
hereof.

 


 




 

11








 






 

 

b) Conversion Price. The
conversion price in effect on any Conversion Date shall be equal to
$1.89, subject to adjustment as provided in this Note (the
“Fixed 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) Mechanics of
Conversion.

 

i. Conversion Shares Issuable Upon
Conversion of Conversion Amount. The number of Conversion
Shares issuable upon a Conversion of any Conversion Amount
hereunder shall be determined by the quotient obtained by dividing
(x) such Conversion Amount by (y) the Fixed Conversion
Price.

 

ii. Delivery of Certificate Upon
Conversion. Not later than two (2) Trading Days after each
Conversion Date (the “Share Delivery Date”),
the Company shall deliver, or cause to be delivered, to the Holder
a certificate or certificates representing the Conversion Shares
which, on or after the date on which such Conversion Shares are
eligible to be sold under Rule 144 without the need for current
public information and the Company has received an opinion of
counsel to such effect, which such opinion must be acceptable to
the Holder in its sole and absolute discretion (which opinion the
Company shall be responsible for obtaining at its sole cost and
expense) shall be free of restrictive legends and trading
restrictions, representing the number of Conversion Shares being
acquired upon the conversion of this Note. All certificate or
certificates required to be delivered by the Company under this
Section 4(c) shall be delivered electronically through the DTC or
another established clearing corporation performing similar
functions. If the Conversion Date is prior to the date on which
such Conversion Shares are eligible to be sold under Rule 144
without the need for current public information, or there is no
registration statement in effect covering the Conversion Shares,
the Conversion Shares shall bear a restrictive legend in the
following form, as appropriate:

 



“THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT 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.”

 


 




 

12








 






 


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

 

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

 

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

 


 




 

13








 






 

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

 

vi. Reservation of Shares Issuable Upon
Conversion. The Company covenants that it will at all times
reserve and keep available out of its authorized and unissued
shares of Common Stock a number of shares of Common Stock at least
equal to three hundred percent (300%) of the Required Minimum (the
“Reserve
Amount”) for the sole purpose of issuance upon
conversion of this Note 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). 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.

 

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

 




 

14








 






 

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

 

d) Holder’s
Conversion Limitations. The Company shall not effect any
conversion of 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 other Persons acting as a group together with
the Holder or any of the Holder’s Affiliates (such Persons,
“Attribution
Parties”)) 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 and Attribution
Parties 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 or Attribution Parties
and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company subject to a
limitation on conversion or exercise analogous to the limitation
contained herein (including, without limitation, any other Notes)
beneficially owned by the Holder or any of its Affiliates or
Attribution Parties. Except as set forth in the preceding sentence,
for purposes of this Section 4(d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. To the extent
that the limitation contained in this Section 4(d) applies, the
determination of whether this Note is convertible (in relation to
other securities owned by the Holder together with any Affiliates
and Attribution Parties) 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 or Attribution Parties) 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(d), 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 one Trading
Day 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
notice to the Company, may increase or
decrease the Beneficial Ownership Limitation provisions of this
Section 4(d), 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(d) shall continue to apply. Any increase in the
Beneficial Ownership Limitation will not be effective until the
61st
day after such notice is delivered to
the Company. The Beneficial Ownership Limitation provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 4(d) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation contained herein or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Note.

 


 




 

15








 






 

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, this Note), (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, (iii) combines (including by way of
a reverse stock split) outstanding shares of Common Stock into a
smaller number of shares or (iv) issues, in the event of a
reclassification of shares of the Common Stock, any shares of
capital stock of the Company, then the Fixed Conversion Price shall
be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding any treasury shares of
the Company) outstanding immediately before such event, and of
which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made
pursuant to this Section shall become effective immediately after
the record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification.

 

b) [Reserved]

 

c) [Reserved]

 

d) 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).

 


 




 

16








 






 

e) Pro Rata Distributions. While
this Note is outstanding, the Company shall not 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”). In the
event that the Note is repaid at the time of such Distribution, the
Holder shall not be entitled to participate in such Distribution.
If the Holder and the Company mutually agree, and the Note is not
repaid at the time of such Distribution, then 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).

 

f) 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 fifty percent (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 fifty percent (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(d) on the conversion of this Note), the number of
shares of Common Stock of the successor or acquiring corporation or
of the Company, if it is the surviving corporation, and any
additional consideration (the “Alternate
Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Note is
convertible immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 4(d) on the conversion
of this Note). For purposes of any such conversion, the
determination of the Fixed Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one (1)
share of Common Stock in such Fundamental Transaction, and the
Company shall apportion the Fixed Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to
the Alternate Consideration it receives upon any conversion of this
Note following such Fundamental Transaction. The Company shall
cause any successor entity in a Fundamental Transaction in which
the Company is not the survivor (the “Successor
Entity”) to assume in
writing all of the obligations of the Company under this Note and
any document ancillary hereto, in accordance with the provisions of
this Section 5(f) 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.

 


 




 

17








 






 

g) 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.

 

h) Notice to the
Holder.

 

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

 

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

 


 




 

18








 






 

 

i) Subsequent Equity Sales; Variable Rate
Transactions; Other.

