EX-10.2



 EXHIBIT 10.2 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAS 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”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT, OR APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION THEREFROM, 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. 
 XENONICS HOLDINGS, INC.

FORM OF CONVERTIBLE SENIOR SECURED NOTE 
  

			
	No. S2014-            	  	                        , 2014
		
		  	U.S.$                        

 1. Convertible Note. 

This Convertible Senior Secured Note is one of a duly authorized series of Convertible Senior Secured Notes (individually, the
“Convertible Note” and collectively, the “Convertible Notes”) of Xenonics Holdings, Inc., a Nevada corporation (the “Company”). The Convertible Notes are similar in terms except for dates,
principal amounts and named payees and are being issued pursuant to a Subscription Agreement of various dates (the “Subscription Agreement”) entered into by and between the Company and the signatories thereto under which the Company
is offering to sell up to an aggregate principal amount of $1,000,000 of Convertible Notes thereunder. By its acceptance of this Convertible Note, each Holder agrees to be bound by the terms of the Subscription Agreement. The Convertible Notes are
secured obligations of the Company, to the extent provided for in the Security Agreement dated as of the date of the Subscription Agreements (the “Security Agreement”) entered into among the Company and the holders of the
Convertible Notes, and are pari passu in right of payment, collection and priority of secured interest to the Prior Notes (as defined in the Security Agreement) of the Company. This Convertible Note is a direct obligation of the
Company and ranks pari passu with all other Convertible Notes now or hereafter issued in accordance with the Subscription Agreement under the terms set forth herein. 

Capitalized terms used and not otherwise defined herein, shall have the respective meanings given to those terms in Section 10
hereof. 







 2. Principal and Interest. 

(a) The Company for value received, hereby promises to pay to
                                        , or its
registered assigns (the “Holder”) on             , 2017 (the “Maturity Date”), (i) the principal sum of
                    DOLLARS (U.S. $            .00) and (ii) all accrued and unpaid
interest thereon. Notwithstanding the foregoing, however, the Company’s payment obligations hereunder may be accelerated in accordance with the redemption rights, as provided in Section 6 below, or in the Event of Default (as
defined in Section 8). Interest is payable on each date specified therefor in Section 2(c) below or on the date of redemption (if any) at the then-current Interest Rate in cash. Payment of the principal of this Convertible
Note shall be made upon the surrender of this Convertible Note to the Company, at its chief executive office (or such other office within the United States as shall be designated by the Company to the Holder hereof) (the “Designated
Office”), in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Payment of principal (and premium, if any), interest and all other amounts
payable with respect to the Convertible Notes shall be made by U.S. dollar check mailed to the address of the Holder entitled thereto as such address shall appear in the Subscription Agreement. Payments of principal and interest shall be deemed made
on the date such payment is deposited or, if mailed, on the date deposited in the mail with proper postage and addressed to the Holder and the address as shown on the records of the Company, or such other address as provided to the Company in
writing by the Holder. In the event that the date for the payment of any amount payable under this Convertible Note falls due on a Saturday, Sunday or public holiday under the laws of the State of California, the time for payment of such amount
shall be extended to the next succeeding Business Day and Interest shall continue to accrue on any principal amount so effected until the payment thereof on such extended due date. 

(b) Payment of Interest. This Convertible Note shall bear simple interest at the rate of 13% per annum (the “Interest
Rate”). Interest on the unconverted and then outstanding principal amount of this Convertible Note shall be calculated on the basis of a 360-day year and shall accrue daily commencing on the original issue date of this Convertible Note
until the earlier of (i) payment in full of the principal sum hereon, together with all accrued and unpaid interest has been made or (ii) this Convertible Note has been converted in full. Interest shall cease to accrue with respect to any
principal amount of Convertible Notes that are converted or repaid. Interest is payable semi-annually on September 30th and March 30th of each year during which this Convertible Note is outstanding, to the holder of the Convertible Notes
on such date and on each Conversion Date (as defined herein) and on the Maturity Date (each such date, an “Interest Payment Date”), in cash. 

3. Conversion. 
 (a)
General. The Holder shall have the right, in accordance with the terms hereof, to convert the principal amount, and any accrued and unpaid interest thereon, of this Convertible Note into shares of Common Stock (“Conversion
Shares”). Except as provided below, the Holder may exercise such conversion rights at any time and from time to time prior to the Maturity Date and prior to the redemption (if any) of this Convertible Note, upon no less than 15 days’
written notice by the Holder to the Company. The Holder may convert all or a portion of the principal amount of outstanding Convertible Notes, and any accrued and unpaid interest thereon, into Conversion Shares at a conversion rate equal to $0.07
per share (the “Conversion Rate”). In calculating the number of Conversion Shares to be issued to the Holder, such number shall be rounded down to the nearest whole number. The Company shall not issue any fractional Conversion
Shares under any circumstances, but shall pay to the Holder any cash amounts in respect of the value of any fractional Conversion Shares that may have been issuable in the absence of the aforementioned prohibition. 

  
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 (b) Number of Conversion Shares. The number of Conversion Shares issuable upon conversion
of this Convertible Note shall be determined by dividing the principal amount of this Convertible Note, or the part of the principal amount to be converted, plus the accrued but unpaid interest, by the Conversion Rate in effect on the Conversion
Date (as defined in subparagraph (c)(2) below). To convert this Convertible Note, at any time and from time to time prior to the Maturity Date and prior to redemption (if any), upon no less than 15 days’ written notice by the Holder
to the Company, the Holder shall send by facsimile (or otherwise deliver) a copy of the fully executed conversion notice in the form attached as Exhibit A hereto (the “Conversion Notice”) to the Company and shall contain a
completed schedule in the form of Schedule 1 to the Conversion Notice (as amended on each Conversion Date, the “Conversion Schedule”) reflecting the remaining principal amount of this Convertible Note and all accrued and unpaid
interest thereon subsequent to the conversion at issue. The Holder shall surrender or cause to be surrendered this Convertible Note as soon as practicable thereafter to the Company, and pay any transfer taxes or other applicable taxes or
duties, if required. The Company shall not be obligated to issue shares of Common Stock upon a conversion unless either this Convertible Note is delivered to the Company as provided above, or the Holder notifies the Company that this
Convertible Note has been lost, stolen or destroyed and delivers the documentation to the Company required by Section 11(c)(3) hereof. 

