Exhibit 4.1


 


SENIOR CONVERTIBLE NOTE


NEITHER THE ISSUANCE AND SALE OF
THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE
TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE 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. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE
TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 17(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY,
THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii)
OF THIS NOTE.


VIRTUS
OIL AND GAS CORP.


Senior
Convertible Note


	Issuance Date: May 22 2015	Original Principal Amount: U.S. $350,000.00


 


FOR VALUE RECEIVED,
VIRTUS OIL AND GAS CORP., a Nevada corporation (the “Company”), hereby promises to pay to the
order of HIMMIL INVESTMENTS, LTD. or its registered assigns (“Holder”) the amount set out above
as the Original Principal Amount (as increased by any Additional Amount added thereto and as reduced pursuant to the terms hereof
pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether upon the Maturity
Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest
(“Interest”) on any outstanding Principal (as defined below) (as such interest on any outstanding Principal
may be reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise) at the applicable Interest Rate (as
defined below) from the date set out above as the Issuance Date (the “Issuance Date”) until
the same becomes due and payable, whether upon the Maturity Date or acceleration, conversion, redemption or otherwise (in each
case in accordance with the terms hereof). This Senior Convertible Note (this “Note”, including all Senior
Convertible Notes issued in exchange, transfer or replacement hereof, collectively, the “Notes”) is one
of a series of Senior Convertible Notes issued pursuant to the Securities Purchase Agreement (as defined below) either on the Initial
Closing Date (as defined below) or, if applicable, on the Additional Closing Date (as defined below) (collectively, the “Notes”
and such other Senior Convertible Notes, the “Other Notes”). Certain capitalized terms
used herein are defined in Section 28 or in the Securities Purchase Agreement, as applicable.



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1.                 
PAYMENTS OF PRINCIPAL. On the Maturity Date, the Company shall pay to the Holder an amount in cash representing all
outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges (as defined in Section 23(c)) on such Principal
and Interest (as adjusted with respect to any Note Reduction (as defined in Section 12)). Other than as specifically permitted
by this Note, the Company may not prepay any portion of the outstanding Principal, accrued and unpaid Interest or accrued and unpaid
Late Charges on Principal and Interest, if any.


2.                 
INTEREST; INTEREST RATE.


(a)               
Interest on this Note shall commence accruing on the Issuance Date and shall be computed on the basis of a 360-day year
and twelve 30-day months, shall be payable in arrears on the Maturity Date or any applicable Redemption Date (each, an “Interest
Date”), subject to adjustment with respect to any Note Reduction. Interest shall be payable on each Interest Date,
to the record holder of this Note on the applicable Interest Date, in shares of Common Stock (“Interest Shares”)
so long as there has been no Equity Conditions Failure; provided, however, that the Company may, at its option following written
notice to the Holder, pay Interest on any Interest Date in cash (“Cash Interest”) or in a combination
of Cash Interest and Interest Shares. The Company shall deliver a written notice (each, an “Interest Election Notice”)
to each holder of the Notes on or prior to the Interest Notice Due Date (the date such notice is delivered to all of the holder,
the “Interest Notice Date”) which notice (i) either (A) confirms that Interest to be paid on such Interest
Date shall be paid entirely in Interest Shares or (B) elects to pay Interest as Cash Interest or a combination of Cash Interest
and Interest Shares and specifies the amount of Interest that shall be paid as Cash Interest and the amount of Interest, if any,
that shall be paid in Interest Shares and (ii) if any Interest is to be paid in Interest Shares, certifies that there has been
no Equity Conditions Failure. If an Equity Conditions Failure has occurred as of the Interest Notice Date, then unless the Company
has elected to pay such Interest as Cash Interest, the Interest Notice shall indicate that unless the Holder waives the Equity
Conditions Failure, the Interest shall be paid as Cash Interest. Notwithstanding anything herein to the contrary, if no Equity
Conditions Failure has occurred as of the Interest Notice Date but an Equity Conditions Failure occurs at any time prior to the
Interest 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 Interest shall be paid in cash. Interest to be paid on an Interest Date in Interest Shares shall
be paid in a number of fully paid and nonassessable shares (rounded to the nearest whole share in accordance with Section 3(a))
of Common Stock equal to the quotient of (1) the amount of Interest payable on such Interest Date less any Cash Interest paid and
(2) the Conversion Price in effect on the applicable Interest Date. If the Company fails to deliver an Interest Election Notice
with respect to an Interest Date on or prior to the applicable Interest Notice Due Date, the Company shall be deemed to have delivered
an Interest Election Notice confirming that Interest to be paid on such Interest Date shall be paid entirely in Interest Shares
and certifying that no Equity Conditions Failure then exists.



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(b)              
When any Interest Shares are to be paid on an Interest Date, the Company shall (i) (A) provided that the Company’s
transfer agent (the “Transfer Agent”) is participating in The Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, credit such aggregate number of Interest Shares to which the Holder shall be entitled
to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (B)
if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program or the shares of Common Stock
may not be issued without restrictive legend in accordance with Section 4.5 of the Securities Purchase Agreement, issue and deliver
on the applicable Interest Date, to the address set forth in the register maintained by the Company for such purpose pursuant to
the Securities Purchase Agreement or to such address as specified by the Holder in writing to the Company at least two (2) Business
Days prior to the applicable Interest Date, a certificate, registered in the name of the Holder or its designee (and without any
restrictive legend or stop transfer order maintained against it unless required pursuant to Section 4.5 of the Securities Purchase
Agreement), for the number of Interest Shares to which the Holder shall be entitled and (ii) with respect to each Interest Date,
pay to the Holder, in cash by wire transfer of immediately available funds, the amount of any Cash Interest. 


(c)               
Prior to the payment of Interest on any Interest Date, Interest on this Note shall accrue at the Interest Rate and be payable
by way of inclusion of the Interest in the Conversion Amount on each Conversion Date in accordance with Section 3(b)(i).
From and after the occurrence and during the continuance of any Event of Default, the Interest Rate shall automatically be increased
to eighteen percent (18.0%) per annum. In the event that such Event of Default is subsequently cured, the adjustment referred to
in the preceding sentence shall cease to be effective as of the calendar day immediately following the date of such cure; provided
that the Interest as calculated and unpaid at such increased rate during the continuance of such Event of Default shall continue
to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of such
cure of such Event of Default. The Company shall pay any and all stamp taxes that may be payable with respect to the issuance and
delivery of Interest Shares.


3.                 
CONVERSION OF NOTES. This Note shall be convertible into validly issued, fully paid and non-assessable shares of
Common Stock (as defined below), on the terms and conditions set forth in this Section 3.


(a)               
Conversion Right. Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date,
the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into validly
issued, fully paid and non-assessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined
below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in
the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the
nearest whole share. The Company shall pay any and all transfer, stamp, issuance and similar taxes that may be payable with respect
to the issuance and delivery of Common Stock upon conversion of any Conversion Amount.



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(b)              
Conversion Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant
to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion
Rate”).


(i)                
“Conversion Amount” means the sum of (A) the portion of the Principal to be converted, redeemed
or otherwise with respect to which this determination is being made, (B) all accrued and unpaid Interest with respect to such portion
of the Principal amount and accrued and unpaid Late Charges with respect to such portion of such Principal and such Interest and
(C) the applicable Make-Whole Amount.


(ii)              
“Conversion Price” means, for any date of determination, the lesser of (A) the product of (x)
the lowest VWAP of the Common Stock during the twelve (12) consecutive Trading Days ending and including the Trading Day immediately
preceding the applicable Conversion Date (the “Variable Conversion Base Price”) and (y) sixty-five percent
(65%), and (B) $0.75 (as adjusted for stock splits, stock dividends, stock combinations or other similar transactions) (the “Fixed
Conversion Price”). All such determinations to be appropriately adjusted for any stock split, stock dividend, stock
combination or other similar transaction during any such measuring period.


(c)               
Mechanics of Conversion.