 

(1) So long as this
Note remains outstanding, neither the Company nor any Subsidiary
shall, directly or indirectly, issue, enter into any agreement to
issue or publicly announce the issuance or proposed issuance of any
shares of Common Stock or Common Stock Equivalents (or a
combination of units thereof), or recommend to its stockholders the
approval or adoption thereof by such stockholders, without the
prior written consent of the Holder (which consent may be withheld,
delayed or conditioned in the sole discretion of such Holder). The
restrictions contained in this Section 5(i)(1) shall not apply to
(i) an Exempt Issuance or (ii) a Qualified Subsequent Financing,
provided that all Qualified Subsequent Financing Net Proceeds from
such Qualified Subsequent Financing are utilized solely to effect a
Mandatory Redemption of the Notes in accordance with Sections 7(c)
and 7(d) of the Notes, until all of the Notes are so redeemed in
full in accordance with their terms, including, without limitation,
payment in full of the Mandatory Redemption Amount to the holders
of the Notes, and are no longer outstanding.

 

(2) So long as this
Note remains outstanding or the Holder holds any Securities (as
defined in the Purchase Agreement), the Company shall not, directly
or indirectly, amend, modify, waive or alter any terms or
conditions of any Common Stock Equivalents outstanding as of the
date of the Purchase Agreement to decrease the exercise, conversion
and/or exchange price, as applicable, thereunder or otherwise
increase the aggregate number of shares of Common Stock issuable in
connection therewith (other than in connection with stock splits or
combinations).

 

(3) So long as this
Note remains outstanding or the Holder holds any Securities, the
Company and each of its Subsidiaries shall be prohibited from
effecting or entering into (or publicly announcing or recommending
to its stockholders the approval or adoption thereof by such
stockholders) any agreement, plan, arrangement or transaction to
effect, directly or indirectly, any issuance by the Company or any
of its Subsidiaries of Common Stock or Common Stock Equivalents (or
a combination of units thereof) involving a Variable Rate
Transaction, without the prior written consent of the Holder (which
consent may be withheld, delayed or conditioned in the sole
discretion of such Holder). “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,
or effects a transaction under, any agreement, including, but not
limited to, an equity line of credit, an at-the-market offering (as
defined in SEC Rule 415) or a similarly structured transaction,
whereby the Company may issue securities at a future determined
price. Notwithstanding the foregoing, the restrictions contained in
this Section 5(i)(3) shall not apply to (i) an Exempt Issuance or
(ii) a Qualified Subsequent Financing, provided that all Qualified
Subsequent Financing Net Proceeds from such Qualified Subsequent
Financing are utilized solely to effect a Mandatory Redemption of
the Notes in accordance with Sections 7(c) and 7(d) of the Notes,
until all of the Notes are so redeemed in full in accordance with
their terms, including, without limitation, payment in full of the
Mandatory Redemption Amount to the holders of the Notes, and are no
longer outstanding.

 


 




 

19








 






 

 

(4) So long as this
Note remains outstanding or the Holder holds any Securities,
neither the Company nor any Subsidiary shall, directly or
indirectly, effect or enter into (or publicly announce or recommend
to its stockholders the approval or adoption thereof by such
stockholders) any agreement, plan, arrangement or transaction
structured in accordance with, based upon, or related or pursuant
to Section 3(a)(9) or Section 3(a)(l0) of the Securities Act,
without the prior written consent of the Holder (which consent may
be withheld, delayed or conditioned in the sole discretion of such
Holder).

 

(5) So long as this
Note remains outstanding or the Holder holds any Securities, the
Company and each of its Subsidiaries shall be prohibited from,
directly or indirectly, effecting or entering into (or publicly
announcing or recommending to its stockholders the approval or
adoption thereof by such stockholders) any agreement, plan,
arrangement or transaction, including, without limitation, any
Subsequent Placement, that would or would reasonably be expected to
restrict, delay, conflict with or impair the ability or right of
the Company to timely perform its obligations under the Purchase
Agreement or the Notes, including, without limitation, the
obligation of the Company to timely (i) deliver shares of Common
Stock to any holder of the Notes (or a designee thereof, if
applicable) in accordance with the Purchase Agreement or the Notes
and/or (ii) repay in cash all outstanding principal amount of this
Note, plus accrued but unpaid interest thereon, Make-Whole Amount,
Late Fees, liquidated damages and other amounts outstanding under
the Notes at maturity or at any other times when payments are
required to be made in cash pursuant to the terms of the
Notes.

 

(6) The Holder shall be
entitled to obtain injunctive relief against the Company to
preclude any such issuance in this Section 5(i) (without the need
for the posting of any bond or similar item, which the Company
hereby expressly and irrevocably waives the requirement for), which
remedy shall be in addition to any right to collect
damages.