(c) Issuance of Conversion Shares. As promptly as practicable on or after the Conversion Date, and in no event more than seven
(7) business days after receipt of the Conversion Notice, the Company shall cause to be issued and delivered to the Holder or its nominee that number of shares of Common Stock issuable upon conversion of the portion of this Convertible Note
being converted. The Company shall deliver to the Holder physical certificates representing the Common Stock issuable upon conversion. The Holder is not entitled to any rights of a holder of Common Stock until this Convertible Note has
been converted into Common Stock. 
 (1) This Convertible Note shall be deemed to have been converted immediately prior to the close of
business on the day that the Holders delivers notice to the Company in accordance with the foregoing provisions (such day, the “Conversion Date”), and at such time the rights of the Holder of this Convertible Note as the Holder
hereof shall cease, and the Person or Persons entitled to receive the shares of Common Stock issuable upon conversion shall be deemed to be a stockholder of record on the Conversion Date; provided, however, that no surrender of this
Convertible Note on any date that is not a Business Day shall be effective to constitute the person or persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such
date, but such surrender shall be effective to constitute the person or persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding Business Day. If
the Holder converts more than one Convertible Note at the same time, the number of shares of Common Stock issuable upon the conversion shall be based on the aggregate principal amount of Convertible Notes converted. 

(2) If the Holder elects to convert less than the entire aggregate principal amount outstanding of this Convertible Note, the Company shall
issue to the Holder a new Convertible Note, duly executed by the Company, in form and substance identical to this Convertible Note surrendered by the Holder, for the balance of the aggregate principal amount of this Convertible Note that has not
been so converted. 

  
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 (d) Adjustment of Conversion Rate. The Conversion Rate will be subject to adjustments
from time to time as follows: 
 (1) In case the Company shall hereafter pay a dividend or make a distribution to all holders of the
outstanding Common Stock in shares of Common Stock, the Conversion Rate in effect at the opening of business on the day following the Conversion Record Date shall be reduced by multiplying such Conversion Rate by a fraction: (A) the numerator
of which shall be the number of shares of Common Stock outstanding at the close of business on the Conversion Record Date fixed for the determination of the holders entitled to such dividend or distribution; and (B) the denominator of which
shall be the sum of such number of shares referred to in (A) above and the total number of shares constituting such dividend or other distribution. Such reduction in the Conversion Rate shall become effective immediately after the opening of
business on the day following the Conversion Record Date. If any dividend or distribution of the type described in this Section 3(e)(1) is declared but not so paid or made, the Conversion Rate shall again be adjusted to the
Conversion Rate that otherwise would then be in effect if such dividend or distribution had not been declared. 
 (2) In case the
outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Rate in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be
proportionately reduced, and conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Conversion Rate in effect at the opening of business on the day following the day upon
which such combination becomes effective shall be proportionately increased, such reduction or increase, as applicable, to become effective immediately after the opening of business on the day following the day upon which such subdivision or
combination becomes effective. 
 (3) (A) In case the Company shall, by dividend or otherwise, distribute to all or substantially all
holders of its Common Stock shares of any class of Capital Stock of the Company (other than any dividends or distributions to which Section 3(e)(1) applies) or evidences of its indebtedness, cash or other assets, including securities,
but excluding dividends or distributions of stock, securities or other property or assets (including cash) in connection with a reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance to which
Section 3(f) applies (such Capital Stock, evidences of its indebtedness, cash, other assets or securities being distributed hereinafter in this Section 3(e)(3) called the “Distributed Assets”), then, in each
such case, the Conversion Rate shall be reduced so that the same shall be equal to the price determined by multiplying the Conversion Rate in effect immediately prior to the close of business on the Conversion Record Date with respect to such
distribution by a fraction: (i) the numerator of which shall be the Fair Market Value of the Common Stock of the Company on such date less the fair market value (as determined by the Board of Directors, whose determination shall be conclusive
and set forth in a Board resolution) on such date of the portion of the Distributed Assets so distributed applicable to one share of Common Stock (determined on the basis of the number of shares of Common Stock outstanding on the Conversion Record
Date); and (ii) the denominator of which shall be such Fair Market Value of the Common Stock of the Company on such date. 
 (B) Such
reduction in the Conversion Rate shall become effective immediately prior to the opening of business on the day following the Conversion Record Date. However, in the event that the then fair market value (as so determined) of the portion of the
Distributed Assets so distributed applicable to one share of Common Stock is equal to or greater than the Fair Market Value on the Conversion Record Date, in lieu of the foregoing adjustment, adequate provision shall be made so that the Holder of
this Convertible Note shall have the right to receive upon conversion hereof (or any portion hereof) the amount of Distributed Assets the Holder would have received had the Holder converted this Convertible Note (or portion hereof) immediately prior
to such Conversion Record Date. In the event that such dividend or distribution is not so paid or made, the Conversion Rate shall again be adjusted to be the Conversion Rate that otherwise would then be in effect if such dividend or
distribution had not been declared. 

  
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 (4) Adjustment of Conversion Rate upon Issuance of Common Stock, Options, Convertible
Securities, Etc. 
 (A) If prior to the Maturity Date (or any Conversion Date or Redemption Date, if applicable), the Company
(i) issues or sells any Common Stock, Convertible Securities, warrants, or Options or (ii) directly or indirectly effectively reduces the conversion, exercise or exchange price for any Convertible Securities or Options which are currently
outstanding, at or to an effective Per Share Selling Price (as defined below) which is less than the then-current Conversion Rate, then in each such case the Conversion Rate in effect immediately prior to such issue or sale date, as applicable,
shall be automatically reduced effective concurrently with such issue or sale to an amount determined by multiplying the Conversion Rate then in effect by a fraction, (x) the numerator of which shall be the sum of (1) the number of shares
of Common Stock outstanding immediately prior to such issue or sale, plus (2) the number of shares of Common Stock which the aggregate consideration received by the Company for such additional shares would purchase at such Conversion Rate and
(y) the denominator of which shall be the number of shares of Common Stock of the Company outstanding immediately after such issue or sale. Notwithstanding the foregoing, however, no adjustment hereunder shall be made with respect to an Exempt
Issuance, as defined below. 
 (B) For the purposes of the foregoing adjustment, in the case of the issuance of any Convertible Securities
or Options, the maximum number of shares of Common Stock issuable upon exercise, exchange or conversion of such Convertible Securities or Options shall be deemed to be outstanding at the initial conversion or exercise price applicable to such
securities, provided that no further adjustment shall be made upon the actual issuance of Common Stock upon exercise, exchange or conversion of such Convertible Securities or Options, and provided further that to the extent such Convertible
Securities or Options expire or terminate unconverted or unexercised, then at such time the Conversion Rate shall be readjusted as if such portion of such Convertible Securities or Options had not been issued. For purposes of this
Section 3(e)(4), if an event occurs that triggers more than one of the above adjustment provisions, then only one adjustment shall be made and the calculation method which yields the greatest downward adjustment in the Conversion Rate
shall be used. If shares are issued for a consideration other than cash, the Per Share Selling Price shall be the fair value of such consideration as determined in good faith by independent certified public accountants mutually acceptable to the
Company and the Holder. In the event the Company directly or indirectly effectively reduces the conversion, exercise or exchange price for any Convertible Securities or Options which are currently outstanding, then the Per Share Selling Price shall
equal such effectively reduced conversion, exercise or exchange price. 