(i)                
Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion
Date”), the Holder shall deliver (whether via facsimile or otherwise), for receipt on or prior to 11:59 p.m., New
York time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion
Notice”) to the Company. If required by Section 3(c)(iii), the Holder shall surrender this Note to a nationally recognized
overnight delivery service for delivery to the Company (or an indemnification undertaking with respect to this Note in the case
of its loss, theft or destruction as contemplated by Section 17(b)). On or before the first (1st) Trading Day following
the date of receipt of a Conversion Notice, the Company shall transmit by facsimile an acknowledgment of confirmation, in the form
attached hereto as Exhibit II, of receipt of such Conversion Notice to the Holder and the Company’s transfer agent
(the “Transfer Agent”) . On or before the third (3rd) Trading Day following the date of receipt
of a Conversion Notice, the Company shall (1) provided that the Transfer Agent is participating in the DTC Fast Automated Securities
Transfer Program and such shares of Common Stock may be issued without restrictive legend in accordance with Section 4.5 of the
Securities Purchase Agreement, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to
the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system or (2) if
the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program or such shares of Common Stock may
not be issued without restrictive legend in accordance with Section 4.5 of the Securities Purchase Agreement, issue and deliver
(via reputable overnight courier) to the address as specified in the Conversion Notice, a certificate, registered in the name of
the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled. If this Note is physically
surrendered for conversion as required by Section 3(c)(iii) and the outstanding Principal of this Note is greater than the Principal
portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three
(3) Trading Days after receipt of this Note and at its own expense, issue and deliver to the Holder (or its designee) a new Note
(in accordance with Section 17(d)) representing the outstanding Principal not converted. The Person or Persons entitled to receive
the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders
of such shares of Common Stock on the Conversion Date.



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(ii)              
Company’s Failure to Timely Convert. If the Company shall fail, for any reason or for no reason, to issue to
the Holder within three (3) Trading Days after the Company’s receipt of a Conversion Notice (whether via facsimile or otherwise)
(the “Share Delivery Deadline”), a certificate for the number of shares of Common Stock to which the
Holder is entitled and register such shares of Common Stock on the Company’s share register or to credit the Holder’s
or its designee’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon
the Holder’s conversion of any Conversion Amount (as the case may be) (a “Conversion Failure”)
then, in addition to all other remedies available to the Holder, (1) the Company shall pay in cash to the Holder on each day after
such Share Delivery Deadline that the issuance of such shares of Common Stock is not timely effected, an amount equal to 2.0% of
the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on a timely basis and to which the
Holder is entitled multiplied by (B) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the last
possible date which the Company could have issued such shares of Common Stock to the Holder without violating Section 3(c)(i),
and (2) the Holder, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have returned
(as the case may be) any portion of this Note that has not been converted pursuant to such Conversion Notice, provided that the
voiding of a Conversion Notice shall not affect the Company’s obligations to make any payments which have accrued prior to
the date of such notice pursuant to this Section 3(c)(ii) or otherwise. In addition to the foregoing, if on or prior to the Share
Delivery Deadline, the Company shall fail to issue and deliver a certificate to the Holder and register such shares of Common Stock
on the Company’s share register or credit the Holder’s or its designee’s balance account with DTC for the number
of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be), and
if on or after such Share Delivery Deadline the Holder purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of all or any portion of the number of shares of Common Stock, or a sale
of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, issuable upon such conversion
that the Holder so anticipated receiving from the Company, then, in addition to all other remedies available to the Holder, the
Company shall, within three (3) Business Days after receipt of the Holder’s request and in the Holder’s discretion,
either: (I) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions
and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including, without limitation, by any other
Person in respect, or on behalf, of the Holder) (the “Buy-In Price”), at which point the Company’s
obligation to so issue and deliver such certificate or credit the Holder’s balance account with DTC for the number of shares
of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) (and to issue
such shares of Common Stock) shall terminate, or (II) promptly honor its obligation to so issue and deliver to the Holder a certificate
or certificates representing such shares of Common Stock or credit the Holder’s balance account with DTC for the number of
shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) and pay
cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (x) such number of shares
of Common Stock multiplied by (y) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing
on the date of the applicable Conversion Notice and ending on the date of such issuance and payment under this clause (II).



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(iii)            
Book-Entry. Notwithstanding anything to the contrary set forth in this Section 3, following conversion of any
portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to
the Company unless (A) the full Conversion Amount represented by this Note is being converted (in which event this Note shall be
delivered to the Company following conversion thereof as contemplated by Section 3(c)(i)) or (B) the Holder has provided the Company
with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical
surrender of this Note. The Holder and the Company shall maintain records showing the Principal, Interest and Late Charges converted
and/or paid and/or adjusted (as the case may be) and the dates of such conversions and/or payments and/or adjustments (as the case
may be) or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender
of this Note upon conversion.


(iv)            
Pro Rata Conversion; Disputes. In the event of a dispute as to the number of shares of Common Stock issuable to the
Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock
not in dispute and resolve such dispute in accordance with Section 22.


(d)              
Limitations on Conversions. Notwithstanding anything to the contrary contained in this Note, this Note shall not
be convertible by the Holder hereof, and the Company shall not effect any conversion of this Note or otherwise issue any shares
of Common Stock pursuant hereto, to the extent (but only to the extent) that after giving effect to such conversion or other share
issuance hereunder the Holder (together with its affiliates) would beneficially own in excess of 4.99% (the “Maximum
Percentage”) of the Common Stock. To the extent the above limitation applies, the determination of whether this
Note shall be convertible (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any
of its affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as among all such securities
owned by the Holder and its affiliates) shall, subject to such Maximum Percentage limitation, be determined on the basis of the
first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to convert this Note,
or to issue shares of Common Stock, pursuant to this paragraph shall have any effect on the applicability of the provisions of
this paragraph with respect to any subsequent determination of convertibility. For purposes of this paragraph, beneficial ownership
and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall
be determined in accordance with Section 13(d) of the 1934 Act (as defined in the Securities Purchase Agreement) and the rules
and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict
conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent
with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary
or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply
to a successor Holder of this Note. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company
may not waive this paragraph without the consent of holders of a majority of its Common Stock. For any reason at any time, upon
the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing to the Holder
the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or
exercisable securities into Common Stock, including, without limitation, pursuant to this Note or securities issued pursuant to
the Securities Purchase Agreement. By written notice to the Company, at any time the Holder may increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not
be effective until the 61st day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply
only to the Holder sending such notice and not to any other holder of Notes.



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4.                 
RIGHTS UPON EVENT OF DEFAULT.


(a)               
Event of Default. Each of the following events shall constitute an “Event of Default”:


(i)                
the suspension from trading or the failure of the Common Stock to be trading or listed (as applicable) on an Eligible Market
for a period of ten (10) consecutive days or for more than an aggregate of thirty (30) days in any 365-day period;


(ii)              
the Company’s or any Subsidiary’s (as defined in the Securities Purchase Agreement) failure to pay to the Holder
any amount of Principal, Interest, Late Charges or other amounts when and as due under this Note (including, without limitation,
the Company’s or any Subsidiary’s failure to pay any redemption payments or amounts hereunder) or any other Transaction
Document (as defined in the Securities 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 and Late
Charges when and as due, in which case only if such failure remains uncured for a period of at least ten (10) days after written
notice to the Company of such default;


(iii)            
the occurrence of any redemption or acceleration prior to maturity of any Indebtedness (as defined in the Securities Purchase
Agreement) of the Company or any of its Subsidiaries, only if such acceleration or redemption obligation remains in effect for
a period of 15 calendar days following the occurrence thereof;


(iv)            
bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be
instituted by or against the Company or any Subsidiary and, if instituted against the Company or any Subsidiary by a third party,
shall not be dismissed within forty-five (45) days of their initiation;



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(v)              
the commencement by the Company or any Subsidiary of a voluntary case or proceeding under any applicable federal, state
or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt
or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Company
or any Subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization
or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the
consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property,
or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence
of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts
generally as they become due, the taking of corporate action by the Company or any Subsidiary in furtherance of any such action
or the taking of any action by any Person to commence a Uniform Commercial Code foreclosure sale or any other similar action under
federal, state or foreign law of all or substantially all of its assets;


(vi)            
the entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company or any Subsidiary
of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization
or other similar law or (ii) a decree, order, judgment or other similar document adjudging the Company or any Subsidiary as bankrupt
or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition
of or in respect of the Company or any Subsidiary under any applicable federal, state or foreign law or (iii) a decree, order,
judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or any Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such other decree, order,
judgment or other similar document unstayed and in effect for a period of thirty (30) consecutive days;