 

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. the Company shall
fail to pay any amount of principal, interest, Make-Whole Amount,
Late Fees, liquidated damages or other amounts as and when the same
shall become due and payable under any of the Notes (whether on a
Conversion Date, Company Optional Redemption Date, Holder Optional
Redemption Date, Event of Default Redemption Date, Mandatory
Redemption Date or the Maturity Date or by acceleration or
otherwise), including, without limitation, any failure to pay any
redemption payments or amounts thereunder, or under any other
Transaction Document (as defined in the Purchase Agreement) or any
other agreement, document, certificate or other instrument
delivered in connection with the transactions contemplated hereby
and thereby, except, in the case of a failure to pay interest,
Make-Whole Amount and Late Fees when and as due, in which case only
if such failure is not cured within three (3) Trading
Days;

 


 




 

20








 






 

 

ii. the Company shall
fail to observe or perform any covenant, provision, or agreement
contained in (A) any of the Notes that is not addressed in clause
(i) above (and other than a breach by the Company of its
obligations to deliver Conversion Shares to the Holder upon
conversion of this Note, which breaches are addressed in clause
(ix) below) or (B) the Purchase Agreement, which failure is not
cured, if possible to cure, within the earlier to occur of (A)
seven (7) Trading Days after notice of such failure sent by the
Holder or by any other Holder to the Company and (B) fifteen (15)
Trading Days after the Company has become or should have become
aware of such failure;

 

iii. (A)
the Company shall fail to observe or perform any covenant,
provision, or agreement contained in, or any default or any event
of default shall occur under, either of the Security Agreement (as
defined in the Purchase Agreement) or the IP Security Agreement (as
defined in the Purchase Agreement) (subject to any grace or cure
period provided in the applicable agreement, document or
instrument), (B) (1) any of the issued and outstanding Series B
Notes shall not have
been (X) fully converted by the holders thereof into shares of
Common Stock that are issued and outstanding on or prior to the
fifteenth (15th) Trading Day
immediately following the Closing Date or (Y) redeemed in full in
cash (all of which has been paid by the Company) and surrendered to
the Company for cancellation, and cancelled by the Company on or
prior to the fifteenth (15th) Trading Day
immediately following the Closing Date, in each case pursuant to
and in accordance with Section 4.25 of the Purchase Agreement, (2)
any amount of principal, interest, late fees or any other amounts
thereunder shall remain outstanding or otherwise payable by the
Company under the terms of the Series B Notes or otherwise after the fifteenth
(15th)
Trading Day immediately following the Closing Date or (3) the
Company of any of its Subsidiaries or Affiliates has any
liabilities or obligations under or with respect to any such Series
B Notes (including any obligation to issue and additional shares of
Common Stock or Common Stock Equivalents thereunder or in respect
thereof), (C) any Person (1) contests
the validity or enforceability of either of the Security Agreement
or the IP Security Agreement, the security interests created
thereunder or the perfection or priority thereof (including,
without limitation, the status of the Notes as senior first lien
secured indebtedness of the Company) or (2) following the
conversion or redemption of the Series B Notes on or prior to the
fifteenth (15) Trading Day immediately following the Closing Date,
makes any claim that such Person has a security interest senior to,
or with priority over, the security interests of the Notes created
under either of the Security Agreement or the IP Security Agreement
or any of the other Transaction Documents, or (D) any
default or event of default occurs with respect to any of the
Transaction Documents, other than this Note, the Security Agreement
and the IP Security Agreement, including, without limitation, any
“Event of Default” (as defined in the other Notes)
under the terms of the other Notes;

 

iv. (A) any
representation or warranty made by the Company or any of its
Subsidiaries in (x) any of the Notes, the Purchase Agreement, the
Security Agreement, the IP Security Agreement, any of the other
Notes or any of the other Transaction Documents, or any written
statement pursuant hereto or thereto, (y) any other mortgage,
credit agreement or other facility, indenture agreement, factoring
agreement or other instrument to which the Company or any of its
Subsidiaries is a party or under which the Company or any of its
Subsidiaries is obligated covered by clause (vi) below, or (z) any
other report, financial statement or certificate made or delivered
to the Holder or any other holder of the Notes shall be untrue or
incorrect in any material respect (except with respect to any
representation or warranty qualified by materiality or material
adverse effect, in which case they shall be untrue or incorrect in
any respect) as of the date when made or deemed made, or (B) any
false or inaccurate certification or statement made or delivered to
the Holder or any other holder of the Notes by or on behalf of the
Company that (x) the Equity Conditions are satisfied or that there
has been no Equity Conditions Failure, (y) as to whether any
Qualified Subsequent Financing has occurred or is expected to
occur, or (z) as to whether any Event of Default has
occurred;

 


 




 

21








 






 

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;

 

vii. the
suspension from trading or quotation of the Common Stock, or the
failure of the Common Stock to be eligible for listing or quotation
on a Trading Market for a period of five (5) consecutive Trading
Days;

 

viii. the
Company does not meet the current public information requirements
under Rule 144(c) under the Securities Act, which failure is not
cured, if possible to cure, within five (5) Trading Days after the
expiration of the applicable grace period permitted under Rule
12b-25 of the Exchange Act, further provided that the Company files
a Form 12b-25 for the relevant report required to meet the current
public information requirements under Rule 144;

 

ix. the Company shall
fail for any reason to deliver certificates to a Holder prior to
the fifth (5th) Trading Day after
a Conversion Date pursuant to Section 4(c), or the Company shall
provide at any time notice to the Holder, including by way of
public announcement, of the Company’s intention to not honor
requests for conversions of this Note in accordance with the terms
hereof;

 

x. the Company shall
fail to remove any restrictive legend on any certificate or any
shares of Common Stock issued to the Holder (or its designee) via
DTC for transfer to a transferee in connection with the resale of
such shares of Common Stock to a transferee following the
conversion of this Note as and when required by this Note or the
Purchase Agreement, unless otherwise then prohibited by applicable
federal securities laws, and any such failure remains uncured for
at least three (3) days;