  
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 (C) As used herein, “Exempt Issuance” means the issuance of (i) shares of
Common Stock or Options or Convertible Securities to employees, officers, consultants, service providers or directors of the Company approved by a majority of the non-employee members of the Board of Directors or a majority of the members of a
committee of non-employee directors established for such purpose an in effect as of June 1, 2014, (ii) Common Stock, Convertible Securities, warrants, or Options (1) upon the exercise or exchange of or conversion of any securities
issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding as of the date of the Subscription Agreement, or (2) pursuant to other rights or agreements binding on
the Company as of the date of the Subscription Agreement; provided that such securities have not been amended since the date of the Subscription Agreement to increase the number of such securities or to decrease the exercise price, exchange price or
conversion price of such securities; (iii) shares of Common Stock issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock; (iv) shares of Common Stock, Convertible Securities, warrants or
Options in connection with transactions with vendors, suppliers, lenders or other commercial partners, the terms of which are approved by the Board of Directors, and in each case, the primary purpose of which is not to raise equity capital;
(v) shares of Common Stock, Convertible Securities, warrants or Options in connection with transactions pursuant to which the Company transfers or assigns liabilities, claims or contract rights; (vi) shares of Common Stock, Convertible
Securities, warrants or Options issued pursuant to mergers, acquisitions, asset sales or strategic alliances approved by a majority of the disinterested directors of the Company, provided that any such issuance shall provide to the Company
additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising equity capital; and (vii) shares of Common Stock, issued pursuant to
the Subscription Agreement. 
 (D) For purposes hereof: (i) “Convertible Securities” means any stock or securities
(other than Options) directly or indirectly convertible into or exercisable or exchangeable for Common Stock; (ii) “Options” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible
Securities; and (iii) “Per Share Selling Price” shall include the amount actually paid by third parties for each share of Common Stock in a sale or issuance by the Company. A sale of shares of Common Stock shall include the
sale or issuance of Convertible Securities or Options, and in such circumstances the Per Share Selling Price of the Common Stock covered thereby shall also include the exercise, exchange or conversion price thereof (in addition to the consideration
received by the Company upon such sale or issuance less the fee amount as provided above). 
 (5) No adjustment in the Conversion Rate shall
be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this Section 3(e)(5) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All calculations under this Section 3 shall be made by the Company in good faith and shall be made to the nearest cent or to the nearest one hundredth of a share,
as applicable. No adjustment need be made for a change in the par value or no par value of the Common Stock. 
 (6) Whenever the
Conversion Rate is adjusted as provided in Section 3(e), the Company shall compute the adjusted Conversion Rate in accordance with Section 3(e) and shall prepare a certificate signed by an officer of the Company setting forth
the adjusted Conversion Rate and showing in reasonable detail the facts upon which such adjustment is based, and shall promptly deliver such certificate to the Holder of this Convertible Note. For purposes of this Section 3(e), the
number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The
Company will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. 

  
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 (7) For purposes hereof: 

(A) “Conversion Record Date” shall mean, with respect to any dividend, distribution or other transaction or event in which
the holders of Common Stock have the right to receive any cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the
date fixed for determination of stockholders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors or by statute, contract or otherwise). 

(B) “Fair Market Value” shall mean the average of the daily Trading Prices per share of Common Stock (or such other security
as specified herein) for the 10 consecutive Trading Days immediately prior to the date in question. 
 Notwithstanding the foregoing,
whenever successive adjustments to the Conversion Rate are called for pursuant to this Section 3(e), such adjustments shall be made to the Fair Market Value as may be necessary or appropriate to effectuate the intent of this
Section 3(e) and to avoid unjust or inequitable results as determined in good faith by the Board of Directors. 
 (f)
Adjustments for Reclassifications, Mergers, Sales of Assets and Other Business Combinations or Transactions. If any of following events occur: (1) any reclassification or change of the outstanding shares of Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), as a result of which holders of Common Stock shall be entitled to receive Capital Stock, securities or other
property or assets (including cash) with respect to or in exchange for such Common Stock; (2) any merger, consolidation, statutory share exchange or combination of the Company with another Person as a result of which holders of Common Stock
shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock; or (3) any sale or conveyance of the properties and assets of the Company as, or substantially as,
an entirety to any other Person as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock, then the Company or the
successor or purchasing corporation, as applicable, shall provide that this Convertible Note shall be convertible into the kind and amount of shares of capital stock and other securities or property or assets (including cash) that such Holder would
have been entitled to receive upon such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance had this Convertible Note been converted into Common Stock immediately prior to such reclassification,
change, merger, consolidation, statutory share exchange, combination, sale or conveyance assuming the Holder, as a holder of Common Stock, did not exercise its rights of election, if any, as to the kind or amount of securities, cash or other
property receivable upon such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance and that the rights of the Holder to convert this Convertible Note for adjustments thereafter shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section 3. The above provisions of this Section shall apply to successive or series of related reclassifications, changes, mergers, consolidations,
statutory share exchanges, combinations, sales and conveyances. 
 (g) Notices of Proposed Adjustments. In case at any time after the
date hereof: 
 (1) the Company shall declare a dividend (or any other distribution) on its Common Stock that would result in an
adjustment to the Conversion Rate pursuant to this Section 3; 
 (2) there shall occur any reclassification of the Common
Stock of the Company (other than a subdivision or combination of its outstanding Common Stock, a change in par value, a change from par value to no par value or a change from no par value to par value), or any merger, consolidation, statutory share
exchange or combination to which the Company is a party and for which approval of any stockholders of the Company is required, or the sale, transfer or conveyance of all or substantially all of the assets of the Company; or 