(vii)          
a final judgment or judgments for the payment of money aggregating in excess of $100,000 are rendered against the Company
and/or any of its Subsidiaries and which judgments are not, within thirty (30) days after the entry thereof, bonded, discharged
or stayed pending appeal, or are not discharged within forty-five (45) days after the expiration of such stay; provided, however,
any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the
$100,000 amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider
(which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance
or an indemnity and the Company or such Subsidiary (as the case may be) will receive the proceeds of such insurance or indemnity
within thirty (30) days of the issuance of such judgment;



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(viii)        
other than as specifically set forth in another clause of this Section 4(a), the Company
and/or any Subsidiary, individually or in the aggregate, fails to pay, when due, or within any applicable grace period, any payment
with respect to any Indebtedness in excess of $100,000 due to any third party (other than (A) Permitted Indebtedness and (B) with
respect to unsecured Indebtedness only, payments contested by the Company and/or such Subsidiary (as the case may be) in good faith
by proper proceedings and with respect to which adequate reserves have been set aside for the payment thereof in accordance with
GAAP) or is otherwise in breach or violation of any agreement for monies owed or owing in an amount in excess of $100,000, which
breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due thereunder (other
than Permitted Indebtedness);


(ix)            
other than as specifically set forth in another clause of this Section 4(a), the Company
or any Subsidiary breaches any representation, warranty, covenant or other term or condition of any Transaction Document, except,
in the case of a breach of a covenant or other term or condition that is curable, only if such breach remains uncured for a period
of ten (10) consecutive Trading Days after written notice to the Company of such breach;


(x)              
any Registration Statement (as defined in the Registration Rights Agreement) covering the resale of the Registrable Securities
(as defined in the Registration Rights Agreement) covered thereby shall not have been (i) filed with the SEC on or prior to the
Filing Deadline (as defined in the Registration Rights Agreement) with respect to such Registration Statement or (ii) declared
effective under the 1933 Act by the SEC on or prior to the Effectiveness Deadline (as defined in the Registration Rights Agreement)
with respect to such Registration Statement;


(xi)            
any Event of Default (as defined in the Other Notes) occurs with respect to any Other Notes;


(xii)          
any Material Adverse Effect (as defined in the Securities Purchase Agreement);



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(xiii)        
any Change of Control occurs (other than as a result of Common Stock issuances pursuant to the Transaction Documents); or


(xiv)        
the Company fails to deliver to the Investor a Current Capitalization Table on or prior to each of the Initial Closing Date
and each Additional Closing Date (as each term is defined in the Securities Purchase Agreement).


(b)              
Notice of an Event of Default; Redemption Right. Upon the occurrence of an Event of Default with respect to this
Note, the Company shall within one (1) Business Day deliver written notice thereof via facsimile and overnight courier (with next
day delivery specified) (an “Event of Default Notice”) to the Holder. At any time after the earlier of
the Holder’s receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require
the Company to redeem, at any time during the period commencing on the date the Holder first becomes aware of such Event of Default
through and including the twentieth (20th) Trading Day after the later of (x) the date the Holder receives the applicable
Event of Default Notice with respect thereto and (y) the date such Event of Default has been cured, all or any portion of this
Note by delivering written notice thereof (the “Event of Default Redemption Notice”) to the Company,
which Event of Default Redemption Notice shall indicate the portion of this Note the Holder is electing to redeem. Each portion
of this Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal
to the greater of (i) the product of (A) the Conversion Amount to be redeemed multiplied by (B) the Redemption Premium and (ii)
the product of (X) the Conversion Rate with respect to the Conversion Amount in effect at such time as the Holder delivers an Event
of Default Redemption Notice multiplied by (Y) the product of (1) the Redemption Premium multiplied by (2) the greatest Closing
Sale Price of the Common Stock on any Trading Day during the period commencing on the date immediately preceding such Event of
Default and ending on the date the Company makes the entire payment required to be made under this Section 4(b) (the “Event
of Default Redemption Price”). Redemptions required by this Section 4(b) shall be made in accordance
with the provisions of Section 10. To the extent redemptions required by this Section 4(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 4, but subject to Section 3(d), until the Event of Default Redemption
Price (together with any Late Charges thereon) is paid in full, the Conversion Amount submitted for redemption under this Section
4(b) (together with any Late Charges thereon) may be converted, in whole or in part, by the Holder into Common Stock pursuant to
the terms of this Note. In the event of the Company’s redemption of any portion of this Note under this Section 4(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 4(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.



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5.                 
RIGHTS UPON FUNDAMENTAL TRANSACTION; OTHER CORPORATE EVENTS.


(a)               
Assumption. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor
Entity assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance
with the provisions of this Section 5(a) pursuant to written agreements in form and substance satisfactory to the Holder and approved
by the Holder prior to such Fundamental Transaction, including agreements to deliver to each holder of Notes in exchange for such
Notes a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Notes,
including, without limitation, having a principal amount and interest rate equal to the principal amounts then outstanding and
the interest rates of the Notes held by such holder, having similar conversion rights as the Notes and having similar ranking to
the Notes, and satisfactory to the Holder and (ii) the Successor Entity (including its Parent Entity) is a publicly traded
corporation whose common stock is quoted on or listed for trading on an Eligible Market. Upon the occurrence of any 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. Upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation
that there shall be issued upon conversion or redemption of this Note at any time after the consummation of such Fundamental Transaction,
in lieu of the shares of the Company’s Common Stock (or other securities, cash, assets or other property (except such items
still issuable under Section 14, which shall continue to be receivable thereafter) issuable upon the conversion or redemption of
the Notes prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the Successor
Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of such Fundamental
Transaction had this Note been converted immediately prior to such Fundamental Transaction (without regard to any limitations on
the conversion of this Note), as adjusted in accordance with the provisions of this Note. Notwithstanding the foregoing, the Holder
may elect, at its sole option, by delivery of written notice to the Company to waive this Section 5(a) to permit the Fundamental
Transaction without the assumption of this Note.


(b)              
Other Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation
of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other
assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall
make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Note (i)
in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder
would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon
the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of
this Note) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets
received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as
the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such
consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion
Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Holder.



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(c)               
The provisions of this Section 5 shall apply similarly and equally to successive Fundamental Transactions and Corporate
Events and shall be applied without regard to any limitations on the conversion of this Note.


6.                 
RIGHTS UPON ISSUANCE OF OTHER SECURITIES.


(a)   
Adjustment of Fixed Conversion Price upon Issuance of Common Stock. If and whenever on or after the Subscription
Date, the Company issues or sells, or in accordance with this Section 6(a) is deemed to have issued or sold, any shares of Common
Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding
shares of Common Stock deemed to have been issued or sold by the Company in connection with any Excluded Securities) for a consideration
per share (the "New Issuance Price") less than a price (the "Applicable Price")
equal to the Fixed Conversion Price in effect immediately prior to such issue or sale or deemed issuance or sale (the foregoing
a "Dilutive Issuance"), then immediately after such Dilutive Issuance, the Fixed Conversion Price then
in effect shall be reduced to an amount equal to the New Issuance Price. For purposes of determining the adjusted Fixed Conversion
Price under this Section 6(a), the following shall be applicable:


(i)                
Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for
which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange or exercise of
any Convertible Securities issuable upon exercise of any such Option is less than the Applicable Price, then such share of Common
Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of
such Option for such price per share. For purposes of this Section 6(a)(i), the "lowest price per share for which one share
of Common Stock is issuable upon the exercise of any such Options or upon conversion or exchange or exercise of any Convertible
Securities issuable upon exercise of such Option" shall be equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise
of the Option and upon conversion or exchange or exercise of any Convertible Security issuable upon exercise of such Option less
any consideration paid or payable by the Company with respect to such one share of Common Stock upon the granting or sale of such
Option, upon exercise of such Option and upon conversion exercise or exchange of any Convertible Security issuable upon exercise
of such Option. No further adjustment of the Fixed Conversion Price shall be made upon the actual issuance of such shares of Common
Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such shares of Common
Stock upon conversion or exchange or exercise of such Convertible Securities.