 

xi. 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), which failure is
not cured, if possible to cure, within five (5) Trading Days after
the expiration of the applicable grace period permitted under Rule
12b-25 of the Exchange Act, further provided that the Company files
a Form 12b-25 for such report;

 

xii. 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 $50,000 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;

 


 




 

22








 






 

 

xiii. the
Company shall fail to maintain the Reserve Amount and such failure
is not cured within five (5) Trading Days;

 

xiv. 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 forty-five (45) calendar
days;

 

xv. the Company shall
fail to obtain all necessary approvals of the sale and issuance of
the Conversion Shares, the Exit Shares (as defined in the Purchase
Agreement) and the Commitment Shares consistent with the rules and
regulations of the principal Trading Market prior to the Closing
Date;

 

xvi. the
electronic transfer by the Company of shares of Common Stock
through the Depository Trust Company or another established
clearing corporation is no longer available or is subject to a
“chill”;

 

xvii. (A)
the Company shall fail to file the Initial Registration Statement
or any additional Registration Statement required under the
Registration Rights Agreement on or prior to the applicable Filing
Date (as defined in the Registration Rights Agreement) therefor in
accordance with the terms of the Registration Rights Agreement, or
(B) the Company shall fail to register all of the Registrable
Securities (as defined in the Registration Rights Agreement) on the
Initial Registration Statement declared effective by the Commission
under the Securities Act on or prior to the Effectiveness Date (as
defined in the Registration Rights Agreement) in accordance with
the terms of the Registration Rights Agreement;

 

xviii. If,
from and after the Effectiveness Date, a Registration Statement (or
the prospectus contained therein) registering all of the
Holder’s Registrable Securities is unavailable to the Holder
for the resale of all of the Holder's Registrable Securities in
accordance with the terms of the Registration Rights Agreement, and
such lapse or unavailability continues for a period of five (5)
consecutive Trading Days or for more than an aggregate of twenty
(20) Trading Days in any 365-day period;

 

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

 

xx. any Change of
Control occurs other than in compliance with Section 5 of the Notes
and Section 4.17 of the Purchase Agreement.

 


 




 

23








 






 

b) Remedies Upon Event of Default.
If an Event of Default occurs with respect to this Note, then, at
the Holder’s election, all or any portion of the outstanding
principal amount of this Note, plus accrued but unpaid interest
thereon, Make-Whole Amount, Late Fees, liquidated damages and other
amounts owing in respect thereof through the Event of Default
Redemption Notice Date, shall accelerate and become immediately due
and payable in cash and shall be redeemed by the Company pursuant
to this Section 6(b) at the applicable Event of Default Redemption
Price. Within three (3) Trading Days of the Company or any of its
Subsidiaries, including any of their respective officers or
directors, becoming aware of the occurrence of an Event of Default
with respect to this Note, the Company shall deliver a written
notice thereof by facsimile or electronic mail to all, but not less
than all, of the holders of Notes (the “Event of Default
Notice”). With respect to an Event of Default with
respect to this Note, at any time after the earlier of (i) the date
on which the Holder received an Event of Default Notice with
respect to such Event of Default (the “Event of Default Notice
Date”) and (ii) the date on which the Holder first
became aware of such Event of Default, the Holder may require the
Company to redeem, on any Trading Day during the period commencing
on the date the Holder first becomes aware of such Event of Default
through and including the sixtieth (60th) Trading Day after
the later of (x) the Event of Default Notice Date and (y) the date
such Event of Default has been cured (the “Event of Default Redemption
Date”), all or any portion of this Note by delivering
written notice thereof (the “Event of Default Redemption
Notice” and the date such Event of Default Redemption
Notice is deemed delivered hereunder, the “Event of Default Redemption Notice
Date”) to the Company, which Event of Default
Redemption Notice shall state (i) the portion of this Note the
Holder is electing to redeem in such Event of Default Redemption
and the total Event of Default Redemption Price to be paid by the
Company to the Holder in cash in such Event of Default Redemption
pursuant to this Section 6(b), (ii) the Event of Default Redemption
Date the Company is required to pay such Event of Default
Redemption Price to the Holder in cash, and (iii) the allocation of
such Event of Default Redemption Price between this Note and any
other Notes held by the
Holder. To the extent redemptions required by this Section 6(b) are
deemed or determined by a court of competent jurisdiction to be
prepayments of this Note by the Company, such redemptions shall be
deemed to be voluntary prepayments. Notwithstanding anything to the
contrary in this Section 6, but subject to Section 4(d), at any
time prior to the date the Event of Default Redemption Price
(together with any Late Charges thereon) is paid in full, the Event
of Default Redemption Price to be paid to the Holder in an Event of
Default Redemption under this Section 6(b) (together with any Late
Charges thereon) may be converted, in whole or in part, by the
Holder, at its option and in its sole discretion, into Common Stock
pursuant to and in accordance with the conversion procedures set
forth in Section 4 hereunder, mutatis mutandis. The Company covenants and agrees that it will
honor all Notices of Conversion tendered from the Event of Default
Redemption Notice Date through the date all amounts owing thereon
are due and paid in full. The portion of the Event of
Default Redemption Price converted by the Holder after the Event of
Default Notice Date shall reduce the Event of Default Redemption
Price required to be paid by the Company to the Holder on the
applicable Event of Default Redemption Date. In the event of the
Company’s redemption of any portion of this Note under this
Section 6(b), the Holder’s damages would be uncertain and
difficult to estimate because of the parties’ inability to
predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for
the Holder. Accordingly, any redemption premium due under this
Section 6(b) is intended by the parties to be, and shall be deemed,
a reasonable estimate of the Holder’s actual loss of its
investment opportunity and not as a penalty. Upon the redemption of
this Note in full by the Holder and the receipt by the Holder of
the total Event of Default Redemption Price therefor, 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 (other
than the Holder’s election to declare such acceleration), 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 of the Event of Default Redemption Price 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 of the Event
of Default Redemption Price pursuant to this Section 6(b). Any
redemption upon an Event of Default shall not constitute an
election of remedies by the Holder, and all other rights and
remedies of the Holder shall be preserved. No such rescission or
annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.

