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2. This Note has been issued subject to investment representations of the original Holderhereof and may be transferred or exchanged only in compliance with the Securities Act andapplicable state securities laws and in compliance with the restrictions on transfer provided inthe Agreement. Prior to thedue presentment for such transfer of this Note, the Issuer and any agent of the Issuer maytreat the person in whose name this Note is duly registered in the Note Register as the ownerhereof for the purpose of receiving payment as herein provided and all other purposes, whether ornot this Note is overdue, and neither the Issuer nor any such agent shall be affected by notice tothe contrary. The transferee shall be bound, as the original Holder by the same representations andterms described herein and under the Agreement.3. The Holder may, at its option, at any time convert the principal amount of this Note or anyportion thereof, and any accrued and unpaid interest thereon, into such number of shares of fullypaid and non-assessable Common Stock of the Issuer (“Conversion Shares”) as is obtained bydividing the Loan Amount by $1.00 (“Conversion Price”). The right to convert the Note maybe exercised by the Issuer by telecopying, mailing (via first class mail, postage prepaid) orpersonally delivering an executed and completed notice of conversion (the “Notice of VoluntaryConversion”) to the Issuer. The business day (a “Business Day”) on which a Notice ofVoluntary Conversion is delivered in accordance with the provisions hereof shall be deemed the“Voluntary Conversion Date”. The Issuer will transmit the certificates representingConversion Shares issuable upon such conversion of the Note (together with the certificatesrepresenting the Note not so converted) to the Holder via express courier, by electronic transfer(if applicable) or otherwise, within ten Business Days after the later to occur of (i) theVoluntary Conversion Date or (ii) the Business Day on which the Issuer has received from the Holderthe original Note being so converted.4. The Issuer may, at its option, (i) on or after April 30, 2009, if the Company has receivedone or more written firm commitments, or has closed on one or more transactions, or a combinationof the foregoing, of at least $3 million gross proceeds of equity or debt; or (ii) on the MaturityDate, ***require***the Holder to convert the Note or any portion thereof, and any accrued and unpaidinterest thereon, into such number of Conversion Shares as is obtained by dividing the Loan Amountby the Conversion Price. The obligation of the Holder to convert the Note may be exercised by theCompany by telecopying, mailing (via first class mail, postage prepaid) or personally delivering anexecuted and completed notice of conversion (the “Notice of Mandatory Conversion”) to theHolder’s Address maintained in the Note Register. The Holder covenants and agrees to acknowledge aNotice of Mandatory Conversion in writing by completing, dating and signing such Notice ofMandatory Conversion and returning it to the Company by telecopier, first class mail (postageprepaid) or personal delivery (the “Holder Acknowledgment Date”). The business day on which aNotice of Mandatory Conversion is delivered in accordance with the provisions hereof shall bedeemed the “Mandatory Conversion Date”. The Issuer will transmit the certificatesrepresenting Conversion Shares issuable upon such conversion of the Note (together with thecertificates representing any portion of the Note not so converted) to the Holder via expresscourier, by electronic transfer (if applicable) or otherwise within ten Business Days after thelater to occur of (i) the Holder Acknowledgment Date or (ii) the date that the Issuer has receivedfrom the Holder the original Note being so converted.5. The principal amount of this Note, and any accrued interest thereon, shall be reduced asper that principal amount indicated on the Notice of Voluntary Conversion or Notice of MandatoryConversion, as the case may be, upon the proper receipt by the Holder of such Conversion Shares dueupon such Notice of Voluntary Conversion or Notice of Mandatory Conversion.6. The number of Conversion Shares shall be adjusted as follows. If the Issuer shall at anytime subdivide its outstanding shares of Common Stock into a greater number of shares of CommonStock, the number of Conversion Shares in effect immediately prior to such subdivision shall beproportionately increased, and conversely, in case the outstanding shares of Common Stock shall becombined into a smaller number of shares of Common Stock, the number of Conversion Shares in effectimmediately prior to such subdivision shall be proportionately decreased.7. No provision of this Note shall alter or impair the obligation of the Issuer, which isabsolute and unconditional, upon an Event of Default (as defined below), to pay the principal of,and interest on this Note at the place, time, and rate, and in the coin or currency hereinprescribed.
 