(ii)              
Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the
lowest price per share for which one share of Common Stock is issuable upon the conversion or exchange or exercise thereof is less
than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by
the Company at the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this
Section 6(a)(ii), the "lowest price per share for which one share of Common Stock is issuable upon the conversion or exchange
or exercise thereof" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the
Company with respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion
or exchange or exercise of such Convertible Security less any consideration paid or payable by the Company with respect to such
one share of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion or exchange or exercise
of such Convertible Security. No further adjustment of the Fixed Conversion Price shall be made upon the actual issuance of such
shares of Common Stock upon conversion or exchange or exercise of such Convertible Securities, and if any such issue or sale of
such Convertible Securities is made upon exercise of any Options for which adjustment of the Fixed Conversion Price has been or
is to be made pursuant to other provisions of this Section 6(a), no further adjustment of the Fixed Conversion Price shall be made
by reason of such issue or sale.



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(iii)            
Change in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration,
if any, payable upon the issue, conversion, exchange or exercise of any Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exchangeable or exercisable for shares of Common Stock increases or decreases at any time, the
Fixed Conversion Price in effect at the time of such increase or decrease shall be adjusted to the Fixed Conversion Price which
would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase
price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued
or sold. For purposes of this Section 6(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of
the Subscription Date are increased or decreased in the manner described in the immediately preceding sentence, then such Option
or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed
to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 6(a) shall be made if such
adjustment would result in an increase of the Fixed Conversion Price then in effect.


(iv)            
Calculation of Consideration Received. In case any Option is issued in connection with the issue or sale of other
securities of the Company, together comprising one integrated transaction, (x) the Options will be deemed to have been issued for
the Option Value of such Options and (y) the other securities issued or sold in such integrated transaction shall be deemed to
have been issued or sold for the difference of (I) the aggregate consideration received by the Company less any consideration paid
or payable by the Company pursuant to the terms of such other securities of the Company, less (II) the Option Value. If any shares
of Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration
other than cash received therefor will be deemed to be the net amount received by the Company therefor. If any shares of Common
Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration
received by the Company will be the fair value of such consideration, except where such consideration consists of publicly traded
securities, in which case the amount of consideration received by the Company will be the Closing Sale Price of such publicly traded
securities on the date of receipt of such publicly traded securities. If any shares of Common Stock, Options or Convertible Securities
are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity,
the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be.
The fair value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and
the Required Holders. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring
valuation (the "Valuation Event"), the fair value of such consideration will be determined within five
(5) Business Days after the tenth (10th) day following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Required Holders. The determination of such appraiser shall be final and binding upon all parties
absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.



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(v)              
Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling
them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or
(B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed
to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the
case may be.


(vi)            
No Readjustments. For the avoidance of doubt, in the event the Fixed Conversion Price has been adjusted pursuant
to this Section 6(a) and the Dilutive Issuance that triggered such adjustment does not occur, is not consummated, is unwound or
is cancelled after the facts for any reason whatsoever, in no event shall the Fixed Conversion Price be readjusted to the Fixed
Conversion Price that would have been in effect if such Dilutive Issuance had not occurred or been consummated.


(b)  
Adjustment of Fixed Conversion Price upon Subdivision or Combination of Common Stock. If the Company at any time
on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes
of its outstanding shares of Common Stock into a greater number of shares, the Fixed Conversion Price in effect immediately prior
to such subdivision will be proportionately reduced. If the Company at any time on or after the Subscription Date combines (by
combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Fixed Conversion Price in effect immediately prior to such combination will be proportionately increased.


(c)               
Other Events. If any event occurs of the type contemplated by the provisions of this Section 6 but not expressly
provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights
or other rights with equity features), then the Company's Board of Directors will make an appropriate adjustment in the Fixed Conversion
Price so as to protect the rights of the Holder under this Note; provided, that no such adjustment will increase the Fixed
Conversion Price as otherwise determined pursuant to this Section 7.



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7.                 
NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its certificate
of incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution,
issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the
terms of this Note, and will at all times in good faith carry out all of the provisions of this Note and take all action as may
be required to protect the rights of the Holder of this Note. Without limiting the generality of the foregoing, the Company (i) shall
not increase the par value of any shares of Common Stock receivable upon conversion of this Note above the Conversion Price then
in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock upon the conversion of this Note, and (iii) shall, so long as any of
the Notes are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the Notes, the maximum number of shares of Common Stock as
shall from time to time be necessary to effect the conversion of the Notes then outstanding (without regard to any limitations
on conversion).


8.                 
RESERVATION OF AUTHORIZED SHARES.


(a)               
Reservation. So long as any of the Notes are outstanding, the Company shall take all action necessary to reserve
and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Notes,
a number of shares of Common Stock, as of any date of determination, for each of the Notes in accordance with the following formula:


P

------------------ x 3 = Share Reserve


(T x B)


P = The aggregate
principal amount of the Notes issued on or prior to such date of determination;


T = The applicable
Conversion Price as of such date of determination;


B = 0.85;


provided, that, the
Share Reserve shall in no event be less than 150% of the number of shares of Common Stock as shall from time to time be necessary
to effect the conversion of all of the Notes then outstanding (without regard to any limitations on conversions) (the “Required
Reserve Amount”).



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(b)              
Insufficient Authorized Shares. If, notwithstanding Section 8(a), and not in limitation thereof, at any time while
any of the Notes remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common
Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at least a number of shares of Common Stock
equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately
take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the
Company to reserve the Required Reserve Amount for the Notes then outstanding. Without limiting the generality of the foregoing
sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty
(60) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval
of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each
stockholder with a proxy statement and shall use its best efforts (including, without limitation, retaining a proxy solicitation
firm reasonably acceptable to the Holder, at the Company’s expense) to solicit its stockholders’ approval of such increase
in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such
proposal. In the event that the Company is prohibited from issuing shares of Common Stock upon any conversion due to the failure
by the Company to have sufficient shares of Common Stock available out of the authorized but unissued shares of Common Stock (such
unavailable number of shares of Common Stock, the “Authorization Failure Shares”), in lieu of delivering
such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for the redemption of such portion of the
Conversion Amount convertible into such Authorized Failure Shares at a price equal to the sum of (i) the product of (x) such number
of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period
commencing on the date the Holder delivers the applicable Conversion Notice with respect to such Authorization Failure Shares to
the Company and ending on the date of such issuance and payment under this Section 8(b) and (ii) to the extent the Holder purchases
(in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Authorization
Failure Shares, any brokerage commissions and other out-of-pocket expenses, if any, of the Holder incurred in connection therewith
(the foregoing sum of clause (i) and (ii), an “Additional Amount”). Notwithstanding the foregoing, the
Holder shall have the option to require that, in lieu of the Company’s obligation to pay an Additional Amount in cash to
the Holder, such Additional Amount shall be added to the outstanding Principal amount of this Note. Nothing contained in Section
8(a) or this Section 8(b) shall limit any obligations of the Company under any provision of the Securities Purchase Agreement.



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9.                 
Company Optional Redemption. At any time after the Issuance Date,
if no Equity Conditions Failure exists, the Company shall have the right to redeem all, but not less than all, of the Conversion
Amount then remaining under this Note (the “Company Optional Redemption Amount”) on the Company Optional
Redemption Date (as defined below) (a “Company Optional Redemption”). The portion of this Note subject
to redemption pursuant to this Section 9 shall be redeemed by the Company in cash at a price (the “Company Optional
Redemption Price”) equal to 130% of the Conversion Amount of this Note then outstanding. The Company may exercise
its right to require redemption under this Section 9 by delivering an irrevocable written notice thereof by facsimile and overnight
courier to the Holder (the “Company Optional Redemption Notice” and the date the Holder receives such
notice is referred to as the “Company Optional Redemption Notice Date”). The Company Optional Redemption
Notice shall (a) state the date on which the Company Optional Redemption shall occur (the “Company Optional Redemption
Date”) which date shall not be less than thirty (30) calendar days nor more than ninety (90) calendar days following
the Company Optional Redemption Notice Date, (b) state the aggregate Conversion Amount of the Notes which is being redeemed in
such Company Optional Redemption from the Holder pursuant to this Section 9 on the Company Optional Redemption Date, (c) if any
Interest portion of the Company Optional Redemption Amount is being paid in Interest Shares, state the information required in
an Interest Election Notice in accordance with Section 2(a) and (d) certify that there has been no Equity Conditions Failure. Notwithstanding
anything herein to the contrary, (i) if 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 applicable
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 Price is paid, in full, the Company
Optional Redemption Amount may be converted, in whole or in part, by the Holder into shares of Common Stock pursuant to Section
3. All Conversion Amounts converted by the Holder after the Company Optional Redemption Notice Date shall reduce the Company Optional
Redemption Amount of this Note required to be redeemed on the Company Optional Redemption Date. The parties hereto agree that in
the event of the Company's redemption of any portion of the Note under this Section 9, 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 9 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. Redemptions made pursuant to this Section 9 shall be made in accordance with Section 10 and any payments
of any Interest portion of the Company Optional Redemption Amount in Interest Shares shall be made in accordance with Section 2.