 


 




 

24








 






 

Section
7. Company Optional Redemption; Mandatory
Redemption; Holder Optional Redemption.

 

(a) Company Optional Redemption.
Subject to the provisions of this Section 7(a), at any time after
the Original Issuance Date and provided no Equity Conditions
Failure then exists, the Company shall have the right to redeem
all, but not less than all, of the then outstanding principal
amount of this Note, plus accrued but unpaid interest thereon,
Make-Whole Amount, Late Fees, liquidated damages and other amounts
owing in respect thereof through the Company Optional Redemption
Date (provided, however, that with the prior written consent of the
Holder, which consent may be withheld, delayed or conditioned in
the sole discretion of such Holder, the Company shall have the
right to redeem any portion (which may be less than all) of the
then outstanding principal amount of this Note, plus accrued but
unpaid interest thereon, Make-Whole Amount, Late Fees, liquidated
damages and other amounts owing in respect thereof through the
Company Optional Redemption Date), for
a cash redemption price equal to the Company Optional
Redemption Amount on the
Company Optional Redemption Date (the “Company Optional
Redemption”). The Company may exercise its right to
require redemption under this Section 7(a) by delivering a written
notice thereof by facsimile or electronic mail to all, but not less
than all, of the holders of Notes (the “Company Optional Redemption
Notice” and the date all of the holders of Notes
received such notice is referred to as the “Company Optional Redemption Notice
Date”). The Company may deliver one or more Company
Optional Redemption Notices hereunder and each such Company
Optional Redemption Notice shall be irrevocable. Each such Company
Optional Redemption Notice shall (x) state the date on which the
Company Optional Redemption shall occur (the “Company Optional Redemption
Date”), which date shall not be less than five (5)
Trading Days nor more than twenty (20) Trading Days following the
Company Optional Redemption Notice Date, (y) certify that there has
been no Equity Conditions Failure and (z) state the aggregate
amount of the Notes which are being redeemed in such Company
Optional Redemption from the Holder and all of the other holders of
the Notes pursuant to this Section 7(a) and the total Company
Optional Redemption Amount to be paid by the Company in cash to the
Holder and all of the other holders of the Notes in such Company
Optional Redemption pursuant to this Section 7(a). Notwithstanding
anything herein to the contrary, (i) if no Equity Conditions
Failure has occurred as of the Company Optional Redemption Notice
Date but an Equity Conditions Failure occurs at any time prior to
the Company Optional Redemption Date, (A) the Company shall provide
the Holder a subsequent notice to that effect and (B) unless the
Holder waives the Equity Conditions Failure, the Company Optional
Redemption shall be cancelled and the applicable Company Optional
Redemption Notice shall be null and void and (ii) at any time prior
to the date the Company Optional Redemption Amount (together with
any Late Charges thereon) is paid in full, but subject to Section
4(d), the Company Optional Redemption Amount (together with any
Late Charges thereon) may be converted, in whole or in part, by the
Holder, at its option and in its sole discretion, into Common Stock
pursuant to and in accordance with the conversion procedures set
forth in Section 4 hereunder, mutatis mutandis. The portion of the
Company Optional Redemption Amount converted by the Holder after
the Company Optional Redemption Notice Date shall reduce the
Company Optional Redemption Amount to be paid by the Company to the
Holder on the applicable Company Optional Redemption Date.
The Company covenants and agrees that
it will honor all Notices of Conversion tendered from the time of
delivery of the Company Optional Redemption Notice through the date
all amounts owing thereon are due and paid in full. If the
Company elects to cause an Company Optional Redemption of this Note
pursuant to this Section 7(a), then it must simultaneously take the
same action with respect to all of the other Notes.

 


 




 

25








 






 

(b) Company Optional Redemption
Procedure. The applicable Company Optional Redemption Amount
payable to the Holder pursuant to a Company Optional Redemption
shall be paid by the Company to the Holder in full and in cash on
the applicable Company Optional Redemption Date. Notwithstanding
anything herein contained to the contrary, if any portion of the
applicable Company Optional Redemption Amount (together with any
Late Charges thereon) remains unpaid after the applicable Company
Optional Redemption Date, the Holder may elect, by written notice
to the Company given at any time thereafter, to invalidate such
Company Optional Redemption, ab
initio, and, with respect to the Company’s failure to
honor the Company Optional Redemption, the Company shall have no
further right to exercise such Company Optional
Redemption.