  
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 (3) there shall occur the voluntary or involuntary dissolution, liquidation or winding up of the
Company; 
 the Company shall cause to be provided to the Holder of this Convertible Note, at least 10 days prior to the applicable record or effective date
hereinafter specified, a notice stating: (A) the date on which a record is to be taken for the purpose of such dividend or distribution, or, if a record is not to be taken, the date as of which the holders of shares of Common Stock of record to
be entitled to such dividend or distribution are to be determined; or (B) the date on which such reclassification, merger, consolidation, statutory share exchange, combination, sale, transfer, conveyance, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such
reclassification, merger, consolidation, statutory share exchange, sale, transfer, dissolution, liquidation or winding up. Neither the failure to give such notice nor any defect therein shall affect the legality or validity of the proceedings or
actions described in Sections 3(g)(1) through 3(g)(3). 
 (h) Availability of Conversion Shares. The Company shall at all times
reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of this Convertible Note, the full number of shares of Common Stock then issuable upon the
conversion of this Convertible Note. The Company covenants that all shares of Common Stock that may be issued upon conversion of this Convertible Note will upon issue be fully paid and nonassessable. 

(i) Taxes. Except as provided in the next sentence, the Company will pay any and all taxes (other than taxes on income) and duties that
may be payable in respect of the issue or delivery of Common Stock upon conversion of this Convertible Note. The Company shall not, however, be required to pay any tax or duty that may be payable in respect of any transfer involved in the issue
and delivery of Common Stock in a name other than that of the Holder of this Convertible Note, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Company the amount of any such tax or duty,
or has established to the satisfaction of the Company that such tax or duty has been paid. 
 (j) Registration Rights;Sales under Rule
144. The Company shall not be required to undertake or cause the registration of the shares of Common Stock issuable upon the conversion of this Convertible Note. For so long as principal or interest under this Convertible Note remain due and
owing, the Company shall (i) make all periodic and other filings required to be made by it from time to time under the Securities and Exchange Act of 1934 and the rules and regulations promulgated thereunder in order to preserve its status as a
“reporting issuer” with the meaning of SEC Rule 144 and (ii) provide at its cost and expense, in a timely manner, for and on behalf of holders of Conversion Shares any and all opinions of counsel as may be required of the
Company’s stock transfer agent to allow for the resale of the Conversion Shares pursuant to SEC Rule 144. 

  
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 4. Prepayment/Redemption. 

(a) At any time and from time to time on a date commencing on the first year anniversary date and ending on a date prior to the Maturity Date,
upon no less than 30 days’ written notice by the Company to the Holder (the “Redemption Notice”), the Company may elect, in its sole option, to redeem all or a portion of the then outstanding Convertible Notes by payment of the
Redemption Amount (defined below) (the “Redemption Amount”). The last day of such notice day period shall be the “Redemption Date” unless such date shall not be a Business Day, in which event, the Redemption Date
shall be first Business Day following the expiration of such notice period. The Redemption Amount is due in full on the Redemption Date. Within 15 days from the date of the Redemption Notice, the Holder may exercise the conversion feature of the
Convertible Notes that are the subject of the Redemption Notice, by providing written notice to the Company of such Holder’s intention to exercise such conversion feature. The Conversion Shares underlying such Convertible Notes shall be issued
by the Company on or prior to the 10th day following the date of the Holder’s notice of intention to exercise such conversion feature. The Company covenants and agrees that it will honor all
Notices of Conversion tendered from the time of delivery of the Redemption Notice through the date all amounts owing thereon are due and paid in full. 

(b) As used herein, “Redemption Amount” means either (i) for any redemption for which the Redemption Date shall be on or
before the second year anniversary of the original issue date of this Convertible Note, the Redemption Amount shall be equal to 110% of the principal amount thereof, plus the unpaid interest which has accrued on the principal of the outstanding
Convertible Notes up to and including the day immediately preceding the Redemption Date or (ii) for any redemption for which the Redemption Date shall be after the second year anniversary of the original issue date of this Convertible Note, the
Redemption Amount shall be equal to 100% of the principal amount thereof, plus the unpaid interest which has accrued on the principal of the outstanding Convertible Notes up to and including the day immediately preceding the Redemption Date. 

5. Seniority and Security. 

(a) Seniority of Note. The Convertible Notes shall rank pari passu with all other Prior Notes and senior to all unsecured Indebtedness
of the Company. This Convertible Note is issued subject to the provisions of this Section 5 and each person taking or holding this Convertible Note, accepts and agrees to be bound by these provisions. Accordingly, the indebtedness
evidenced by this Convertible Note is hereby expressly in right of payment to the prior payment of all other Indebtedness. The Holder will not demand or receive from the Company (and Company will not pay to the Holder) all or any part of the
Convertible Note, by way of payment, prepayment, setoff, lawsuit or otherwise, nor will the Holder exercise any remedy with respect to any of the collateral secured by the Senior Indebtedness, nor will the Holder commence, or cause to commence,
prosecute or participate in any administrative, legal or equitable action against the Company, except in accordance with the Security Agreement. Notwithstanding the foregoing, the Holder shall be entitled to receive cancellation of indebtedness
hereunder in consideration of the conversion of such indebtedness into securities of the Company pursuant to the terms of this Convertible Note. Nothing in this section shall prohibit the Holder from converting all or any part of the Convertible
Note into equity securities of the Company. The Company and the Holder further agree that neither the Company nor the Holder will modify this Section 5 without the prior consent of holders of a Majority in Interest of the Convertible
Notes. 

  
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 (b) Security Interest. As security for the full, prompt and complete payment and
performance of the Company’s obligations hereunder, the Company hereby grants to the Holder of this Convertible Note, equally and ratably with the security interests granted to the other Holders of other Convertible Notes issued under the
Subscription Agreements, a security interest in and to the Collateral (as collectively defined in that certain Security Agreement) pursuant to the Security Agreement. Provided that proper filing is made in accordance with the Uniform Commercial Code
and as otherwise expressly set forth herein, the Company hereby represents and warrants that Holder shall, and during such time as this Convertible Note remains outstanding, have a valid, perfected first priority security interest in the Collateral.