10.             
REDEMPTIONS.


(a)               
Mechanics. The Company shall deliver the applicable Event of Default Redemption Price to the Holder in cash within
five (5) Business Days after the Company’s receipt of the Holder’s Event of Default Redemption Notice. The Company
shall deliver the applicable Company Optional Redemption Price to the Holder in cash on the applicable Company Optional Redemption
Date. In the event of a redemption of less than all of the Conversion Amount of this Note, the Company shall promptly cause to
be issued and delivered to the Holder a new Note (in accordance with Section 17(d)) representing the outstanding Principal which
has not been redeemed. The Holder’s delivery of a notice voiding a Redemption Notice and exercise of its rights following
such notice shall not affect the Company’s obligations to make any payments of Late Charges which have accrued prior to the
date of such notice with respect to the Conversion Amount subject to such notice.



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11.             
VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law (including,
without limitation, the Nevada Revised Statutes) and as expressly provided in this Note.


12.             
NOTE REDUCTION.


(a)               
Note Reduction. (i) If as of the Trading Day immediately following the Filing Deadline (as such term is defined in
the Registration Rights Agreement), the Company has properly filed a registration statement with the SEC on or prior to the Filing
Deadline covering the resale by the Holder of all of the shares of Common Stock issued or issuable upon conversion of the Notes
or otherwise pursuant to the terms of the Notes in accordance with the 1933 Act and the Registration Rights Agreement, (ii) if
as of the Trading Day immediately following the Effectiveness Deadline with respect to the Initial Registration Statement, the
Initial Registration Statement has been declared effective by the SEC on or prior to the Effectiveness Deadline for the Initial
Registration Statement and the prospectus contained therein is available for use by the Holder for the resale by the Holder of
all of the shares of Common Stock issued or issuable upon conversion of the Notes or otherwise pursuant to the terms of the Notes
and (iii) no Event of Default or an event that with the passage of time or giving of notice would constitute an Event of Default
has occurred on or prior to such date, then $100,000 of the outstanding Principal hereunder (together with any accrued and unpaid
Interest with respect to such portion of the Principal amount and accrued and unpaid Late Charges with respect to such portion
of such Principal and such Interest) shall be automatically extinguished and shall no longer remain outstanding hereunder without
any payment thereof by the Company; notwithstanding anything to the contrary herein, in the event that the Holder is deemed an
“underwriter” and in accordance with Section 2(c) of the Registration Rights Agreement the resale of any Interest Shares
or Conversion Shares is not registered under the 1933 Act, then $100,000of the outstanding Principal hereunder (together with any
accrued and unpaid Interest with respect to such portion of the Principal amount and accrued and unpaid Late Charges with respect
to such portion of such Principal and such Interest) shall be automatically extinguished and shall no longer remain outstanding
hereunder without any payment thereof by the Company, provided that the Registration Statement was filed prior to the Filing Deadline,
the decision not to register the resale of the Interest Shares and Conversion Shares in accordance with Section 2(c) of the Registration
Rights Agreement was made prior to the Effectiveness Deadline, and no Event of Default has occurred prior to such date or an event
that with the passage of time or giving of notice would constitute an Event of Default has occurred prior to such date.


(b)              
Disputes. In the event of a dispute as to the arithmetic calculation of any Note Reduction, the Company and the Holder
shall resolve such dispute in accordance with Section 22.


13.             
COVENANTS. Until all of the Notes have been converted, redeemed or otherwise satisfied in accordance with their terms:


(a)               
Rank. All payments due under this Note (i) shall rank pari passu with all Other Notes and (ii) shall be senior
to all other Indebtedness of the Company and its Subsidiaries, except for any Permitted Indebtedness.



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(b)              
Incurrence of Indebtedness. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly
or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness (other than (i) the Indebtedness evidenced by this
Note and the Other Notes and (ii) other Permitted Indebtedness).


(c)               
Existence of Liens. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly
or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”)
other than Permitted Liens.


(d)              
Restricted Payments. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly
or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents
(in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion
of any Indebtedness (other than the Notes, Other Notes and Permitted Indebtedness), whether by way of payment in respect of principal
of (or premium, if any) or interest on, such Indebtedness if at the time such payment is due or is otherwise made or, after giving
effect to such payment, (i) an event constituting an Event of Default has occurred and is continuing or (ii) an event that with
the passage of time and without being cured would constitute an Event of Default has occurred and is continuing.


(e)               
Restricted Issuances. The Company shall not, directly or indirectly, without the prior written consent of the holders
of a majority in aggregate principal amount of the Notes then outstanding, (i) issue any Notes (other than as contemplated by the
Securities Purchase Agreement and the Notes) or (ii) issue any other securities that would cause an Event of Default under the
Notes.


(f)               
Restriction on Redemption and Cash Dividends. The Company shall not, and the Company shall cause each of its Subsidiaries
to not, directly or indirectly, redeem, repurchase or declare or pay any cash dividend or distribution on any of its capital stock
(other than the repurchase of Common Stock upon the termination of an employee or consultant).


(g)              
Restriction on Transfer of Assets. The Company shall not, and the Company shall cause each of its Subsidiaries to
not, directly or indirectly, sell, lease, license, assign, transfer, spin-off, split-off, close, convey or otherwise dispose of
a significant amount of assets or rights of the Company or any Subsidiary owned or hereafter acquired whether in a single transaction
or a series of related transactions, other than (i) sales, leases, licenses, assignments, transfers, conveyances and other dispositions
of such assets or rights by the Company and its Subsidiaries in the ordinary course of business and (ii) sales of inventory or
mineral interests in the ordinary course of business.


(h)              
Maturity of Indebtedness. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly
or indirectly, permit any Indebtedness (other than Permitted Indebtedness) of the Company or any of the Subsidiaries to mature
or accelerate prior to the Maturity Date.



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(i)                
Change in Nature of Business. The Company shall not, and the Company shall cause each of its Subsidiaries to
not, directly or indirectly, engage in any material line of business substantially different from those lines of business conducted
by the Company and each of its Subsidiaries on the Issuance Date or any business substantially related or incidental thereto. The
Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, modify its or their corporate
structure or purpose. For the purposes of this section, the nature of the Company’s business is an oil and gas exploration
and production company.


(j)                
Preservation of Existence, Etc. Except for instances that would not have a Material Adverse Effect, the Company shall
maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become
or remain, and cause each of its Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction in
which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification
necessary.


(k)              
Maintenance of Properties, Etc. Except for instances that would not have a Material Adverse Effect, the Company shall
maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties which are necessary or
useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply,
and cause each of its Subsidiaries to comply, at all times with the provisions of all leases to which it is a party as lessee or
under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.


(l)                
Maintenance of Intellectual Property. Except for instances that would not have a Material Adverse Effect, the Company
will, and will cause each of its Subsidiaries to, take all action necessary or advisable to maintain all of the Intellectual Property
Rights of the Company and/or any of its Subsidiaries that are necessary or material to the conduct of its business in full force
and effect.


(m)            
Maintenance of Insurance. The Company shall use commercial efforts to obtain and maintain, and cause each of its
Subsidiaries to obtain and maintain, insurance with responsible and reputable insurance companies or associations (including, without
limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to its properties (including
all real properties leased or owned by it) and business, in such amounts and covering such risks as is required by any governmental
authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies
in similar businesses similarly situated.


(n)              
Transactions with Affiliates. The Company shall not, nor shall it permit any of its Subsidiaries to, enter into,
renew, extend or be a party to, any transaction or series of related transactions (including, without limitation, the purchase,
sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any affiliate,
except in the ordinary course of business in a manner and to an extent consistent with past practice and necessary or desirable
for the prudent operation of its business, for fair consideration and on terms no less favorable to it or its Subsidiaries than
would be obtainable in a comparable arm’s length transaction with a Person that is not an affiliate thereof.