 

(c) Mandatory Redemption. Subject
to the provisions of this Section 7(c), if, at any time after the
Original Issuance Date, the Company proposes to effect a Qualified
Subsequent Financing, then, simultaneously with the closing of such
Qualified Subsequent Financing, all of the outstanding principal
amount of this Note, plus accrued but unpaid interest thereon,
Make-Whole Amount, Late Fees, liquidated damages and other amounts
owing in respect thereof through the Mandatory Redemption Date,
shall accelerate and become immediately due and payable in cash and
shall be redeemed by the Company for a
cash redemption price equal to the Mandatory Redemption
Amount on the Mandatory
Redemption Date (the “Mandatory Redemption”).
At least five (5) Trading Days prior to the closing date of a
Qualified Subsequent Financing, the Company shall deliver a written
notice by facsimile or electronic mail to all, but not less than
all, of the holders of Notes (the “Pre-Notice”), which shall
state (A) that the Company may effect a Subsequent Financing that
would, if consummated, constitute a Qualified Subsequent Financing
as defined in the Purchase Agreement and the Notes, (B) the process
by which any holder of Notes that wishes to receive any additional
information regarding such contemplated transaction may request and
receive such information and (C) certify that the information
contained in such Pre-Notice does not constitute material
non-public information regarding the Company or any of its
Subsidiaries or any of the Company’s securities. After 4:00
p.m, Eastern Time, but prior to 5:00 p.m., Eastern Time, on the
Trading Day immediately preceding the closing date of a Qualified
Subsequent Financing (the “Mandatory Redemption Notice
Date”), the Company shall deliver a written notice by
facsimile or electronic mail to all, but not less than all, of the
holders of Notes (the “Mandatory Redemption
Notice”), which shall state (A) that the Company
intends to complete a Qualified Subsequent Financing as defined in
the Purchase Agreement and the Notes on the Trading Day immediately
following the Mandatory Redemption Notice Date, (B) the gross
proceeds from such Qualified Subsequent Financing, (C) the amount
of Qualified Subsequent Financing Net Proceeds to be received by
the Company at the closing of such Qualified Subsequent Financing,
(D) that the Company shall effect the Mandatory Redemption of all
outstanding Notes pursuant to and in accordance with this Section
7(c) and Section 7(d), (E) the total aggregate Mandatory Redemption
Amount to be paid by the Company in cash in the Mandatory
Redemption to all holders of Notes, (F) the total Mandatory
Redemption Amount to be paid by the Company in cash in the
Mandatory Redemption to the Holder of this Note (which information
shall not be shared with any other holders of Notes), and (F) the
date on which the Mandatory Redemption shall occur, which shall be
no later than one (1) Trading Day following the closing date of
such Qualified Subsequent Financing (the “Mandatory Redemption
Date”). Notwithstanding anything herein to the
contrary, at any time prior to the date the Mandatory Redemption
Amount (together with any Late Charges thereon) is paid in full,
but subject to Section 4(d), the Mandatory Redemption Amount
(together with any Late Charges thereon) may be converted, in whole
or in part, by the Holder, at its option and in its sole
discretion, into Common Stock pursuant to and in accordance with
the conversion procedures set forth in Section 4 hereunder,
mutatis mutandis. The
Company covenants and agrees that it will honor all Notices of
Conversion tendered from the date of delivery of the Mandatory
Redemption Notice through the date all amounts owing thereon are
due and paid in full. The portion of the Mandatory Redemption
Amount converted by the Holder after the Mandatory Redemption
Notice Date shall reduce the Mandatory Redemption Amount to be paid
by the Company to the Holder on the Mandatory Redemption Date.
The Company covenants and agrees that
it will honor all Notices of Conversion tendered from the time of
delivery of the Mandatory Redemption Notice Date through the date
all amounts owing thereon are due and paid in full. To the
extent redemptions required by this Section 7(c) are deemed or
determined by a court of competent jurisdiction to be prepayments
of the Note by the Company, such redemptions shall be deemed to be
voluntary prepayments.

 




 

26








 






 

(d) Mandatory Redemption Procedure.
The applicable Mandatory Redemption Amount payable to the Holder
pursuant to a Mandatory Redemption shall be paid by the Company to
the Holder in full and in cash on the applicable Mandatory
Redemption Date. Notwithstanding anything herein contained to the
contrary, if any portion of the applicable Mandatory Redemption
Amount (together with any Late Charges thereon) remains unpaid
after the applicable Mandatory Redemption Date, the Holder may
elect, by written notice to the Company given at any time
thereafter, to invalidate such Mandatory Redemption, ab initio.

 