 (c) Intercreditor Agreement. Each Holder of this Convertible Note and the rights granted hereunder and under the Security Agreement, shall
be subject to the terms and conditions of the Intercreditor Agreement of even date herewith between the Company, the holders of Prior Debt and the Holder. Pursuant to the terms of the Intercreditor Agreement, among other things, the Holder and the
Company agree: 
 (i) So long as the Company remains current in its interest payments to the New Secured Parties under the
Notes, the Company may pay interest to the Existing Secured Parties (as defined in the Intercreditor Agreement) under the Existing Secured Notes (as defined in the Intercreditor Agreement); 

(ii) So long as the Company generates (a) at least $1,000,000 of revenue during any fiscal quarter of the Company, and
(b) positive EBITDA (as defined in the Intercreditor Agreement) during such quarter, the Company may, in its discretion, pay down the principal balance under the Existing Secured Notes within 45 days after the end of any such quarter in an
amount not to exceed 25% of such positive EBITDA on a cumulative basis; 
 (iii) provided, however, that no principal
payments may be made unless the Company has free cash of at least $200,000. 
 (d) Consent to Appointment of Agent. Each Holder of
this Convertible Note consents to the appointment of Sandlapper Securities LP as the agent in the Security Agreement and Intercreditor Agreement, and any successor to the initial agent, for the purposes of exercising the rights and remedies of the
Holders as set forth in the Security Agreement and the Intercreditor Agreement. 
 6. Events of Default. 

(a) “Event of Default”, wherever used herein, means any one of the following events (whatever the reason for such Event
of Default and whether it shall be voluntary or involuntary or be 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): 

(1) the Company defaults in the payment of the principal or interest (a “Defaulted Payment”) on this Convertible Note
when the same becomes due and payable, and such default continues for a period of 30 days after written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company by the holders of at least a Majority in
Interest of the outstanding Convertible Notes; 
 (2) the Company fails to perform or observe any other term, covenant or agreement
contained in this Convertible Note or the Security Agreement or Intercreditor Agreement, and the default continues for a period of 30 days after written notice of such failure, requiring the Company to remedy the same, shall have been given to the
Company by the holders of at least a Majority in Interest of the outstanding Convertible Notes; 

  
 10 








 (3) a default by the Company in the conversion of any of the Convertible Notes, which
default continues for a period of 15 days after written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company by the holders of at least a Majority in Interest of the outstanding Convertible Notes;

 (4) any proceeding under any applicable U.S. federal or state bankruptcy, insolvency, reorganization or other similar law relating to the
Company or to all or any material part of its properties is instituted against the Company without its consent and continues undischarged or unstayed for ninety (90) calendar days, or any order for relief is entered in any such proceeding or
there is an entry by a court having competent jurisdiction of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable U.S. federal or state bankruptcy, insolvency, reorganization or
other similar law or (B) a decree or order adjudging the Company bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company, under any
applicable U.S. federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of
its affairs; 
 (5) the commencement by the Company of a voluntary case or proceeding under any applicable U.S. federal or state
bankruptcy, insolvency, reorganization or other similar law; or the Company commences any other proceeding under any adjustment of debt, relief of debtors, dissolution, or liquidation or similar law relating to the Company or any subsidiary thereof;
or the consent by the Company to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable U.S. federal or state bankruptcy, insolvency, reorganization or other similar law or to
the commencement of any bankruptcy or insolvency case or proceeding against the Company, or the consent by the Company to the appointment of, or the taking possession by, a custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company, of any substantial part of its property which continues undischarged or unstayed for a period of 60 days; or the making by the Company of an assignment for the benefit of creditors; or 

(6) A default or event of default exists under the Prior Notes or any other obligation of the Company for the payment of borrowed money in
excess of $50,000 individually or $150,000 in the aggregate for all such obligations, and is not paid when due or within any applicable grace period, or such obligation becomes or is declared to be due and payable before the expressed maturity of
the obligation, or there shall have occurred an event which, with the giving of notice or lapse of time, or both, would cause any such obligation to become, or allow any such obligation to be declared to be, due and payable; 

(7) One or more final judgments, orders or decrees shall be rendered against the Company by a court of competent jurisdiction that either:
(i) exceeds by more than $50,000 any insurance coverage applicable thereto (to the extent the relevant insurer has been notified of such claim and has not denied coverage therefor); or (ii) would be reasonably likely to have a Material
Adverse Effect on the Company, and either (x) enforcement proceedings shall have been commenced upon any such judgment, order or decree or (y) such judgment, order or decree shall not have been vacated or discharged for a period of thirty
(30) consecutive days and there shall not be in effect (by reason of a pending appeal or otherwise) any stay of enforcement thereof; 

  
 11 








 (8) The direct or indirect sale, lease, exclusive license, assignment, transfer, conveyance or
other disposition by the Company of: (i) all or substantially all of its assets, including without limitation, a sale, transfer or assignment of the assets of any direct or indirect subsidiary, in one or a series of related transactions; or
(ii) any capital stock or limited liability interests of any subsidiary; or (iii) any profits, losses, dividends or distributions of any kind of the Company or any subsidiary.

(b) Acceleration of Payment. If an Event of Default occurs and is continuing, the holders of at least a Majority in Interest of the
Convertible Notes, by written notice to the Company, may declare due and payable the principal of this Convertible Note and all other outstanding Convertible Notes, plus any accrued and unpaid interest to the date of payment. Upon a declaration
of acceleration, such principal and premium, if any, and accrued and unpaid interest, to the date of payment shall be immediately due and payable. Notwithstanding the foregoing, if an Event of Default specified in Section 7(a)(4) or
7(a)(5) occurs with respect to the Company, the principal and accrued and unpaid interest, on this Convertible Note shall become and be immediately due and payable, without any declaration or other act on the part of the Holder. 

The holders of not less than a Majority in Interest of the principal of the outstanding Convertible Notes may, on behalf of the holders of all
of the Convertible Notes, waive, rescind and annul an acceleration and its consequences (including waiver of any defaults) if the rescission would not conflict with any judgment or decree of a court of competent jurisdiction and is not
precluded by the restrictions set forth in Section 9(d). 
 (c) Collections. If an Event of Default with respect to
this Convertible Note occurs and such Event of Default has not been waived or annulled, the Holder may pursue any available remedy by proceeding at law or in equity to collect the Defaulted Payment or interest due and payable on this Convertible
Note or to enforce the performance of any provision of this Convertible Note. 
 (d) Right to Receive Payment Upon Default.
Notwithstanding any other provision in this Convertible Note, unless the Holder elects to convert this Convertible Note following any Event of Default, the Holder of this Convertible Note shall have the right, which is absolute and unconditional,
subject to the Senior Indebtedness and the Intercreditor Agreement, receive payment of the principal and interest in respect of the Convertible Notes held by the Holder, on or after the final Maturity Date, or to bring suit for the enforcement of
any such payment on or after such date or the right to convert, and such rights shall not be impaired or affected adversely without the consent of the Holder. 