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8. Events of Default. Each of the following occurrences is hereby defined as an “Event ofDefault”:a. Nonpayment. The Issuer shall fail to make any payment of principal,interest, or other amounts payable hereunder when and as due; orb. Dissolutions, etc. The Issuer or any subsidiary shall fail to comply withany provision concerning its existence or any prohibition against dissolution, liquidation,merger, consolidation or sale of assets; orc. Noncompliance with this Agreement. The Issuer shall fail to comply in anymaterial respect with any provision hereof, which failure does not otherwise constitute anEvent of Default, and such failure shall continue for ten (10) days after the occurrence ofsuch failure; ord. Bankruptcy. Any bankruptcy, insolvency, reorganization, arrangement,readjustment, liquidation, dissolution, or similar proceeding, domestic or foreign, isinstituted by or against the Issuer or any of its subsidiaries, or the Issuer or any of itssubsidiaries shall take any step toward, or to authorize, such a proceeding; ore. Insolvency. The Issuer shall make a general assignment for the benefit ofits creditors, shall enter into any composition or similar agreement, or shall suspend thetransaction of all or a substantial portion of its usual business.9. If one or more “Events of Default” shall occur, then, or at any time thereafter, and ineach and every such case, unless such Event of Default shall have been waived in writing by theHolder (which waiver shall not be deemed to be a waiver of any subsequent default) or cured asprovided herein, at the option of the Holder, and in the Holder’s sole discretion, the Holder mayelect to consider this Note (and all interest through such date) immediately due and payable. Inorder to so elect, the Holder must deliver written notice of the election and the amount due to theIssuer via certified mail, return receipt requested, at the Issuer’s address as set forth herein(or any other address provided to the Holder), and thereafter the Issuer shall have ten businessdays upon receipt to cure the Event of Default, pay the Note, or convert the amount due on the Notepursuant to the conversion formula set forth above. It is agreed that in the event of such action,such Holder shall be entitled to receive all reasonable fees, costs and expenses incurred,including without limitation such reasonable fees and expenses of attorneys. The partiesacknowledge that a change in control of the Issuer shall not be deemed to be an Event of Default asset forth herein.10. In case any provision of this Note is held by a court of competent jurisdiction to beexcessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted ratherthan voided, if possible, so that it is enforceable to the maximum extent possible, and thevalidity and enforceability of the remaining provisions of this Note will not in any way beaffected or impaired thereby.
 
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11. This Note does not entitle the Holder hereof to any voting rights or other rights as astockholder of the Issuer prior to the conversion into Common Stock thereof, except as provided byapplicable law. If, however, at the time of the surrender of this Note and conversion the Holderhereof shall be entitled to convert this Note, the Conversion Shares so issued shall be and bedeemed to be issued to such holder as the record owner of such shares as of the close of businesson the Conversion Date.12. This Note and all other notes in this series may be subordinated to up to $10 million ofadditional debt financing that the Issuer may incur prior to the Maturity Date.IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed by an officerthereunto duly authorized.           **BIOLARGO, INC.**             By: XXXXXX             Name: Dennis Calvert, President             **ACCEPTED:**             Signature:              Print Name:              Holder’s Address:                      
 
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**NOTICE OF VOLUNTARY CONVERSION**(To be Executed by the Registered Holder in order to convert the Note)The undersigned hereby irrevocably elects to convert$_____ of the principal amount ofthe above Note, and $_____ of accrued and unpaid interest, into _____ Shares of CommonStock of BioLargo, Inc. (the “Company”) according to the conditions hereof, as of the date writtenbelow.The undersigned represents and warrants to the Company that, as of the date hereof, theundersigned is an “accredited investor” as that term is defined in Rule 501(a) of Regulation Dunder the Securities Exchange Act of 1934, as amended.         Date of Voluntary Conversion:                      Signature:               Print Name:               Holder’s Address:                             Social Security No.:             ACCEPTED:             BIOLARGO, INC.             By (Signature)                        Print Name:                        Title:             
 
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**NOTICE OF MANDATORY CONVERSION**(To be Executed by the Company in order to required the Holder to convert the Note)The undersigned hereby notifies you of its irrevocably election to require you to convert$_____ of the principal amount of the above Note, and$_____ of accrued and unpaidinterest, into _____ Shares of Common Stock of BioLargo, Inc. according to the conditionshereof, as of the date written below.       Date of Mandatory Conversion:                      BIOLARGO, INC.           By (Signature)             Print Name:             Title:           
 
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