(e) Holder Optional Redemption.
Subject to the provisions of this Section 7(e), at any time and
from time to time on or after December 17, 2018 (the
“Holder Optional
Redemption Trigger Date”), the Holder may, at its sole
option and in its sole discretion, require the Company to redeem
all or any portion of the outstanding principal amount of this
Note, plus accrued but unpaid interest thereon, Make-Whole Amount,
Late Fees, liquidated damages and other amounts owing in respect
thereof through the applicable Holder Optional Redemption Date
(each as defined below), for a cash
redemption price equal to the Holder Optional Redemption
Amount on such applicable
Holder Optional Redemption Date (each, a “Holder Optional
Redemption”). The Holder may exercise its right to
require redemption of this Note under this Section 7(e) in whole or
in part at any single time or at multiple times from and after the
Holder Optional Redemption Trigger Date, at its sole option and in
its sole discretion, by delivering (with respect to each such
election by the Holder to require redemption by the Company
hereunder) a written notice by facsimile or electronic mail to the
Company (each, a “Holder Optional Redemption
Notice” and the date such Holder Optional Redemption
Notice is deemed delivered hereunder, each a “Holder Optional Redemption Notice
Date”). Each such Holder Optional Redemption Notice
shall state (i) the portion of this Note the Holder is electing to
require the Company to redeem in such Holder Optional Redemption
and the total Holder Optional Redemption Amount to be paid by the
Company to the Holder in cash in such Holder Optional Redemption
pursuant to this Section 7(e), (ii) the date on which such Holder
Optional Redemption shall occur, which date shall not be less than
five (5) Trading Days following the applicable Optional Redemption
Notice Date (each, a “Holder Optional Redemption
Date”), and (iii) the allocation of such Holder
Optional Redemption Amount between this Note and any other
Notes held by the
Holder. Each portion of this Note subject to redemption pursuant to
this Section 7(e) shall be redeemed by the Company at a price equal
to the Holder Optional Redemption Amount. To the extent redemptions
required by this Section 7(e) are deemed or determined by a court
of competent jurisdiction to be prepayments of this Note by the
Company, such redemptions shall be deemed to be voluntary
prepayments. Notwithstanding anything to the contrary in this
Section 7(e), but subject to Section 4(d), at any time prior to the
date the Holder Optional Redemption Amount (together with any Late
Charges thereon) is paid in full, the Holder Optional Redemption
Amount submitted for redemption under this Section 7(e) (together
with any Late Charges thereon) may be converted, in whole or in
part, by the Holder, at its option and in its sole discretion, into
Common Stock pursuant to and in accordance with the conversion
procedures set forth in Section 4 hereunder, mutatis mutandis. The Company covenants and agrees that it will
honor all Notices of Conversion tendered from the Holder
Optional Redemption Notice Date
through the date all amounts owing thereon are due and paid in
full. The portion of the Holder Optional Redemption Amount
converted by the Holder after the Holder Optional Redemption Notice
Date shall reduce the Holder Optional Redemption Amount required to
be paid by the Company to the Holder on the applicable Holder
Optional Redemption Date.

 


 




 

27








 






 

(f) Holder Optional Redemption
Procedure. The applicable Holder Optional Redemption Amount
payable to the Holder pursuant to a Holder Optional Redemption
shall be paid by the Company to the Holder in full and in cash on
the applicable Holder Optional Redemption Date. Notwithstanding
anything herein contained to the contrary, if any portion of the
applicable Holder Optional Redemption Amount (together with any
Late Charges thereon) remains unpaid after the applicable Holder
Optional Redemption Date, the Holder may elect, by written notice
to the Company given at any time thereafter, to rescind the
applicable Holder Optional Redemption, ab initio.

 

(g) Redemption by Other Holders.
Upon the Company’s receipt of notice from any of the holders
of the other Notes for redemption or repayment as a result of an
event or occurrence substantially similar to the events or
occurrences described in Section 6(b) or Section 7(e) (each, an
“Other Redemption
Notice”), the Company shall immediately, but no later
than one (1) Business Day of its receipt thereof, forward to the
Holder by facsimile a copy of such notice. If the Company receives
an Event of Default Redemption Notice or a Holder Optional
Redemption Notice and one or more Other Redemption Notices, during
the seven (7) Business Day period beginning on and including the
date which is three (3) Business Days prior to the Company’s
receipt of the Holder’s applicable Event of Default
Redemption Notice or applicable Holder Optional Redemption Notice
and ending on and including the date which is three (3) Business
Days after the Company’s receipt of the Holder’s
applicable Event of Default Redemption Notice or applicable Holder
Optional Redemption Notice and the Company is unable to redeem all
principal, interest, Make-Whole Amounts, Late Fees and other
amounts designated in such Event of Default Redemption Notice or
Holder Optional Redemption Notice and such Other Redemption Notices
received during such seven (7) Business Day period, then the
Company shall redeem a pro
rata amount from each holder of the Notes (including the
Holder) based on the principal amount of the Notes submitted for
redemption pursuant to such Event of Default Redemption Notice or
Holder Optional Redemption Notice and such Other Redemption Notices
received by the Company during such seven (7) Business Day
period.

 

Section
8. Negative Covenants. As long as
any portion of this Note remains outstanding, unless the Holder
shall have otherwise given prior written consent (which consent may
be withheld, delayed or conditioned in the sole discretion of such
Holder), the Company shall not, and shall not permit any of the
Subsidiaries to, directly or indirectly:

 

(a) other than
Permitted Indebtedness, enter into, create, incur, assume,
guarantee or suffer to exist any indebtedness for borrowed money of
any kind, including, but not limited to, a guarantee, on or with
respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits
therefrom;

 

(b) other than
Permitted Liens, enter into, create, incur, assume or suffer to
exist any Liens of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom;

 

(c) amend its charter
documents, including, without limitation, its certificate of
incorporation and bylaws, in any manner that materially and
adversely affects any rights of the Holder;

 




 

28








 






 

(d) repay, repurchase
or offer to repay, repurchase or otherwise acquire more than a
de minimis number of shares
of its Common Stock or Common Stock Equivalents other than as to
(i) the Conversion Shares, Commitment Shares or Exit Shares as
permitted or required under the Transaction Documents and (ii)
repurchases of Common Stock or Common Stock Equivalents of
departing officers and directors of the Company, provided that such
repurchases shall not exceed an aggregate of $50,000 for all
officers and directors during the term of this Note;