(e) No Exclusive Right or Remedy. Except as otherwise provided herein, no right or remedy conferred in this Convertible Note upon
the Holder is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 

(f) No Waiver of Right or Remedy. No delay or omission of the Holder of this Convertible Note to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or any acquiescence therein. Every right and remedy given by this Section 6 or by law to the Holder may be
exercised from time to time, and as often as may be deemed expedient, by the Holder. 

  
 12 








 7. Covenants. 

For so long as all or any portion of principal or interest on this Convertible Note is due and payable, the Company shall not take any of the following actions
without the prior written consent of Majority in Interest, which consent may be withheld for any reason: 
 (a) the acquisition of the
Company by another entity by means of any transaction or series of related transactions (including any acquisition of common stock or common stock equivalents, limited liability membership interests, partnership interests, reorganization, merger or
consolidation), after the consummation of which the holders of the voting securities of the Company outstanding immediately prior to such transaction or series of related transactions own, directly or indirectly, less than a majority of the total
voting power represented by the outstanding voting securities of the Company or such other surviving or resulting entity (or if the Company or such other surviving or resulting entity is a wholly-owned subsidiary immediately following such
acquisition, its parent) immediately after such transaction or series of related transactions; 
 (b) the direct or indirect sale, lease,
exclusive license, assignment, transfer, conveyance or other disposition by the Company of: (i) all or substantially all of its assets, except by the Company to a direct or indirect wholly-owned subsidiary of the Company; or (ii) any
capital stock or limited liability interests of any direct or indirect subsidiary; or (iii) any profits, losses, dividends or distributions of any kind of the Company or any direct or indirect subsidiary. 

(c) any acquisition or disposition (including licensing) of any business or assets, except in the ordinary course of business or the sale of
inventory on an arms-length basis (which, for purposes of clarity, includes entering into normal and customary agreements and licenses with manufacturers, distributors, sales agents and the like); 

(d) the liquidation, dissolution or winding-up of the business and affairs of the Company or any direct or indirect subsidiary of the Company;

 (e) any capital expenditure exceeding the sum of $50,000 individually or $150,000 in the aggregate which is not for the benefit of the
Company; 
 (f) enter into any agreement or arrangement to incur any indebtedness other than the Convertible Notes or unsecured debt; 

(g) enter into any agreement or arrangement that would result in the creation of any lien or encumbrance on any of the assets of the Company or
any direct or indirect subsidiary; 
 (h) redeem, purchase for cancellation or otherwise retire or pay off any of its outstanding securities
other than the Convertible Notes; 
 (i) declare or pay any dividends or make any distribution, whether in cash, in shares of stock, limited
liability interests, or in specie, or otherwise on any of its outstanding securities; 

  
 13 








 (j) alter, modify or amend the terms of employment or compensation to the Company’s Chairman
of the Board of Directors or Chief Executive Officer, except if such alteration, amendment or modification is to reduce or terminate the terms of such employment; 

(k) enter into any transaction, or make any amendment thereto, with any director or officer of the Company, or any immediate family member or
Affiliate of any director or officer of the Company, including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring
payments to or from, any such officer or director (or any immediate family member or Affiliate thereof); and 
 (p) use all or any portion of
the proceeds of the issuance of the Convertible Notes to pay any fees to Affiliates of the Company, except as described in the Subscription Agreement. 

8. Restrictions on Transfer. 

(a) This Convertible Note and the Common Stock or other securities issuable upon conversion of this Convertible Note have not been registered
under the Securities Act, or the securities laws of any state or other jurisdiction. Neither this Convertible Note nor the Common Stock or other securities issuable upon conversion of this Convertible Note nor any interest or participation
herein may be reoffered, sold, assigned, transferred, pledged, encumbered or otherwise disposed of (a “Transfer”) in the absence of such registration or unless (i) such transaction is exempt from, or not subject to,
registration under the Securities Act or the securities laws of any state or other jurisdiction and (ii) is made in compliance with applicable federal and state statutory resale restrictions, if any. The Holder by its acceptance of this
Convertible Note or the Common Stock issuable upon conversion of this Convertible Note agrees that it shall not offer, sell, assign, transfer, pledge, encumber or otherwise dispose of this Convertible Note or any portion thereof or interest therein
other than in a minimum denomination of $10,000 principal amount (or any integral multiple of $1,000 in excess thereof) and then (other than with respect to a Transfer pursuant to a registration statement that is effective at the time of such
Transfer) only (a) to the Company, (b) to an Affiliate of the Holder, (c) to a person it reasonably believes to be an “accredited investor” within the meaning of Rule 501(a) under the Securities Act, or
(d) pursuant to a transaction in compliance with Rule 144 or Rule 144A under the Securities Act, and in the case of (b), (c) and (d) above in which the transferor (y) agrees to be bound by the restrictions and limitations
set forth herein and in the Subscription Agreement and (z) furnishes the Company with such certifications, legal opinions or other information as the Company may reasonably request to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration requirements of the Securities Act as applicable.
 (b) The Holder
acknowledges that the shares of Common Stock and other securities issuable upon conversion of this Convertible Note shall bear the following legend: 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), 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, OR
(B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT (II) UNLESS SOLD OR TRANSFERRED TO A “QUALIFIED INSTITUTIONAL BUYER” WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT
OR (III) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. 

  
 14 








 (c) The Holder represents that it is an “accredited investor” within the meaning of
Rule 501 of the Securities Act. The Holder has been advised that this Convertible Note has not been registered under the Securities Act, or any state securities laws and, therefore, cannot be resold unless it is registered under the
Securities Act and applicable state securities laws or unless an exemption from such registration requirements is available. The Holder is aware that the Company is under no obligation to effect any such registration or to file for or comply
with any exemption from registration. The Holder has not been formed solely for the purpose of making this investment and is acquiring the Convertible Note for its own account for investment, and not with a view to, or for resale in connection
with, the distribution thereof. 
 (d) The Company shall cooperate with the Holder and take all actions reasonably necessary to effectuate
any Transfer of this Convertible Note by the Holder that is permitted under Section 8(a) above. 
 9. Definitions.