    	20



    	 



    




14.             
RESERVED.


15.             
AMENDING THE TERMS OF THIS NOTE. The prior written consent of the Holder shall be required for any change or amendment
to this Note.


16.             
TRANSFER. This Note and any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned
or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 4.5 of the Securities
Purchase Agreement.


17.             
REISSUANCE OF THIS NOTE.


(a)               
Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 17(d)), registered as the
Holder may request, representing the outstanding Principal being transferred by the Holder and, if less than the entire outstanding
Principal is being transferred, a new Note (in accordance with Section 17(d)) to the Holder representing the outstanding Principal
not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions
of Section 3(c)(iii) following conversion or redemption of any portion of this Note, the outstanding Principal represented by this
Note may be less than the Principal stated on the face of this Note.


(b)              
Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Note (as to which a written certification and the indemnification contemplated
below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this
Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 17(d)) representing the outstanding
Principal.


(c)               
Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder
at the principal office of the Company, for a new Note or Notes (in accordance with Section 17(d) and in principal amounts of at
least $1,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time of such surrender.


(d)              
Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such
new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal
remaining outstanding (or in the case of a new Note being issued pursuant to Section 17(a) or Section 17(c), the Principal designated
by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does
not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have
an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have
the same rights and conditions as this Note, and (v) shall represent accrued and unpaid Interest and Late Charges on the Principal
and Interest of this Note, from the Issuance Date.



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18.             
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.


19.             
PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) 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 (b) 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 costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization,
receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements. The Company expressly
acknowledges and agrees that no amounts due under this Note shall be affected, or limited, by the fact that the purchase price
paid for this Note was less than the original Principal amount hereof.


20.             
CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not
be construed against any Person as the drafter hereof. The headings of this Note are for convenience of reference and shall not
form part of, or affect the interpretation of, this Note. Terms used in this Note but defined in the other Transaction Documents
shall have the meanings ascribed to such terms on the Initial Closing Date in such other Transaction Documents unless otherwise
consented to in writing by the Holder.


21.             
FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless
it is in writing and signed by an authorized representative of the waiving party.



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22.             
DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Conversion Price (including, without
limitation, any disputed adjustment thereto), any Redemption Price, the Closing Bid Price, the Closing Sale Price or fair market
value (as the case may be) or the arithmetic calculation of the Conversion Rate, any Note Reduction or the applicable Redemption
Price (as the case may be), the Company or the Holder (as the case may be) shall submit the disputed determinations or arithmetic
calculations (as the case may be) via facsimile (i) within two (2) Business Days after receipt of the applicable notice giving
rise to such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time
after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to agree upon
such determination or calculation within two (2) Business Days of such disputed determination or arithmetic calculation (as the
case may be) being submitted to the Company or the Holder (as the case may be), then the Company shall, within two (2) Business
Days, submit via facsimile (a) the disputed determination of the Conversion Price, any Redemption Price, the Closing Bid Price,
the Closing Sale Price or fair market value (as the case may be) to an independent, reputable investment bank selected by the Company
and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Rate, any Note Reduction or any Redemption
Price (as the case may be) to an independent, outside accountant selected by the Holder that is reasonably acceptable to the Company.
The Company shall cause at its expense the investment bank or the accountant (as the case may be) to perform the determinations
or calculations (as the case may be) and notify the Company and the Holder of the results no later than ten (10) Business Days
from the time it receives such disputed determinations or calculations (as the case may be). Such investment bank’s or accountant’s
determination or calculation (as the case may be) shall be binding upon all parties absent demonstrable error.


23.             
NOTICES; CURRENCY; PAYMENTS.


(a)               
Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall
be given in accordance with Section 8.4 of the Securities Purchase Agreement. The Company shall provide the Holder with prompt
written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the
reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately
upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment
and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect
to any dividend or distribution upon the Common Stock, (B) with respect to any grant, issuances, or sales of any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property to holders of shares of Common Stock or (C) for
determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that
such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.


(b)              
Currency. All dollar amounts referred to in this Note are in United States Dollars (“U.S. Dollars”),
and all amounts owing under this Note shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall
be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “Exchange
Rate” means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Note,
the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation (it being understood
and agreed that where an amount is calculated with reference to, or over, a period of time, the date of calculation shall be the
final date of such period of time).



    	23



    	 



    




(c)               
Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless otherwise
expressly set forth herein, such payment shall be made in lawful money of the United States of America by a check drawn on the
account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company
in writing, provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by
providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions. Whenever
any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead
be due on the next succeeding day which is a Business Day. Any amount of Principal or other amounts due under the Transaction Documents
which is not paid when due (solely to the extent such amount is not then accruing interest at the Default Rate) shall result in
a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of eighteen percent
(18%) per annum from the date such amount was due until the same is paid in full (“Late Charge”).


24.             
CANCELLATION. After all Principal, accrued Interest, Late Charges and other amounts at any time owed on this Note
have been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation
and shall not be reissued.


25.             
WAIVER OF NOTICE. To the extent permitted by law, the Company hereby irrevocably waives demand, notice, presentment,
protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this
Note and the Securities Purchase Agreement.


26.             
GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in the State of New York, County of New York, for
the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein,
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 any such court, that such suit, action or proceeding is brought in an inconvenient forum or that
the venue of such suit, action or proceeding is improper. 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 by certified mail, return receipt
requested, postage prepaid to such party at the address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof. In the event that any provision of this Note is invalid
or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may
prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note.
THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.



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27.             
MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest
or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid
or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against
amounts owed by the Company to the Holder and thus refunded to the Company.


28.             
CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:


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


(b)              
“Additional Closing Date” shall have the meaning ascribed to such term in the Securities Purchase
Agreement, which date is the date the Company initially issued Additional Notes (as defined in the Securities Purchase Agreement)
pursuant to the terms of the Securities Purchase Agreement.


(c)               
“Approved Stock Plan” means any employee benefit plan which has been approved by the board of
directors of the Company prior to or subsequent to the date hereof pursuant to which shares of Common Stock and standard options
to purchase Common Stock may be issued to any employee, consultant, officer or director for services provided to the Company in
their capacity as such.


(d)              
“Bloomberg” means Bloomberg, L.P.


(e)               
“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks
in The City of New York are authorized or required by law to remain closed.


(f)               
“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 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,
(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.



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(g)              
“Closing Bid Price” and “Closing Sale Price” means, for any security
as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market,
as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing
bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security
prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal
securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively,
is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers
for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing
Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the
Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved in accordance with the procedures in Section 22. All such determinations shall
be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.


(h)              
“Closing Date” shall have the meaning set forth in the Securities Purchase Agreement, which date
is the date the Company initially issued the Note pursuant to the terms of the Securities Purchase Agreement.


(i)                
“Common Stock” means (i) the Company’s common stock, $0.001 par value per share, and (ii)
any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of
such common stock.


(j)                
“Convertible Securities” means any stock or other security (other than Options) that is at any
time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise
entitles the holder thereof to acquire, any shares of Common Stock.


(k)              
“Eligible Market” means the OTC Bulletin Board, The NASDAQ Global Market, The NASDAQ Global Select
Market, The NASDAQ Capital Market, the New York Stock Exchange, NYSE Arca, the NYSE MKT, the OTCQX Marketplace or the OTCQB Marketplace
operated by OTC Markets Group Inc. (or any successor to any of the foregoing).