 

(e) repay, repurchase
or offer to repay, repurchase or otherwise acquire any
Indebtedness, other than the Notes if on a pro-rata basis, other
than regularly scheduled principal and interest payments as such
terms are in effect as of the Original Issue Date, provided that
such payments shall not be permitted if, at such time, or after
giving effect to such payment, any Event of Default exist or
occur;

 

(f) pay cash dividends
or distributions on any equity securities of the
Company;

 

(g) enter into any
transaction with any Affiliate of the Company which would be
required to be disclosed in any public filing with the Commission,
unless such transaction is made on an arm’s-length basis and
expressly approved by a majority of the disinterested directors of
the Company (even if less than a quorum otherwise required for
board approval); or

 

(h) enter into any
agreement with respect to any of the foregoing.

 

Section
9. 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 email or
facsimile, or sent by a nationally recognized overnight courier
service, addressed to the Company at 1700 E. 68th Avenue, Denver,
Colorado 80229, or such other address, facsimile number, or email
address as the Company may specify for such purposes by notice to
the Holder delivered in accordance with this Section 9(a), with a
copy in writing and delivered personally, by email or facsimile, or
sent by a nationally recognized overnight courier service,
addressed to Sichenzia, Ross, Ference & Kesner, Attn: Gregory
Sichenzia, 1185 Avenue of the Americas, 37th Floor, New York,
New York 10036. Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by email or facsimile, or sent by
a nationally recognized overnight courier service addressed to each
Holder at the email address, facsimile number, or address of the
Holder appearing on the books of the Company, or if no such email
address, facsimile number, or address appears on the books of the
Company, at the principal place of business of such Holder. Any
notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest (i) the date of
transmission, if such notice or communication is delivered via
facsimile or email at the facsimile number or email address set
forth on the signature pages attached hereto prior to 12:00 p.m.
(New York City time) on any date, (ii) the next Trading Day after
the date of transmission, if such notice or communication is
delivered via facsimile or email at the facsimile number or email
address set forth on the signature pages attached hereto on a day
that is not a Trading Day or later than 12:00 p.m. (New York City
time) on any Trading Day, (iii) the second Trading Day following
the date of mailing, if sent by U.S. nationally recognized
overnight courier service or (iv) upon actual receipt by the party
to whom such notice is required to be given.

 


 




 

29








 






 

(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.

 

(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.

 

(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.

 


 




 

30








 






 

(f) Amendments. The prior written
consent of the Holder (which consent may be withheld, delayed or
conditioned in the sole discretion of such Holder) shall be
required for any change or amendment to this Note.

 

(g) 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.

 

(h) 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.

 

(i) 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.

 


 




 

31








 






 

(j) Payment of Collection, Enforcement and
Other Costs. If (i) this Note is placed in the hands of an
attorney for collection or enforcement or is collected or enforced
through any legal proceeding or the Holder otherwise takes action
to collect amounts due under this Note or to enforce the provisions
of this Note or (ii) there occurs any bankruptcy, reorganization,
receivership of the Company or other proceedings affecting Company
creditors’ rights and involving a claim under this Note, then
the Company shall pay the reasonable and documented out-of-pocket
costs incurred by the Holder for such collection, enforcement or
action or in connection with such bankruptcy, reorganization,
receivership or other proceeding, including, but not limited to,
reasonable attorneys’ fees and disbursements.

 

(k) 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]

 




 

32








 






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.

 



NEW AGE BEVERAGES CORPORATION


 


By: /s/
Brent Willis

 



Name: Brent Willis

 



Title: Chief Executive Officer

 



Facsimile No. for delivery of Notices:

 

 




 





33








 










 



ANNEX A

 



NOTICE OF CONVERSION

 


The
undersigned hereby elects to convert principal under the Senior
Secured Convertible Promissory Note, due June 20, 2019 of New Age
Beverages Corporation, a Washington corporation (the
“Company”), into shares of
common stock of the Company (the “Common Stock”), according
to the conditions hereof, as of the date written below. If shares
of Common Stock are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in
accordance therewith. No fee will be charged to the holder for any
conversion, except for such transfer taxes, if any.

 


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

 


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

 



Conversion calculations:

 


Date
to Effect Conversion:

 


Principal
Amount of Note to be Converted:

 


Payment
of Interest in Common Stock __ Yes __ No

 


If
Yes, $_____ of Interest Accrued on Account of Conversion at Issue
and Accrued and Unpaid Late Charges.

 


If
Yes, $_____ of Make-Whole Amount on Account of Conversion at
Issue

 


Number
of Shares of Common Stock to be Issued:

 




Signature:                                                      







 



           
           
           
           
           
           
        Name:


 



                                                                               
Delivery Instructions:


 

 




 

34








 







Schedule 1

 



CONVERSION SCHEDULE

 



This Senior Secured Convertible Promissory Note, due June 20, 2019,
in the original principal amount of $4,750,000 is issued by New Age
Beverages Corporation, a Washington 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 ofConversion

	


AggregatePrincipalAmountRemainingSubsequent toConversion(or
originalPrincipalAmount)

	


Company Attest


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 






 




 

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