Unless otherwise defined in this Convertible Note, the following capitalized terms shall have the following respective meanings when used
herein. Other capitalized terms used in this Convertible Note that are not defined herein shall have the respective meanings ascribed to such terms as set forth in the Subscription Agreement: 

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person. For the purposes of this definition, “control”, when used with respect to any specified Person, means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing. 

“Board of Directors” means the board of directors of the Company or any authorized committee of the board of directors. 

“Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which the banking institutions
in the City of New York, New York are authorized or obligated by law or executive order to close or be closed. 
 “Capital
Stock” of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interest in (however designated) equity of such Person, but excluding any debt securities convertible
into such equity. 

  
 15 








 “Common Stock” means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which is not subject to redemption by the Company. However, subject to the
provisions of Section 3(e) hereof, shares assumable on conversion of the Convertible Notes shall include only shares of the class designated as Common Stock, par value $0.001 per share, of the Company at the date of execution of this
Convertible Note or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which are not subject to redemption by the Company, provided that if at any time there shall be more than one such resulting class, the shares of each such class then so assumable shall be
substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. 

“Convertible Note Register” means the register or other ledger maintained by the Company that records the record owners of
the Convertible Notes. 
 “Defaulted Payment” has the meaning set forth in Section 8 hereof. 

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

 “Holder” means the person in whose name this Convertible Note is registered on the Convertible Note Register. 

“Indebtedness” means, without duplication, with respect to any Person (the “subject Person”), all
liabilities, obligations and indebtedness of the subject Person to any other Person, of any kind or nature, now or hereafter owing, arising, due or payable, howsoever evidenced, created, incurred, acquired or owing, whether primary, secondary,
direct, contingent, fixed or otherwise, consisting of indebtedness for borrowed money or the deferred purchase price of property, excluding purchases of property, product, merchandise and services in the ordinary course of business, but including
(a) all obligations and liabilities of any Person secured by any lien on the subject Person’s property, even though the subject Person shall not have assumed or become liable for the payment thereof; (except unperfected liens incurred in
the ordinary course of business and not in connection with the borrowing of money); provided, however, that all such obligations and liabilities which are limited in recourse to such property shall be included in Indebtedness only to the
extent of the book value of such property as would be shown on a balance sheet of the subject Person prepared in accordance with GAAP; (b) all capital lease obligations and other obligations or liabilities created or arising under any
conditional sale or other title retention agreement with respect to property used or acquired by the subject Person, even if the rights and remedies of the lessor, seller or lender thereunder are limited to repossession of such property;
provided, however, that all such obligations and liabilities which are limited in recourse to such property shall be included in Indebtedness only to the extent of the book value of such property as would be shown on a balance sheet of the
subject Person prepared in accordance with GAAP; (c) all obligations and liabilities under guarantees; (d) the present value of lease payments due under synthetic leases; (e) all obligations and liabilities under any asset
securitization or sale/leaseback transaction; and (f) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; provided,
further, however, that in no event shall the term Indebtedness include the capital stock surplus, retained earnings, minority interests in the common stock of Subsidiaries, lease obligations (other than pursuant to (b) or (d) above),
reserves for deferred income taxes and investment credits, other deferred credits or reserves. 
 “Majority in Interest”
has the meaning set forth in Section 11(d). 
 “Maturity Date” has the meaning set forth in
Section 2 hereof. 

  
 16 








 “Person” shall mean and include an individual, a partnership, a corporation
(including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a governmental authority. 

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

“Subscription Agreement” means the Subscription Agreement among the Company and the initial holders of the Convertible Notes.

 “Subsidiary” means, in respect of any Person, any corporation, association, partnership or other business entity of
which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, general
partners or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person; (ii) such Person and one or more Subsidiaries of such Person; or (iii) one or more Subsidiaries of such Person. 

“Trading Day” means: (1) if the applicable security is quoted on the Nasdaq Stock Market, a day on which the Nasdaq
Stock Market is open for business; (2) if that security is listed on the New York Stock Exchange, a day on which trades may be made on the New York State Exchange; (3) if that security is not so listed on the New York Stock Exchange and
not quoted on the Nasdaq Stock Market, a day on which the principal U.S. securities exchange on which the securities are listed or the OTC Bulletin Board, if the Company’s securities are quoted thereon, is open for business; or (4) if the
applicable security is not so listed, admitted for trading or quoted, any day other than a Saturday or a Sunday or a day on which banking institutions in the State of California are authorized or obligated by law or executive order to close. 

“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 AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board. 

“Trading Price” of a security on any date of determination means: (1) the closing sale price as reported by the Trading
Market on which the Common Stock is listed or quoted for trading on the date in question; or (2) if such security is not listed or quoted for trading on a Trading Market, the average of the last bid and ask prices for such security on such date
from a dealer engaged in the trading of convertible securities selected by the Company for this purpose, or as determined by the Board of Directors in good faith. 

10. Miscellaneous. 
 (a)
Payment; No Recourse. No provision of this Convertible Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest, if any, on this Convertible Note
at the times, places and rate, and in the coin or currency, herein prescribed, and in accordance with the terms and conditions set forth herein; or to convert this Convertible Note as herein provided. This Convertible Note is issued upon the express
condition, to which each successive holder expressly assents and by receiving the same agrees, that no recourse under or upon any obligation, covenant or agreement of the Convertible Note, or for the payment of the Principal of, or premium, if any,
or the interest on, the Convertible Note, or for any claim based on the Convertible Note, or otherwise in respect hereof, shall be had against any incorporator or any past, present or future stockholder, officer or director, as such, of the Company
or of any successor corporation, whether by virtue of the constitution, statute or rule of law or by any assessment or penalty or otherwise howsoever, all such individual liability being hereby expressly waived and released as a condition of and as
a part of the consideration for the execution and issue of the Convertible Note. 