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(l)                
“Equity Conditions” means that each of the following conditions is satisfied: (i) on each day
during the period beginning sixty (60) calendar days prior to the applicable date of determination and ending on and including
the applicable date of determination (the “Equity Conditions Measuring Period”), either (x) the Registration
Statement filed pursuant to the Registration Rights Agreement shall be effective and the prospectus contained therein, as supplemented,
shall be available for the resale by the Holder of all shares of Common Stock issuable upon conversion of the Notes and as Interest
Shares or (y) all shares of Common Stock issuable upon conversion of the Notes and as Interest Shares shall be eligible for resale
by the Holder without restriction and without the need for registration under any applicable federal or state securities laws (in
each case, disregarding any limitation on conversion of the Notes and other issuance of securities with respect to the Notes);
(ii) on each day during the Equity Conditions Measuring Period, the Common Stock (including all shares of Common Stock issuable
upon conversion of this Note and as Interest Shares) is listed or designated for quotation (as applicable) on an Eligible Market
and shall not have been suspended from trading on an Eligible 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 Eligible Market have been threatened (with a reasonable prospect of delisting occurring) or pending either (A) in writing
by such Eligible Market or (B) by falling below the minimum listing maintenance requirements of the Eligible 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 and as Interest Shares
on a timely basis as set forth in Section 3 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 3(d) hereof; (v) 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; (vi) the Company shall have no knowledge of any fact that would reasonably
be expected to cause (1) the Registration Statement to not be effective or the prospectus contained therein, as supplemented, to
not be available for the resale by the Holder of all shares of Common Stock issuable upon conversion of the Notes and as Interest
Shares or (2) any shares of Common Stock issuable upon conversion of the Notes or as Interest Shares to not be eligible for resale
by the Holder without restriction and without the need for registration under any applicable federal or state securities laws (in
each case, disregarding any limitation on conversion of the Notes and other issuance of securities with respect to the Notes);
(vii) 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, officers, directors (unless consented to by Holder); (viii) on each
day during the Equity Conditions Measuring Period, the Company otherwise shall have been in material compliance with each, and
shall not have breached any provision, covenant, representation or warranty of any Transaction Document; (ix) on each day during
the Equity Conditions Measuring Period, there shall not have occurred any Volume Failure or Price Failure; 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.



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(m)            
“Equity Conditions Failure” means, for any determination date, that on any day during the period
commencing ten (10) calendar days prior to such date of determination, the Equity Conditions have not been satisfied (or waived
in writing by the Holder).


(n)              
“Excluded Securities” means (A) shares of Common Stock or standard options to purchase Common
Stock to directors, consultants, officers or employees of the Company in their capacity as such pursuant to an Approved Stock Plan,
provided that (1) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after
the date hereof pursuant to this clause (A) do not, in the aggregate, exceed more than 15% of the Common Stock issued and outstanding
immediately prior to the date hereof and (2) the exercise price of any such options is not lowered, none of such options are amended
to increase the number of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially
changed in any manner that adversely affects the Investor; (B) shares of Common Stock issued upon the conversion or exercise of
Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are
covered by clause (A) above) issued prior to the date hereof, provided that the conversion price of any such Convertible Securities
(other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (A)
above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant
to an Approved Stock Plan that are covered by clause (A) above) are amended to increase the number of shares issuable thereunder
and none of the terms or conditions of any such Convertible Securities (other than standard options to purchase Common Stock issued
pursuant to an Approved Stock Plan that are covered by clause (A) above) are otherwise materially changed in any manner that adversely
affects the Investor; (C) the Securities, shares of Common Stock issued pursuant to the Notes and Other Notes and shares of Common
Stock issued pursuant to the Registration Rights Agreement, and (D) shares of Common Stock or Convertible Securities issued or
issuable in connection with strategic alliances, acquisitions, mergers, and strategic partnerships, provided, that (1) the primary
purpose of such issuance is not to raise capital, (2) the purchasers or acquirers of the securities in such issuance does not include
any affiliate of the Company or any of its Subsidiaries and solely consists of either (x) the actual participants in such strategic
alliance or strategic partnership, (y) the actual owners of such assets or securities acquired in such acquisition or merger or
(z) the stockholders, partners or members of the foregoing Persons, (3) the number or amount of securities issued to such Person
by the Company shall not be disproportionate to such Person’s actual participation in such strategic alliance or strategic
partnership or ownership of such assets or securities to be acquired by the Company, as applicable, (E) shares of Common Stock
issued or issuable by reason of a dividend, stock split or other distribution, (F) the issuance of up to $500,000 of Common Stock
to be sold in private placement transactions during the 12-month period from the date hereof to Fieldstone Partners (or its affiliates)
and/or Mablewood Investments (or its affiliates); provided that (1) the terms of issuance of such Common Stock (or any securities
convertible, exercisable or exchangeable into Common Stock) do not contemplate the issuance of additional shares of Common Stock
including by way of any reset, make-whole or similar provisions and (2) the terms of such issuance do not provide for the right
to include the registration of such shares of Common Stock on any registration statement filed pursuant to the Registration Rights
Agreement, and (G) shares of Common Stock to be issued pursuant to the employment agreement dated May 13, 2014 by and between the
Company and Rupert Ireland and the consulting agreement dated June 1, 2014 by and between the Company and Brett A. Murray &
Associates dated prior to the date hereof, provided that (1) such agreements are not amended to increase the number of shares issuable
thereunder and the terms of issuance of such Common Stock (or any securities convertible, exercisable or exchangeable into Common
Stock) do not contemplate the issuance of additional shares of Common Stock including by way of any reset, make-whole or similar
provisions and (2) such agreements do not provide for the right to include the registration of such shares of Common Stock on any
registration statement filed pursuant to the Registration Rights Agreement.



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(o)              
“Fundamental Transaction” means that (i) the Company or any of its Subsidiaries shall, directly
or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of
its Subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise
dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to
make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting
Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to,
or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a
stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares
of Voting Stock of the Company (not including any shares of Voting Stock of the Company 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), or (ii) any “person” or “group” (as these terms are used for purposes of
Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial
owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power
represented by issued and outstanding Voting Stock of the Company.


(p)              
“GAAP” means United States generally accepted accounting principles, consistently applied.


(q)              
“Initial Closing Date” shall have the meaning ascribed to such term in the Securities Purchase
Agreement, which date is the date the Company initially issued Initial Notes (as defined in the Securities Purchase Agreement)
pursuant to the terms of the Securities Purchase Agreement.


(r)                
“Interest Notice Due Date” means the third (3rd) Trading Day immediately prior to the
applicable Interest Date


(s)               
“Interest Rate” means seven percent (7.0%) per annum, as may be adjusted from time
to time in accordance with Section 2.


(t)                
“Make-Whole Amount” means, as to any Conversion Amount on any Conversion Date, as to any Event
of Default Redemption on any Event of Default Redemption Date, or as to any Company Optional Redemption on any Company Optional
Redemption Date, the amount of any Interest that, but for (i) the Holder’s exercise of its conversion right pursuant to Section
3(c)(i); (ii) an Event of Default Redemption pursuant to Section 4(b), or (ii) a Company Optional Redemption pursuant to Section
9, would have accrued with respect to the Conversion Amount being converted or redeemed under this Note at the Interest Rate for
the period from the applicable Conversion Date, Event of Default Redemption Date or Company Optional Redemption Date, as the case
may be, through the Maturity Date.



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(u)              
“Maturity Date” shall mean May 22, 2016 provided, however, the Maturity Date may
be extended at the option of the Holder through the date that is twenty (20) Business 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 3
hereof, and the Conversion Amount would be limited pursuant to Section 3(d) hereunder, the Maturity Date shall automatically be
extended until such time as such provision shall not limit the conversion of this Note.


(v)              
"Option Value" means the value of an Option based on the Black and Scholes Option Pricing model
obtained from the "OV" function on Bloomberg determined as of (A) the Trading Day prior to the public announcement of
the applicable Option if the issuance of such Option is publicly announced or (B) the Trading Day immediately following the issuance
of the applicable Option if the issuance of such Option is not publicly announced, for pricing purposes and reflecting (i) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of the applicable Option as of the
applicable date of determination, (ii) an expected volatility equal to the greater of 100% and the 100 day volatility obtained
from the HVT function on Bloomberg as of the day immediately following the public announcement of (A) the Trading Day immediately
following the public announcement of the applicable Option if the issuance of such Option is publicly announced or (B) the Trading
Day immediately following the issuance of the applicable Option if the issuance of such Option is not publicly announced, (iii)
the underlying price per share used in such calculation shall be the highest Weighted Average Price during the period beginning
on the day prior to the execution of definitive documentation relating to the issuance of the applicable Option and the public
announcement of such issuance, (iv) a zero cost of borrow and (v) a 360 day annualization factor.


(w)            
“Options” means any rights, warrants or options to subscribe for or purchase shares of Common
Stock or Convertible Securities.


(x)              
“Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable
Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than
one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation
of the Fundamental Transaction.


(y)              
“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation,
a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.



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(z)               
“Permitted Indebtedness” means (i) Indebtedness evidenced by this Note and the Other Notes, (ii)
Indebtedness outstanding as of the quarter ended February 28, 2015, (iii) Indebtedness secured by Permitted Liens, (iv) Indebtedness
incurred by the Company that is made expressly subordinate in right of payment to the Notes and Other Notes, (v) obligations in
respect of performance, bid, appeal and surety bonds and completion guarantees and similar obligations provided in the ordinary
course of business, (vi) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar
instrument drawn against insufficient funds in the ordinary course of business, (vii) Indebtedness consisting of the financing
of insurance premiums or take-or-pay obligations contained in supply arrangements in each case, incurred in the ordinary course
of business, (viii) capital leases entered into in the ordinary course of business, (ix) Indebtedness related to trade payables
incurred in the ordinary course of the Company’s or its Subsidiaries’ business or credit card debt associated with
the payment of the foregoing, (x) Trade Indebtedness, and (xi) hedging activities relating to the Company’s oil and gas operations.


(aa)           
“Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in
good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory
Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent,
(iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens,
arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested
in good faith by appropriate proceedings, (iv) Liens (A) upon or in any equipment acquired or held by the Company or any of its
Subsidiaries to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the acquisition
or lease of such equipment, or (B) existing on such equipment at the time of its acquisition, provided that the Lien is confined
solely to the property so acquired and improvements thereon, and the proceeds of such equipment, (v) Liens incurred in connection
with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clause (iv) above, provided
that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal
amount of the indebtedness being extended, renewed or refinanced does not increase, (vi) Liens that do not have a Material Adverse
Effect, (vii) any Liens from Permitted Indebtedness, (vii) leases or subleases and licenses and sublicenses granted to others in
the ordinary course of the Company’s business, not interfering in any material respect with the business of the Company and
its Subsidiaries taken as a whole, (viii) Liens in favor of customs and revenue authorities arising as a matter of law to secure
payments of custom duties in connection with the importation of goods, (ix) Liens arising from judgments, decrees or attachments
in circumstances not constituting an Event of Default.


(bb)          
“Price Failure” means, with respect to a particular date of determination, the average VWAP of
the Common Stock during the five (5) consecutive Trading Day period ending on the Trading Day immediately preceding such date of
determination (such period, the “Price Failure Measuring Period”) fails to exceed $0.35 (as adjusted
for stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions). All such determinations
to be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions
during such Price Failure Measuring Period.



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(cc)           
“Principal Market” means, as of any date of determination, the principal securities exchange or
securities market on which the Common Stock is then traded.


(dd)         
“Qualified Real Property” means real property reasonably prospective for oil and gas resources.


(ee)           
“Redemption Notices” means, collectively, the Event of Default Redemption Notices and the Company
Optional Redemption Notice, and each of the foregoing, individually, a “Redemption Notice.”


(ff)            
“Redemption Premium” means (i) in the case of the Events of Default described in Section 4(a)
(other than Sections 4(a)(iv) through 4(a)(vi)), 135% or (ii) in the case of the Events of Default described in Sections 4(a)(iv)
through 4(a)(vi), 100%.


(gg)          
“Redemption Prices” means, collectively, Event of Default Redemption Prices and the Company Optional
Redemption Price and each of the foregoing, individually, a “Redemption Price.”


(hh)          
“Registration Rights Agreement” means that certain registration rights agreement, dated as of
the Initial Closing Date, by and between the Company and the Holder relating to, among other things, the registration of the resale
of the Common Stock issuable upon conversion of the Notes or otherwise pursuant to the terms of the Notes, as may be amended from
time to time.


(ii)              
“Registration Statement” means any registration statement required to be filed pursuant to the
Registration Rights Agreement.


(jj)              
“SEC” means the United States Securities and Exchange Commission or the successor thereto.


(kk)          
“Securities Purchase Agreement” means that certain Securities Purchase Agreement, dated as of
the Initial Closing Date, by and between the Company and the Holder pursuant to which the Company issued this Note, as may be amended
from time to time.


(ll)              
“Subsidiaries” shall have the meaning as set forth in the Securities Purchase Agreement.


(mm)      
“Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed
by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity)
with which such Fundamental Transaction shall have been entered into.


(nn)          
“Trade Indebtedness” means Indebtedness incurred by the Company in the normal course of drilling,
operating, producing and maintaining Qualified Real Property in connection with (i) vendor contracts, (ii) partnership, joint venture,
farm-in, farm-out, joint operating and similar arrangements or agreements, and (iii) related contractual obligations.



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(oo)          
“Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if
the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities
market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day
on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock
is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate
in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time)
unless such day is otherwise designated as a Trading Day in writing by the Holder.


(pp)          
“Volume Failure” means, with respect to a particular date of determination, the aggregate daily
dollar trading volume (as reported on Bloomberg) of the Common Stock on the Principal Market on any Trading Day during the thirty
(30) consecutive Trading Day period ending on the Trading Day immediately preceding such date of determination (such period, the
“Volume Failure Measuring Period”) is less than $20,000 (as adjusted for any stock splits, stock dividends,
stock combinations, recapitalizations or other similar transactions). All such determinations to be appropriately adjusted for
any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during such Volume Failure
Measuring Period.


(qq)          
“Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant
to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the
board of directors, managers, trustees or other similar governing body of such Person (irrespective of whether or not at the time
capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).


(rr)             
“VWAP” means, for any security as of any date, the dollar volume-weighted average price for such security
on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal
securities exchange or securities market on which such security is then traded) during the period beginning at 9:30:01 a.m., New
York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “AQR” function or, if the
foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such
hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security
as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If VWAP cannot be calculated
for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value
as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value
of such security, then such dispute shall be resolved in accordance with the procedures in Section 22. All such determinations
shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such
period.



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29.             
DISCLOSURE. Upon receipt or delivery by the Company of any notice in accordance with the terms of this Note, unless
the Company has in good faith determined that the matters relating to such notice do not constitute material, non-public information
relating to the Company or any of its Subsidiaries, the Company shall within one (1) Business Day after any such receipt or delivery
publicly disclose such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company
believes that a notice contains material, non-public information relating to the Company or any of its Subsidiaries, the Company
so shall indicate to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the
Holder shall be allowed to presume that all matters relating to such notice do not constitute material, non-public information
relating to the Company or its Subsidiaries. Nothing contained in this Section 29 shall limit any obligations of the Company, or
any rights of the Holder, under Section 4.4 of the Securities Purchase Agreement.


[Signature page follows]


 


 


 


 


 


 


 


 


 






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IN WITNESS WHEREOF,
the Company has caused this Note to be duly executed as of the Issuance Date set out above.


 


VIRTUS
OIL AND GAS CORP.


 


By: /s/ M. Rupert
Ireland


       Name: M. Rupert Ireland


       Title: President and Chief Executive Officer


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 






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EXHIBIT
I



VIRTUS OIL AND GAS CORP.

CONVERSION NOTICE


Reference is made
to the Senior Convertible Note (the “Note”) issued to the undersigned by Virtus Oil and Gas Corp., a
Nevada corporation (the “Company”). In accordance with and pursuant to the Note, the undersigned hereby
elects to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock, $0.001
par value per share (the “Common Stock”), of the Company, as of the date specified below. Capitalized
terms not defined herein shall have the meaning as set forth in the Note.


	Date of Conversion:	 
	Aggregate Principal to be converted:	 
	Aggregate accrued and unpaid Interest and accrued and unpaid Late Charges with respect to such portion of the Aggregate Principal and such Aggregate Interest to be converted:	 
	AGGREGATE CONVERSION AMOUNT TO BE CONVERTED:	 
	Please confirm the following information:
	Conversion Price:	 
	Number of shares of Common Stock to be issued:	 
	Please issue the Common Stock into which the Note is being converted in the following name and to the following address:
	Issue to:	 
	 	 
	 	 
	Facsimile Number:	 
	Holder:	 
	By:	 
	Title:	 
	Dated:	 
	Account Number:	 
	(if electronic book entry transfer)	 
	Transaction Code Number:	 
	
        (if
electronic book entry transfer)
	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 






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ACKNOWLEDGMENT


The Company hereby
acknowledges this Conversion Notice and hereby directs _________________ to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated _____________, 20__ from the Company and acknowledged and agreed
to by ________________________.


 


VIRTUS OIL AND GAS CORP.


 


By:_____________________________


       Name:


       Title:



 


 


 


 


 


 


 


 


 


 


 


 






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