  
 17 








 (b) Notice. The Company will give prompt written notice to the Holder of this Convertible
Note of any change in the location of the Designated Office. Any notice to the Company or to the holder of this Convertible Note shall be given in the manner set forth in the Subscription Agreement; provided that the Holder of this
Convertible Note, if not a party to such Subscription Agreement, may specify alternative notice instructions to the Company. 
 (c)
Transfer. (1) The transfer of this Convertible Note is registrable on the Convertible Note Register upon surrender of this Convertible Note for registration of transfer at the Designated Office, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, and thereupon one or more new Convertible Notes, of authorized denominations and for
the same aggregate principal amount, will be issued to the designated transferee or transferees. Such Convertible Notes are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. No
service charge shall be made for any such registration of transfer, but the Company may require payment of a sum sufficient to recover any tax or other governmental charge payable in connection therewith. Prior to due presentation of this
Convertible Note for registration of transfer, the Company and any agent of the Company may treat the Person in whose name this Convertible Note is registered as the owner thereof for all purposes, whether or not this Convertible Note be overdue,
and neither the Company nor any such agent shall be affected by notice to the contrary. 
 (2) Upon presentation of this Convertible
Note for registration of transfer at the Designated Office accompanied by (i) certification by the transferor that such transfer is in compliance with the terms hereof and (ii) by a written instrument of transfer in a form approved by the
Company executed by the Holder, in person or by the Holder’s attorney thereunto duly authorized in writing, and including the name, address and telephone and fax numbers of the transferee and name of the contact person of the transferee, such
Convertible Note shall be transferred on the Convertible Note Register, and a new Convertible Note of like tenor and bearing the same legends shall be issued in the name of the transferee and sent to the transferee at the address and c/o the contact
person so indicated. Transfers and exchanges of Convertible Notes shall be subject to such additional restrictions as are set forth in the legends on the Convertible Notes and to such additional reasonable regulations as may be prescribed by
the Company as specified in Section 9 hereof. Successive registrations of transfers as aforesaid may be made from time to time as desired, and each such registration shall be Convertible Noted on the Convertible Note register.

 (3) Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this
Convertible Note, and in the case of loss, theft or destruction, receipt of indemnity reasonably satisfactory to the Company and upon surrender and cancellation of this Convertible Note, if mutilated, the Company will deliver a new Convertible Note
of like tenor and dated as of such cancellation, in lieu of such Convertible Note. 

  
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 (d) Amendments; Waivers. Neither this Convertible Note nor any term hereof may be
amended or waived orally or in writing, except that any term of this Convertible Note and the other Convertible Notes may be amended and the observance of any term of this Convertible Note and the other Convertible Notes may be waived (either
generally or in a particular instance and either retroactively or prospectively), and such amendment or waiver shall be applicable to all of the Convertible Notes, upon the approval of the Company and the holders of fifty-one percent (51%) or
more of the outstanding principal amount of all then outstanding Convertible Notes (a “Majority in Interest”); provided, however, that any amendment that would (i) change the maturity of the principal of or any installment of
interest on any of the Convertible Notes, (ii) reduce the principal amount of, or any premium or interest on any Convertible Note, (iii) reduce the percentage in aggregate principal amount of Convertible Notes outstanding necessary to
modify or amend the Convertible Notes or to waive any past default; or (iv) modify this Section 10(d) shall, in each case, require the approval of the holder of each Convertible Note to which such amendment shall apply. The Company
may, without the consent of any holder of the Convertible Notes, amend the Convertible Notes for the purpose curing any ambiguity or correcting or supplementing any defective provision contained in the Convertible Notes; provided that such
modification or amendment does not, in the good faith opinion of the Board of Directors, adversely affect the interests of the holders of the Convertible Notes in any material respect, or adding or modifying any other provisions with respect to
matters or questions arising under the Convertible Notes which the Company may deem necessary or desirable and which will not adversely affect the interests of the holders of the Convertible Notes. The Company will not amend any provision of
any other Convertible Note in a manner favorable to any holder thereof unless a similar amendment is made or offered with respect to all of the Convertible Notes. 

(e) Governing Law. This security shall be governed by and construed in accordance with the internal laws of the State of California,
without regard to the principles of conflicts of law thereof. 
 (f) Headings. Article and Section headings used herein are for
convenience of reference only, are not part of this Convertible Note and shall not affect the construction of, or be taken into consideration in interpreting, this Convertible Note. 

(g) Severability. If any provision of this Convertible Note is invalid, illegal or unenforceable, the balance of this Convertible 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. This Convertible Note is subject to the express condition that at no time
shall the Company be obligated or required to pay interest hereunder at a rate which could subject the Holder or any other Person to either civil or criminal liability as a result of being in excess of the maximum interest rate which the Company is
permitted by applicable law to contract or agree to pay. If by the terms of this Convertible Note, the Company is at any time required or obligated to pay interest hereunder at a rate in excess of such maximum rate, the rate of interest under
this Convertible Note shall be deemed to be immediately reduced to such maximum rate and the interest payable shall be computed at such maximum rate and all prior interest payments in excess of such maximum rate shall be applied and shall be deemed
to have been payments in reduction of the principal balance of this Convertible Note.

  
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 (h) Execution; Entirety. This Convertible Note may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Convertible
Note by telecopy shall be effective as delivery of a manually executed counterpart of this Convertible Note. This Convertible Note constitutes the entire contract among the parties relating to the subject matter hereof and supersede any and all
previous agreements and understandings, oral or written, relating to the subject matter hereof. 
 [Remainder of page intentionally left
blank.] 

  
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 IN WITNESS WHEREOF, the Company has caused this Convertible Note to be duly executed on the date
first written above. 
  

			
	XENONICS HOLDINGS, INC.
		
	 By:
	 	 
	 Name:
	 	 Alan Magerman

	 Title:
	 	 Chairman and Chief Executive Officer




  
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 EXHIBIT A 

CONVERSION NOTICE 
 NOTICE OF
CONVERSION 
 The undersigned hereby elects to convert principal and, if specified, interest under the Convertible Note (the “Convertible
Note”) of Xenonics Holdings, Inc. (the “Company”) into shares of common stock, $0.001 par value per share (the “Common Stock”), of the Company according to the conditions hereof, as of the date written below. If shares 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. 
 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 Convertible Notes to be Converted:

			
		 		 	 $
                    

			
		 		 	Number of shares of Common Stock or Conversion Securities (if applicable) to be Issued:
                    
			
		 		 	 Applicable Conversion Rate:
                                    

				
		 		 	 Signature:
	 	  

				
		 		 	 Name:
	 	  

				
		 		 	 Address:
	 	  



  
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 Schedule 1 

CONVERSION SCHEDULE 
 This Conversion
Schedule reflects conversions made under Section 3 of the above referenced Note. 
 Dated: 

 

							
	 Date of
 Conversion

(or for first entry,
 Original Issue

Date)
	  	Amount of
Conversion	  	Aggregate
Principal Amount
Remaining
Subsequent to
Conversion
(or original
Principal
Amount)	  	Company Attest


  
 23